It should come as little surprise that many stocks that make it into the Magic Formula Investing [MFI] screen are attractive acquisition targets. Many, if not most, are good businesses selling at cheap prices, exactly what the screen is designed to find. When you have quality selling cheap, not only individual investors but business managers, both public and private, take notice as well. Particularly if the screened business is one that is a current or potential competitor, or a business that nicely compliments current operations, it makes sense to acquire it at a favorable price. When this happens, investors reap big rewards in short periods of time.

Of course, there is the other side of the coin too - declining businesses or heavy cyclicals can find their way onto the screen as well, usually well into the downside. With these firms we need to be very careful - too much debt can land them in bankruptcy court. Unfortunately, MFI has turned up a few of these as well. Let's take a look at some individual "buyouts and bankruptcies" on the MFI screen in 2009.

Priceline.com, Inc. (PCLN) – Third-quarter sales and profit at online travel agency, Priceline.com, exceeded analyst expectations and sent shares up 19% today to a new 52-week high of $206.78. PCLN posted earnings of $3.45 per share whereas previous forecasts averaged around $2.92 per share. Priceline raked in 30% higher sales of $730.7 million for the quarter. Investors initiated bullish stances on the stock by purchasing 3,200 calls at the November 210 strike for an average premium of 2.72 apiece. Traders will profit if shares of PCLN continue to rally another 4% and surpass the breakeven price of $212.72 by expiration this month. Nearly 1,000 call options were purchased at the November 230 strike for approximately 64 cents premium each. Investors long the November 230 strike calls could already reel in short term profits by selling the contracts, which now tote an asking price of 1.15 per contract. Option implied volatility imploded following earnings, falling 24%, to an intraday low of 42%.

E*Trade Financial Corp. (ETFC) – The Wall Street Journal reported that ETFC withdrew its application for funding through the Troubled Asset Relief Program (TARP) because the company’s “recent capital-raising and debt-reduction efforts negates the need for the money.” E*Trade raised $150 million by selling stock in the third quarter out of some $765 million of sold stock this year. The seemingly bullish news that the company no longer plans to participate in the capital-purchase program did not do much for the current share price, which slipped 6% lower to $1.37. Our scanners picked up on interesting options activity this afternoon that may or may not have been inspired by today’s news. It appears 95,000 put options sold at the January 1.0 strike for about 5.5 pennies apiece. One may infer the transaction represents bullish sentiment on ETFC if the sale of the put options is fresh activity. If this is the case, the trader pockets the 5.5 cents premium, and expects shares to remain above $1.00 through expiration. However, the sale could also be the work of an investor closing out a long put position given the already high reading of open interest at the small number of available strike prices.

As Merger Monday makes its come-back, we bring you the latest merger arbitrage spreads - click to enlarge:

Q3 2009 Earnings Call

October 27, 2009 10:00 am ET

As noted earlier, Friday marks the two-year anniversary of the S&P 500's closing peak. As of Thursday's close (10/8), only 57 of the 500 stocks currently in the index are up since then. Needless to say, it has been a lousy two years. Below we highlight the 25 best performing stocks in the index over the last two years. As shown, sectors which are the most heavily represented include Technology (7), Energy (6), Consumer Discretionary (5), and Health Care (5). Check back Friday morning for a list of the top performing Mid and Small Cap stocks since 10/9/07.

click to enlarge

Below are a few of the most interesting trades that took place in the options market on Wednesday September 30th, 2009.

I not only provide what the action was that traded, but also the most likely reasoning behind the approach and what it means for shares.

4:10 PM, Sep 28, 2009 --

• NYSE up 116.3 (1.7%) to 6,939.77.
• DJIA up 124.2 (1.3%) to 9,789.
• S&P 500 up 18.6 (1.8%) to 1,063.
• Nasdaq up 39.8 (1.9%) to 2,131.

GLOBAL SENTIMENT

Agrium Inc. (AGU) got the thumbs up this week from Desjardins Securities analyst John Redstone, who initiated coverage on the fertilizer company, with a BUY rating and C$75.80 price target.

"Agrium is well positioned to benefit from improving fertilizer markets through its current operations and from its acquisition of CF Industries," said Mr. Redstone in a note to clients.

There is a ton of good information in this quarterly report (link to PDF here, or in full at the bottom of this post). Goldman looks at 687 funds with $500 billion in long stock positions. Similar to a lot of what we do on AlphaClone.

