Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

Shares of Apple Inc. (Nasdaq: AAPL) have gained 100% since the start of the year, and with the likely release of an innovative “tablet” computer and the pending debut of its wildly popular iPhone in China both in the offing, the company’s stock could still find some room to run.

Shares in the Cupertino, Calif.-based company are at their highest level since August 2008, thanks to a successive string of upbeat earnings reports, a near-$30 billion cash reserve and recession-defying sales of its products.

The iPhone alone sold 5.2 million units in the second quarter, compared to 717,000 the year before, and its Macintosh computers, which still have a miniscule share compared to Windows-based PCs, are gaining momentum.

Several market research firms, including Deutsche Bank AG (NYSE: DB) and Barclays PLC (NYSE ADR: BCS), now have price targets for Apple stock that exceed $200 a share.

Apple’s shares closed Friday at $170.05, up 60 cents, or 0.35%, each. An advance to $200 would represent a gain of about 18% from current levels.

Sales of Apple’s now-ubiquitous iPod have slowed, but Apple executives anticipated that would be the case, as sales of its music-playing iPhone and iPod Touch grow.  Both of those devices have access to thousands of applications sold in the App Store.

A tablet computer from Apple, which has been a hot news topic in the tech world since last spring, moved closer to reality last week. The Wall Street Journal reported that since returning from leave to undergo aliver transplant, Apple Co-Founder and Chief Executive Officer Steve Jobs has devoted almost all of his time to this specific device.

Pundits have already dubbed the gadget the “MacBook Tablet” or “iTablet,” and executives believe it will have positive implications for media going forward.

“It’s a portable entertainment device,” one entertainment executive toldThe Financial Times. “It’s going to be fabulous for watching movies.”

Recording executives say Apple plans on using the large screen for interactive booklets and liner notes that typically accompany compact discs. And book publishers could view the tablet as an alternative to Amazon.com Inc.’s (NASDAQ: AMZN) popular Kindle or Sony Corp.’s (NYSE ADR: SNE) Reader in the growing e-book market.

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“It would be a color, flat-panel TV to the old-fashioned, black-and-white TV of the Kindle,” one book executive told the FT.

Hollywood and video game executives haven’t been briefed on the tablet, but both have shown optimism for it. A large selection of movies and games are already available for the iPod, iPod Touch and iPhone.

Apple is one of the most secretive companies in Silicon Valley. Its iPhone 3G S, which sold 1 million units in its first weekend, wasn’t announced until a few days before its release. By contrast, one of its primary competitors Palm Inc.’s (NASDAQ: PALM) Pre smartphone, released a few weeks before the 3G S in June, was first announced in January at the Consumer Electronics Show. Apple is aiming for a September or October launch of the tablet, The FT said.

While tablet computers are nothing new – they first debuted in the early part of this decade – they only comprise 1.4% of the global portable market, The Journal said. Toshiba Corp., Hewlett-Packard Co. (NYSE:HPQ) and Fujitsu Ltd. (OTC ADR: FJTSY) all attempted to sell tablets, but ultimately the devices proved to be too cost-prohibitive for consumers.

Despite the worst economic downturn since World War II, Apple is having no trouble convincing consumers to buy iPhones with pricey plans and more expensive Macs. Oppenheimer & Co. analyst Yair Reiner told the FT he expects Apple’s tablet to cost between $600 and $1,000, the range for many Windows-based laptops today.

The tablet is considered by analysts to be Apple’s answer to popularnetbooks, which are smaller laptop PCs designed for navigating the Internet. They usually cost between $200 and $400. CEO Jobs and others in the Apple brass ruled out developing a netbook in a conference call last fall.

“We don’t know how to make a $500 computer that’s not a piece of junk,” Jobs said at the time.

The iPhone Meets the Red Dragon

Apple, whose Mac computers have played second fiddle to personal computers since 1984, found mainstream success in the gadget realm starting in 2002 when it debuted the iPod. To date, roughly 300 million iPods have been sold since 2002. In 2007, Apple debuted the iPhone, which has sold more than 26 million units.

The iPhone will make its debut in mainland China in the fourth quarter with state-owned China Unicom Ltd. (NYSE ADR: CHU) having cut a deal to act as the exclusive carrier for three years. Like AT&T Inc. (NYSE: T) in the United States, Unicom will not share revenue with Apple. Instead, it will offer a subsidy to consumers to lower the price, which is expected have a similar $99 to $299 range with two-year service contracts.

