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

Marc Lichtenfeld — Thu, 10 Sep 2009 18:29:35 +0000

You ready for a good ol’ 1960s rock n’ roll flashback, courtesy of four lads from Liverpool?

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

Delays Hit Video Game Maker’s Guidance Hard

Bob Blandeburgo — Wed, 15 Jul 2009 15:00:00 +0000

Shares of “Grand Theft Auto” maker Take-Two Interactive (Nasdaq:TTWO) took a drubbing yesterday (Tuesday) after it lowered its financial outlook and delayed key video game releases until its next fiscal year.

Take-Two now expects its loss to fall between 65 cents and 75 cents per share and revenue to be between $120 million and $130 million for the quarter ending July 31. Wall Street analysts were expecting a loss of 54 cents and revenue of $162.2 million.

The move reflects reduced sales of catalog products and lower than anticipated initial retailer orders of new releases due to a retail environment that is proving even more challenging Take-Two expected, it said in a statement.

The company delayed the release of “Bioshock 2,” “Max Payne 3” and “Red Dead Redemption” to fiscal 2010, which starts November 1. It is unclear whether any of these titles will ship in time for the holiday season, a critical time for the $22 billion video game industry.

“The decision to shift a release date is never an easy one, especially with a product as highly anticipated as ‘BioShock 2,’” said Take-Two Chief Executive Officer Ben Feder. “We felt that it was essential to invest the additional time to ensure that this title will deliver what its fans expect and deserve.”

Had “Bioshock 2” not been delayed, 2 million copies would have shipped in Take-Two’s fiscal fourth quarter ending October 31, Wedbush Morgan Securities Inc. analyst Michael Pachter said in a note to investors obtained by The Associated Press. Such a shipment would have generated $90 million in revenue, Pachter said.

Still, Pachter reiterated his “outperform” rating on the company, attributing the rating to next year’s earnings and the next title in the popular “Grand Theft Auto” series, which Take-Two has not given any indication of shipping next year.

Shares of Take-Two closed at $8.10 yesterday, down 9.80%.

Once thought of as recession-proof, the video game industry has suffered a series of tough losses in the last few quarters, particularly with industry giant Electronic Arts (Nasdaq: ERTS), which has suffered losses in the hundreds of millions this fiscal year.

Despite Take-Two’s delay of key holiday titles, a slew of big-name titles from other players in the industry will propel the stocks of companies that publish video games, particularly Activision Blizzard Inc. (Nasdaq:ATVI), a possible second-half wonder as reported by Money Morning.

Source: Delays Hit Video Game Maker’s Guidance Hard

Rebounding Tech Sector Stars Could Play Key Role in U.S. Economy’s Second-Half Rebound

Bob Blandeburgo — Wed, 01 Jul 2009 16:49:24 +0000

If the last three months are any indication, the U.S. tech sector has shaken off its recession-heightened late-winter doldrums, and could see its fortunes soar in the year’s second half as businesses and consumers open their wallets and the broader economy picks up speed.

The technology-laden Nasdaq Composite Index was at the forefront of the most-recent market rally, having soared more than 45% since hitting its 52-week low on March 10. That outpaced both the Dow Jones Industrial Average – up 30% in that time – and the Standard & Poor’s 500 Index – up about 37%.

According to industry analysts, the technology sector – because it is heavily reliant on borrowing, as well as consumer demand – can serve as a harbinger of economic recovery.

“Technology tends to be a leader in the early stages of an economic turn. That’s what we took for as confirmation of a sustainable rally-money rotating into a sector that historically is seen as consumer- and business-sensitive, and requiring more leverage in terms of borrowed money, because it is more sensitive to the economy,” Marc Pado, U.S. market strategist at Cantor Fitzgerald told MarketWatch.com. “I expect technology to continue to lead well through this year and into February of next year.”

Spearheading the Nasdaq’s charge has been Redmond, Wash. software giant Microsoft Corp. (Nasdaq: MSFT). While its fiscal third-quarter profit fell 11% from a year earlier, Microsoft beat analysts’ expectations, helping the company’s stock to surge more than 50% from its mid-March low. Microsoft is up about 16% in the past month.

Semiconductor manufacturer Texas Instruments Inc. (NYSE: TXN) could trade in the is up more than 45% in the past six months to its current level of about $21 per share. The company could trade up into mid-$30s within 12 months, according to Paul J. Nolte, director of investments atHinsdale Associates Inc., an Illinois money management firm.

Earlier this month, in fact, Texas Instruments sharply raised its second-quarter financial guidance. The reason: Customers had slowed the rate at which they were reducing chip inventories – a signal that the market for semiconductors may be stabilizing.

