• Investors yesterday (Monday) cashed in on profits from Friday’s market rally, which followed better-than-expected unemployment news. The Standard & Poor’s 500 Index fell 0.33% to 1,007.10, the Dow Jones Industrial Average dropped to 9,337.95, down 0.34%, and the Nasdaq Composite Index closed at 1,992.24, a decline of 0.40%.

• Southwest Airlines Co. (NYSE: LUV) offered more than $170 million for bankrupt Fontier Airlines Holdings (OTC: FRNTQ). That’s up more than 50% from its first offer of $113.6 million. The move is intended to head off a bidding war with rival Republic Airways Holdings (Nasdaq: RJET). The winning bidder will get a stronger foothold in the Rocky Mountain region.

• General Motors Co. (OTC: MTLQQ) is partnering with eBay Inc.(Nasdaq: EBAY) to sell cars and trucks on a new portal sitestarting today (Tuesday). The joint venture will involve roughly 225 California dealerships and will run through September 8. If the program is successful, it could expand nationally as soon as next month, The New York Times reported.

• Shares of Dish Network Corp. (Nasdaq: DISH) rose more than 4% yesterday (Monday) to close at $19.30, as the satellite television provider reported its first increase in subscribers in more than a year, adding 26,000 new customers. Still, high expenses from increased marketing and patent dispute litigation with TiVo Inc.(Nasdaq: TIVO) caused Dish’s profit to fall to $63.4 million, or 14 cents a share, in the quarter ended June 30. That compares to a net income of $335.9 million, or 73 cents a share, a year ago. Revenue was flat at $2.9 billion.

• Bankruptcies among U.S. consumers grew by more than 126,000 in July, representing a 34% increase over July 2008, Bloomberg News reported, citing the American Bankruptcy Institute (ABI). “Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said. The increase came after bankruptcies in the first six months of 2009 grew 36.5%.

• U.S. Federal Reserve Chairman Ben Bernanke deserves another term based on his success in battling the financial crisis, Nobel Prize winner and Princeton University economist Paul Krugman toldBloomberg News in an interview. “He turned the Fed into the financial intermediary of last resort,” Krugman said. “When the banking system failed to deliver capital where it was needed, he put the Fed into the markets.” In 2000, Krugman was recruited by Bernanke to join Princeton. Bernanke’s term ends on January 31 2010.

• Fast-food giant McDonald’s Corp. (NYSE: MCD) reported its same-store sales for July rose 4.3%. Sales in the United States grew 2.6%, Europe sales were up 7.2%, and sales in the Asia/Pacific, Middle Eastern and African markets rose 2.1%. The company attributed the growth to a strong reception of its McCafe espresso-based coffees, a tiered-menu approach and longer operating hours. “With July’s improved trends, we are encouraged by (McDonald’s) ability to gain or maintain share in a still challenging environment,” Oppenheimer analyst Matthew DiFrisco said in a note to clients.

• Bank of America Corp. (NYSE: BAC) will pay $55 million to employees of its Countrywide Financial Corp. to settle a class-action lawsuit in which the employees accused Countrywide of misleading them about its financial health and causing the value of their retirement plan to drop, Bloomberg News reported. Lawyers for the employees called the settlement “fair, reasonable and adequate.” BofA acquired Countrywide in January 2008.

Source: Investment News Briefs Tuesday, August 11, 2009

Without some big event or monolithic development coming down the road, there’s no reason for investors to care about these tiny companies.

You see, the majority of investors are only interested in making 5%–10% per year. That’s pretty much the maximum you can expect to gain if you are investing in blue chips. Here at Penny Sleuth, we view the stock market a little differently.

We want the money multipliers — double-, triple-, even quadruple-digit gains. For that to happen, we need some kind of spark to set our penny stocks apart from the rest. After all, there are currently over 6,000 to choose from.