Unicom, which is rolling out its third-generation network (3G), enabling wireless video and high-speed Internet navigation, has 141 million wireless users. Unicom will be competing with an estimated 1.5 million gray market iPhones, The Journal reports, citing research firm BDA China Ltd. Unicom, which just reported a 45% drop in profit, is counting on Apple’s iPhone to gain share over market leader China Mobile Ltd. (NYSE: CHL), which has over three times Unicom’s subscribers.

The overall Chinese mobile market, which has 687 million subscribers – more than twice the population of the United States – is highly competitive. Several phones running Google Inc.’s (Nasdaq: GOOG) Android operating system are due by year’s end, and China Telecom Ltd. (NYSE ADR: CHA) is in talks with BlackBerry maker Research in Motion Ltd. (Nasdaq: RIMM) and Palm to bring those phones to the world’s fastest-growing major market.

“It’s essential for Apple to be in China; it’s a huge market,” CIMB Securities Ltd. Deputy Head of Research Bertram Lai told Bloomberg News. The iPhone “is not just the premium product, it’s an aspirational product,” he said.

Source: Hot Stocks: Up 100%, Apple’s Shares May Still Have Room to Run ]]> http://www.contrarianprofits.com/articles/hot-stocks-up-100-apple%e2%80%99s-shares-may-still-have-room-to-run/20247/feed 0 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-july-28-2009/19493 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-july-28-2009/19493#comments Wed, 29 Jul 2009 00:42:27 +0000 Money Morning Staff http://www.contrarianprofits.com/?p=19493 Verizon Lays Off 8,000 as Profit Sinks 21%; Bulls Run in Monday Markets; SEC Seeks to Limit “Naked Shorting;” New Single-Family Home Sales Rise in June; Oil Rises 1.4%; Deutsche Bank: Windows 7 Could Trigger New Enterprise Tech Investments; Video Game Industry Takes Hit From Recession

• Verizon Communications (NYSE: VZ) will lay off 8,000 full-time and contract workers following a 21% profit drop in its second quarter, The Wall Street Journal reported. All of the job cuts will come from Verizon’s wireline business, which was hit by 630,000 residential phone subscribers canceling their service. This was offset by a rise in its fledgling fiber-optic television and Internet service called FiOS, which saw subscriber gains of 300,000 and 303,000, respectively. For the quarter ended June 30,…

But don’t expect that to last. A slump in consumer spending and soaring unemployment could both pose a significant threat to retailers going into the 2009 holiday season.

The U.S. unemployment rate hit 9.5% in June and could eclipse 10% by the end of the year, sending the economy into a “jobless recovery.”

In a speech to Congress on May 9, Federal Reserve Chairman Ben Bernanke cited a lack of consumer spending could serve as a constraint on hiring. This could create a paradoxical effect as employment obviously plays a key role in consumers’ spending habits.

Even for the employed, the lessons learned from the worst economic downturn since the Great Depression will resonate with consumers. That has already been evidenced by the U.S. savings rate, which has climbed above 4% for the first time in more than a decade.

In addition to taking money out of the hands of potential customers, soaring unemployment could lead to higher lending standards. As unemployment rises, so too will credit defaults and the cost of credit will increase accordingly.

In the past, consumers have counted on attractive financing promotions for the purchase of big-ticket items such as high-definition televisions and kitchen appliances. But that won’t be the case with tighter credit

“Consumers were also able to spend more because of the easy availability of credit, most notably through mortgage equity withdrawal and they responded by buying more items,” said Deloitte Strategic Advisor Richard Hyman.  “These conditions underpinned retail growth for the past 10 years but have now disappeared. However, it’s worse than that. They will clearly not return once the recession is over.”

Of course, tighter credit isn’t just a problem for consumers.

A Brick & Mortar Inventory Crunch for the Holidays?

The potential bankruptcy of commercial lender CIT Group Inc. (NYSE:CIT) could be a major tipping point for businesses that rely heavily on credit. Vendors for retail giants such as Wal-Mart Stores Inc. (NYSE:WMT) and Target Corp. (NYSE: TGT) rely on CIT for factoring – an old form of finance in which the lender pays the vendor for its accounts receivable. If the retailer fails to pay for the goods, the lender assumes the responsibility to pay the vendor.