The company now expects to report earnings per share (EPS) of 14 cents to 22 cents, up from the previous forecast of 1 cent to 15 cents per share.

Opening New Windows

The long-suffering PC market may get a shot in the arm this fall with the Oct. 22 release of Microsoft’s Windows 7, which is all but guaranteed to generate better reviews than its predecessor, Windows Vista. Pre-release versions being publicly tested are already being called better than Vista, which was dogged by geeks and general end-users alike for its slow performance and questionable compatibility with legacy software and hardware.

Stopping short of admitting the goof and giving away Windows 7 to existing Vista users, Microsoft is offering cheaper upgrades to those who pre-order Windows 7 between June 26 and July 11. The company will offer free Windows 7 upgrades to anyone who purchases a PC pre-installed with Vista after June 26.

Windows 7 is expected to be the operating system of choice for information technology (IT) managers who make purchasing decisions for corporate users.

“The upcoming introduction of Windows 7 could spur a rapid corporate PC upgrade cycle starting in late 2010/early 2011, catalyzed by the end of support for Windows XP and a recovery-based increase in IT spending,” said Jeffries & Co. Inc. analyst Katherine Egbert wrote in a recent research report.

But history shows that a release of a new operating system – no matter how positive the buzz – will translate into only a slight increase in PC sales, Microsoft Senior Vice President Bill Veghte said in a webcastearlier this month. On the business side, enthusiasm is high for Windows 7, but corporations will not rush to upgrade when it is released. The release “will get drowned by the macroeconomic environment,” Veghte said. “As the macro environment comes back, people will have to buy new PCs. People aren’t using PCs any less.”

Game On

Looking ahead, the tech sector is anticipating a slew of product releases in the year’s second half – many of them in the $22 billion video-game sector, which lives and dies on new releases.

Activision Blizzard Inc. (Nasdaq: ATVI), the largest third-party game publisher in the world, will lead the way with the latest in its rock music game series with the September release of “Guitar Hero 5″ on four platforms: Sony Corp.’s (NYSE ADR: SNE) PlayStation 2 and 3, Microsoft’s Xbox 360 and Nintendo Co. Ltd.’s (OTC ADR: NTDOY) Wii. The third iteration of “Guitar Hero” became the first video game ever to achieve $1 billion in sales.

But the music from Activision won’t stop with the last strum of a toy guitar: The company will debut “DJ Hero” in October for the same four platforms. “DJ Hero” will ship with a mock turntable and should appeal to fans that don’t turn to rock for their music fix.

Activision will release new titles for proven franchises such as “Modern Warfare” and “Tony Hawk.” The first “Modern Warfare” title, released in 2007, has sold 13 million copies worldwide and is one of the best-selling games on Xbox 360. The new “Tony Hawk” game represents the 12th installment in the series since it was started 10 years ago.

While sales of console games typically garner most of the attention, it is Activision’s “World of Warcraft” (WoW) playing the role of its single largest sales generator. In 2008, WoW accounted for $1.1 billion in revenue, or 38% of Activision’s total revenue. Sales from all of Activision’s console titles were $1.2 billion. WoW has more than 11.5 million subscribers, Activision said.

Since its dropping down to its 52-week low of $8.14 in January, Activision shares have risen steadily, and are now trading in the $12 range. With a war chest stuffed with nearly $3 billion in cash and ratingsof mostly “Buy” or “Strong Buy” from analysts, Activision may warrant closer study by individual investors, too.

Activision’s rival, Electronic Arts Inc. (Nasdaq: ERTS) also has some potential-big-hit titles coming in the year’s second half, but saw its losses more than double to $1 billion for the fiscal year that ended March 31. Like most game publishers looking to cash in on the holiday shopping season – primetime for consumer spending – EA is saving its best for the second half of 2009.

Titles such as “Madden NFL 10,” “The Beatles Rock Band” and “Left 4 Dead 2″ will sell well, but the outlook for EA on Wall Street is mixed, with the majority of analysts rating the company as a “Hold.”

Some analysts say that EA can weather the current downturn in consumer spending, as it sits on more than $1.6 billion in cash, according to its annual regulatory filing with the Securities Exchange Commission (SEC), but the outlook for the 2009 Christmas shopping season remains uncertain.

Will iSpend?

Following a sharp drop in its stock after the revelation that its chief executive officer’s health may be worse than previously thought, shares of Apple Inc. (Nasdaq: AAPL) have slowly been climbing back toward its 52-week high of $180.91. The shares are currently trading at about 21% below that peak.