So, what kind of catalysts can make a penny stock pop? Let’s look at a couple big ones:

• Commercialization — After years of research and development, and sometimes painstakingly long clinical trials and efficacy tests, there comes a time in any successful start up company’s life when it needs to actually manufacture and sell its products or services. Just take a look at what happened to Tata Motors Ltd. (NYSE: TTM)…

As you might already know, this was the growth story of last year, and it continues to today. Tata is the Indian car giant that made its mark on the global economy, when it released the world’s cheapest car.

In March of this year, the company commercialized a new product. It started selling the Tata Nano in India. Investors were so excited by this car design, they started buying enormous amounts of Tata stock. Since the company started pre-selling the car, shares are up 165%.

• Buyout Candidates — Sometimes, it’s as simple as waiting for a larger competitor to buy the penny stock. When one company buys another, they agree on a price. Many times, that price is much higher than what the soon-to-be-purchased company’s share price is currently trading. This gives those shareholders an instant gain.

A few weeks ago, I discussed the consolidation of the soda industry. Both PepsiCo Inc. (NYSE: PEP) and Coca-Cola Inc. (NYSE: KO) are buying out their bottling operations to save on expenses and double spending.

Pepsi is in the process of buying its two largest bottlers: PepsiAmericas and Pepsi Bottling Group. Shares of both of these companies popped more than 22% the day it was announced. From their March lows, PepsiAmericas is up 67% and Pepsi Bottling Group is up 94%.

• Legal Battles — The last of the major catalysts is court rulings. In many cases, a simple ruling can make or break a penny stock. Hardly any company has been entrenched in the courtroom like TiVo Inc. (NASDAQ: TIVO).

We wrote about TiVo back in December 2007. Its revolutionary digital recording technology is both a huge moneymaker and a legal nightmare. You see, plenty of other competitors claim rights to certain patents TiVo profits from.

It takes a tech geek to decipher the differences between most of its intellectual properties, which isn’t usually a prerequisite for a judge. For the last five years, TiVo has been tied up in court with its competitor EchoStar Communications Corp (NASDAQ:SATS), now part of Dish Network Corp. (NASDAQ:DISH), over a patent dispute. The court finally ruled in favor of TiVo, rewarding the company $103 million plus interest.

Upon the day of the ruling, shares of TiVo jumped 53%. This gain sent TiVo’s stock over $11 per share and out of penny stock land. That just a drop in the bucket of what a lawsuit ruling can do for a company. Imagine what $103-plus can do for an even smaller company…

These are just four types of things to consider when thinking about buying a penny stock. But even if you do have the perfect catalyst lined up, that’s only the beginning.

Sincerely,
Jim Nelson

Source: How to Tell When a Penny Stock Will Pop

• Nobel Prize-winning economist Paul Krugman said the United States needs to take aggressive economy-stimulating action or risk facing a lost decade of growth a la Japan in the 1990s. “We’re doing half-measures that help the economy limp along without fully recovering, and we’re having measures that help the banks survive without really thriving,” Krugman told reporters in Beijing, Reuters reported. “We’re doing what the Japanese did in the 90s.”

• European Central Bank President Jean-Claude Trichet said he and fellow policy makers are seeing the first signs of economy recovery. Recent reports are “encouraging, but it’s no time for complacency,” Trichet said at a meeting of global banks, Bloomberg reported.

• AstraZeneca plc’s (NYSE ADR: AZN) heart drug Brilinta beat blockbuster drug Plavix – of Sanofi-Aventis SA (NYSE ADR: SNY) and Bristol-Myers Squibb Co’s (NYSE: BMY) – in one of the largest comparative head-to-head drug studies, Reuters reported. Plavix alone nets about $8 billion and if approved, Brilinta would take a large portion of that.

• Intel Corp. (NASDAQ: INTC) may have to pay an antitrust fine of more than 1 billion euros ($1.36 billion) and stop giving discounts to computer sellers. The company faces awaits the decision of the European Commission on charges that it has been muscling competitors out of the European market, Bloomberg reported.