“Right now our industry is preparing for the fall and winter season,” Kevin M. Burke, president and chief executive of the American Apparel and Footwear Association told The New York Times. “A lot of these orders are going to come to a grinding halt if there is no capital.”
A CIT bankruptcy would be a “double whammy” to stores whose suppliers have already cut the amount of merchandise they are making to better align inventory with the drop in consumer spending, said Burke. If those suppliers lose their sole source of capital, what little merchandise retailers originally ordered might never arrive.
The timing of CIT’s woes is “terrible,” Al Ferrara, a partner in retail and consumer products business of consulting firm BDO Seidman LLC said in a Reuters interview. “Retailers now are basically gearing up for the back-to-school and the fall season.”
An inventory crunch at brick & mortar retailers would give a competitive advantage to online retailers, which have more flexibility and already account for about a third of holiday retail sales.

For brick & mortar retail businesses, managing inventories during the holiday season is a delicate balancing act in which managers must walk a fine line between over- and under-ordering stock.

If retailers overstock, they will be forced to offer even steeper post-holiday discounts than they would like in a desperate bid to unload inventory. But if they don’t stock enough merchandise to meet demand they risk not only missing out on sales, but driving potential customers to online retailers, such as Amazon.com Inc. (Nasdaq: AMZN) whose warehouses are not restricted by the display racks and checkout counters found in brick & mortar stores.

This doesn’t mean brick & mortar retailers will sit idly by this holiday season as Amazon siphons off customers via the Internet. All of the nation’s biggest retail players have their own websites too, but the gap between Amazon and the No. 2 online retailer, Staples Inc. (Nasdaq:SPLS) is huge: Amazon generated $19.2 billion in online revenue in 2008, while Staples generated less than half of that in the same year: $7.7 billion.

While half of the top 10 online revenue generators came from traditional stores, notably absent were brick & mortar discount giants Wal-Mart and Target.

And even Best Buy Co. Inc. (NYSE: BBY), which displays in-store signage promoting an “expanded assortment” of products online for consumers who did not find what they were looking for in the store, came in at just No. 10 on the list.

Shopping for a Silver Lining

While a continued slump in consumer spending would benefit no one, certain retailers are better positioned than others, and could ultimately use adverse economic conditions to turn a profit.

For instance, the aforementioned Amazon.com, which is the world’s largest online retailer, could see a sizeable boost in its web traffic as consumers comb the Internet for bargains.

Companies that have a consumer-friendly economical brand, such as Wal-Mart, will also benefit.

Wal-Mart’s “Save Money, Live Better” slogan is already resonating with consumers, and The No. 1 retailer in the world has gone to great lengths to cement its reputation as the affordable choice for shoppers.

The company has set up a “Save Money, Live Better” website (complete with testimonials of what people are doing with the money they save by shopping at Wal-Mart) and a “Live Better Index,” which includes an interactive map of the United States to show how much money people have saved in each state by shopping at Wal-Mart.

The result of Wal-Mart’s efforts? Holiday sales grew 7% last year, according to the Advertising Research Foundation.

Similarly, same-store sales are consistently rising at discount houses such as Family Dollar Stores Inc. (NYSE: FDO), and Ross Stores Inc. (Nasdaq: ROST), the latter of which has the “Dress for Less” sloganright under its name at every store. On the flip side, stores like Macy’s Inc. (NYSE: M) and Saks Inc. (NYSE: SKS) have reported consistent declines in same-store sales over the past few quarters.

“Needs-driven spending will gravitate towards retailers able to tick the most important consumer boxes like price and convenience,” said Deloitte’s Hyman. “Although it will remain the engine of retail growth, wants-driven spending will slow and consumers will be much more choosy.”

Source: Retail Sector Faces Uphill Climb in 2009

With options running out over the weekend, CIT advisors began preparations for a bankruptcy filing. As of Sunday, JPMorgan Chase & Co. (NYSE: JPM) and Morgan Stanley (MS) were talking with other banks about a debtor-in-possession loan, used to fund a company’s operations after it seeks court protection from creditors, Bloomberg News reported.

Bondholders held calls last week to discuss whether to swap some claims for equity to reduce indebtedness. Thomas Lauria, a lawyer at White & Case LLP, told Bloomberg that a group of CIT creditors he represents offered to provide $3 billion in new loans to bridge CIT to an out-of-court restructuring or an orderly bankruptcy, but had yet to hear back from CIT management.

“It seems CIT was ill-prepared for this moment, so they’re scrambling,” Scott Peltz, a managing director at consulting firm RSM McGladrey Inc. told Bloomberg. “Unless you have all these bondholders holding hands and singing Kumbaya, I think they’re too far behind the eight ball to avoid filing.”

While CIT is not nearly the household name of Citigroup Inc. (NYSE: C)or Bank of America Corp. (NYSE: BAC), the lender finances over 1 million businesses – including Dunkin Donuts and Eddie Bauer.