The Cupertino, Calif.-based company on June 8 removed a barrier that had stopped many consumers from purchasing its popular iPhone when it lowered the price of its 8-gigabyte 3G model to $99. With wireless plans starting at around $70 per month, Apple’s phone – and perhaps more importantly, its app store – will find its way into the hands of many more consumers in the second half of 2009.

Couple the 8GB iPhone 3G with the newly released, feature-rich 3GS model – and then stir in a barrage of television commercials – and the result should be a marked improvement in revenue.

It is unlikely that Palm Inc.’s (Nasdaq: PALM) Pre will put a dent in iPhone sales, partly because of sustained shortages as Apple floods the market with its phone. However, Sprint Nextel Corp. (NYSE: S) customers locked in their contracts looking to upgrade to a phone with a growing app catalog will see the Pre’s similarities with the iPhone.

Sprint Chief Financial Officer Bob Brust told investors via a webcast at Wachovia Corp.’s Annual Mid-Year Equity Conference that Pre shortages still exist weeks after its launch.

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week,” Brust said. Sprint is the exclusive carrier of the Pre.

Analysts estimate that 50,000 to 100,000 Pres were sold in its debut weekend earlier this month, while Apple said the new iPhone sold 1 million units in its opening weekend.

Source: Rebounding Tech Sector Stars Could Play Key Role in U.S. Economy’s Second-Half Rebound

[Editor's Note: This tech-sector preview is the opening installment of a new Money Morning series that will make economic projections for key U.S. sectors for the last half of 2009. As part of that series, look for forecasts for housing, energy, U.S. stocks and the emerging markets.]

Make 20% by March as Electronic Arts (ERTS) Tumbles

Charles Delvalle — Tue, 03 Feb 2009 19:46:16 +0000

I come from a generation of children that grew up playing Nintendo for at least two to three hours a day. My parents didn’t touch that “magical fun box”. But today, my generation is made up of a bunch of 28 to 34 year olds that all play video games with their kids. Because of that, the video game industry has become one of the fastest growing, and largest sectors of the entertainment industry. And even though it has shown some slowing as this recession has grinded along, growth is still there.

Too bad Electronic Arts (NASD:ERTS) simply is not feeling the love.

After rising for a number of years on increased consumer spending in video games, it’s been all downhill since the credit crunch struck back in August. Shares dropped by 70%.

Just when you thought the pain is over, we notice that on the chart ERTS recently broke under its December lows (it’s previous support line). This break under support constitutes a “Major Technical Break” and could be used to make a bearish trade with.

Shorting this stock could give you a tidy 10 – 20 percent gain by the end of the month. And if you buy a put option… well you could easily make triple-digits.

Just be careful about holding this company short for months on end. As mentioned before, the video game industry hasn’t lost money… it simply isn’t expanding as quickly.

This 70 percent drops seems extremely overdone considering ERTS is one of the top dogs in the industry.

How To Make Real Profits In The Virtual World

Martin Hutchinson — Mon, 01 Dec 2008 13:26:15 +0000

The video game industry has a reputation for being recession proof. And soaring sales this year suggest there are some great profit opportunities in the sector. That’s why the Money Morning team have created this comprehensive guide to virtual investing.

If you want to invest in video games there are, essentially, four ways to do it…

Investing in video game publishers.

Investing in video game retailers.

Investing in companies that make video game consoles.

Investing in companies that make video game accessories.

Game Publishers

These are the companies that make the games. And Electronic Arts Inc. (NASDAQ:ERTS) and Activision Blizzard (NASDAQ:ATVI) are the best bets right now.

Electronic Arts is the publisher of the popular Madden franchise, which gives it a consistent intake every year. Adding to its arsenal with a game like Spore will no doubt boost its bottom line even further.

Activision Blizzard is another strong contender. Guitar Hero has proven extremely popular, as has World of Warcraft. And while the new Call of Duty probably won’t sell as well as its hugely successful predecessor, Call of Duty 4, it will no doubt turn a respectable profit.

Avoid THQ Inc. (NASDAQ:THQI), which seems to have forgotten what games are and Take-Two Interactive (NASDAQ:TTWO), which is overly reliant on its controversial Grand Theft Auto series. Take-Two also had a good opportunity to be taken over by the much larger Elecrtonic Arts, but a deal never got done, which raises questions about the company’s management.

Accessories

As the unrivaled success of the Wii showed, innovation in video game accessories can pay off. For every console, as well as the PC, there are multiple games that can be enhanced by the use of a new input medium.

Games such as Guitar Hero, a game where you use a guitar shaped controller to play along with music, Flight Simulator X – the premiere flight simulator game is greatly enhanced by the use of a joystick, and the Dance Dance Revolution series, which features games that are best played with a dance pad, are always emerging on the market.

