Here's a one page summary of leading stories from this weekend's (May 13) Barron's (paid sub. req.), noting stocks to watch for Monday morning when the market opens and brief comments on the Barron's articles. Note: clicking on a stock ticker pulls up opinion, analysis and a quote for that stock.
Barron's 500 by Christopher C. Williams
* Highlighted companies: The top five -- Lehman Brothers (LEH), Goldman Sachs (GS), C.H. Robinson Worldwide (CHRW), Phelps Dodge (PD), Valero Energy (VLO)
* Thesis: Investment firms and resource/energy companies top the Barron's 2006 index of the 500 most profitable corporations. These firms profit from great movements of capital in the markets, and from the purchase of natural resources such as energy and copper.
* Quick comment: In previous years, health care and homebuilders topped the list. The cash-flow return on investment model is the basis for First Trust's proposed "DB Strategic Value Fund"
At Last, a Bright Cable Picture by Eric Savitz
* Highlighted companies: Comcast (CMCSA), Verizon (VZ), AT&T (T)
* Thesis: Interview with Comcast CEO Brian Roberts. The company's internet phone business is booming, digital subscribers are up sharply, and broadband is also growing nicely. The stock is up 20% since early April, fueled by stronger than expected first quarter results. Roberts says video on demand is driving alot of the subscription growth.
Quick comment: As we'd expect from Barron's, the interview contains a great deal of insight and information -- anyone invested in (or researching) the VoIP or cable sector needs to read this its entirety.
Finally Charging Ahead by Michael Santoli
* Highlighted companies: Master Card (MA), First Data (FDC), Global Payments (GPN)
* Thesis: Soon Master Card will consummate its $2.5 billion-plus IPO, at $40-43 a share on earnings of $1.98/share. That places it at a slight discount to First Data and Global Payments. The IPO is expected to be the largest of 2006, with only the Burger King offering having similar size. The market for its product is growing at a strong clip, but antitrust lawsuits filed by American Express and Discover could create huge liabilities after the IPO.
* Quick comment: Mastercard's new PayPass, 'Wave and Pay' system could be a source of competitive advantage.
Going Once, Going Twice: The Unmistakable Stamp of Success by Suzanne McGee
* Highlighted companies: Sotheby (BID)
* Thesis: A booming market for modern art has created record profits for auction houses like Christie's and Sotheby's. Last year's Spring auctions brought in 35% more in sales than the previous year's. Many collectors are branching out towards more contemporary art, which is bringing in unprecedented auction prices.
* Quick comment: A boom in the art market preceded the 1987 crash.
The Big Three Run Out of Oxygen by Jacqueline Doherty
* Highlighted companies: Wachovia (WB), Golden West Financial (GDW), Portland General Electric (POR).
* Thesis: Jacqueline Doherty reviews the wild action during last week in which a lot of air was knocked out of US equities, especially small cap and NASDAQ stocks. Wachovia (WB) plans to purchase Golden West Financial (GDW) which specializes in Pay-Option Adjustable rate mortgages in California. Some market participants question if the Option ARM franchise will have value when interest rates hold flat or rise. Portland General Electric was part of Enron and then transferred to creditors during ENE's bankruptcy. POR is trading very cheap compared to other electric utilities, and a hedge fund did make a take-out bid that was quashed by regulators.
* Quick comment: The problem with Option ARMs is what happens when the negative amortization stops, and payments begin. Many in the area of mortgage securitization refuse to handle Option ARMs as they believe that they have enormous amount of latent default risk which is currently being ignored.
Like a Virgin by Randall W. Forsyth
* Highlighted companies: NZ Telecom (NZT)
* Thesis: Randall Forsyth reviews chaos in the markets, including a discussion with Dave Ranson who feels that recent rise of gold prices is related to decline in value of dollars as the result of fears of a possible default on US Treasuries. NT Telecom's stock price is buffeted by the New Zealand dollar and by New Zealand's socialist government cracking the company's monopoly.
Quick comment: Seeking Alpha contributor Roger Nusbaum has written extensively recently on NZ Telecom -- view Roger's posts.
SanDisk's Hope: Flash Chips Everywhere by Bill Alpert
* Highlighted companies: Sandisk (SNDK)
* Thesis: Sandisk plans to use capital raised by the recent sale of convertible notes to build flash chip-making factories alongside Toshiba. The flash memory market suffers from a nasty conflict: demand for data storage (and therefore flash chips) is ever increasing, but the price of flash chips per megabyte is ever decreasing. A company must be able to increase storage capacity of its chips faster than the price per megabyte declines. A new dual-layer technology SanDisk is implementing hopes to do just that, finding big markets in notebook computers and cell phones.
* Quick comment: Convertable bonds are cheaper for a company to issue because the embedded conversion options compensate the buyer for a lower coupon and extra credit risk. In some cases, companies even issue convertible bonds with zero coupon rates.
Mission: Improbable by Kopin Tan
* Highlighted companies: AtheroGenics (AGIX)
* Thesis: If AtheroGenics's investigational drug AGI 1067 can cure heart disease, then the company will make scads of money. If not, the company will crash and burn. This has lead to rampant speculation in the options for the AGIX stock.
* Quick comment: In many cases, an at the money LEAP (long term option) is the best way to participate in a speculative stock.
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