Here is a list of stocks which traded higher Wednesday November 11, 2009 on unusually higher volume. I will keep an eye on these stocks Thursday to see if there is continued buying pushing the stocks higher. This method is just one of the ways I use to pick stocks to structure particular option trades. This post requires the knowledge of stock options. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.

The table below shows the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.

When I last commented on Sanderson Farms (SAFM) in August 2008, their CEO Joe Sanderson was praying for a miracle.

If you missed our first post, we've already covered our first set of notes from the Great Investors' Best Ideas Symposium. In that particular post, we detailed investment ideas from prominent hedge fund players Bill Ackman of Pershing Square & David Einhorn of Greenlight Capital amongst many others and we highly recommend checking it out. This post is a continuation of those notes as we wanted to post up some other notable investors' ideas that weren't covered in the first article.

Mario Gabelli, GAMCO Investors

Packaged food producer Smithfield Foods (SFD) is trading down 8% today, on news that the CEO unloaded 100,000 shares of stock this week after the company enticed new investors to buy shares a couple of weeks ago. A pump-and-dump indeed.

Look at the chart:

Post holiday season as investors get back to their desks, it's evident that M&A activity is back on the agenda as the market digests news of Kraft Foods (KFT) offer to acquire Cadbury's (CBY). The bid is perceived as hostile and it's expected that more news will emerge as we step through the coming month. This event has prompted interest in the sector and Dataexplorers highlights the following short positions:

As of Sept 11th, the names with the largest short interest were; Smithfield Foods Inc (SFD), Treehouse Foods Inc (THS), Green Mountain Coffee (GMCR), Cal Maine Foods Inc (CALM), and Diamonds Foods (DMND).

Sentiment

Stocks are holding modest gains in a day of relatively uneventful market action Wednesday. After a 56-point gain Tuesday, the Dow Jones Industrial Average opened modestly higher, but with no economic data and no earnings of broad market significance to guide the action one way or the other. A modest morning rally developed with help from some of the energy-related names after crude oil added another 39 cents to $71.49 a barrel.

However, the major averages came off their best levels of the day following the release of the latest Beige Book from the Federal Reserve, which noted some signs of stabilization in economic activity and improvement in real estate markets. Maybe some investors were expecting a more upbeat assessment of economic conditions because the Dow Jones Industrial Average suffered a modest pullback on the news.

SmithField Foods Inc. (SFD), producer and marketer of fresh and packaged meat products in the U.S. and internationally, reported results for its first quarter of fiscal 2010 with a net loss of 56 cents per share. The loss was a penny higher than the Zacks Consensus Estimate of 55 cents. The loss was also greater than net of loss of 21 cents reported in the comparable prior-year quarter.

Despite controlled production, the company reported a loss primarily due to higher one-time items and lower hog prices domestically due to oversupply, the impact of the H1N1 (commonly referred to as "swine flu") pandemic and the recession.

Sep 8, 2009

-NYSE up 88.9 (1.3%) to 6,726.06.

-DJIA up 56.07 (0.6%) to 9,497.