While, most of the accessories are made by the company of the game that requires them, there are external controllers that are always there competing for the market. Some companies that make these include MadCatz Interactive Inc. (AMEX:MCZ), a peripheral company specializing in mainly console accessories and Logitech International (NASDAQ:LOGI) a Swiss company that specializes in mostly in PC peripherals.

Retailers

While many electronics stores and retailers sell video games, there are some specifically designed to do so. The biggest of these in the world is GameStop Corp. (NYSE:GME). GameStop stocks new, used and old games, as well as multiple accessories and consoles. The largest video game retailer in Europe is GAME Group PLC (London:GMG). They operate similarly to GameStop.

Consoles

More than $9 billion was spent on video game consoles last year. Nintendo, Microsoft, and Sony all have new systems on the market, and they’ve all proved formidable.

[...] All of these companies are reasonably solid investments, but, in terms of gaming, Sony Corp. (NYSE:SNE) and Nintendo Co. (Pink Sheets:NTDOY) look like they are going to have some very good years.

Sony has got an amazing games division that is producing very high quality games for its console. And Nintendo is always going to be in demand, though it needs to start making more games for the Wii and DS.

Microsoft Corp. (NASDAQ: MSFT), on the other hand, needs to acquire more exclusives, plus this report has nothing to do with the upcoming Windows 7, which is the biggest part of Microsoft’s business.

Hon Hai Precision Industry Co.

Hon Hai Precision Industry Co. (OTC: FXCNF) is a technology company based in Taiwan. It manufactures the Mac mini, the iPhone and the iPod for Apple Inc. (AAPL), cell phones for Nokia Corp. (NOK), and motherboards for Intel Corp. (INTC).

Of course, it also manufactures PS2, PS3, Xbox 360, and Wii – the four most popular gaming consoles – making it a tremendous play on the video game industry.

Emerging Markets: The Future of the Gaming Industry

The Middle East, China, India, Africa, and South America all have extreme pirating problems where video games are concerned. Thus, most companies have trouble expanding into these markets.

The Chinese market is a rapidly growing area for video games. However, the video games that the Chinese are enjoying are not what the West is enjoying. Chinese consumers love MMORPGs. While an average Western MMORPG, like Everquest for example, will reach 500,000 users. An AVERAGE Chinese MMORPG will attract well over 1,000,000 users very quickly.

Of World of Warcraft’s 10 million subscribers, 1.5 million live in China. Analysts estimate that the WoW Chinese market, alone, could eventually have 10 million users.

Most Chinese play MMORPGs in internet cafés (since most of them have limited Internet access). A large percentage of Chinese, however, do play free MMORPG’s. Free MMORPGs usually are completely free to play, but players can pay money to expand the gaming experience (bigger map to play on, more areas etc.) or improve their character (items, weapons character stats, etc.). While this doesn’t seem to like it would make a lot of money, it actually does, thanks to the addictive nature of most MMORPGs.

Some of the bigger names in the Chinese MMORPG market are Giant Interactive Group Inc. (NYSE:GA), Perfect World Co. Ltd. (Nasdaq:PWRD), Shanda Interactive Entertainment Ltd. (Nasdaq:SNDA), and The9 Ltd. (Nasdaq:NCTY).

Unfortunately, China is China. As such, the government always thinks of something ‘imaginative’ to do with the gaming market. The ‘Fatigue System’ is a means by which the government gets to control how long its citizens spend online playing games.

This system requests that games stop rewarding players after three hours of play in one day. Additionally, the system also requests an ID for players so as to be able to control their play more easily. While the system was originally meant for all gamers, it has been limited to gamers under the age of 18, due to the initial outcry it garnered.

China is also notorious for having the largest game sweatshop industry in the world. A game sweatshop is where a person is paid to play a game intensively and to make an extremely good character in it. That character is then sold to whomever wants it.

Chinese censorship is surprisingly low as the government only censors games that are anti-Chinese or portray Tibet and Taiwan as independent nations.

India’s market has yet to fully realize the potential of video games (putting the pirating aside). India is regularly compared to China in 2001. The online video games market is picking up but the overall market is still small. The few Indians who do game, do so like the Chinese: in Internet cafés. Unfortunately, there aren’t any enormous MMORPG makers (or equivalents) in India, yet.

The Middle East is generally also a pirating heaven though there are some legitimate shops usually selling games that haven’t been translated. Countries like Saudi Arabia also tend to ban certain games that are conceived as anti-Muslim.

If you wanted to invest in one of the Chinese MMORPG makers, the one that looks the best thanks to its pricing model and quality of games is Giant Interactive.

