Fed's Yellen: Economic Downturn a Possibility
San Francisco Fed President Janet Yellen said in a speech over the weekend that a U.S. economic downturn is possible, and it could have "major spillover effects" on the rest of the world. The economy grew at a lethargic 1.3% in Q1, reflecting a slumping housing market and an uptick in inflation -- the country's fourth straight quarter of disappointing growth. Despite her warning, Yellen said she believes the economy "is going to pick up steam and revert back to trend growth before 2007 comes to an end." The current period of slow growth should ease pressure created by the "slightly elevated" inflation level, she said. If the U.S. economy does enter a downturn, other countries have tools in place that can mitigate the impact. Those include inflation targets, a tool the Fed does not use but is considering. Other global economic risks include investment and savings imbalances and disruptions caused by the repricing of risk abroad. The Fed has maintained the U.S. benchmark interest rate at 5.25% since June in order to give growth a chance to recover. The next Federal Open Market Committee meeting, the Fed policy gathering at which interest rates are decided, will be held on May 9.
Commentary: Friday's GDP Report Shows Economy Definitely Slowing, Consumer Fighting Valiantly • GDP Drops While Inflation Flares • Chicago Fed Index Shows Slowing Economy - Not a Recession
Stocks/ETFs to watch: iShares Lehman Aggregate Bond Fund (AGG), DIAMONDS Trust, Series 1 (DIA), SPDR S&P 500 (SPY)
Chartered Semi CEO Says Firm Is Not a Takeover Target -- WSJ
The Wall Street Journal reports Chartered Semiconductor Manufacturing CEO Chia Song Hwee said his firm 'isn't a takeover target, and nor is it in talks with any potential buyer,' in an interview on Friday. This follows Chartered Semi's Q1 earnings release the day prior, in which it reported a 76% decline in net income to $5.3 million ($0.01/ADS), and a 10.6% drop in revenues to $345.3m. The Journal notes speculation of a takeover began in March when Temasek Holdings -- the state-owned investment arm of Singapore and a 60% Chartered Semi shareholder -- made an offer for chip tester and assembler STATS ChipPAC Ltd. In Chartered Semi's earnings press release, Mr. Chia said, "... we are seeing resumption of growth across several of our customers and applications [in Q2]" and "... we are expecting wafer shipments to grow approximately 15% sequentially," however, due to lower 90nm wafer shipments to the computer sector, "we expect Chartered revenues and revenues including our share of SMP to be essentially flat sequentially."
Sources: The Wall Street Journal, Q1 Earnings Press Release
Commentary: Five Reasons To Be Bullish On Semiconductors • Growth is Trumping Value: Counting Semi Stock Chips • The Long Case for Semi Stocks
Stocks/ETFs to watch: Chartered Semiconductor Manufacturing (CHRT). Competitors: Semiconductor Manufacturing International (SMI), United Microelectronics (UMC), Taiwan Semiconductor Manufacturing (TSM)
Apple Battery Replacement Not Expected To Have a Material Impact On Earnings
Apple Inc. announced Friday that it plans to issue free replacements for certain batteries designed for its MacBook and MacBook Pro notebook computers that have been having continual performance problems. Apple said the batteries are simply not charging, even when plugged in, and that they do not pose a safety risk. The affected batteries are in MacBook and MacBook Pro notebooks sold between February 2006 and April 2007. The company released a software update designed to improve battery performance, but it did not work in all cases. Apple does not expect the battery update to have a material impact on earnings. Apple shares gained nearly 10% last week on the company's strong earnings report.
Sources: Reuters, bizjournals.com, Software Journal
Commentary: Zinc Miners to Benefit from Dell Battery Recall? • Sony's Q2 Earnings Tank on Battery Recall Costs, PS3 Development • Apple Beats On Strong Mac Sales, Declining Flash Memory Prices; Board Defends Jobs
Stocks/ETFs to watch: Apple (AAPL). Competitors: Hewlett-Packard (HPQ), Dell (DELL), Microsoft (MSFT), Lenovo (OTC:LNVGY), SanDisk (SNDK). ETFs: Internet Architecture HOLDRs (IAH), Ultra QQQ ProShares (QLD), iShares S&P Global Technology (IXN)
Conference call transcripts: Apple F2Q07 (Qtr End 3/31/07) Earnings Call Transcript
Yahoo to Acquire Right Media for $680 Million
In a counterpunch to Google's acquisition of online ad services company DoubleClick, Yahoo announced it will purchase the 80% of online ad exchange Right Media it does not already own for $680 million in cash and stock. Yahoo paid $40 million last October for its original 20% stake. Sites like Right Media provide a virtual market, not unlike a stock exchange, that connects buyers and sellers of Internet ads. DoubleClick, which Google is purchasing for $3.1 billion, is planning to open an ad exchange similar to Right Media's. Right Media will give Yahoo access to the more than 20,000 buyers and sellers of online ad space that currently trade through it and should enhance its efforts in the nonpremium ad space. It will also bolster Yahoo's efforts to broker ads on non-Yahoo sites. Yahoo's competitors will be free to sell ads on the Right Media exchange, which functions like an auction. Yahoo Chairman and CEO Terry Semel: “The acquisition of Right Media will further Yahoo’s goal to create the industry’s most open, accessible and vibrant advertising marketplace, which will help democratize the buying and selling of digitally enabled advertising.”