F1Q10 Earnings Call

September 8, 2009 9:00 am ET

• Krafting a Cadbury deal. Cadbury (CBY) rejected a £10.2B ($16.7B) acquisition offer from Kraft (KFT) yesterday, saying the bid 'fundamentally undervalues' the company and paving the way for possible counteroffers, including from rivals Hershey (HSY) and Nestle (NSRGY.PK). The offer was a 31% premium to Cadbury's Friday close, and Kraft said it remains committed to reaching a deal. However, analysts suggested Kraft may have to raise its offer as much as 40% to get Cadbury to accept. KFT -2.3%, CBY +41% premarket (7:00 ET). (Read Kraft's press release (.pdf))
• U.K. mobile phone merger. Earlier this morning, Deutsche Telekom (DT) and France Telecom (FTE) announced plans to join their U.K. operations in a 'merger of equals,' surpassing Telefonica (TEF) as Britain's largest mobile phone operator. The joint venture will have 30M customers, control 38% of the U.K.'s highly competitive mobile market and generate £4B ($5.7B) of savings. Separately, Telefonica reached an agreement to expand its strategic alliance with China Unicom (CHU), giving the Spanish firm a stronger foothold in the world's largest mobile phone market. (Read the Deutsche Telekom press release)
• G-20 keeps banking reform alive. Over the weekend, G-20 finance ministers and regulators announced new, tougher guidelines that would force banks to raise billions more in capital over the coming months. Full details are not yet finalized, but central bank governors and bank supervisors from 27 countries said they would present concrete proposals by the end of this year. (Read the G-20's plans for strengthening the financial system (.pdf))
• AIG continues to shed units. AIG (AIG) may be looking to take its time on the sale of some major assets, but it's open to quick sales of smaller units. Case-in-point: Saturday's agreement to sell an asset-management division to Hong Kong tycoon Richard Li's Pacific Century Group for $500M, below the $800M price tag potential bidders were discussing several months ago. In its press release, AIG said the deal 'provides fair value' for the unit. Meanwhile, Chinatrust Financial has reportedly outbid rivals by offering $2.4B for AIG's Taiwan Nan Shan Life unit. AIG had targeted the unit to bring in $2B.
• Pro-Linux group closes in on MSFT patents. The Open Invention Network, a group which supports open-source software and includes such giants as IBM (IBM) and Sony (SNE), is nearing an agreement to acquire 22 of Microsoft's (MSFT) patents in an effort to avoid any legal threats that could discourage the adoption of Linux. Microsoft has suggested in the past that the Linux operating system may violate some of its patents. The patents are currently held by Allied Security Trust, which bought the patents from Microsoft earlier this year.
• Abu Dhabi challenges chip firms. Abu Dhabi's Advanced Technology Investment Co. [ATIC] agreed to buy Chartered Semiconductor Manufacturing (CHRT) for $1.8B in cash yesterday. ATIC's second major investment in the industry, the deal will allow its semiconductor joint venture to better compete with Taiwan's leading contract-chip manufacturers, including Taiwan Semiconductor Manufacturing (TSM) and United Microelectronics (UMC). (Read ATIC's press release (.pdf))
• WTO ruling gives Boeing fans ammo. After the WTO's preliminary ruling that Airbus received illegal subsidies from European governments, pro-Boeing (BA) lawmakers in the U.S. are pushing the Pentagon to keep the ruling in mind for its $40B tender to supply tanker planes. However, upside implications of the ruling may be limited, as "we live in a glass house of global subsidies" and future WTO victories may be harder to come by following the U.S. provision of billions of dollars to banks and automakers.
• Google shelves European book plan. Bowing to pressure from European publishers, Google (GOOG) said it will remove all copyright-protected European books from its book scanning program. Google also promised to put two non-U.S. representatives on the governing board of the Books Rights Registry, which will oversee Google's settlement with publishers. Shares +1% premarket (7:00 ET).
• OPEC happy with oil prices. Ahead of tomorrow's OPEC meeting, Saudi Oil Minister Ali al-Naimi said the oil market is in 'good shape' and 'everybody likes' the current price. The group is expected to leave output quotas unchanged. Taking advantage of the production cuts is Russia, which is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse.

Earnings: Tuesday Before Open

• Smithfield Foods (SFD): FQ1 EPS of -$0.56 misses by $0.01. Revenue of $2.7B (-14%) vs. $2.8B. (PR)

Today's Markets

Markets are up across the globe.

Food stocks have been on a tear lately. Attributes such as more predictable earnings, juicy dividends, lower volatility and more reasonable price multiples are at the forefront of the sector’s recent success. They aren’t highflyers, glamorous or exciting like the tech sector, but they will help you sleep better at night.

The Basic Food Fund (BFF) certainly lagged the overall market the past five weeks rising a mere 9% from $167.73 to $182.93 compared to a more robust rally in the DJIA's 14% hike from 8332 to 9506, but it also won’t fall like a rock when the major averages correct through profit taking in the near future.

Sentiment

Stocks opened lower on weakness in overseas markets along with cautious earnings guidance from HP (HPQ) and Deere (DE), but the major averages have erased early losses and are trading higher late Wednesday. With no economic data scheduled for today, the focus was on overseas markets Wednesday morning. Shanghai's Composite Index lost 4.3 percent and is down roughly 20 percent since August 4 amid concerns officials in Beijing aren't doing enough the help the credit markets and the economy.

Markets were broadly lower across the Asia/Pacific and in Europe before the exchanges opened in New York. Meanwhile, Dow component HPQ was under pressure on cautious earnings guidance. Deere (DE) fell on earnings news as well.