PS. This is an excerpt from a three-part guide to investing in the video game industry. For the complete version, please go to Money Morning’s archive pages.

Source: The Investor’s Guide to The Video Game Industry – Page 2

Buy These 3 Bargain Small-Cap Stocks for Fall Profits

Laura Cadden — Tue, 23 Sep 2008 13:37:24 +0000

The Dow plunged over 370 points in yesterday’s going, wiping out Friday’s spectacular gains for big-name stocks.

But there are profits to be made in the small-cap market says Laura Cadden in Today’s Financial News. She’s found three great small-cap stocks going for bargain prices. All three have solid valuation ratios and strong short-term growth prospects.

They are Javo Beverage Company (OTC:JAVO), The Home Shopping Network (NASDAQ:HSNI), and Take-Two Interactive Software (NASDAQ:TTWO).

Best Small Cap #1

A poor man’s Starbucks: Javo Beverage Company, Inc. (OTC:JAVO).

Ah… coffee. Coffee addicts NEED their java. But we’ve already seen that in tough times, people are stepping away from the Starbuck’s counter.

That’s where these guys come in.

Good, fast and CHEAP coffee

Javo Beverage Company, Inc.’s main focus is on dispensable tea and coffee. The company manufactures and markets beverage concentrates, as well as formulations, extracts and flavors, to restaurants and retail outlets.

A sampling of their client list includes 7-Eleven, Sysco Food, BP Products North America, Exxon-Mobil, Mrs. Fields, Haagen-Dazs, Caribou Coffee, Sunoco, Shamrock Foods and Speedway.

Javo greatly increased their outlet potential in the second quarter of this year resulting in excellent results primarily from iced coffee sales.

On July 30, the company announced record revenues for the second quarter of 2008 of 6.7 million. A record gross margin of a remarkable 49% was also achieved for the quarter.

Javo’s target for dispenser installation for this year was 7,500. They achieved that goal by the end of July.

Turning to their hot coffee product, they are now ready to have 10,000 dispensers in place by year’s end. Each new location is anticipated to produce between $3,000 and $6,000 in revenue annually.

This company is one of the most promising small caps I’ve seen this year and the price is below $1!

What’s not to love?

I recommend you buy shares of Javo Beverage Company, Inc. (OTC:JAVO) for at or under $0.60 a share.

*****

Best Small Cap #2

On the cutting edge of retail: The Home Shopping Network (NASDAQ:HSNI)

Her name is Mary-Ann and she is an addict.

Her addiction? The Home Shopping Network (HSNi) owned and operated by HSN, Inc.

Mary-Ann (actually NOT her real name) tells me that she can’t help it… the convincing chatter by charming hosts, the phoned-in testimonials, the seemingly reasonable prices, the “limited number available” push, and the countdown clock – it just wins her over every time.

She’s not alone… The 24/7 HSNi channel reaches 90 million households in the U.S.

And in 15 million of those homes, they also have the latest technological advance in TV purchasing – Shop By Remote.

In addition, HSNi has one of the top 10 e-commerce websites (http://www.hsni.com).

Cornering the market

HSN Inc. has another operating segment, Cornerstone, which is made up of seven popular brands including The Territory Ahead, Smith+Noble, Frontgate, Ballard Design, Garnet Hill, Improvements and Travelsmith.

Each brand has its own website and catalog (400 million are mailed out annually!).

HSN, Inc. began trading on its own in late August.

Formerly, it had been part of IAC/InterActiveCorp (NASDAQ:IACI) but was spun off along with Interval Leisure Group, Inc. (NASDAQ:IILG), Ticketmaster (NASDAQ:TKTM), and Tree.com Inc. (NASDAQ:TREE).

Since the separation (and the volatile market in recent weeks) the stock price has decreased in value.

Its current PE ratio is hovering around 6 – always a good thing!

Most importantly, these people KNOW how to sell and with the peak retail season fast approaching, I expect this stock price to climb steeply.

I recommend you buy shares of HSN Inc. (NASDAQ:HSNI) at or under $12.

*****

Best Small Cap #3

Failure to merge = good news for you: Take-Two Interactive Software, Inc. (NASDAQ:TTWO)

After prolonged negotiations, Electronic Arts Inc. (NASDAQ:ERTS) will not be purchasing Take-Two Interactive Software, Inc.

News of this prompted seven-year lows in the stock price of Take-Two providing a great buying opportunity.

Highway robbery

Take-Two’s claim to fame (or infamy, depending on your perspective) is its “Grand Theft Auto” video game series.

