Analysts were expecting a pretty rough quarter from Alcoa (AA) with aluminum prices still low and industrial demand depressed.  Alcoa swung to a loss in the last quarter with at 28 cent per share deficit, and that number was expected to grow in the first quarter with consensus estimates predicting a 57 cent loss per share.  Revenue was expected to slow considerable to $4.08 billion, representing a 44.7% drop from last year.  Alcoa fell as much as 5% and finished the day down 2% for Tuesday's trading as traders feared the results would be even worse than forecast.

The pressure was on Alcoa to deliver in this make or break earnings season.  Revenue actually topped estimates ever so slightly coming in at $4.1 billion.  However, the loss was worse than expected coming in at 59 cents per share, totally $497 million.  They will be cutting cap ex by 50%, which totaled $471 in the first quarter.  The results were not all that bad, as Alcoa was successfully able to raised $1.4 billion in a convertible note offering, also the company was able to reduce the cost to produce aluminum by 33%.  The stock is trading slightly higher in after hours.  But as Fox Business Network reports, there is still a lot of excess capacity in aluminum and it could be some time before that ramps up again,

"One thing we look at the aluminum or metal's business is a utilization rate. Alcoa is down to a 75% utilization rate at their plant. That speaks to a bigger issue. When we start to recover, we have so much express capacity that short term you may make money on Alcoa, but it will be a long time before they are ramped up again."

Disclosure: No Positions

"The numbers here are truly better than expected. Unlike many other stocks that are simply going higher because The Street has become more bullish about the market, SPIL's accumulated first quarter sales are now expected to fall. They're still going to fall 26% but that's much better than the previous expectations of a 35% and the second quarter analysts think that SPIL sales could grow by 15% to 20% thanks to resumed orders for everything from handset chips, you know, semiconductors that go into cell phones, to graphics processors …

The recovery was really not anticipated by anyone, including the companies. And that's precisely what makes SPIL and the other companies involved in the semiconductor food chain so attractive right in order to deal with the slowdown in business SPIL had taken a bunch of actions to cut costs, and these are moves that should really pay off now that we're seeing a recovery in the semis. SPIL eliminated overtime pay. That should save roughly 180 million new Taiwan dollars, that's on top of the head count reduction that the company put through in the fourth quarter. SPIL has also shut down unused production costs to minimize fixed costs.

It's done everything right. Now it's a leaner, meaner company that can package and test more chips for less money. Then there's the dividend. Got to love big dividends. SPIL intends to pay out a massive dividend this year, bring the yield to 8.5%, a payoff I think is marathon man-like as in it will only eat up about a third of the cash the company has on hand." CNBC's Mad Money on Monday, April 06, 2009

Cramer is getting pretty bullish off late, but at least he is specifically stating that this stock is a speculative play on a recovery.  At the current price level, we have an Ockham valuation stance of Fairly Valued.  Our methodology is not built for speculating, rather it is geared towards investing.  The stock is was undervalued by our methodology when the market was bottoming in early March.  Just in the last month the stock has appreciated 37%, and we no longer consider it Undervalued.  The fact that the company has made very appropriate cost and wage cuts has, in our opinion, has largely been priced in.  Furthermore, the stock is enjoying the "Cramer bounce" today up 6%, while the market indexes are down.  Cramer has many devoted viewers, and you can often observe that if Cramer spends any length of time on a stock that normally does not get huge volume, he can literally move the market.  On Tuesday morning, it was the most searched on stock on Google Finance.  But be careful when trying to ride that wave, it often will swing to the other side in the next few days.

While the overall sales growth picture for SPIL is attractive, we think that it is simply too expensive right now.  In this case, we will leave the speculating to those that like to chase momentum. 

Disclosure: no positions

While this analysis may be correct, we think that Sanderson Farms shares are simply too overbought currently.  The poultry industry may be due for a rebound, but Sanderson Farms is actually trading higher than where it was a year ago, so there is not a huge downside that it would be rebounding from.  With Pilgrim's Pride declaring bankruptcy and Tyson Foods down more than 35% over the last year, Sanderson's largely avoided the difficulty surrounding the industry and its two main competitors in the past year.

Sanderson does have a balance sheet that is worthy of some adulation, and it is gaining market share.  However, it is a far cry from being Undervalued, especially in this market environment where so many companies have been beaten down far worse than Sanderson Farms.  The company is expecting revenue to be flat in the year ahead, and Sanderson recently swung to a loss of 33 cents per share in the first quarter.  Although that was better than some analysts had expected.  At Ockham, we do not like recommending a company that has recently swung to a loss and is not growing revenues.  So, simply stated Sanderson Farms shares are too expensive given the fundamentals supporting them. 

Disclosure: No Positions

While price is certainly a concern of both parties, it seems that there is a difference of opinion on how hard IBM would be willing to push were the deal to face regulatory challenges.  IBM states that they are fully committed to the deal, but Sun believes there was too much wiggle room for IBM to drop the deal if needed.  This may be a very valid concern for Sun that they do not want to be left without a dance partner if the deal does face push back, but Sun needs to be very careful about how they play the situation.  Should they turn negotiations into a confrontation, they may find themselves a stand alone business with no one interested in buying them. 

Sun's decline has been well documented and they began shopping themselves around last winter.  Sun management needs to think long and hard before it leaves a deal on the table that would pay a 100% premium to the pre acquisition price.  Perhaps IBM rival Hewlett-Packard (HPQ) could be interested but there has been nothing more than rumor to support that.  After all, IBM was the only company that stepped to the plate when Sun began shopping itself around.

"Sun down 25% but up more than 100% year to date. There's been a lot of talk on the street that if it's not going to be IBM, who is going to buy Sun Microsystems? It is the number one target in the tech industry right now." Fox Business Network 4/6/2009

Not surprisingly, Sun stock tanked 22.5% on Monday.  After having an Undervalued stance on Sun for more than a year, we are reaffirming our Fairly Valued valuation on post merger announcement price levels.  Fundamentally, Sun has been able to grow revenues steadily over the past few years but the company swung to a loss last summer.  The fact remains, that Sun Micro needs IBM far more than IBM needs Sun.  At this point the talks are "fluid" but it seems that IBM has all of the power in this situation.  We do not know exactly what has been going on in negotiations but Sun management should tread carefully because there will be a lot of angry shareholders should the deal eventually die. 

Disclosure: No positions