Stock investors will key next on earnings from tech giant Intel Corp.(Nasdaq: INTC) and banks including J.P. Morgan Chase & Co. (NYSE:JPM) for hints of what to expect in the third quarter — and how badly the recession hurt businesses in the second quarter.

The Standard & Poor’s 500 Index and Dow Jones Industrial Average delayed declined for the fourth straight week last week – the longest string of losses since stocks hit their low point in March – and investors are looking at the tech sector to squelch the ongoing decline. The Nasdaq Composite Index complost 2.47% in the week ended Friday.

Earnings reports this week from computer-chip giant Intel and several big banks – including JPMorgan Chase & Co. - could provide investors and economists some insights on where the U.S. economy appears to be headed. Earnings are expected to improve over the last quarter, even though they’ll still be down substantially on a year-over-year basis, Binky Chadha, chief U.S. equity strategist at Deutsche Bank AG (NYSE: DB), told MarketWatch.com,

“A necessary condition for the markets to go up from here is that earnings have to deliver, and we need a dissipation of the uncertainty about earnings,” Chadha said.

Year-over-year (annual) earnings comparisons are typically the financial yardstick that analysts use to assess whether the U.S. economy is growing or declining, meaning that “sequential” (quarter-to-quarter) earnings aren’t as crucial. This time around, however, the quarterly numbers may be viewed as important because they might give a better picture of the economy’s health.

During periods of extreme uncertainty, earnings estimates for companies tend to be widely dispersed – a function of investors not really knowing what to expect. That’s particularly true right now of banks and financial-services companies – and companies that derive most of their income from discretionary consumer spending.

And that makes sense, given that those are the two most uncertain portions of the U.S. economy – thanks to the ongoing global financial crisis and a jobless recovery that is badly crimping consumer confidence.

After mounting one of the strongest surges in history from their March lows, U.S. stocks have fallen back in recent weeks as investors dealt with a growing realization that the U.S. economy – and its counterparts abroad – won’t rebound with the speed or strength that had been widely expected. Further evidence of this came on July 2, when a U.S. payrolls report said the economy had lost more jobs than had been expected.

Against that backdrop, analysts and other investors are looking to the U.S. high-tech sector to pull the economy out its doldrums, Money Morning recently reported as part of its mid-year forecast series.

Thomson Reuters predicted that S&P 500 earnings will decline by 36% from last year’s levels, with financials (-53%) leading the way and techs (-24%) performing better than other sectors.  This should represent the eighth-straight quarterly decline, though analysts seem more concerned about the ensuing management comments on future operations, since that will shed some light on where the economy is headed.

When Intel reports tomorrow (Tuesday) analysts expect to see that /quotes/comstock/15*!intc/quotes/nls/intcsecond-quarter sales and earnings plunged, but some analysts believe demand may be returning to the battered market following a sharp slowdown in demand for high-tech goods. Internet-search juggernaut Google Inc. (Nasdaq: GOOG) will report on Thursday.

Other firms that report this week include Goldman Sachs Group Inc. (NYSE: GS), Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C). JPMorgan reports Wednesday.

“The market is filled with folks who want to be optimistic, but simply cannot find enough genuine reasons to buy into the market,” Mike Gambale, an analyst at Informa Global Markets, told journalists. “We don’t expect impressive numbers across the board, but there will be some surprises, as there always are.”

[If you're new to the commodities-investing arena, and are uncertain about the landscape - or even if you're an "old hand" at natural-resource stocks, but want some insights into the new profit plays and new players - consider hiring a guide: Money Morning Contributing Editor Peter Krauth, a recognized expert in metals, mining and energy stocks, is also the editor of the Global Resource Alert trading service, which ferrets out companies poised to profit from the so-called "Secular Bull Market" in commodities. A former portfolio advisor, Krauth continues to work out of resource-rich Canada, which keeps him close to most of the companies he researches. Against the growing global financial malaise, Krauth says that commodities are among the most-profitable and least-risky investments available, and notes that this may well be the most powerful bull market for commodities we'll see in our lifetime. He makes a strong case. To read more about his strategies, and the sector plays he likes the most, Please click here. ] 

Market Matters

“New and improved” was the market mantra of the week. General Motors Corp. (OTC: GMGMQ) emerged from Chapter 11 bankruptcy protection after just over a month, eager to start anew as a “new and improved” automaker.