Wildly successful, these games often top the list of objectionable entertainment due to their seeming glorification of criminality and excessive violence. (No doubt that accounts for much of their popularity.)

A sampling of Take-two’s other franchises include Sid Meier’s Civilization, Manhunt, BioShock, Sid Meiers’s Railroalds!, Top Spin, Sid Meier’s Pirates, and Max Payne.

Headquartered in New York City, the company’s publishing segment is made up of Rockstar Games, 2K Games, 2K Sports and 2K Play labels.

Can’t argue with the numbers

After a showing a negative balance in 2007 (with a net margin of –14.10%), Take-Two clearly buckled down their operating expenses. That, and the over 6 million(!) copies of Grand Theft Auto IV sold after its April release, resulted in an increased net margin of 11.95% as of Q3 (ending July 2008).

The company’s PE ratio is just under 12, its forward PD is 10.81 and its PEG is an amazing .56. Now with recent market devaluations, these numbers are not the full picture, but they are still indications of a good investment.

On the table

The Take-two executive chairman of the board, Strauss Zelnick, has said that the company is communicating with other parties to consider “strategic alternatives.”

Any additional takeover bids should be good for shareholders.

Besides the decent fundamentals, profits and buyout possibilities, there are all those fans that failed to get “GTA IV” in the spring. They will no doubt be placing it at the top of their hoped-for holiday gift lists, which should give the stock price a nice bump.

I recommend you buy shares of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) at or under $21.

Source: The 3 Best Small Caps to Own This Fall: A TFN Special Report

Global Investing Roundups Tuesday, September 16th, 2008

William Patalon III — Tue, 16 Sep 2008 14:07:36 +0000

Electronic Arts Ditches Take-Two; Nucor’s Positive Outlook; Best Buy Snaps up Napster; Target’s New Ballpark; Oil Hits Six-Month Low; Wilbur Ross Expects 1,000 U.S. Banks to Fail; Hewlett-Packard Slashes Payrolls

Take-Two Interactive Software, Inc. (TTWO) shares plunged yesterday (Monday) after Electronic Arts Inc. (ERTS) withdrew its bid for the maker of the popular Grand Theft Auto 4 video game. Take-Two shares shed $5.32, a decline of 24%, to close at $16.57. But Ben Feder, Take-Two’s chief executive, said in an interview yesterday the company is “very, very happy to stay independent,” The Associated Press reported.

Steelmaker Nucor Corp. (NUE), a recent feature in Money Morning’s “Buy, Sell or Hold” column, raised its third quarter earnings target, The Wall Street Journal reported. Due to improved performance and recent acquisitions, Nucor upped its project to $2.15 – $2.20 per share from an earlier estimate of $1.80 – $1.85 per share. Nucor’s recent acquisitions include scrap purchaser SHV North America and Harris Steel Group Inc.

Electronics retailer Best Buy Co. Inc. (BBY) announced yesterday (Monday) that it would purchase Napster Inc. (NAPS) in a deal valued at $121 million. Best Buy’s acquisition includes Napster’s roughly 700,000 subscribers, its Web-based customer-service platform and mobile capabilities, MarketWatch reported.

Target Corp. (TGT) and the Major League Baseball’s Minnesota Twins announced a deal that will put the second-largest U.S. discount retailers name on the new ballpark that is expected to be ready in time for the 2010 season, Bloomberg News reported. It’s the second sports venue contract for the Minneapolis-based Target, which already has its name on the arena of the National Basketball Association’s Minnesota Timberwolves.

Oil prices closed below $100 a barrel for the first time in six months Monday, tumbling more than $5 as the outlook for both the global and domestic economy darkened. Light, sweet crude for October delivery fell $5.47 to settle at $95.71 a barrel on the New York Mercantile Exchange – the first time crude has settled under $100 a barrel since March 4.

Wilbur Ross, chairman and CEO of WL Ross & Co. LLC, said in an interview with CNBC that as many as a thousand banks could fail in the coming months. “I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s,” Ross said.

Hewlett-Packard Co. (HPQ) announced yesterday (Monday) that it plans to cut over 24,000 jobs as part of its takeover of Electronic Data Systems (EDS). The cuts represent about 7.5% of the two company’s combined workforce, MarketWatch reported. The restructuring should result in an ultimate $1.8 billion in annual savings.

Source: Global Investing Roundups Tuesday, September 16th, 2008

EA Drops Hostile Bid for Take-Two but a Friendly Deal Could be Imminent

Jason Simpkins — Tue, 19 Aug 2008 14:55:15 +0000

Electronic Arts Inc. (ERTS) dropped its $2 billion hostile takeover of video game publisher Take-Two Interactive Software Inc. (TTWO) yesterday (Monday), but the two companies have entered into private discussions that may finally result in a friendly merger.