Three prominent retail trade groups sent letters to financial regulators this week warning that the failure of CIT would undermine the industry supply chain.
“[Retailers] are unbelievably concerned right now,” New York bankruptcy lawyer Jerry Reisman told the Buffalo News. “What we may have here is a total disruption in small business.”

Reisman said he received more than two dozen calls from panicked stores and apparel manufacturers, some of which said they may not have the money to pay their employees.

An otherwise light week on the economic calendar gives way to the next round of earnings as Apple Inc (Nasdaq: AAPL) and Texas Instruments Inc. (NYSE: TXN) highlight the corporate releases this week, while consumer companies The Coca Cola Co. (NYSE: KO),McDonalds Corp. (NYSE: MCD), and Amazon.com Inc. (Nasdaq:AMZN) join the mix.

U.S. Federal Reserve Chairman Ben S. Bernanke will head to Congress where several critics await.  As for the healthcare debate, the August deadline seems less likely, though the Senate has its two cents to add in the coming days.  Expect plenty of politicized talk about the ballooning deficit and the impact on small businesses.

Market Matters

The financial sector appears to be on the mend as earnings season brought several positive signs that the worst is over and soon “business as usual” will return to Wall Street.  Goldman Sachs Group Inc. (NYSE: GS) easily surpassed analysts’ earnings estimates on solid trading revenues, while JP Morgan got a boost from its investment banking division to shatter the forecasts.

Even Citigroup and Bank of America posted solid results (thanks to one-time gains), though both entities have many ongoing challenges to overcome before the Feds let them fend for themselves.

Of course, the possibility that CIT will file for bankruptcy protection has left panicked customers without a significant source of funding for their daily operations.  After late hour negotiations failed, the government chose to pass on another sizable bailout and allow true capitalism to play itself out.  CIT turned to private firm and bondholders to help devise a financing plan and avoid the fate of Lehman Bros. and others.  But now, nervous retailers and manufacturers are lining up alternative funding sources with the hope of dodging significant business interruptions.

Bed Bath & Beyond (Nasdaq: BBBY) and Wal-Mart Stores Inc. (NYSE: WMT) are among CIT’s largest customers, though many are small independent operations.  A CIT failure could prove devastating for those firms considered the lifeblood of American business.

In other earnings news, techs enjoyed another decent quarter as Intel Corp. (INTC) easily bested expectations (that is, before that $1.45 billion antitrust fine) and International Business Machines Corp. (NYSE: IBM) earnings grew by double-digits, while management raised its outlook for the next few quarters.  Though both offered encouraging signs for the sector (and economy as a whole), Dell Inc. (Nasdaq:DELL) warned that lower margins are impacting its operations andGoogle Inc. (Nasdaq: GOOG) experienced its lowest rate of revenue growth since going public five years ago.

The travel industry continued to struggle as consumers and business professionals delayed trips and Marriott International Inc. (NYSE:MAR) and American Airlines parent AMR (NYSE: AMR) posted disappointing results.

Market/ Index	Year Close (2008)	Qtr Close (06/30/09)	Previous Week (07/10/09)	Current Week (07/17/09)	YTD Change
Dow Jones Industrial	8,776.39	8,447.00	8,146.52	8,743.94	-0.37%
NASDAQ	1,577.03	1,835.04	1,756.03	1,886.61	+19.63%
S&P 500	903.25	919.32	879.13	940.38	+4.11%
Russell 2000	499.45	508.28	480.98	519.22	+3.96%
Global Dow	1526.21	1,629.31	1,561.11	1,664.23	+9.04%
Fed Funds	0.25%	0.25%	0.25%	0.25%	0 bps
10 yr Treasury (Yield)	2.24%	3.52%	3.30%	3.65%	+141 bps

Economically Speaking

The White House also experienced a “good news/bad news” week as House Democrats began to push forward a major healthcare overhaul.  Before the real lobbying could begin in earnest, the Congressional Budget Office (CBO) Director proclaimed the proposal would have no positive results on reducing costs or expanding coverage and would actually increase government spending.

Investors shrugged off the CIT developments and focused on positive earnings and economic data.  Stocks surged early on the Goldman news and soared right through the technology reports.  Technicians joined the fun as the Standard & Poor’s 500 Index broke beyond resistance at 930, a strong sign for traders who monitor charts.  Major indexes snapped a month-long losing streak and the tech-heavy Nasdaq Composite climbed to levels not seen since last October, while fixed income suffered reverse “flight-to-quality” trades.  Oil rebounded on the favorable market and economic signs.