The Commodity Futures Trading Commission (CFTC) set its sights on “new and improved” trading regulations to limit excessive speculation within the energy and other commodities markets.  Some politicos are calling for a “new and improved” stimulus package to move the economy beyond the worst recession since the Great Depression.  A “new and improved” Public-Private Investment Program (PPIP) was scaled back dramatically as selected managers will begin purchasing toxic assets from ailing banks.  Unfortunately, as the week progressed, investors did not seem too keen on these “new and improved” developments.

Despite harsh protests by consumer groups and creditors, new GM reopened for business, “leaner and meaner” than ever.  A judge’s ruling allowed the once-bankrupt company to sell its performing assets to a new government-controlled entity (thanks to a $50 billion “investment” by taxpayers).

The government then shifted its attention to the regulatory world and announced plans to propose trading restrictions on certain commodities and increase the oversight over risky derivative products that have proven so detrimental to the financial markets.

The widely anticipated earnings season got started as Alcoa Inc. (NYSE: AA) reported another quarterly loss (with better-than-expected numbers) and oil giant Chevron Corp. (NYSE: CVX) warned that its results would be hindered by poor refinery operations and a weak dollar.

Investors have taken a more cautious approach heading into the new (but not improved) earnings season, particularly after last week’s pessimistic labor data.

Stocks fell throughout the week and fixed income again became beneficiary of safe-haven trades.  The tech-heavy Nasdaq now remains the only major domestic stock index “in the black” for the year.

Fickle energy traders suddenly turned bearish, as well, as the weak economic data implied that oil demand would be curtailed for the foreseeable future (or, at least, until 2013 according to Organization of the Petroleum Exporting Countries’ “2009 World Oil Outlook”).  Crude oil plunged beneath $59, or more than 10% during the week, on ongoing economic concerns,  although consumers ultimately may be recipients of cheaper gas prices.

Economically Speaking

Talk of a second stimulus surfaced this week, with several leaders – including U.S. Vice President Joe Biden and investing icon Warren Buffett – stating that the Obama administration’s $787 billion stimulus isn’t enough to jumpstart the U.S. economy.

On the other hand, Senate Majority Leader Harry Reid, D-Nev., believes the plan needs more time to work through the system as only 10% or so has even been distributed thus far.  Economists seem to agree with “Hank,” as the latest Wall Street Journal survey reported that over 80% of respondents feel that the country does not need a new round of stimulus in the current environment.  Still, the “Oracle of Omaha” painted an optimistic picture of the future by stating that the United States is “going  to come out of this better than ever, the best days of America lie ahead but not next week or next month.”

On the global front, the International Monetary Fund (IMF) revised – upward – its forecast of economic growth for 2010 and confirmed its belief that the developing economies in China and India will greatly contribute to the global rebound.

The May trade balance highlighted a slow week of data as the deficit declined to its lowest level since late 1999 and the weak labor market helped reduce consumer demand for foreign goods.

While initial claims for unemployment benefits fell to levels not seen since the beginning of the year, continuous claims (those folks who remain on the unemployment rolls for over a week) rose by another record amount.

In other words, no matter how one dissects the numbers, the labor picture looks dire and may not begin to improve for some time.  As such, the latest University of Michigan consumer sentiment reading dropped for the first time since February, another sign that the optimism of the past few months may be fading fast.

Weekly Economic Calendar

Source: Investors Looking to Tech to Pull U.S. Stocks – and the Economy – Out of Their Doldrums

Google Inc. (Nasdaq: GOOG), not satisfied owning the search engine market, yesterday (Wednesday) revealed it is going to assault Microsoft Corp. (Nasdaq: MSFT) on the turf it has dominated for two decades: the operating system (OS).

In a blog posting, the Mountain View, Calif.-based company introduced the Google Chrome Operating System, which shares the same name as the web browser it introduced in September. Google expects the OS to be available in the second half of 2010, and it initially will run onnetbooks, or low-cost laptops designed for Internet access. The company is working with multiple manufacturers such as Acer Inc., Hewlett-Packard Co. (NYSE: HPQ) and Toshiba Corp. to bring Chrome OS-backed netbooks to the market, Google said.

No. 1 computer seller H-P told the Dow Jones Newswires that it is “studying” the Chrome OS.

“We want to assess the capability it may have for the computer and communications industries,” said H-P spokeswoman Marlene Somsak.