They examine a few strategies that historically outperform the S&P 500. The first is a strategy of buying the 20 most concentrated stocks (defined as hedge funds owning X% of the company). This has beaten the market by 14% a year since 2001. The 20 current stocks are:

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is Eric Mindich's hedge fund firm, Eton Park Capital. Mindich started the fund back in 2004 with $3 billion under management with a $5 million minimum investment. Nowadays, Eton Park manages over $6 billion. The fund's investment strategy draws upon Mindich's time at Goldman Sachs where he focused on merger arbitrage. He was so good at his job that he became the youngest partner in Goldman Sachs' history at the age of 27. In addition to merger arbitrage, Eton Park focuses on long/short equity strategies and even invests up to 30% of its portfolio into private investments.

Last week,CF Industries (CF) upped its bid for Terra Industries (TRA) from its prior bid of 0.4129 to 0.4539 shares to 0.465 CF shares. The deal currently values TRA at nearly $39 share (.465 x $83 CF share) or 30% above its Friday closing price of $29.91. How could the Terra Board of Directors turn down such a sweet offer?

Many reasons exist for turning down a premium offer. For example, shareholder growth would be higher as an independent compared to being part of a conglomerate, shareholders want cash for various reasons including the premium can be wiped out if the acquiring company's price drops after announcing the deal, or the premium just isn't large enough to cash out.

• Judge holds up BoA settlement. A judge is refusing to allow Bank of America (BAC) to pay a $33M settlement to the SEC in connection to allegations that it made false statements about bonuses in its acquisition of Merrill Lynch, even though both the SEC and Bank of America asked for the settlement to be approved. Judge Jed S. Rakoff said permitting the payment without a hearing would leave the public in the dark about a critical part of the financial sector bailout. Rakoff set a hearing date for Monday.
• AIG soars on short squeeze. AIG (AIG) shares skyrocketed yesterday, climbing nearly 63% to $22.00. Analysts said the spike was likely a result of a short squeeze on the stock, as investors with short positions before a recent 20-1 reverse stock split rushed to buy scarce shares to cover their positions. Some of the movement could also have been speculative trading ahead of AIG's Q2 earnings report tomorrow. Shares +4.8% premarket (7:00 ET).
• SEC to sue former AIG chief? The SEC may file a civil suit against former AIG (AIG) Chairman and CEO Hank Greenberg on allegations of accounting fraud, said sources familiar with the matter. Greenberg has been the subject of investigation for more than four years, though he flatly denies any claims of misconduct. The lawsuit could be filed as soon as today.
• Fannie, Freddie could face major reform. The White House is considering a plan that would strip hundreds of billions of dollars in troubled assets from Fannie Mae (FNM) and Freddie Mac (FRE). The assets would be placed in a government-backed 'bad bank,' leaving Fannie and Freddie with healthy balance sheets while the 'bad bank' would try to collect as much of the outstanding loan balances as possible. A White House spokesman said "it should come as no surprise that the administration is thinking through [government-sponsored enterprises] reform," but no final decisions have been made. Premarket: FNM +4.1%, FRE +7.5% (7:00 ET).
• BNY Mellon bids TARP adieu. Bank of New York Mellon (BK) became the sixth big lender to exit TARP by paying $136M to buy back its government warrants. The repurchase price was below the $160M estimated by the Congressional Oversight Panel, but by the bank's calculations, the government received a 12% annualized return on its investment.