• General Motors Corp (GM) is open to moving its headquarters from Detroit. The company also may sell some of its U.S. plants and renegotiate its restructuring plan with unions as it heads toward probable bankruptcy, GM Chief Executive Officer Fritz Henderson said yesterday (Monday), according to Reuters. Henderson it was more likely that GM was headed for bankruptcy by June 1 – the U.S. government-imposed deadline for the automaker to restructure.

• Microsoft Corp. (NASDAQ: MSFT) plans to sell $3.75 billion of debt in its first bond offering, taking advantage of its top credit ratings to help fund a share buyback and technology investments.  The world’s largest software maker, whose shares have declined 34% in the past year, is seizing on a credit-market rally to help fund a $40 billion stock repurchase program. The company is also investing in data centers to compete against Google Inc. (NASDAQ: GOOG) in Internet search, Bloomberg reported.

• Dish Network Corp (NASDAQ: DISH) posted better-than-expected profits on Monday and lost fewer subscribers than most Wall Street analysts had forecast, sending its shares soaring, Reuters reported. U.S. satellite TV provider Shares rose as much as 21.5 percent in afternoon trading on the Nasdaq on the lower customer losses and indications that the company had started to get control over a long-standing problem with piracy with its set-top box software.

• Nortel Networks Corp (OTC: NRTLQ), North America’s biggest maker of telephone equipment, said yesterday (Monday) its quarterly loss widened as the global recession contributed to a 37% drop in revenue, Reuters reported.  Nortel, which filed for bankruptcy protection earlier this year, also said it is completing plans to decentralize some functions at each of its four main businesses to give it more flexibility as it decides which divisions to sell.

Source: Investment News Briefs Tuesday, May 12, 2009

• Six months after becoming Freddie Mac (FRE) Chief Executive Officer, David Moffett is stepping down from his post, citing a desire to return to the financial services industry, Reuters reported. “Whatever the reason Mr. Moffett has determined to leave, the abrupt departure with no replacement in hand is a negative indicator for the company,” said Jim Vogel, a strategist at FTN Financial Capital Markets.

• Europe’s largest lender, HSBC Holdings plc (ADR: HBC), said it plans to raise 12.5 billion pounds ($17.7 billion) by selling shares. The company also announced 6,100 job cuts and plans to close lending units in the United States. “We are playing the ball from where it lies,” Chief Financial Officer Douglas Flint said on a call with reporters, Bloomberg reported.

• Wendy’s Arby’s Group Inc. (WEN), the third-largest fast food chain in the United States, posted a fourth-quarter loss of $393.2 million, or 84 cents a share, largely a result of impairment charges and falling sales at Arby’s, Reuters reported. In September, Arby’s owner, Triarc, bought Wendy’s International Inc. for about $2 billion in September to form Wendy’s/Arby’s.

• According to a Bloomberg study, South Africa’s unemployment rate for the fourth quarter clocked in at 21.9%, the highest of the 61 countries in the study. South Africa is the continent’s largest economy, and it contracted for the first time in a decade, a result of plummeting manufacturing output, Bloomberg reported.

• Investment in start-up companies in the United States fell 71% in January from a year earlier, according to preliminary figures by Thomson Reuters. Venture capital funding dropped to $1.3 billion in January from $4.5 billion in January 2008. The number of companies that received funds was cut in half as well, falling to 203 from 466.

• Dish Network Corp. (DISH) said yesterday (Monday) that its fourth-quarter profit rose 24%, but that higher prices and fees cost the nation’s second-largest satellite-TV provider more than 100,000 subscribers. Dish Network earned $217 million, or 48 cents per share, for the three months ended Dec. 31, up from $175 million, or 39 cents per share, a year earlier. Sales rose 1% to $2.92 billion from $2.89 billion.