Dell Inc. (Nasdaq: DELL) is also giving consideration to Chrome OS.

Analysts were mixed on the news.

“There is a possibility that the new OS can break the paradigm Microsoft and Intel created over the past 20 years,” aid Yukihiko Shimada, a computer analyst at Mitsubishi UFJ Securities Co. told Bloomberg News. “There is plenty of business opportunity for Google in this market.”

However, FBR Capital Markets Corp. (Nasdaq: FCBM) analyst David Hilal said Google could capture some share on the netbook front, but could find it tough to get beyond that.

“I really don’t picture Google going upstream to laptop or PC market,” he said in an interview with MarketWatch.com. “They may try, but that is a much tougher row to hoe.”

Comparing the Chrome OS to its Chrome web browser, Google said it is “going back to the basics and completely redesigning the underlying security architecture of the OS so that users don’t have to deal with viruses, malware and security updates. It should just work.”

The move represents a natural progression for Google, which for years has been experimenting in applications beyond its search. Its most successful experiment is undoubtedly Gmail, which earlier this week left its beta phase after five years. Since Gmail’s inception, the company produced Google Apps, which gives users a central location for calendar, word processing and spreadsheet applications-all of which are compatible with Microsoft Office applications.

Google Apps, a prime example of cloud computing, allows for a more consistent collaboration between users: Instead of emailing attachments, the document will be on a central server where anyone with permission can access edit it within the web browser from any computer.

Chrome OS will utilize the same “cloud” that Google Apps is using. For app developers, “the web is the platform,” Google said. This will give Chrome OS a competitive advantage over the top three operating systems on the market right now (Windows, MacOS and Linux) because any app that runs in the Chrome OS will also run on the others.

“We hear a lot from our users and their message is clear-computers need to get better,” Google said. Whether Google can make an impact on the quality of computers is an entirely different issue. It faces a steep uphill battle against not only Microsoft, but also Apple Inc. (Nasdaq:AAPL), which is slowly eroding Microsoft’s commanding lead in the OS market.

Last November, Microsoft’s Windows OS market share dropped to 89.6%according to market research firm Net Applications. That marked the first time the OS held less than a 90% share of the market. In May, that share was down to 87.8%, while Apple’s MacOS was up to 9.8% from November’s 8.9%.

The news of a Google OS could ice its relationship with Apple, where Google Chief Executive Officer Eric Schmidt has a seat on the board of directors. The two companies have already been competing on the mobile phone front with Google’s Android OS competing with Apple’s iPhone.

In November 2007, when Google announced it would develop the OS for a line of T-Mobile USA Inc. phones, some analysts were surprised that Schmidt would remain on the board of operations at both companies.

In May, The New York Times reported the Federal Trade Commission launched an inquiry into the close ties of the two boards. And now with the Chrome OS news, respected tech site CNET is calling for Schmidt to step down from Apple’s board.

When Chrome OS is released, it will mark the third major front in its war with Microsoft. The other two are cloud applications and search.

Microsoft is attempting to chip away at Google’s ubiquitous search engine with its newly launched Bing search engine. To a lesser extent, Google competes with Microsoft with its Chrome web browser (which has 1.8% of the market share in May versus Microsoft Internet Explorer’s 65.5%) and on the mobile phone front, pitting its Android OS against Windows Mobile.

Chrome OS, an open source project that will have its code readily available for anyone to see-will be free, Google spokesman Eitan Bencuya told Money Morning in an e-mail. This strategy removes an important barrier for many and will likely serve as a funnel to Google’s other products and lucrative ads.

Microsoft is set to debut its latest version of Windows, Windows 7 on October 22. Market research firm International Data Corp. (NYSE: IDC) expects Windows 7 to become the dominant OS by 2012.
Shares of Google were boosted 1.48% by the news yesterday, closing at $402.49, up $5.86.