• Google ogles web video. Google (GOOG) agreed to acquire On2 Technologies (ONT) in an all-stock deal worth $106.5M. Google, which already owns popular web video site YouTube, hopes the deal will bring it closer to its goal of being an innovator in web video. Separately, Google sold its radio-ad placement technology to WideOrbit Inc., a small San Francisco company. Terms of the deal were not disclosed.
• CF sweetens offer. CF Industries (CF) raised its all-stock offer for Terra Industries (TRA) to $3.7B, a 29% premium to Terra's Wednesday close, and said it's prepared to return at least $1B in cash to Terra's shareholders if the deal goes through. Agrium (AGU) said it remains committed to acquiring CF Industries.
• SEC plans to muscle up. The SEC is planning to issue more subpoenas and provide individuals with greater incentives to cooperate with investigations, in part by submitting more requests for immunity. As part of its efforts to increase financial oversight, the SEC also plans to create a new office to monitor incoming tips, and to create new units to investigate cases involving asset management, foreign corrupt practices, market abuses, municipal securities and public pensions, and structured products.
• News Corp. still waiting for recovery. News Corp. (NWS.A) posted a quarterly loss (see details below), hurt by a fall in advertising and charges related to its MySpace site. Though CEO Rupert Murdoch told investors 'the worst may be behind us,' he also warned that "there are no clear signs yet of a fast economic recovery" and the next few months will be difficult. Murdoch also said News Corp. plans to charge for all its news websites: "Quality journalism is not cheap, and an industry that gives away its content is simply cannibalizing its ability to produce good reporting."
• Treasury tips towards TIPS. The Treasury will increase the sale of TIPS, inflation-protected bonds, in response to growing demand from China and other investors. The decision is part of a broader effort to make sure the U.S. can finance its burgeoning budget deficit.
• Taylor Bean stops lending. Taylor Bean & Whitaker, which was suspended earlier this week from making Federal Housing Administration loans, will cease operations and won't fund mortgages in its pipeline. The failure of Taylor Bean, the country's 12th-largest mortgage lender, further consolidates an industry that is coming to be dominated by a handful of large banks.
• Bank of England boosts buyback plan. The Bank of England maintained its target rate at 0.5%, and increased its asset purchase program by £50B to £175B. Commenting on the inflation/deflation paradox, the central bank noted two conflicting sets of forces: "On the one hand, there is a considerable stimulus still working through from the easing in monetary and fiscal policy... On the other hand, the need for banks to continue repairing their balance sheets is likely to restrict the availability of credit, and past falls in asset prices and high levels of debt may weigh on spending."
• Monster employment dips down (.pdf). Monster's online employment index inched down in July, falling three points to 114 to reflect a seasonal dip in hiring patterns. Year on year, the index fell by 27%, the least in four months, indicating an improvement in underlying employer demand.
• Jobless data worse than expected. ADP employment was -371,000 in July vs. consensus of -350K. June's losses were revised to -463K. According to the Challenger, Gray & Christmas job report, firing announcements rose 31% in July to 97,373, marking the first monthly increase since January after June's 'surprisingly low' numbers. "While there are signs that the economy is stabilizing and the pace of layoffs slowing, we are still a long way from a full recovery."
• Factory orders inch up. June's Factory Orders rose +0.4% to $349B vs. -0.8% consensus. Last month orders were up 1.1%. Shipments increased 2.3% to $358B, the first gain in 11 months. Inventories decreased another 1.2% to $318B, the sixth straight month of shrinkage.