Sources: Press release, Bloomberg, MoneyCentral (I, II), Wall Street Journal, PaidContent
Commentary: Yahoo Adds McClatchy to Ad Partnership • Viacom and Yahoo Sign Exclusive Search-Ad Deal • Yahoo: Estimates Up On Success Of Panama
Stocks/ETFs to watch: Yahoo! Inc. (YHOO). Competitors: Google Inc. (GOOG). ETFs: Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN), Morgan Stanley Technology ETF (MTK)
Conference call transcripts: Yahoo! Q1 2007
Reuters To Launch Algorithmic News Sentiment Tool; Acquires Israeli Digital Text Solutions Developer
Reuters Group PLC plans to launch a computer application Monday that scans news articles to measure whether companies are receiving positive or negative news coverage, a tool that can be used to trigger stock trade ideas. The program, offered to Reuters clients at hedge funds and bank trading desks, will initially integrate just Reuters's own news service, but eventually will incorporate news sentiment from other services as well. In addition to tracking individual company names, the program can track news sentiment in entire industries or exchanges, which can be applied via ETF trading. Reuters will charge between $200,000 to more than $1 million for the new product, depending on the size of the firm and how customized a particular firm wants it to be. In related news, Israeli business daily Globes reports Reuters has acquired Israeli digital text analysis solutions developer ClearForest Ltd. for about $30 million. ClearForest's CTO, Dr. Yonatan Aumann is the son of Nobel Prize for Economics Laureate Prof. Israel Aumann, and helped found the company in 1998.
Sources: Press Release, Wall Street Journal, Globes
Commentary: Reuters, CME Team Up To Open Spot Currency Exchange • Reuters Group: ValueAct Capital Raises Stake
Stocks/ETFs to watch: Reuters Group PLC (RTRSY). Competitors: Dow Jones & Company Inc. (DJ), THOMSON CORP (TOC), Track Data Corp. (OTC:TRAC), Interactive Data Corp. (IDC), Morningstar Inc. (MORN)
Jones Apparel Considering Sale of Barneys
Stymied by an inert stock price, Jones Apparel CEO Peter Boneparth is reported to be considering the sale of luxury department store chain Barneys New York, the company's best-performing asset. Barney's is not yet on the market and Jones has declined to comment in advance of earnings, which will be reported Wednesday. The 2004 purchase of Barneys for $400 million was questioned by analysts as inconsistent with Jones's moderate portfolio, which includes Nine West and Gloria Vanderbilt. Barneys has thrived, however, vindicating Boneparth's advocacy of the high-end purchase. If Jones sells Barneys, it can use the proceeds to buy back stock, invest in brands or buy new ones. A sale could also, however, make Jones even more vulnerable to weakness in the moderate apparel sector. It would come at a difficult time for the company: Boneparth just fired Heather Pech, the head of the retail division; CFO Thimios Sotos resigned last month; and Boneparth himself has failed to reach a contract extension agreement with the company. Boneparth attempted last year to sell the whole company to a private equity firm, a move that ended ignominiously five months later when the auction was canceled due to insufficient bids.