Hot Stocks: Google Fires Shot Across Microsoft’s Bow with New Operating System ]]> http://www.contrarianprofits.com/articles/google-fires-shot-across-microsoft%e2%80%99s-bow-with-new-operating-system/18922/feed 0 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-july-7-2009/18784 http://www.contrarianprofits.com/articles/investment-news-briefs-tuesday-july-7-2009/18784#comments Tue, 07 Jul 2009 13:45:14 +0000 Money Morning Staff http://www.contrarianprofits.com/?p=18784 World Bank President to G8: Economy Still Dangerous; Service Sector Improves for Third Straight Month; Rio Sells Packaging Business to Bemis for $1.2 Billion; Crude Prices Drop Again; Report: Bank of America Writeoffs to Rise; Brazil’s Credit Rating Could Increase; DOJ Investigating Telecoms; Father of Web Browser Starts New Tech Venture Capital Firm

• World Bank President Robert Zoellick warned in a letter to the Group of Eight nations that the global economy is not out of the woods yet and they should be cautious about pulling back on stimulus programs.  Dated July 1, the letter was addressed to G8 host Italian Prime Minister Silvio Berlusconi and said interventions by central banks and governments appeared to have “broken the fall in the…

• In spite of tense geopolitical situations in the Middle East, light sweet crude for July delivery yesterday (Monday) fell $2.62, or 3.8%, to settle at $66.93 a barrel on the New York Mercantile Exchange (NYMEX). Large and violent protests in Iran over the outcome of its recent election would normally raise concerns about supply disruptions and drive up the price of oil. Instead, the market is looking past this tense backdrop in the world’s No. 4 oil producer because of a large supply worldwide, Alaron Trading energy analyst Phil Flynn told CNN Money.

• The Securities and Exchange Commission (SEC) charged a brokerage firm and several individuals with raising money from investors to feed Bernie Madoff’s Ponzi scheme. Cohmad Securities Corp., its chairman Maurice Cohn, Chief Operating Officer Marcia Cohn and representative Robert Jaffe have all been charged with securities fraud, CNN Money reports. The Cohns and Jaffe allegedly courted investors for Madoff’s grand scheme, which may get Madoff up to 150 years in prison and $170 billion in restitution.

• The chief executive officer and president of the world’s largest third-party video game publisher fired a shot over Sony Corp.’s (NYSE: SNE) bow, taking the electronics giant to task over the high price of its PlayStation 3 console and going as far to say his company may pull its support if a price drop doesn’t happen soon. Activision Blizzard Inc.’s (Nasdaq: ATVI) Bobby Kotick said his company paid Sony $500 million in royalties and other goods last year, according to the Times Online. “They have to cut the price, because if they don’t, the attach rates [the ratio of games purchased to a console] are likely to slow. If we are being realistic, we might have to stop supporting Sony,” Kotick said. “When we look at 2010 and 2011, we might want to consider if we support the console – and the [PlayStation Portable] too.” Activision is the company responsible for the some of the sector’s largest franchises including “Guitar Hero,” “Call of Duty” and the “Tony Hawk” series of skateboarding games. A loss of support from Activision would be a huge blow for Sony’s gaming arm, which lost $597 million last year. Sony’s PlayStation 3 is currently third in a three-horse video game race behind Nintendo Co. Ltd.’s (ADR OTC: NTDOY) Wii and Microsoft Corp.’s (Nasdaq: MSFT) Xbox 360.

• In a sign that may show investors have let their guard down, technology stocks have significantly outperformed the broader market, according to MarketWatch.com. Since its March low, the tech-heavy Nasdaq Composite Index is up more than 40% and nearly 13% for the year. “Technology tends to be a leader in the early stages of an economic turn.,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “That’s what we look 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.” Still, Nasdaq’s notorious volatility was on display yesterday (Monday), as it fell 3.35%, more than both the Dow Jones Industrial Average and the Standard & Poor’s 500 Index.

• Restructuring costs and merchandise markdowns contributed toWalgreen Co.’s (NYSE: WAG) declining profit, which fell by 8.7% in the quarter ended May 31. The drugstore chain reported a net income of $522 million, or 53 cents per share on $16.2 billion in revenue. That compares to a net income of $572 million, or 58 cents per share on revenues of $15 billion in the same period last year. Wall Street was expecting Walgreens to earn 56 cents per share. The company’s shares closed at $29.64 yesterday (Monday), down 5.7%.

• Ford Motor Co. (NYSE: F) and General Motors’ (OTC: GMGMQ) Chevrolet division are close to eliminating a long-criticized quality gap with Toyota Motor Corp. (ADR NYSE: TM), according a closely watched J.D. Power and Associates survey. The top three spots in the survey went to luxury brands, while Chevrolet, Ford and Toyota were in what amounted to a statistical dead heat further down in the rankings, Reuters reported. “Have the leading domestic nameplates caught up with Toyota? The answer is almost,” Dave Sargent, vice president for auto research at J.D. Power said. Toyota’s Lexus brand took the top spot, while Porsche and GM’s Cadillac were Nos. 2 and 3 respectively.