Relations between the two companies began to thaw Friday, when Electronic Arts Chief Executive Officer John Riccitiello placed a call Take-Two Chairman Strauss Zelnick. After a weekend of discussions, EA announced that after six months, it would not extend the deadline for its hostile takeover bid.

EA said yesterday that its $25.74 a share offer was contingent on being able to distribute Take-Two products during the 2008 Christmas season. But since there is no longer any chance of that happening, EA must “validate the assumptions” inherent in its previous offer.

To assuage EA’s concerns Take-Two has agreed to present the company with its three-year product lineup, as well as financial forecasts.

In a letter made public yesterday, Take-Two’s Zelnick said his company looks forward to showing EA, and its board members, “the significant strides made by Take-Two since [Electronic Arts] last undertook a detailed review of our business in early 2007.”

However, Zelnick also reiterated his previous claim that a bid of $25.74 a share “undervalues Take-Two’s franchise and financial performance.”

EA initially offered $26 dollars a share for Take-Two in February, but lowered the bid to $25.74 a share after Take-Two issued additional shares. EA extended the deadline for the offer five times in an attempt to wear Take-Two investors down, and to give antitrust regulators ample time to review the deal.

“They are both posturing,” Wedbush Morgan analyst Michael Pachter told The Associated Press. “EA is saying ‘we want to pay less,’ Take-Two is saying they want more. The important thing is that they are talking.”

EA is very interested in Take-Two’s hit “Grand Theft Auto” series, which has garnered a reputation among parents and young adults alike for its graphic violence and sexually charged content. The latest installment of the series, “GTA IV,” was released on April 29 and been a boon for Take-Two.

The game sold 11 million units and pulled in gross revenue of $500 million in its first week. GTA IV’s success alone was enough to push fiscal 2008 revenue estimates to a range of $1.4 billion to $1.5 billion. The previous range was $1.25 billion to $1.4 billion.

Sales from the Grand Theft Auto franchise accounted for 78% of Take Two’s total sales last quarter.

Outside of Grand Theft Auto, Take-Two’s product line runs thin but includes well-known games such as “Civilization” and “BioShock,” which is being made into a movie. And EA is looking to bolster its arsenal to compete with rival Activision Bizzard Inc. (ATVI), maker of the hit “Guitar Hero” series.

“A mutual deal is going to have to be higher than $25.74, in order for the board of Take-Two to save face – call it a dollar or two dollars more,” Hudson Square Research analyst Daniel Ernst told Reuters. “EA can certainly afford to pay more.”

Source: EA Drops Hostile Bid for Take-Two but a Friendly Deal Could be Imminent

Global Investing Roundups: Tuesday, May 20th, 2008

William Patalon III — Tue, 20 May 2008 14:25:44 +0000

Lowe’s Reports 1Q Declines; Oracle of Omaha for Obama; Microsoft, Yahoo at it Again; Staples Launches Hostile Takeover of Corporate Express; News Corp. Increases Premier Stake; Take-Two Snubs EA; Pacific Ethanol Stock Surges Despite Loss; Feds to Investigate DeVry.

Lowe’s Cos. Inc. (LOW) coughed up a rough first quarter, reporting a 18% decline in profit as the declining U.S. housing market and weakened dollar cut customer spending. The No. 2 home-improvement retailer in the United States also lowered its full-year outlook and revisiting plans for store expansion, MarketWatch reported.

Billionaire investor Warren Buffett told AFP that he’s backing Barack Obama for the presidency. Buffett said he’d offer support to either Obama or Hillary Clinton, but leaned in favor of the Illinois senator. “I will be very happy if he is elected president,” Buffett said.

Microsoft Corp. (MSFT) is once again trying to team up with Yahoo Inc. (YHOO) though the renewed talks have not yet escalated to another takeover attempt. The Associated Press reported that discussions were revived Sunday, but Microsoft refused to offer up any specifics about the nature of the deal being explored except to say it involved bolstering the companies’ position in the online search and advertising markets.

Office supplies retailer Staples Inc. (SPLS) yesterday (Monday) launched a hostile $2.34 billion bid for Corporate Express NV (CXP), as the Dutch office supplier was unwilling to negotiate, Reuters reported. Corporate Express rejected Staples’ $12 (8 euros) a share offer last week saying it significantly undervalued the company. Based on 182.848 million Corporate Express shares outstanding, the equity value is worth $2.26 billion (1.46 billion euros). Including net debt, the value is $4.3 billion (2.8 billion euros), Staples said.