Earnings: Thursday Before Open

• Ameren (AEE): Q2 EPS of $0.75 beats by $0.08. Revenue of $1.7B (-6%) vs. $2B. (PR)
• Biovail (BVF): Q2 EPS of $0.50 vs. $0.34 consensus (may not be comparable). Revenue of $193.5M (+4%) vs. $191M. (PR)
• Brinker International (EAT): FQ4 EPS of $0.52 beats by $0.03. Revenue of $829M (-23%) vs. $853M. Issues downside EPS guidance for FQ1 of $0.12-0.14 vs. $0.29 consensus. Shares -7.3% premarket (8:00 ET). (PR)
• Canadian Natural Resource (CNQ): Q2 EPS of $1.18 beats by $0.08. Revenue of $2.5B (-43%) vs. $1.7B. (PR)
• Canadian Solar (CSIQ): Q2 EPS of $0.49 beats by $0.58. Revenue of $114M (-46%) vs. $94M. Shares +16.4% premarket (7:40 ET). (PR)
• Comcast (CMCSA): Q2 EPS of $0.33 beats by $0.07. Revenue of $8.9B (+4.5%) in-line. (PR)
• Continental Resources (CLR): Q2 EPS of $0.16 beats by $0.06. Revenue of $152M (-50%) vs. $131M. (PR)
• Delta Petroleum (DPTR): Q2 EPS of -$0.89 vs. -$0.14 consensus (may not be comparable). Revenue of $23M (-72%) vs. $25M. Shares -4% premarket (8:20 ET). (PR)
• Diana Shipping (DSX): Q2 EPS of $0.39 misses by $0.01. Revenue of $60M (-31%) vs. $57M. (PR)
• DirecTV Group (DTV): Q2 EPS of $0.40 misses by $0.03. Revenue of $5.2B (+9%) in-line. (PR)
• El Paso (EP): Q2 EPS of $0.25 beats by $0.04. Revenue of $973M (-16%) vs. $1.1B. (PR)
• Fuqi International (FUQI): Q2 EPS of $0.45 beats by $0.14. Revenue of $101M (+51%) vs. $93M. Shares +10.4% premarket (8:10 ET). (PR)
• GLG Partners (GLG): Q2 EPS of $0.26 beats by $0.22. Revenue of $86M (+263%) vs. $90M. (PR)
• Hospitality Properites Trust (HPT): Q2 EPS of $0.96 beats by $0.02. Revenue of $267M (-21%) vs. $278M. Shares -4.5% premarket (8:10 ET). (PR)
• Huntsman (HUN): Q2 EPS of -$0.27 misses by $0.14. Revenue of $1.9B (-36%) vs. $2B. Shares -4.9% premarket (8:10 ET). (PR)
• IAMGOLD Corp. (IAG): Q2 EPS of $0.15 beats by $0.05. Revenue of $225M (+0.1%) vs. $206M. (PR)
• King Pharmaceuticals (KG): Q2 EPS of $0.32 beats by $0.06. Revenue of $445M (+12%) vs. $438M. (PR)
• Lamar Advertising Company (LAMR): Q2 EPS of -$0.13 vs. consensus of -$0.12 (may not be comparable). Revenue of $275M (-15%) in-line. (PR)
• Lexington Realty Trust (LXP): Q2 EPS of $0.35 beats by $0.01. Revenue of $99M (-21%) vs. $98M. (PR)
• Linn Energy LLC (LINE): Q2 EPS of $0.45 beats by $0.06. "We believe that the Company is poised to continue to deliver positive results and to grow through additional acquisition opportunities." (PR)
• Melco Crown Entertainment Ltd. (MPEL): Q2 EPS of -$0.30 misses by $0.17. Revenue of $216M (-44%) vs. $256M. Shares -3.9% premarket (8:10 ET). (PR)
• MetroPCS Communications (PCS): Q2 EPS of $0.07 misses by $0.07. Revenue of $860M (+27%) vs. $862M. (PR)
• MF Global (MF): FQ1 EPS of -$0.10 misses by $0.14. Revenue of $271.5M (-27.5%) vs. $271.3M. (PR)
• NASDAQ (NDAQ): Q2 EPS of $0.47 in-line. Revenue of $367M (-13%) vs. $369M. (PR)
• Plains Exploration & Production Company (PXP): Q2 EPS of $0.37 beats by $0.05. Revenue of $279M (-62%) vs. $326M. Shares -0.9% premarket (8:00 ET). (PR)
• Sirius XM Radio (SIRI): Q2 EPS of -$0.01 in-line. Revenue of $608M (+1.2%) in-line. Says cash operating expenses are 28% lower since the merger. Increases full-year income from operations guidance to $400M from $350M. (PR)
• Teradata (TDC): Q2 EPS of $0.36 beats by $0.11. Revenue of $421M (-7.5%) vs. $414M. (PR)
• Tetra Technologies (TTI): Q2 EPS of $0.24 beats by $0.05. Revenue of $218M (-28.4%) vs. $229M. Shares +0.75% premarket (8:10 ET). (PR)
• Wendy's/Arby's Group (WEN): Q2 EPS of $0.06 in-line. Revenue of $913M (+192%) vs. $928M. Shares +1% premarket (8:30 ET). (PR)
• Western Refining (WNR): Q2 EPS of -$0.11 beats by $0.04. Revenue of $1.6B (-53%) in-line. Shares -7.9% premarket (7:10 ET). (PR)
• Williams Companies (WMB): Q2 EPS of $0.24 beats by $0.08. Issues in-line EPS guidance for FY '09 of $0.70-0.90 vs. $0.83 consensus. (PR)
• Windstream (WIN): Q2 EPS of $0.21 misses by $0.02. Revenue of $753M (-6%) vs. $754M. (PR)