Sources: Wall Street Journal
Commentary: Jones Apparel: Room to Grow -- Barron's • No Private Equity Suitors for Bally, Jones Apparel, Others
Stocks/ETFs to watch: Jones Apparel Group, Inc. (JNY). Competitors: AnnTaylor Stores Corp. (ANN), Liz Claiborne Inc. (LIZ). ETFs: Retail HOLDRS ETF (RTH), SPDR S&P Retail (XRT), PowerShares Dynamic Retail (PMR)
Yum Brands Removes Trans Fat From Its List of Ingredients
Yum Brands Inc. chains KFC and Taco Bell announced they have stopped using oils containing trans fat in an attempt to smooth over its unhealthy image. A recent E. Coli outbreak at Taco Bell made 71 customers ill and gave Yum plenty of bad press. Doctors say trans fatty acids simultaneously raise bad cholesterol while reducing the good kind. New York City and Philadelphia have passed laws requiring restaurants to phase out trans fat from their menus by 2008; Yum's move means its restaurants in those locations will be in compliance. The decision follows more than two years of consumer testing, which demonstrated removing trans fats did not negatively affect the taste of Yum's foods. Other companies including Burger King Corp., McDonald's Corp., Starbucks and Wendy's have also said they plan to phase trans fats out of their menus though it is unclear what the timetable on that is.
Sources: MarketWatch, AP
Commentary: Yum's U.S. Profit Chomped by E.Coli Outbreak at Taco Bell • Ratting Out Yum Brands • Yum! Brands: Satisfy Your Cravings
Stocks/ETFs to watch: Yum! Brands, Inc. (YUM). Competitors: Burger King Corp. (BKC), McDonald's Corp. (MCD), Starbucks (SBUX), Wendy's (WEN). ETFs: PowerShares Dynamic Food & Beverage (PBJ), PowerShares Dynamic Leisure & Entertainment (PEJ)
TRANSPORT AND AEROSPACE
B/E Aerospace Posts Sharp Rise in Q1 Profit; Beats Street; Raises Guidance
Aircraft cabin interior manufacturer B/E Aerospace reported a more-than-doubling of Q1 earnings on surging airline refurbishments stemming from booming demand in air travel. Q1 net profit came in at $32.1 million ($0.40/share) from $13.8 million ($0.18/share), ahead of Street forecasts of $0.32. Revenue rose 57% to $387.8 million, again beating analyst expectations of $323.3 million. The company has raised its full-year earnings guidance to $137 million from $117 million and its EPS forecast to $1.55 a share from $1.45-1.47. Analysts had been expecting $1.46. Results were helped by a 191% increase in the seating segment's operating margin and by healthy retrofit program deliveries. Burgeoning air traffic demand generated more orders from clients Boeing and Airbus, and many other airlines are upgrading their cabins. CEO Amin J. Khoury said orders for the company's spare parts and products are at "record levels."
Sources: Press release, Reuters, Bloomberg, MarketWatch
Commentary: BE Aerospace Should Continue To Reach New Heights • DoD's FY-08 Budget: The Largest in US History
Stocks/ETFs to watch: B/E Aerospace, Inc. (BEAV). Competitors: Anixter International Inc. (AXE). ETFs: iShares Russell 2000 Growth Index (IWO)
ENERGY AND MATERIALS
BP Leads Bid for Pakistani Oil Stake -- London Times
The Times of London reports a BP-led consortium is likely to win the race to buy a controlling stake in Pakistan State oil for about $600 million. BP will partner with London investment bank MerchantBridge, and is competing with Malaysian giant Petronas and oil marketer Vitol, among others. The Pakistani government is selling a 51% stake, and leaving itself with only 3%. The auction is due to be completed imminently, the Times said. BP declined to comment, but the managing partner of MerchantBridge said: "Pakistan’s economy is growing at between 6 and 7% a year. We take the view that that will continue for the foreseeable future and wish to participate in that growth.... BP can bring additional operating improvements to the business."
Sources: London Times, MarketWatch
Commentary: BP: Difficult Execution Worries Investors • BP: Trouble On Two Shores • Jim Cramer's Take on BP
Stocks/ETFs to watch: BP plc (BP). Competitors: Royal Dutch Shell (RDS.A), Total S.A. (TOT), Chevron Corp. (CVX), ExxonMobil Corp. (XOM). ETFs: SPDR Oil & Gas Exploration & Production ETF (XOP), iShares Dow Jones U.S. Oil & Gas Exploration/Production (IEO)
Citi, Lehman Lead Bidding to Partner with India's IFCI
Reuters reports the Hindustan Times said Citigroup and Lehman Brothers are leading candidates to acquire a 26% stake in Indian lender IFCI Ltd., quoting an anonymous investment banker reportedly directly involved in the deal. IFCI hired Ernst & Young last month to help locate a strategic partner. The banker is quoted saying, "Offers made by Citi and Lehman are more attractive than others. A decision over the stake sale is expected by the month-end." There are no comments out of Citi or Lehman at present. IFCI previously told Reuters it expects to obtain $250 million selling a 26% stake. The Hindustan Times mentioned other foreign banks were bidding, including Barclays. Shares of IFCI listed in India were up nearly 11% in late trading, reaching new all-time high levels.