Source: Investment News Briefs Tuesday, June 23, 2009

In spite of tough economic times, smartphone sales represented 23% of all mobile phone sales in the fourth quarter of 2008, up from just 12% a year earlier, according to market research firm The NPD Group Inc. Another firm, Gartner Inc. (NYSE: IT), says smartphone sales will increase 25% even as the overall mobile phone sector contracts.

Some of the millions of jobless Americans are turning to smartphones as a tool in their job searches, as a means to enhance communication with potential employers.

“I don’t know if it’s really an expectation, but if another job candidate returns an e-mail message eight hours later, and you get back immediately with a message that says ‘Sent from my iPhone,’ I think it has to be a check box in your favor,” jobseeker Helene Rude told The New York Times.

While Apple Inc.’s (Nasdaq: AAPL) iPhone typically gets all the headlines, it is Research in Motion Ltd.’s (Nasdaq: RIMM) line of BlackBerry phones that commands 55% of the market share versus Apple’s 20%, according to market research firm International Data Corp.

The key factors in RIM’s success are market penetration, choice of models, price and, most recently, enticing promotions such as buy one, get one free. BlackBerry phones are on all U.S. carriers, and range in price from $30 to $250. Apple’s two iPhone models, the 3G and 3G S, will cost any user who signs a new contract $99 and $199, respectively.

Smartphones are proving to be profitable, as well. Canada-based RIM last week announced a net income of $643 million, or $1.12 per share diluted on revenues of $3.4 billion. That compares to a net income of $482.5 million, or 84 cents per share diluted on revenue of $2.2 billion in the same period a year ago. Approximately 81% of RIM’s revenue came from sales of BlackBerry devices.

Few smartphones are limited to one carrier. Among them are the iPhone, which can be used only on AT&T Mobility LLC’s network, and Palm Inc.’s (Nasdaq: PALM) newly launched Pre, available only through Sprint Nextel Corp. (NYSE: S).

Apple’s recent price drop on its 8 gigabyte iPhone 3G model to $99 will be interesting to watch, as it will put the company’s wildly popular App Store in the hands of more consumers, who are being bombarded by a series of “there’s an app for that” TV commercials.

Other smartphone makers are playing catch-up in the app department, which will not only be an important factor in consumers’ purchase decisions, but another revenue stream for smartphone makers and their wireless carrier partners.

Apple Chief Executive Officer Steve Jobs told The Wall Street Journalthat his company’s App Store generated $1 million a day in its first month.

Apple’s App Store launched in July last year, followed by Google Inc.’s (Nasdaq: GOOG) Android Market (for HTC Corp.’s G1 phone) in October, BlackBerry App World in April and finally, Palm App Catalog, still in its infancy after its debut with the June 6 launch of the Pre.

Source: Research in Motion Still Leading the Smartphone Pack

Palm Inc. (Nasdaq: PALM) can’t seem to catch a break. Just days after its stock hit a 52-week high and its new Pre smartphone sold out in its Saturday debut, Apple Inc. (Nasdaq: AAPL) stole Palm’s thunder by announcing a new iPhone, the iPhone 3G S, and more importantly, cut the price on its existing 8 gigabyte model to $99-half the price of the Pre.

The move was a very shrewd one that will allow Apple and its iPhone to stay ahead of the pack in the smartphone industry. But Palm’s attempt to win a share of the market by releasing a smartphone that is compatible with Apple’s iTunes computer software shows that it is determined to give Apple a run for its money.

Pre had an impressive launch, but gauging just how impressive will be difficult until Palm actually reveals the numbers. Analysts’ estimatesrange between 50,000 and 200,000 Pres sold this past weekend. Apple’s first-generation iPhone sold 146,000 units on its launch day alone back in 2007.

Shortages of Pre may be to blame for a cooling of investor interest Palm reached its 52-week high of $14.14 on Friday: The shares had fallen 10% by Tuesday’s close and were down another 5.5% in mid-afternoon trading yesterday (Wednesday). And it isn’t likely that a Pre shortage-artificial or not-would produce the feverish demand that’s sometimes seen with electronic products … demand that can send the product-maker’s stock into a stratospheric climb.