Earnings: Wednesday After Close

• Activision (ATVI): Q2 EPS of $0.08 beats by $0.01. Sees Q3 EPS of $0.03 vs. $0.10. Sees Q3 revenue of $700M vs. $909M. Sees full-year EPS of $0.63 vs. $0.66 and revenue of $4.5B vs. $4.9B. Delaying launch of Singularity and Starcraft II into 2010. Revenue of $1B (+195%) vs. $801M. (PR)
• Allstate (ALL): Q2 EPS of $0.72 misses by $0.40. Revenue of $8.5B (+15%) vs. $8.2B. (PR)
• Amerco (UHAL): FQ1 EPS of $1.01 misses by $0.14. Revenue of $521M (-4%) vs. $515M. (PR)
• AmeriCredit (ACF): FQ4 EPS of $0.23 beats by $0.18. Revenue of $454M (-24%) vs. $413M. (PR)
• Atwood Oceanics (ATW): FQ3 EPS of $1.05 beats by $0.23. Revenue of $149M (+6%) vs. $142M. (PR)
• Brigham Exploration Company (BEXP): Q2 EPS of -$0.12 misses by $0.06. Revenue of $10.5M (-58%) vs. $15.2M. (PR)
• Career Education (CECO): Q2 EPS of $0.07 misses by $0.12. Revenue of $441M (+6%) vs. $419M. Increases stock buyback by $200M to $255.5M. (PR)
• CardioNet (BEAT): Q2 EPS of $0.11 beats by $0.06. Revenue of $38.3M (+30%) vs. $38.5M. (PR)
• Cisco Systems (CSCO): FQ4 EPS of $0.31 beats by $0.02. Revenue of $8.5B (-18%) in-line. (PR)
• Cooper Tire & Rubber (CTB): Q2 EPS of -$0.22 misses by $0.26. Revenue of $773M (+22%) vs. $659M. (PR)
• Corrections of America (CXW): Q2 EPS of $0.30 beats by $0.02. Revenue of $413M (+6%) vs. $411M. (PR)
• Eagle Bulk Shipping (EGLE): Q2 EPS of $0.26 in-line. Revenue of $53M (+42%) vs. $52M. (PR)
• General Cable (BGC): Q2 EPS of $1.02 beats by $0.20. Revenue of $1.1B (-17%) vs. $1.2B. Sees Q3 EPS of $0.45-0.55 vs. $0.72. (PR)
• Great Plains Energy (GXP): Q2 EPS of $0.26 beats by $0.13. Revenue of $481M vs. $495M. (PR)
• Health Care REIT (HCN): Q2 EPS of $0.80 in-line. Revenue of $142M (+10%) vs. $140M. (PR)
• ION Geophysical (IO): Q2 EPS of -$0.05 in-line. Revenue of $101M (-44%) vs. $145M. Sees full-year EPS of -$0.09 to -$0.19 vs. -$0.05. Sees full-year revenue of $450M-500M vs. $534M. (PR)
• MBIA (MBI): Q2 EPS of $4.30 not comparable to consensus of -$0.92. (PR)
• Murphy Oil (MUR): Q2 EPS of $0.83 may not be comparable to consensus $0.65. Revenue of $4.6B (-45%) vs. $4B. (PR)
• Nationwide Health Properties (NHP): Q2 FFO of $0.61 beats by $0.02. Revenue of $97M (+5%) vs. $94M. (PR)
• News Corp. (NWS.A): FQ4 EPS of -$0.08 misses by $0.26. Revenue of $7.7B (-11%) vs. $7.6B. (PR)
• ON Semiconductor (ONNN): Q2 EPS of $0.09 beats by $0.07. Revenue of $420M (-25%) vs. $406M. Sees Q3 revenue of $445M-455M vs. $428M. (PR)
• Orient-Express Hotels (OEH): Q2 EPS of -$0.04 misses by $0.14. Revenue of $132M (-26%) vs. $138M. (PR)
• Prudential Financial (PRU): Q2 EPS of $1.88 beats by $0.68. Revenue of $6.3B (-8%) vs. $6.6B. Sees full-year EPS of $5.00-5.20 vs. $4.72. (PR)
• Redwood Trust (RWT): Q2 EPS of $0.10 misses by $0.13. Net interest income of $35M. (PR)
• Regency Centers (REG): Q2 FFO before impairments of $0.61 beats by $0.32. Net loss attributable to common stockholders of $17.2M. (PR)
• Service International (SCI): Q2 EPS of $0.12 beats by $0.05. Revenue of $514M (-6%) vs. $494M. Raises full-year EPS guidance to $0.36-0.42 from $0.26-0.36 vs. $0.32. (PR)
• Sunoco (SUN): Q2 EPS of -$0.27 misses by $0.15. Revenue of $7.5B (-51%) vs. $12B. (PR)
• Sunstone Hotel Investors (SHO): Q2 FFO of $0.22 misses by $0.11. Revenue of $187M (-23%) vs. $196M. (PR)
• Vertex Pharmaceuticals (VRTX): Q2 EPS of -$0.99 misses by $0.16. Revenue of $19M (-73%) vs. $33M. (PR)

Today's Markets

Asian markets closed mixed but European markets are starting the day in the black. U.S. futures, once again, are sending no clear signals.

