Here's a one page summary of leading stories from this weekend's (July 1) 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; clicking on a headline takes you to the full Barron's article (paid sub. req'd.).
Prince and the Citi by Jack Willoughby
Highlighted companies: Citigroup (C)
Thesis: For all its advantages as the world's largest financial institution, Citi stock has struggled in the market recently -- in the past five years, Citi shares have declined 1%, versus gains of 62% for Bank of America, 56% for Wachovia, 46% for Wells Fargo and 47% for HSBC. Willoughby notes: 'Among the biggest financials, only JPMorgan Chase has done worse, with a loss of 4%.' The difficulties include melding the different business cobbled together by Sandy Weill, plus some high profile regulatory problems. But Chairman and CEO Charles O. Prince has a plan to streamline and expand in emerging markets that seems to be working. If it doesn't start implementing Prince's 'no excuses' policy, large shareholders may begin pushing for a breakup. But Willoughby believes that once the market begins understanding the growth potential at Citi, 'look for the shares to head to 60'.
Golden Goose by Rhonda Brammer
Highlighted companies: Newmont Mining Corp. (NEM)
Thesis: In the resurgent gold market, the only pure-play gold stock in either the S&P 500 or the Fortune 500 is Newmont. The company's global portfolio tends to be concentrated in politically stable areas, the management is 'first-rate' and finances 'robust'. Newmont doesn't hedge its gold production, and therefore its share prices is closely correlated with gold pricing. But in the past two years, gold is up 50%, while Newmont lagged that by far, and this year has proven even worse. The bottom line from Brammer: 'As Newmont's fortunes improve, its stock price should follow suit. The shares, now around $53, could easily be fetching $75 to $80 in 12 to 18 months.'
Quick comment: Seeking Alpha has a rich selection of articles and data on Newmont and the Gold sector in general.
Warning: Fallout Ahead by Sandra Ward
Thesis: Interview with 'master technician and risk manager' Ned Davis, President and senior investment strategist, Ned Davis Research. Davis is 'in a pretty defensive position', underweight stocks at 45%, bonds at 35% and overweight cash. He believes we're in a cyclical bear market. The disconnect between rich and poor in the U.S., and the high level of public debt trouble him. He thinks energy is now a 'crowded trade', which raises the risk profile, though the demand for energy is clearly growing strong. He believes bonds are currently attractive and would buy the 5- and 10-year treasuries, but not the long bond.
Sweet DRAMs by Leslie P. Norton
Highlighted companies: Infineon (IFX), Micron (MU), Intel (INTC)
Thesis: After a long price decline environment, the market for memory chips is turning back up, and DRAM memory should get a boost from the Microsoft Vista rollout, as it's the memory used in the great majority of PCs for random access memory. The recent shift in investment toward flash memory has taken attention away from DRAM, but it looks ready to rebound. The bottom line, according to Norton: 'As pricing improves throughout the DRAM market, stocks of some manufacturers could climb by 30% to 50%. Infineon and Inotera both look poised for big gains.'
Quick comment: Look for IFX and MU to get a boost from this article early this week. See more on Seeking Alpha on storage/memory stocks.
The Spin on Sally by Shirley A. Lazo
Highlighted companies: Alberto-Culver (ACV)
Thesis: Alberto-Culver is spinning off its Sally Beauty unit, the world's largest seller of professional beauty supplies. ACV shareholders will receive a one-time dividend of $25 a share and one shares the new Sally Beauty. The new shares should be tax-free for investors, because the private equity firm buying the Sally Beauty unit isn't buying a majority of the company. But the dividend will be taxable: 'if the dividend is covered by earnings and profits (E&P is strictly a tax-accounting concept, designed to measure a corporation's dividend-paying capacity, tax-wise), it represents qualified dividend income and is eligible to be taxed at no more than 15%, provided the stock is held for more than 60 days of the 121-day period that starts 60 days before the ex-dividend date.'
Stocks Find an Excuse to Cut Loose by Michael Santoli
Highlighted companies: Services Acquisition (SVI)
Thesis: Santoli comments on Thursday's big rally, which saw a 217-point spurt in the Dow: 'Though impressive, and helpful in working off some of the pessimism that had built up, Thursday's surge wasn't enough to justify declarations that any kind of summer rally is under way. For one thing, it looked quite similar in magnitude and trajectory to the one-day jump of two Thursdays earlier. And this Friday, with participation thinning ahead of a quasi-holiday weekend, stocks didn't add to the gains, instead slipping mildly... There's a gathering consensus among technically oriented market analysts -- maybe too cozy a consensus? -- that any rally will fall short of the old highs (1325 on the S&P, up 4.3% from here), that it's not a pop worth chasing, that the market will test the recent lows and maybe break them.'
Services Acquisition is buying the Jamba Juice smoothie chain, and will soon change its name to Jamba. That high growth health juice chain will attempt to coax consumers into buying $4 juices instead of $4 Starbucks coffee. While Santoli has plenty of words of warning on this business, he concludes: 'it's noteworthy that some of the venture-capital investors who sold Jamba to SVI rolled their after-tax profits into SVI shares. This one requires close research, but could well be worth the effort.'
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