Commentary: The Long Case for India • Citigroup Wins 61% Stake in Nikko Cordial • Foreign Banks in China Approved to Accept Yuan Deposits
Stocks/ETFs to watch: Citigroup (C), Lehman Brothers (LEH), Barclays (BCS), IFCI Ltd. [BSE: 500106, NSE: IFCI]
Conference call transcripts: Citigroup Q1'07, Lehman Brothers F1Q07
Citigroup Executives Resist Calls for Breakup
The Financial Times reported Sunday that senior executives at Citigroup are apprehensive that activist hedge funds might attempt to break up the company. The unidentified executives said the company will have to boost its shareholder relations efforts to explain why a breakup is unwise. CFO Gary Crittenden will reportedly meet soon with large investors. The bank's lagging share price has perked up recently on news of pending cuts of 17,000 jobs and a good Q1 earnings report, but CEO Charles Prince remains under pressure to find ways to boost it even more. The manager of one hedge fund, Tom Brown, was quoted as advocating a breakup of the bank into four entities: US consumer finance; international consumer finance; investment banking; and wealth management. Though Citigroup -- which is valued at $260 billion -- is viewed by some as too massive to be a target, others, unnerved by the campaign by activist investor TCI (The Children's Investment) Fund to force a breakup of Dutch bank ABN Amro, believe that "even Citigroup is not too big." Although speculation is swirling about activist interest in either a breakup or a forced ouster of Mr. Prince, no hedge funds have made significant increases in their Citigroup stakes recently.
Sources: MoneyCentral, Forbes, MarketWatch
Commentary: Citigroup Needs Un-Grouping • Citigroup: Does a Breakup Make Sense? (Part II) • Citigroup: Does a Breakup Make Sense? • ABN AMRO: Children's Investment Fund Urges Break-Up or Sale
Stocks/ETFs to watch: Citigroup Inc. (C). Competitors: Bank of America Corp. (BAC), JP Morgan Chase & Co. (JPM), Deutsche Bank AG (DB). ETFs: First Trust Morningstar Div Leaders Idx (FDL), WisdomTree High-Yielding Equity (DHS), WisdomTree LargeCap Dividend (DLN)
Conference call transcripts: Q1 2007
Dutch Court to Decide Thursday on ABN's Sale of LaSalle to BoA
Dutch judge Huub Willems of the Enterprise Chamber will decide this Thursday whether or not ABN Amro may proceed with its sale of LaSalle Bank to Bank of America. The Dutch shareholders' group VEB took ABN to court to protest the $21 billion sale, which was announced last week concurrently with the announcement that ABN was to be sold to Barclays for $91 billion in stock. VEB contends that the sale of LaSalle to BoA is illegal because shareholders were not consulted. It views the sale as a "poison pill" intended to thwart other, better offers -- particularly a rival $98.5 billion cash bid from a consortium led by Royal Bank of Scotland [RBS] that wants to break up ABN. The consortium has arranged financing for most of their bid, which is 70% cash and 30% RBS shares. A freeze of the LaSalle sale could set off a long legal battle that could undermine the sale of ABN to Barclays and expose ABN to costly damages claims from BoA. RBS is said to be preparing a counterbid for LaSalle that would be contingent on the consortium's buying all of ABN. In related news, Cees Maas, the former CFO of Dutch bank ING Groep, said ING had examined a combination with ABN and concluded it would not create sufficient value. He also took ABN's board to task for "failing to come through on [its] promises."