Source: Global Investment News Briefs Tuesday, March 3, 2009

The deal also marks another chapter in an ongoing saga featuring John Malone, Liberty’s CEO, and rival Charles Ergen, the satellite-TV pioneer behind Dish Network Corp. (DISH) and sister firm Echostar Corp. (SATS).  The two have occasionally worked together but are major competitors in satellite, as they were when Malone controlled cable-television company Tele-Communications Inc.

“Sometimes they play nicely together in the sandbox, but sometimes they are good, old-fashioned rivals,” satellite analyst April Horace of Denver-based Janco Partners told the Denver Post. Both companies are headquartered in Englewood, Colorado.

Under terms of the agreement, Liberty would provide a $280 million senior secured loan   to help Sirius repay $171.6 million in convertible notes due yesterday (Tuesday), which are owned by Ergen.  At a later date, Liberty would provide another $150 million loan to XM Satellite Radio, Sirius XM’s wholly owned subsidiary, and purchase up to $100 million of XM’s credit facilities, according to Bloomberg News.

The loan will pay Liberty a whopping 15% interest rate and mature in December 2012. When the second loan is completed, Liberty will get 12.5 million shares of preferred stock convertible into 40% of Sirius XM common stock.

The deal allows Sirius to avoid bankruptcy and a major shuffle of talent. A bankruptcy filing could have threatened contracts with such luminaries as Martha Stewart and Bob Dylan, as well as the company’s five-year, $500 million pact with Howard Stern.

Sirius has never been profitable, mainly because it was burdened with massive interest payments on its debt. After acquiring rival XM in July, it was hit hard by the credit crunch and poor auto sales – its main distribution channel.  Sirius XM has about $3.25 billion in total debt.

“Sirius is in the process of getting out of the woods because Liberty is putting up a lot of money,” David Joyce, an analyst with Miller Tabak & Co., told Bloomberg News. “It shows that Sirius will be around for a long time.”

Malone and Ergen, who have been fierce rivals over the decades, were again pitted against one another by Sirius Chief Executive Mel Karmazin to save the company he formed just seven months earlier.

In 2003, Ergen abandoned a bid for DirecTV’s then-parent company, Hughes Electronics Corp. because he couldn’t get regulatory approval. Malone gained control of DirecTV last year after buying out Rupert Murdoch’s News Corp.’s (NWSA) stake. Ergen’s Dish Network had 13.8 million customers as of Sept. 30, trailing DirecTV’s 17.3 million.

The Liberty deal came after recent efforts by Ergen to acquire control of Sirius by purchasing its maturing debt, following an unsuccessful takeover bid in December, according to the sources cited by Bloomberg.

Ergen, a former professional gambler, bought the majority of a $300 million batch of discounted Sirius bonds that came due Tuesday. The company, said Feb. 13 it might have to file for bankruptcy if it couldn’t reach an agreement to restructure the debt.

Ergen offered to restructure the debt and invest several hundred million dollars into Sirius in exchange for control of the company.  That plan was scuttled by Liberty’s “white knight” move, which allows Karmazin to keep his job as CEO.

Liberty’s plans for Sirius are unclear.

“We think that John Malone and Charlie Ergen’s strategies are different,” Thomas Eagan, an analyst at Collins Stewart told Reuters. “We think that Charlie Ergen’s strategy may have been more about creating a broader strategic play in wireless services as he has attempted mobile video before. For John Malone it’s more of a financial investment. He had this venture fund with cash available and he figured this was a worthwhile investment.”

Whatever his motives, Ergen’s strong personality and previous clashes with Karmazin may have presented obstacles impossible to overcome.

The two locked horns in 2004 when Karmazin was head of media giant Viacom. When talks broke down over rate hikes imposed by Viacom for the rights to carry certain channels, Ergen published Karmazin’s home number and told subscribers to call him.

“I can’t imagine Ergen and Mel Karmazin working that well together,” said Matthew Harrigan, an analyst at Wunderlich Securities.

Source: Sirius Business – Liberty Injects $530 Million into Satellite Radio Provider