We hear the phrase “When pigs fly” when we’ve asked a question for which a simple, polite “no” is beyond the bounds of human compassion, or when someone is euphemistically trying to describe the very low probability of something occurring.

Unfortunately, anyone using that phrase has never watched what goes on in D.C. as there is so much pork flying around down there that if they flipped the Capital Dome over they could dip the Washington Monument in and use it like one of those contraptions on the boardwalk that makes cotton candy. Additionally, given that at least in the fairy tales, pigs are pink, you wouldn’t even need the F.D.A to get involved as no Red Dye #7 would be required.

Having said that, it is often instructive to take a look at the changes made during Q2 to get a sense of what themes managers are focusing on. Of course, we cannot see their short portfolios so for many of these managers you really only get half the story. But on the long side, having the data from Q4 2008, Q1 2009 and Q2 2009 all together, it is sometimes possible to re-engineer a certain manager’s strategy.

In a 13G filed with the SEC, Stephen Mandel's hedge fund Lone Pine Capital has disclosed a 5.6% ownership stake in Vistaprint (VPRT). The filing was made due to activity on July 21st, 2009 and they now own 2,365,511 shares. This is up massively from the last position they disclosed in VPRT as of March 31st, 2009 when they previously owned 258,100 shares. So, somewhere between April and July, Lone Pine has significantly increased their VPRT holdings.

Stephen Mandel's hedge fund has been quite busy over the past few months and we've covered all their moves. At the end of June, Lone Pine filed a 13G on Smithfield Foods (SFD). In terms of other big bets Lone Pine has made recently, we saw that Mandel likes Strayer Education (STRA). He presented this choice at the 2009 Ira Sohn Conference where numerous hedge fund managers each presented an investment idea. You can check out the rest of Lone Pine's portfolio here.

The Associated Press yesterday reported that there would be no licensed swine flu vaccine until the end of the year. Apparently the yield of the active ingredient(s) from the swine flus being used is only about half of that of normal flu viruses.

As part of that article, AP cited British Health Minister Andy Burnham as saying the UK could see up to 100,000 cases per day by the end of August. Swine flu vaccine is supposed to start arriving in the UK in August (but not nearly enough to vaccinate everyone).

We have all heard it: food stocks are defensive in nature so that when things are dreadful, they shouldn’t get beat up as bad, and when things are good, they don’t participate with the same rigor on the upside as other stocks. But in this market, it just hasn’t worked out that way. In fact, when the market dived earlier in the year, food stocks actually had poorer relative strength than other sectors, but then when the market bounced back, the food sector’s relative strength was superior. The moral of the story: Sometimes you just have to throw out all the rules and trade by the “seat of your pants” utilizing your own gut instincts as your guide.

Disclosure: Long all equites included in the BFF Index.

In a 13G filing made with the SEC due to activity on June 9th, 2009, Lone Pine Capital has disclosed a 7.7% ownership stake in Smithfield Foods (SFD). This is a brand new position for Stephen Mandel's hedge fund and it now owns 11,116,850 shares. Lone Pine previously did not show a position in SFD when we looked at its entire portfolio, so it has just recently entered the position over the past 2 months or so. In terms of other big bets Lone Pine has made recently, we saw that Mandel likes Strayer Education. He presented this choice at the 2009 Ira Sohn Conference where numerous hedge fund managers each presented an investment idea.

His $7 Billion fund has returned over 25% annually since its inception in 1997, but had a rough year in 2008. The term 'lone pine' comes from Mandel's days at Dartmouth College, where the school has a historical lone pine tree. He is well versed in the ways of finding undervalued companies and he typically likes to sniff out solid companies with good management that are trading below their intrinsic value. In Alpha's 2009 hedge fund rankings list, Lone Pine was ranked 21st.

The "BFF" index has replaced SCS, PBY and JBLU with the following food related equities: LUB, FLO and DLM. The reshuffling, which was clearly overdue will present an index much more representative of the food sector. The old index finished at $141.55, and the new index starts at $157.74. The new index will include 14 equities.

Component highlights

BRID: The snack food purveyor keeps making higher highs and higher lows as it approaches fresh four year highs. A challenge of the $10 area by midsummer seems plausible.