While the debate over a healthcare overhaul rages on, the Treasury Department reported that the budget deficit ballooned beyond a record $1 trillion and seemed prime to move even higher if Congress cannot reign in spending.   Analysts fear that interest rates ultimately will move higher should the alarming trend continue and foreign investors shy away from U.S. securities.

But for now, inflation seems very much under control, despite sizable jumps in both the retail and wholesale gauges.  Though gasoline prices surged by 17% in June, prices have already begun dropping at the pumps and most economists do not expect a repeat performance in the months to come.

Though retail sales increased in June for the second consecutive month, much of the gain was related to the rising gas prices and consumers remain reluctant to part with their hard-earned income in light of the weakening labor picture.

On a positive note, weekly jobless claims fell to its lowest level since January. However, naysayers claimed that much of the decline was due to calculation problems stemming from auto closures and layoffs are still very much on the rise.

Finally, the hectic economic calendar ended on a positive note as the housing sector showed renewed signs of a rebound as both new construction and permits for future activity experienced unexpected strength.  Even Dr. Doom himself, NYU professor Nouriel Roubini, the man best known for predicting the current crisis, reversed course and claimed the global economy would move out of recession by late 2009.

The minutes from the June Fed meeting showed that policymakers revised (positively) their forecasts for economic activity in 2009 and 2010, though they expect the unemployment situation to remain weak through next year.  Most Fed watchers do not see any change in the funds rate for the foreseeable future.

On another note, numerous renown economists (about 200), including a few Nobel prize winners, called on Congress to cease the grandstanding and stop criticizing the Fed’s handling of the financial crisis and economic downturn (particularly Bernanke’s “tactics” surrounding the Bank of America/Merrill Lynch deal).  The strongly worded letter by some of the nation’s sharpest minds stated that such politicizing could prove detrimental to the recovery.

Weekly Economic Calendar

Source: Market Recoils as CIT Edges Toward Bankruptcy

Here’s one hot off the press:

Oh my, where do we begin? This beast calls for bullet points:

• Obviously, Wal-Mart (NYSE:WMT) is no longer No. 1. That title now goes to Royal Dutch Shell (NYSE:RDS.A). The American consumer is out, and a global oil conglomerate is in… ’nuff said
• There’s a clear sea change in American business. AIG, Lehman and Bear Stearns fell off the list from 2008-2009. Nike (NYSE:NKE), Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) moved up
• The world is increasingly less Amero-centric. An American company is not No. 1 for the first time in over a decade. In the whole list for 2009, 140 companies are American, the lowest number on record
• The world is increasingly more Sino-centric. Look at China National Petroleum and Sinopec (NYSE:SHI). Both Chinese companies are by far the biggest movers up from 2008-2009. Sinopec, an oil and gas company, also marks China’s first foray into Fortunes’ top 10. China now has 37 companies in the list of 500, its largest presence ever
• Oil is still where it’s at. In spite of all the price drama over the last year, seven of the top 10 firms are oil companies
• In the face of the worst global economic environment of our lifetimes, the world’s biggest companies are still making lots of money. The 2008 top 25 pulled in $4.88 trillion in revenue. This year, they made $5.38 trillion
• And freakin’ GE… what a black box. The world’s producer of everything was one of very few companies to retain the same position from 2008-2009. And despite the infamous GE Capital, the finance arm that apparently threatened to torpedo the whole company, GE ended up increasing revenues by nearly $7 billion. Hmmm…

Source: The Great Shift of 2009

That quickly turned to mania, as the media went nuts over it and fans clamored to pay their respects by buying tons of Michael Jackson merchandise. And MJ fever shows no signs of being ready to “Beat It.”

As demand for all things Michael has spiked, there’s are no doubt that many suppliers are willing to meet it. From vendors outside the Staples Center selling cheesy souvenirs, to multi-billlion dollar corporations, there are several beneficiaries of massive spending on Jackson’s music and memorabilia.

While I’m not suggesting you should unscrupulously profit from his demise, it’s a fact that some companies are enjoying a boom in Michael Jackson-related business. Here are four of them…

Four Companies At The Center Of The Michael Jackson Story

• eBay (Nasdaq: EBAY): As soon as tickets to the memorial were released, they predictably went on sale on eBay for thousands of dollars.

A search for “Michael Jackson” on eBay yielded 47,611 results, including an autographed photo for $3,200, a sealed version of “Thriller” for $1,200 and even this $1 million bill with Jackson’s face on it. And people say the Federal Reserve has recklessly printed money!