Q2 2009 Earnings Call

July 28, 2009 10:00 am ET

• AOL goes solo. Time Warner (TWX) filed with the SEC to officially turn AOL into a stand-alone, publicly traded company called AOL Inc. According to the filing, Time Warner repurchased Google's (GOOG) 5% stake in AOL for $283M earlier this month, valuing AOL at less than $5.66B vs. the $20B implied valuation the business carried in 2005.
• Speculators drove oil price spike. The Commodity Futures Trading Commission will release a report next month suggesting speculators played a major role in causing oil prices to spike, reversing an earlier finding by the CFTC that attributed oil price swings primarily to supply and demand. One of the CFTC commissioners said the original analysis was based on 'deeply flawed data.' The agency, which is shifting away from its former hands-off approach, is expected to institute rules limiting the investments of large institutions in commodities.
• AIG keeps asset sale proceeds. AIG (AIG) used $2.4B from recent asset sales to improve the capital position of its property-casualty unit rather than using the funds to pay down some of its government debt. AIG's need to use some of the sale proceeds to bolster its own businesses will undoubtedly raise questions about the insurer's ability to repay its government bailout.
• U.S. pledges to rein in deficit. At the beginning of a strategic round of talks with China, Geithner pledged to ensure a 'sustainable' U.S. budget deficit by 2013 as Chinese officials expressed concern over the security of their U.S. financial holdings. There were few signs of tensions over the value of the yuan. Both countries agreed not to prematurely withdraw economic stimulus measures.
• SEC updates short-selling rules. The SEC will no longer require institutional investors to report their short-sale positions on a weekly and confidential basis, part of an effort to curb abuse by making more information about short positions available to the public. The weekly reporting was instituted in October as an emergency measure and will expire August 1. A temporary ban on naked short selling was made permanent.
• Amgen, Glaxo reach drug agreement. Amgen (AMGN) and GlaxoSmithKline (GSK) reached an agreement to jointly market denosumab, an osteoperosis treatment that could see annual sales of $2B within a decade if approved by regulators. Glaxo will pay $120M for near-term milestones to share profits in Europe and to sell the drug in countries where Amgen doesn't have any exposure. Amgen will market the drug in the U.S. and Canada, and retain the rights to sell it for cancer in Europe once it's approved.
• Third time's the charm for Delphi. Delphi looks set to emerge from nearly four years of bankruptcy protection with its third attempt at an exit plan. Delphi's board approved an offer to split the company between former parent General Motors and lenders, replacing an agreement announced two months ago between GM and Platinum Equity. Under the new deal terms, lenders will forgive $3.4B in debt in exchange for most of the supplier's assets, and the lenders will pay cash to keep Delphi operating. GM will pay a little over $3B for four North American factories and Delphi's steering business.
• BoA to shutter branches. Bank of America (BAC) is planning to slash the company's 6,100-branch network by 10%, reversing two decades of coast-to-coast expansion. Bank officials reportedly attribute the closings to changes in customer preferences, citing the shift away from traditional branches in favor of online and mobile banking. A timeline for the closures wasn't specified.
• Reining in derivatives. Lawmakers are considering steps to curb speculation in the $39T credit default swaps [CDS] market, which could include preventing investors from speculating on a borrower's credit quality. Among the options under consideration to curb speculation are a ban on naked CDS and a requirement that derivative dealers and investment advisers managing more than $100M report their short interests in CDS contracts to the appropriate regulator.
• Magna improves bid. Magna International (MGA) reportedly improved its bid for General Motors' Opel unit, offering to inject €350M upfront vs. an earlier offer of €100M. The improved offer comes after the German government criticized all three bidders for the amount of their own capital they were willing to inject into Opel.
• CVC brews up AB InBev bid. According to media reports, private equity group CVC Capital Partners is prepared to pay up to €1.5B ($2.1B) for the Central and Eastern European assets of Anheuser-Busch InBev. AB InBev was accepting bids until yesterday, by which point CVC and TPG Capital were still in the running but KKR had dropped out.
• New homes sales (.pdf). New home sales came in at 384K in June, up 11% from May, vs. consensus of 350K. Sales were down 21.3% vs. the previous year. The median home price of $206,200 was down from May's $221,600. Inventory of 281K homes represents an 8.8 month supply, down from 10.2 months in May.