Palm’s Pre is billed as an “iPhone killer” by some, but it really isn’t and probably never will be unless it can rival Apple’s impressive arsenal of iPhone software applications – known as “apps” in the technology lexicon.

Apple’s “App Store” – an online store that sells added features for the iPhone like access to Google Earth, the Weather Channel, and social-networking site Facebook – is a big reason for the iPhone’s popularity.More than 1 billion apps were downloaded to iPhones since the App Store’s launch last July.

To date, there are 50,000 applications available for iPhone. The closest competitor, Google Inc.’s (Nasdaq: GOOG) Android cell phone operating system, has only 5,000 apps available for HTC Corp.’s G1. Pre had only18 apps at launch.

Apple takes 30% of the revenue generated by the App Store. Apple Chief Executive Officer Steve Jobs says the App Store generates $1 million in revenue daily, which would mean his company makes about $300,000 from the App Store daily.

Lightspeed Venture Partners‘ Managing Director Jeremy Liew said Applemade $45 million from the App Store in its first nine months.

Apple’s exclusivity with AT&T Inc. (NYSE: T) is due to end next year, and iPhones may become an option on the largest U.S. wireless  carrier – Verizon Communications Inc.’s (NYSE: VZ) Verizon Wireless unit – as soon as next year, according to a USA Today report. That would expose a whole new customer base to the iPhone and its popular applications. Sources told The Wall Street JournalPre is set to debut with Verizon in January.

While it remains to be seen if iPhone can be toppled, the one safe bet is that the smartphone market will get more crowded. In addition to Apple’s iPhone and Palm’s Pre, Research in Motion (Nasdaq: RIMM), which makes the Blackberry, are all jockeying for market share.

Blackberry’s biggest advantage over the iPhone and the Pre is that it isn’t subject to limiting exclusivity agreements: The Blackberry is available to customers of all major U.S. wireless carriers. Currently, anyone who wants an iPhone has to be a part of – or switch to – AT&T’s network, and anyone who wants a Pre must be a to be a Sprint Nextel Corp. (NYSE: S) customer.

Analysts are mixed on RIMM’s outlook, but the consensus estimate among analysts is that the Waterloo, Ontario (Canada)-based company will earn $3.96 per share for the current fiscal year, and will see its profits advance to $4.70 per share in 2010. That would push the Price/Earnings (P/E) ratio – currently 25 – down to 17.5 on a company whose earnings are projected to grow at an average annual rate of 20% for the next several years.

Source: Hot Stocks: Palm Pre Is No ‘iPhone Killer’ ]]> http://www.contrarianprofits.com/articles/hot-stocks-palm-pre-is-no-%e2%80%98iphone-killer%e2%80%99/17787/feed 0 http://www.contrarianprofits.com/articles/robots-and-memristors/16595 http://www.contrarianprofits.com/articles/robots-and-memristors/16595#comments Wed, 13 May 2009 17:45:36 +0000 Patrick Cox http://www.contrarianprofits.com/?p=16595 There’s something about having servants – even if they seem to love their jobs – that is vaguely disturbing. It offends many Americans’ sense of egalitarianism. But robots are different. They aren’t human. And that’s a big part of their potential appeal. They don’t eat, they don’t get offended and they don’t ask for pay raises. So if a robot could do what a human servant could do, wouldn’t you want a robot?

They’ll keep our homes, track our finances and clean up after our pets. Best of all, they’ll be robotic. So you won’t have to feel guilty. You won’t even have to tip them! Within a few years, truly sophisticated consumer robots will be common in high-income households. Before…

Or as Jack Ablin, Chief Investment Officer at Harris Private Bank puts it, “A lot of these deals are motivated by self-defense.”

But they’re wrong.

Even though this Monday wouldn’t even make the cut for the top 20 deal days during the last takeover boom (in 2007), it’s more than just a function of survival or some freak bear market anomaly.

Another takeover boom is brewing. Here’s how I can be so sure…

Takeover Boom Catalyst – Private Equity

We all know the catalyst behind any serious takeover boom is private equity. Because when they’re flush with cash, competition for targets heats up and bidding wars ensure.

• We also know such activity sputtered along in the first quarter.
• Only $8.7 billion worth of private-equity-led deals were completed, compared to the $57.6 billion in the first quarter of 2008, according to Dealogic.
• Moreover, private equity fundraising – the fuel for future activity – also fell off the cliff, dropping 81%, to its lowest level in over five years.