• Amazon.com (Nasdaq: AMZN) – If it’s for sale, chances are Amazon sells it. You can download the mp3 of “Thriller” for $1.29, purchase a “Michael Jackson Superstar of the 80s” outfit doll for about $1,000, or the Michael Jackson $1 million novelty notes above for $0.99 each (or 100 for $30). At that price, you can’t afford to be without your fake Michael Jackson currency.

• Sony (NYSE: SNE): Michael Jackson’s record label was Epic Records, part of Sony Entertainment. He’s sold half a million albums since his death, compared with 10,000 the week before he died. You can be sure Sony will try to capitalize on his newfound popularity with some greatest hits albums in the near future.

• Time Warner (NYSE: TWX): With the vast amount of media coverage that the story is attracting, detailing every morsel of Jackson’s life and death, one outlet is emerging from the hungry pack.

Already a well-established site for entertainment news, celebrity gossip and video, the death of the greatest entertainer since Elvis has launched TMZ.com into the stratosphere. Mainstream outlets like CNN and Fox credited TMZ with breaking the story of Jackson’s death.

TMZ is a joint venture between two TWX divisions, AOL and Telepictures Productions. Anyone looking for this type of news now has to consider TMZ the go-to website. And over the past three months, page views have jumped more than 26%, in large part due to the spike in Michael Jackson traffic just in the past few weeks.

In short, while it might be difficult to play this news directly, companies with exposure to Michael Jackson’s popularity could see a bump in revenue.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld

Source: How the Michael Jackson Story Impacts Investors

The analysis played out like clockwork: The catalysts started delivering their bonanza and the stock rallied some 36% in four months.  So, is it time to take profits or do we let it run?

Let’s reassess both the long-term and the short-term catalysts.

In the long-term side I see no reason to bail out:

Amazon continues not only to maintain a commanding lead in online retailing, but it keeps building on that lead.  The basis of such expansion resides in price, convenience and innovation.  Price has become a much more important variable to consumers in the recession and will continue to be important in the years ahead, as the battered consumer struggles to rebuild wealth lost in the housing and stock market blow-ups.

Given Amazon’s size, which gives the company inordinate economies of scale, and its sophisticated systems and distribution network, which allow it to capture such efficiencies, Amazon is virtually impossible for competitors to challenge on that front. Simply attempting to reinvent Amazon’s model and compete against it is a sure way to go bankrupt fast.  This sustainable competitive advantage is here to stay.  What’s more, it allows Amazon to keep expanding market share.

On the convenience front, Amazon again is unsurpassed.  Being able to very quickly find a variety of products online, complete a purchase in just one click (without paying sales taxes in most states), and then have your purchases delivered to your house by an increasingly efficient logistics system in the United States fulfills the initial premise on which the company was founded.

In addition, the growth in fiber-optic Internet connectivity makes shopping online much faster than it used to be.  And U.S. President Barack Obama’s plan to deliver high-speed Internet access to rural communities will only benefit Amazon further.

On the innovation front, Amazon consistently surprises. Our Feb. 4 article correctly speculated that the revelation of a new, revolutionary Kindle 2 was on the horizon.  Kindle sales shot through the roof.

I myself bought one, as I had speculated in the article and I was extremely pleased with the result.  I was able to buy the complete works of Charles Dickens for my 11-year old daughter for less than $5, if I recall correctly.  She has been devouring them ever since.  I also bought “The Art of War,” “The Federalist Papers,” a Bible and many other titles for a small fraction of what I would have paid for them in paperback.

In addition, when my daughter made a “mistake” (her words, not mine) and bought some titles using the Kindle 2 online that I did not authorize, Amazon quickly rebated the money with no questions asked. Also, at one point I made a mistake using it and could not see many of the titles that I had bought.  So I called them up late at night using their 800 number and they very quickly and courteously explained how to navigate back to them.  So, Amazon deserves big kudos for its technical support and customer service.  This is another sustainable competitive advantage that will continue delivering customer loyalty and its consequences will be sales and margin growth.

In addition to the success of the Kindle 2, Amazon topped itself.  It soon after launched the Kindle 3.  Now, I must confess that I had the typical buyer’s remorse, since the launch of the Kindle 3, which has a larger screen with better resolution. The fact that it also has and an even more incredible capacity made me wish I held back and bought the new, improved unit.

Also, Amazon is working together with six universities – including Princeton, where I live –to offer all the books that students require for their studies through the Kindle.  So instead of lugging a huge backpack around campus (short on backpack makers soon?), students are going to be carrying a 19-ounce, 10-inch ultra-slim device with up to 3,500 books, as well as music that can be downloaded in seconds from a free wireless connection and backed up instantaneously in Amazon’s servers at no additional cost.