Sources: Wall Street Journal, CNN.com, Reuters, Bloomberg, Forbes
Commentary: ABN Shareholders Determined to Thwart LaSalle Sale to BoA • ABN Amro Now Seeking Rival Bids for LaSalle • ABN Amro Takeover: Rival Trio Tops Barclays with $98.5 Billion Bid
Stocks/ETFs to watch: ABN Amro Holding N.V. (ABN), Barclays PLC (BCS), Royal Bank of Scotland Group plc [ADR] (RBSPY), Fortis NV [ADR] (FORSY), Bank of America Corp. (BAC). Competitors: HSBC Holdings plc ADR (HBC), Deutsche Bank AG (DB), UBS AG (UBS). ETFs: First Trust Morningstar Div Leaders Idx (FDL), PowerShares Intl Dividend Achievers (PID), iShares MSCI Netherlands Index (EWN)
Sanofi-Aventis Gets FDA Approval for Disposable Insulin Pen
Sanofi Aventis said the FDA has approved its disposable insulin pen, SoloStar, for once-daily use in treating hyperglycemeia in Type 1 or 2 diabetes. The pen incorporates the company's 24-hour basal insulin Lantus, and its ease of use will make it a potent competitor against rival products. Sanofi says SoloStar's heightened sensitivity to a combination of user needs differentiate it from other disposable insulin devices such as Eli Lilly's Humulin/Humalog pen and Novo Nordisk's FlexPen. The company's strategy was to retain the best features of existing pens while addressing unmet or unsatisfied needs, including simplicity of use, injection force, dial extension (how far the pen extends when a dose is dialed), robustness, maximum dose deliverable in one injection, and the ease of distinguishing between different types of insulin carried in the same pen. Sanofi says its drive mechanism requires 30-50% less force than either FlexPen or the Lilly Pen; injection force and dial extension are important, considering about 58% of diabetics have limited joint mobility of the hand and significantly weakened grip strength. Pens account for 56% of all insulin units delivered worldwide; 94% in Japan and 86% in Europe but only 14% in the U.S.
Sources: Press release (.pdf), MarketWatch, in-Pharma
Commentary: 7 Companies Searching to Treat or Cure Parkinson's • Novo Nordisk: Set to Conquer the Insulin Market - Barron's • Top Pharma Innovations In 2006
Stocks/ETFs to watch: sanofi-aventis (SNY), Eli Lilly and Company (LLY), Novo Nordisk A/S (NVO). ETFs: Pharmaceutical HOLDRs (PPH), iShares Dow Jones US Pharmaceuticals (IHE)
Related: Drug delivery study
FDA K.O.'s Merck's Arcoxia
The FDA has rejected Merck's application for its painkiller Arcoxia on the grounds that it has a similar risk profile to Vioxx, a drug Merck withdrew from the market in 2004. The decision was expected because an FDA advisory panel had recommended non-approval earlier in the month, citing heart attack and stroke risk. The FDA's non-approvable letter said Merck did not provide sufficient evidence that the benefits of Arcoxia outweigh its risks. Merck was attempting to gain approval for use of Arcoxia to treat osteoarthritis. Arcoxia is on the market in 63 countries and Merck will continue to sell it abroad. Had Arcoxia been approved in the U.S., it could have brought in $1 billion in annual domestic sales, according to analysts. That would have contributed toward the recovery of the $2.5 billion in annual revenue lost to Merck when Vioxx was withdrawn. Merck shares, which have risen 50% in the past year, shed 1.1% to close at $51.86.
Sources: MarketWatch, Bloomberg
Commentary: FDA Panel Nixes Merck's Arcoxia; Shares Climb on Raised Guidance • Merck's Profit Rises 12% On Strong Sales of New Drugs • Getting High on Drug Stocks
Stocks/ETFs to watch: Merck & Co., Inc. (MRK). Competitors: Bristol-Myers Squibb Co. (BMY), Pfizer Inc. (PFE), Sanofi-Aventis (SNY). ETFs: Pharmaceutical HOLDRs (PPH), PowerShares FTSE RAFI Health Care (PRFH), iShares Dow Jones US Pharmaceuticals (IHE)
Conference call transcripts: Q1 2007
China Raises Reserve Requirements Again; Shanghai Hits New High
Chinese banks will have to set aside 11% of deposits as reserves -- an increase of 0.5% -- starting May 15, according to the People's Bank of China website. This marks the seventh increase over the past eleven months. An economist at Barclays Capital in Hong Kong commented, "The next steps for the central bank are to raise interest rates and allow the yuan to appreciate faster, possibly by widening the trading band." A Hong Kong based Goldman Sachs analyst said, "Prices in the equity market will continue to rise," despite the reserve-ratio hike, which "... may not be as effective as raising interest rates." Separately, Bloomberg notes the yen was strengthening initially on the news of the reserve-ratio increase, as investors unwound carry trades. However, currency strategists seem to think yen strength will be short lived, especially considering there are three public holidays this week in Japan (including today). Meanwhile, the Shanghai Composite gained 2.2% to 3,841.27, renewing its all-time high.