But those are only the headlines. And sadly, most investors stop there. Digging deeper, though, reveals a new trend is unfolding.

The number of firms hitting the pavement to raise new funds is on the rise. In January, there were 1,624 funds trying to raise $889 billion, a 25% increase from last year… and a 43% increase from 2007.

And they’re enjoying success.

Morgan Stanley raised a record-setting $1.14 billion for its Private Markets Fund IV. Abbott Capital Management also raised more than $1 billion for their latest fund.

In other words, the next takeover boom is incubating. And it makes perfect sense. Despite such a challenging environment, the smart money knows it’s time to make a deal…

Stock valuations rest at historically low levels. Financing, although hard to come by, is similarly cheap. And thanks to the bear market, every manager is amenable to a deal. In many cases, it’s their only hope at quickly restoring shareholder value.

So if you’re not preparing for the imminent takeover boom by investing in potential takeover targets now, you should be. After all, the institutional money is getting ready. And history proves the premiums will be rich and the opportunities plentiful.

Of course, half the battle is being prepared, like a Boy Scout. The other half is knowing where to look, a la G.I. Joe.

An Imminent Takeover Boom In These 3 Sectors

In my opinion, you should focus on the following three sectors because they will attract both private equity suitors and publicly traded competitors. Thus, bidding wars will erupt and premiums paid to shareholders will be the greatest.

• Health care (specifically drug makers) – All major pharmaceutical companies are scrambling to replenish pipelines. Sure $150 billion worth of deals have already been announced this year. But the largest drug makers are still sitting on a $100 billion in cash and need to replace $84 billion in annual sales.
• Energy – As famous oilman T. Boone Pickens famously acknowledged, it’s much cheaper to drill for oil on Wall Street than in the ground. The pullback in oil and natural gas prices should entice cash-rich international giants to try to replenish reserves on the cheap.
• Technology – This is another cash-rich sector with cheap valuations and technologies becoming more essential to everyday life. At the same time, the industry heavyweights are struggling to grow organically. Acquisitions are the only quick fix. Yet private equity shops are equally eager to pounce on the high margin, high penetration products in this sector.

Next week, I’ll show you how to do identify the most attractive takeover targets in each sector. I’ll even include three companies at the top of my list. So stay tuned.

Source: The Coming Takeover Boom: 3 Sectors Ripe for Mergers & Acquisitions

Amazon was trading at $61.15 a share when we recommended it, and rose about 30% in the nine weeks since. And I’m pretty certain that our investment in Amazon will continue to reward us with a steadily advancing profit.

Not only does the company continue to gain market share against its brick-and-mortar competitors, its innovation and superior strategic execution continues unabated.

Our reasons for buying Amazon stock back in February turned out to be right on target:  Amazon did release the mysterious-but-rumored encore to its successful Kindle, known, appropriately, as the Kindle 2, just one week after we beat them to the punch on their own announcement right here in this column.  And a large amount of other new and improved technologies have been hitting the market lately, from multi-terabyte storage memory devices, to enhanced iPods, laptops and PCs. A step-up in technology is bringing with it another wave of upgrade fever.

Amazon’s “cloud-computing” initiative continues to make major progress, as well.  The impact of this technology – like most new successful technologies – has been grossly understated at the onset, but it promises to gain massive momentum.

The reality is that Amazon is turning out to be a much better profit play than I anticipated. In fact, after I wrote that article, I bought a Kindle 2 for my youngest daughter’s 11th birthday.

I had been looking for a way to appease my daughter’s voracious reading appetites. But I also wanted to try the novel device for myself, and save the long and highly inconvenient morning walk through the snow, rain or cold up and down my long driveway to pick up The Wall Street Journal and the Financial Times print editions.  I also wanted to experiment with other foreign newspaper subscriptions like the Shanghai Times.  And lastly, but very importantly, I wanted to see for myself just what the upside for this device actually was.

The experiment proved to be an immediate success.  In short, I was blown away by the Kindle’s simplicity and powerful capabilities. It can hold more than 1,500 books, the definitions for words a reader might not know appear at the bottom of the page, and you can make notes and cut and paste sections of the onscreen content.