Soon, I can see road warriors visiting clients carrying all of their product manuals in PDF form, and lawyers and other professionals being able to carry an entire library of reference books, as well as their own work in this compact device.

So I expect Kindle 2 and Kindle 3 to be hot items on the Christmas shopping season this year and to keep growing strongly, transforming the way in which people buy their books, magazines, study and carry reference material easily and cheaply on the road.

Finally, I have talked at length about “cloud computing.”   This new trend relies on people buying very cheap notebook computers with very fast Internet access and keeping their data and performing their computing on someone else’s servers.  The advantage here is that you own a much cheaper, simpler computer with very little software, and the data and software you do use is safeguarded and constantly updated by the professionals with ultra-sophisticated and efficient operations – like Amazon – for a reasonable monthly fee.

The trick for this to work, once more is to have high-speed Internet connectivity available nationwide, whether at home or in the office.  As these connectivity functions grow, cloud computing will thrive, taking Amazon to new, unforeseen heights.  But this is a longer-term proposition, much like online shopping took some time to really take off.

Hence, there are short-term catalysts for the upcoming Christmas season. And the long-term proposition for Amazon is unaltered, because all of its sustainable competitive advantages remain in place.

Recommendation:
If you are a long time holder, feel free to let your position in Amazon.com Inc. (Nasdaq: AMZN) run and look for much higher prices in a few years.  If you are a short-term player, given the recent stock price rally, you might want to take some profits, based strictly on valuation.   Even though, I expect to see a positive earnings surprise this coming July 15, nobody ever got poorer by taking some profits.  You might want to wait until later in the year, closer to October and November, to add to your position in anticipation of a blowout Christmas surprise from this online retailer (**).

(**) - Special Note of Disclosure: Horacio Marquez holds no interest in Amazon.com Inc.

Source: Buy, Sell or Hold: Amazon.com Inc. (Nasdaq: AMZN) Remains Unquestionably Bullish

The widespread acceptance of the Internet has lead to a monumental shift in the way we do almost everything. Communication now happens instantly across thousands of miles, e-commerce has generated billions of dollars for companies like Amazon.com (NASDAQ:AMZN) and eBay (NASDAQ:EBAY), and, with the advent of search technologies like Google (NASDAQ:GOOG), the planet’s information is at our fingertips.

But in spite of these advances, something was missing…

After all, why should you have to scour pages and pages of Google results to find out which country is the world’s 5th smallest exporter? How is it that that sort of factual information isn’t readily available? In the past, search technologies had a big limitation – they required you to ask a question that’s already been asked and answered. But on May 15, with the public release of Wolfram Alpha, that all changed.

Wolfram Alpha is a computational knowledge engine. What that means is it answers factual questions based on structured databases that catalogue information. And it’s creating quite a stir among technology experts.

“[Wolfram Alpha] doesn’t simply return documents that (might) contain the answers, like Google does, and it isn’t just a giant database of knowledge, like the Wikipedia. It doesn’t simply parse natural language and then use that to retrieve documents… Instead, Wolfram Alpha actually computes the answers to a wide range of questions,” said Nova Spivak in an article posted on Twine, a social networking site.

So, if you really do want to know what the 5th smallest exporter nation is, or the average salary of a school bus driver, or what 20/200 vision looks like, with Wolfram Alpha the answer is truly only one click away… without having to rummage through search results.

Not a Search Engine

The most critical thing to remember about Wolfram Alpha is that it’s not a search engine – it’s an answer engine. While searching for “penny stocks” will yield you 5.7 million results on Google, Wolfram Alpha won’t return a single web page. Where Wolfram shines is in answering factual questions (asking subjective questions like “which car is cooler” won’t get you much success).

So, enter something like “What is the circulation of the Wall Street Journal?” or “What is the density of milk?” and you’ll get your answer (2.012 million readers and 242 g/cup respectively).

The most important thing about Wolfram Alpha isn’t what it’s capable of right now, it’s how the unique way it handles data makes big advances possible in the future. “Where Google is a system for finding things that we as a civilization collectively publish, Wolfram Alpha is for computing answers to questions about what we as a civilization collectively know.

It’s the next step in the distribution of knowledge and intelligence around the world — a new leap in the intelligence of our collective ‘Global Brain.’ And like any big next-step, Wolfram Alpha works in a new way — it computes answers instead of just looking them up,” explains Spivak.