Earnings: Tuesday Before Open

• AMB Property (AMB): Q2 EPS of $0.37 beats by $0.01. Revenue of $147M (-27%) vs. $144M.
• BE Aerospace (BEAV): Q2 EPS of $0.39 beats by $0.05. Revenue of $475M (-9%) vs. $488M. (PR)
• BP (BP): Q2 EPS of $1.01 beats by $0.09. Revenue of $54.8B (-50%) vs. $64B. Shares -1.2% premarket (6:50 ET). (BP press release (.pdf))
• Celanese (CE): Q2 EPS of $0.53 beats by $0.07. Revenue of $1.2B (-33%) vs. $1.3B. (PR)
• Check Point Software (CHKP): Q2 EPS of $0.48 beats by $0.02. Revenue of $224M (+12%) vs. $220M. (PR)
• Coach (COH): FQ4 EPS of $0.43 in-line. Revenue of $778M (-0.5%) vs. $780M. (PR)
• Coventry Health Care (CVH): Q2 EPS of $0.50 beats by $0.10. Revenue of $3.5B (+19%) in-line. (PR)
• Diamondrock Hospitality Company (DRH): Q2 EPS of $0.24 beats by $0.03. Revenue of $144M (-21%) vs. $145M. (PR)
• EarthLink (ELNK): Q2 EPS of $0.29 beats by $0.03. Revenue of $186M (-24%) in-line. (PR)
• Energizer (ENR): Q2 EPS of $1.12 beats by $0.09. Revenue of $997.5M (-6.5%) vs. $1B. (PR)
• FPL Group (FPL): Q2 EPS of $0.99 beats by $0.01. Revenue of $3.8B (+6%) vs. $3.9B. (PR)
• Interpublic Group of Companies (IPG): Q2 EPS of $0.04 misses by $0.06. Revenue of $1.5B (-20%) vs. $1.6B. (PR)
• Jacobs Engineering Group (JEC): FQ3 EPS of $0.76 beats by $0.01. Revenue of $2.7B (-7%) vs. $2.8B. (PR)
• McGraw-Hill Companies (MHP): Q2 EPS of $0.58 beats by $0.03. Revenue of $1.46B (-12%) vs. $1.54B. (PR)
• National Oilwell Varco (NOV): Q2 EPS of $0.90 beats by $0.03. Revenue of $3B (-9.5%) vs. $3.1B. Shares -2.7% premarket (8:10 ET). (PR)
• Office Depot (ODP): Q2 EPS of -$0.22 misses by $0.10. Revenue of $2.8B (-22%) vs. $2.9B. (PR)
• PACCAR (PCAR): Q2 EPS of $0.07 vs. consensus of $0.04 (may not be comparable). Revenue of $1.6B (-58%) vs. $1.7B. Shares +0.9% premarket (8:30 ET). (PR)
• Patriot Coal Corporation (PCX): Q2 EPS of $0.39 vs. consensus of -$0.47 (may not be comparable). Revenue of $507M (+49.3%) vs. $518M. (PR)
• PepsiAmericas(PAS): Q2 EPS of $0.74 beats by $0.06. Revenue of $1.3B (-6%) in-line. (PR)
• Rockwell Automation (ROK): FQ3 EPS of $0.23 beats by $0.03. Revenue of $1B (-31.5%) in-line. (PR)
• Smith International (SII): Q2 EPS of $0.15 misses by $0.06. Revenue of $1.9B (-22%) vs. $2B. (PR)
• SUPERVALU (SVU): Q2 EPS of $0.55 beats by $0.02. Revenue of $12.7B (-5%) vs. $12.8B. (PR)
• Teva Pharmaceutical Industries (TEVA): Q2 EPS of $0.83 beats by $0.03. Revenue of $3.4B (+20%) vs. $3.5B. (PR)
• Textron (TXT): Q2 EPS of $0.08 beats by $0.11. Revenue of $2.6B (-29%) in-line. Lowers guidance for FY '09, sees EPS of $0.33-0.63 vs. prior $0.45-0.75, sees FY '09 revenue of ~$10.6B vs. prior $11B. (PR)
• United States Steel Corporation (X): Q2 EPS of -$3.28 beats by $0.17. Revenue of $2.1B (-68.5%) vs. $2.4B. Shares -3.7% premarket (8:30 ET). (PR)
• Valero Energy (VLO): Q2 EPS of -$0.48 beats by $0.02. Revenue of $17.9B vs. $16.3B. Shares -2% premarket (8:15 ET). (PR)
• Viacom (VIA.B): Q2 EPS of $0.49 beats by $0.01. Revenue of $3.3B (-14.5%) vs. $3.5B. (PR)
• Vishay Intertechnology (VSH): Q2 EPS of -$0.10 misses by $0.02. Revenue of $460M (-41%) vs. $459M. Issues upside guidance for Q3, sees revenue of $480-520M vs. $477M consensus. (PR)
• Waddell & Reed Financial (WDR): Q2 EPS of $0.28 beats by $0.03. Revenue of $200M (-21%) vs. $195M. (PR)
• Waters (WAT): Q2 EPS of $0.78 misses by $0.01. Revenue of $363M (-9%) vs. $366M. (PR)