Sources: Bloomberg (i, ii)
Commentary: What’s Behind the Euphoria in Shanghai Red-Chips? • Strong China Growth, Inflation • China: Q1 GDP Stronger than Expected, Stocks Fall Across Asia
Stocks/ETFs to watch: iShares Trust FTSE-Xinhua China 25 Index Fund (FXI), PowerShares Golden Dragon Halter USX China Portfolio (PGJ). Bond ETFs: iShares Lehman 1-3 YR Treasury Bond (SHY), iShares Lehman 7-10 YR Treasury Bond (IEF), iShares Lehman 20+ YR Treasury Bond (TLT). Currency ETFs: PowerShares DB G10 Currency Harvest Fund (DBV), Euro Currency Trust (FXE), CurrencyShares Japanese Yen Trust (FXY)
ACTIONABLE BARRON'S CALLS
Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries
- Barron's says nuclear players in power-constrained markets should see sustained growth for another 3-5 years due to global warming (coal), rising global power needs, diminishing NG supply, and cost-efficiency. Analysts peg electric utility stocks like Exelon (EXC), Entergy (ETR), Dominion Resources (D) and Constellation Energy (CEG) for 20% gains over the next 12 months. NRG Energy's (NRG) assets are undervalued; bulls see 25% upside. Scarce uranium supplies have boosted miners, but Canada's Cameco (CCJ) is cheap. NRG ordered new reactors from GE (GE) and GE hopes India will too. Strong energy prices should push nuclear engineers and clean-up experts Fluor (FLR) and Chicago Bridge & Iron (CBI) earnings higher.
- Although untouched by scandal, Siemens' (SI) CEO Klaus Kleinfeld is leaving amid corporate probes and union pressure. Shares are up 45% during his 2-year reign, and with no replacement lined up, his firing may prove to have been a hasty decision. Siemens needs to get its parts to working efficiently through cost-controls and working-capital management, which may prove difficult if Kleinfeld's departure signals workers have gained the upper hand.
- Last Tuesday shares of engineering and consulting firm Tetra Tech (TTEK) hit a 52-week high of $21.78, giving them a current P/E of 33. Thanks to a constant flow of new contracts, solid quarterly results and investors' appetite for water stocks, the stock could climb much higher -- into the mid 20s within the year.
- On Wednesday, Nano Chemical (NCSH.PK) took out a full-page New York Times ad promising riches to its investors. Tech Trader Bill Alpert says its CEO payed $50,000 in 2003 to settle SEC charges of faked earnings, and two major investors have records for cocaine selling and stock fraud. Shares dropped 27% Friday to $0.435 on six times daily volume.
- Barron's surveys 113 Big Money Pros: 46% are bullish or very bullish on stocks through year-end, down from 64% in the fall. 4% expect Dow 14,000 this year; 38% see it by June 2008. They like Apple Computer Inc. (AAPL), Intel Corp. (INTC), Berkshire Hathaway Inc. (BRKA), Dell Inc. (DELL), tech, energy, healthcare and basic materials.
- Technical analyst Michael Kahn makes the case for a near-term bull market correction: Stocks haven't dropped 10% in four years; weak bullish volume; growing positivity in investor sentiment with a distinct lack of fear; momentum indicators showing the market is overbought. Individual stocks showing the same tendencies: Kohl's (KSS) and Advanced Micro Devices Inc. (AMD). Stocks that look ready to weather any storm: BHP Billiton (BHP) and Millipore Corp. (MIL).
- Despite a 21% rally in Valero (VLO) shares since late February, there's still more upside potential. Improving refining margins should remain robust for longer than most on Wall Street expect. At 9.7x 2008e earnings, Valero is still the cheapest of the large refiners.
- Carl Icahn's American Real Estate Partners (ACP) $110 shares trade at a 69% premium to fair value. Investors say Icahn is the next Buffett, but Berkshire Hathaway's (BRK.A) premium is lower and its assets are cash cows. Despite an upcoming deal to acquire Lear (LEA), Barron's says ACP is overvalued.
- Barron's interviews Charles Hess of Inferential Focus, who looks to detect subtle shifts in trend across investment themes: He says the housing market has yet to see forced sales. Oil prices will drop if Iran stirs the Middle East pot and rise if it cooperates. Online collaboration is the 'new necessity' due to significant increases in telecommuting; stocks that stand to benefit: Cisco (CSCO) who just bought WebEx, Citrix (CRXS), Polycom (PLCM), Optelecom (OPTC) and iLinc (ILC). Stocks that will profit from the DoD's $34 billion global satellite initiative: Globecomm Systems (GCOM), SAIC (SAI) and Radvision (RVSN).
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