Putting Wolfram Alpha to Work for You

And as an investor, Wolfram Alpha has some abilities that transcend the potential of its technologies. With this platform, you can instantly get a slew of financial information on a stock just by typing its ticker into Wolfram’s engine.

You can also make interesting computations on the fly, like this chart of GM revenues divided by Ford’s revenues:

If you’re interested in options, bonds, or currencies, Wolfram Alpha also has the ability to make complex calculations (like the value of a straddle option) instantly for you.

Keeping an Eye on the Future

There’s little question that the work the folks at Wolfram Research are doing on Wolfram Alpha is going to change the way we interact with data. I think it’s clear that those changes are going to trickle down to make data more available to investors – and they’re also going to fuel huge growth for the handful of companies who are working on computational engine technologies. Visit wolframalpha.com to check out this amazing new technology for yourself.

Unfortunately for us Wolfram Research is a privately held company, but there are other plays in the field. We’ll keep you posted as they make their moves.

Cheers,
Jonas Elmerraji

Source: Get a Glimpse at the Next Google

We have been raking in huge profits in all our cyclical and aggressive plays since we called the turnaround in Brazil last October 27:  Petroleo Brasileiro (NYSE: PBR) — known as Petrobras – Vale (NYSE: VALE), Apple Inc. (Nasdaq: AAPL), BHP Billiton Ltd. (NYSE: BHP), Research in Motion Ltd. (Nasdaq: RIMM), IBM (NYSE: IBM), Amazon.com Inc. (Nasdaq: AMZN),  Diamond Offshore Drilling Inc. (NYSE: DO), and Ciena Corp. (Nasdaq: CIEN) have all done splendid.

And over the longer term, all of these companies are going to continue delivering, with some obvious profit-taking bouts along the way.

One of such profit-taking episode could be starting right now.  And it could be driven by Standard & Poor’s recent downgrade of United Kingdom’s sovereign debt rating.  This was in turn followed by the comments coming out from PIMCO that suggest the United States’ debt rating could be in jeopardy.  Even though S&P minimized that possibility, when Bill Gross speaks, the bond markets listen.

General Mills met earnings expectations in March and raised its earnings outlook.  It has been benefiting from the drop in commodities prices, especially agricultural. In addition, the firm, like many in the consumer business, has suffered from a strong U.S. Dollar, which reduced the value of the profits abroad.  The nice thing about consumer staples is that, since people have to eat in good and bad times, these companies are not cyclicals, but rather suffer very little in downturns.

That has been the case for General Mills, which in the last report showed a 4% sales increase from the same quarter in the prior year.  And this sales increase was achieved despite a 6% drop in the sales of food service and bakery products, where the firm nonetheless managed to increase pricing.  But this sector is being de-emphasized with some divestment.

Just think about the solid brands that allow General Mills to dependably keep chugging along every quarter, increasing sales as the population grows. General Mills also boasts well established and new brands that keep increasing its market penetration around the world.   Since then, the dollar has corrected in value and the commodities prices have dropped. That will show up in next month’s earnings report and the stock should perform nicely.

The company is dominant with its Pillsbury brand, which has more than two-thirds of the market.  Cheerios, which has come under some scrutiny for health claims by the FDA, is the top cereal franchise in the ready-to-eat segment.  In addition, we are going to see hundreds of new products being launched soon.

The global story is only beginning for this company, even though they are already in China, and many other fast-growing emerging markets.  This international presence, which right now accounts for only 20% of the company’s total sales, is likely to grow much faster in the near future.  This will be achieved with joint ventures and by leveraging the brands that have the highest international penetration, like Nature valley and Haagen Dazs.

The stock is trading with a price-earnings ratio of only 16 times and an attractive dividend yield of 3.3%. But looking at the company’s growth, it is trading at only 13 times future earnings.  This is a low-risk proposition, as both the company earnings and the dividend appear to be very safe. In addition, the stock has a small short ratio that should diminish if we see profit-taking in the cyclical.

Last but not least, in addition to the short-term technical turning bullish at the end of April, as the stock crossed its 13-day and 50-day exponential averages to the upside, the long-term technicals have also turned bullish and the stock is still way oversold.

Recommendation: Buy General Mills Inc. (GIS) at the market and accumulate more if you see weakness (**).

(**) – Special Note of Disclosure: Horacio Marquez holds no interest General Mills Inc.

Source: Buy, Sell or Hold: General Mills Inc. (NYSE: GIS) is a Wholesome Company with Profit Coming Down the Pipeline