Earnings: Monday After Close

• ACE Limited (ACE): Q2 EPS of $2.09 beats by $0.15. Net premiums written of $3.4B (-5%). (PR)
• Amgen (AMGN): Q2 EPS of $1.29 beats by $0.13. Revenue of $3.7B (-1%) vs. $3.6B. Raises full-year EPS guidance to $4.80-4.95 vs. $4.57. (PR)
• CF Industries (CF): Q2 EPS of $4.33 beats by $1.72. Revenue of $991M (-15%) vs. $764M. (PR)
• Crane Company (CR): Q2 EPS of $0.47 misses by $0.02. Revenue of $545M (-21%) vs. $588M. (PR)
• Desarrolladora Homex (HXM): Q2 EPS of $0.91 beats by $0.24. Revenue of $359M (+8%) vs. $329M. (PR)
• Fidelity National Financial (FNF): Q2 EPS of $0.40 beats by $0.01. Revenue of $1.6B (+34%) in-line. (PR)
• Health Management Associates (HMA): Q2 EPS of $0.13 beats by $0.03. Revenue of $1.2B (+5%) vs. $1.1B. (PR)
• Hexcel (HXL): Q2 EPS of $0.18 misses by $0.01. Revenue of $277M (-23%) vs. $302M. (PR)

• Kilroy Realty (KRC): Q2 FFO of $0.79 beats by $0.09. Revenue of $71M (+2%) vs. $66M. (PR)

In dedication to my recent posts on value investing vs. trading strategies, I decided to focus this week's screen to the market's favorite word: growth. Specifically, the criteria used was positive revenue growth for the next fiscal year. Of course, this does not translate to earnings growth but management teams should have figured out there's a recession and cut the cost side.

In addition to revenue growth, we are looking for companies that can thrive in this recession and take market share. These qualities are hard to quantify but I used ROE and ROA as measures of company quality, with the added kicker of a low debt-to-capital ratio so the company theoretically will have resources to pounce on opportunities.

Canadian agri-business Agrium Inc. (AGU) announced Tuesday it will continue to pursue a hostile takeover of U.S. competitor CF Industries Holdings Inc. (CF) after 62% of shareholders accepted the company's latest bid.

The American fertilizer company is resisting, but if Agrium is unsuccessful it could have serious downside consequences for CF, UBS analyst Brian MacArthur said in a new note responding to the news Tuesday.

Traditional Discounted Cash Flow (DCF) models have been been underutilized in equity analysis over the years primarily because of the assumptions one has to sign off on. We will concentrate on just two of the major issues we have with traditional DCF models, the lack of ability to deal with competition and the perpetuity assumption embedded in a DCF model. These assumptions lead to irrational calculations of intrinsic value and force analysts to make compromising decisions in their model building efforts.

AFG uses a modified DCF model that accurately addresses the competitive nature of the business while also dealing with the perpetuity issue through our Economic Margin decay or competitive advantage period.

CF Acquisition