News Corp. (NWS) said yesterday (Monday) that it raised its stake in Premiere AG, a German pay-TV operator, to 25%, the Associated Press reported. News Corp., which previously owned 22.7% of the company, has been increasing its stake in Premiere since January, when it bought a 14.5% stake the from cable operator Unitymedia. Premiere has more than 4 million subscribers in Germany and Austria.

Video game maker Take-Two Interactive Software Inc. (TTWO) once again rejected rival Electronic Art Inc.’s (ERTS) $2 billion hostile takeover offer. Due in part to the strength of Take-Two’s release of Grand Theft Auto 4, management recommended that shareholders not accept EA’s offer, Reuters reported.

Pacific Ethanol Inc. (PEIX) shares more than doubled yesterday (Monday) as first quarter results beat expectations. The ethanol producer lost $35.2 million, or 90 cents per share, compared to earnings of $3 million, or 5 cents per share, for the same period the year prior, The Associated Press reported. But if not for a one-time charge of 96 cents, the company would have posted a first-quarter profit of 6 cents per share. Shares gained $1.94, an increase of 60%, to close at $5.14.

Shares of for-profit education firm DeVry Inc. (DV) dropped yesterday (Monday) on news that the federal government is investigating the firm’s recruitment policies, The Associated Press reported. DeVry stock shed $2.47, a 4.36% decline to close at $54.20. DeVry has pledged to cooperate fully with the investigation.

Global Investing Roundups: Tuesday, May 20th, 2008

Global Investing Roundups: Thursday, May 8th, 2008

William Patalon III — Thu, 08 May 2008 11:56:57 +0000

Congress Considers Steel Pennies and Nickels; Slovakia to Adopt the Euro; U.S. Home Sales Hit New Low in March; “Grand Theft Auto” Nets $500 million in One Week; Vallejo, Calif. Officials Vote for Bankruptcy; Disney Shares Gain on Happy Earnings; Cisco Stock Slumps; SEC Wants to Avoid Another BSC.

The U.S. Congress is considering a return to steel pennies and nickels that hasn’t been seen since World War II, according to the Associated Press. The cost of making a penny has risen to 1.26 cents and the cost of making a nickel has risen 7.7 cents, as soaring costs for copper, zinc, and nickel have soared in the past year.

The European Union said yesterday (Wednesday) that Slovakia has met its criteria for adopting the euro. It will be the sixteenth country to join the group, effective January. “However, to ensure that the adoption of the euro is a success, Slovakia must pursue its efforts to maintain a low-inflation environment, be more ambitious with regard to budgetary consolidation and strengthen its competitiveness position,” Joaquín Almunia, EU commissioner for economic and monetary affairs, said in a statement.

U.S. home sales dropped to a new low in March, signaling the housing slump has yet to bottom, the National Association of Realtors reported. The group’s seasonally adjusted index of pending sales for existing homes fell to 83.0 from a reading of 83.8 in February. The index stood at 103.9 in March 2007.

“Grand Theft Auto 4,” Take-Two Interactive Software Inc.’s marquee video game, reeled in more than $500 million in global sales (or about 6 million units) in its first week on the shelves, Reuters reported. Take-Two was hoping strong GTA sales would bolster its position in talks with Electronic Arts Inc. (ERTS), which is offering a $2 billion, or $25.74 share, buyout.

City officials of Vallejo, Calif. voted to file for bankruptcy, as declining housing-related tax revenue has left the San Francisco suburb unable to pay for basic services. Starting July 1, the city will have a $16 million deficit forecast for the year. “Nobody wants bankruptcy, but there doesn’t appear to be a whole lot of options left,” City Councilwoman Joanne Schivley told Bloomberg. “We are going to be out of money by June 30. It’s all a numbers game now.”

The Walt Disney Co. (DIS) announced net income for the Burbank, Calif.-based company’s second fiscal quarter increased 22% to $1.13 billion, or 58 cents per share, Bloomberg News reported. Shares got a nice 3% boost, gaining 97 cents to close at $34.70 yesterday (Wednesday).

Tech giant Cisco Systems Inc. (CSCO) announced it earned $1.77 billion, or 29 cents per share for its fiscal third quarter, down from $1.87 billion, or 30 cents, for the same period in the prior year, MarketWatch reported. Cisco shares slumped 2%, losing 55 cents to close at $25.78 yesterday (Wednesday).

The U.S. Securities and Exchange Commission will require greater disclosure from investment banks following the liquidity run on The Bear Stearns Cos. Inc. (BSC). “One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity,” SEC Chairman Christopher Cox told reporters in Washington yesterday (Wednesday), Bloomberg News reported.