When parents and teachers across America find out about these capabilities, the Kindle’s sales are going to take off exponentially. These functionalities make reading a book much easier and more useful in this electronic form than in the “hard-copy” formatf. The device also proved to be much more attractive and addictive than I expected and it’s remarkably easy to use.

Critics point to the devices hefty price tag, but the low cost of electronic publications versus paperback or hard cover books – as well as the aforementioned technological advantages – offsets the high cost of the Kindle.

With the Kindle’s free Whispernet wireless Internet access, I was able to quickly purchase and download the complete works of Charles Dickens (more than 200 works) for less than $5, a Bible (Old and New Testament) for $2, and other works for as little as 75 cents each.

I went on to buy Adam Smith’s “The Wealth of Nations,” Sun Tzu’s “The Art of War” and Baron Von Clausewitz’ “On War” for a pittance.  Just buying the more than 200 Dickens books in physical form would have cost well in excess of $1,000.  And the whole exercise took less than five minutes.  Such convenience and value in buying can be very dangerous to people’s budgets and conversely good for Amazon.

And you don’t have to carry that weight.  A student could conceivably carry all his or her school or university textbooks in the 10-ounce Kindle. Imagine having every book you ever read or studied readily at hand.

What’s more is that every book you buy is not just stored in your Kindle, but also in your Amazon account – a true testament to the huge value of cloud computing. So, if you ever lost your Kindle, you could re-download your previous purchases into your new device.  And should you max the memory capacity of your Kindle, you can just delete it from the device and it appears as “archived,” reminding you that you can re-download it from Amazon’s servers whenever you please.

Indeed, the Kindle is both unique revolutionary, and will be a huge success for Amazon.

So, ahead of the quarterly profits I would not dare to take profits in this stock. Sure, technology stocks have been on a tear, and Amazon is one of the leaders, but this is just the beginning.

We still have the bank stress tests ahead, the General Motors Corp. (NYSE: GM) and Chrysler LLC deadlines and the implementation of the Public-Private Investment Program (PPIP) government program to help ease the toxic asset problem at the banks, so nothing is certain. But I am optimistic about these three situations.

As we saw with Wells Fargo & Co. (NYSE: WFC), when you are borrowing at 0% interest and lending at 6% through 22% (lowest FICO score credit card loans), profits accumulate very fast and help resolve many problems.

I expect the PPIP program to be a resounding success, as well, Since it not only provides huge subsidized financing from the government, it moves much of the credit risk in those positions to them.

Finally, the Chrysler and GM situations – either through bankruptcy or voluntary reorganization – will eventually result in companies that can be great once more.

That brings us back to Amazon’s valuation.  Amazon has continued to grow sales and profits in this recession and as the economy picks up, I can see momentum accelerating.

The first line of true resistance that Amazon stock should encounter is its all-time high.  And if Amazon beats estimates when it releases its earnings on April 23, it will get there really fast.  But even if it doesn’t get there as quickly as I expect, this is a stock to keep well stashed for years to come.

Recommendation:  Buy Amazon.com Inc. (Nasdaq: AMZN) before Monday’s product announcement and ahead of the rollouts of the stimulus packages planned by both the United States and China (**).

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

Source:  Buy, Sell or Hold: Amazon.com Inc. Looks Even Better Now Than it Did in February

]]> http://www.contrarianprofits.com/articles/buy-sell-or-hold-amazoncom-inc-looks-even-better-now-than-it-did-in-february/15494/feed 0 http://www.contrarianprofits.com/articles/red-hat-inc-nyse-rht-stock-of-the-day/15017 http://www.contrarianprofits.com/articles/red-hat-inc-nyse-rht-stock-of-the-day/15017#comments Tue, 17 Mar 2009 18:10:38 +0000 Alexander Green http://www.contrarianprofits.com/?p=15017 When the New York Stock Exchange needed a computer operating system to handle its vast amount of daily transactions, it did not look to the perennial tech-bellwethers like Apple or Google.

Instead, the exchange had a much better company in mind, one whose technology is stronger and more efficient. And one whose technology is “crash-proof”.

You see, the NYSE simply can’t run on a program like Microsoft Windows. Why? According to this company’s President and CEO Jim Whitehurst, “It crashes too often.”

That’s why the New York Stock Exchange selected Red Hat, Inc. (NYSE: RHT). Headquartered in Raleigh, North Carolina, Red Hat is the largest provider of Linux software and is the most recognized open brand source in the world.

The company serves global enterprises…