Seeing trends in options activity has led to many great trades for me, and while looking through my nightly data set I noticed that a number of REITs showed up as having the highest put/call ratios in the market yesterday.

After some more digging I noticed that the trend was option traders hitting the bid (sellers) in February and March dated puts in a variety of stocks.

Q3 2009 Earnings Call

October 27, 2009 2:00 pm ET

• Goldman defends dark pools, status quo. In a letter to the SEC (.pdf), Goldman Sachs (GS) dispelled five common myths about so-called 'dark pool' anonymous trading exchanges, saying the venues benefit both institutional and retail traders by reducing transaction costs and increasing competition. The rest of the 56-page document - which summarizes a Sept. 24 SEC/Goldman gettogether - sheds light on industry practices of short selling, high-frequency trading, flash trading and naked access, which have come under varying levels of criticism in recent months.
• India begins exit. With inflation pressures building, the Reserve Bank of India took the first step toward withdrawing its record fiscal stimulus by ordering lenders to keep more cash in government bonds. "It may be appropriate to sequence the 'exit' in a calibrated way," governor Duvvuri Subbarao said today after boosting the liquidity ratio to 25% from 24%. BofI kept its benchmark rates unchanged, and maintained its 6% GDP growth forecast. "We will start to see G-20 economies exiting now, starting with the emerging ones and then the advanced countries," economist Mridul Saggar said. India's BSE Sensex was down 2.3% amid a broad Asia pullback. (ETF: INP)
• New IRS group targets ultra-rich. A new IRS unit will target the ultra-wealthy by helping decode partnerships, offshore trusts and other complex techniques used to hide earnings. Speaking to an accountants' trade group Monday, IRS commissioner Doug Shulman said the new Global High Wealth Industry group will begin its first audits next month, honing in on individuals with assets or income in the tens of millions - for whom, he said, you cannot assess compliance "by looking only at their 1040s."
• Gross sees weaker U.S., pressure on Treasurys. Influential bond manager Bill Gross warned Monday that an end to the Fed's debt buyback schemes could add selling pressure to several credit markets, including U.S. Treasurys. Gross also said he believes emerging economies will grow faster than the U.S.: "The emerging world, whether it's in Asia, Australia or other associated countries, will do much better from the standpoint of growth, and that's where money should eventually move to. It moves there because of higher profits and it moves there actually because of higher real interest rates."
• China predicts more growth ahead. China reported a 190% jump in overseas investment (to $20.5B in Q3), and forecast industrial production would rise 16% in Q4 after a 13.9% gain in Q3. Analysts say Beijing may be encouraging Chinese companies to invest abroad to ease upward pressure on the yen. Last week, China reported an 8.9% gain in Q3 GDP, leading to speculation about an imminent exit from its super-loose monetary stance. This morning, Morgan Stanley's Stephen Roach said investors are wrong to bet on China reining things in: "The Chinese really are fixated on one thing and one thing alone which is social stability - they don’t want to take a risk of another negative growth surprise." (ETFs: FXI, PGJ)
• Japan's Fujii criticizes BOJ. Japan's finance minister lashed out at its central bank Tuesday, calling its view of the economy too rosy and narrowly informed. "The BOJ has repeatedly said the economy is getting better, but they are dealing with different people," Hirohisa Fujii said at a meeting. The BOJ has a developed a reputation of allowing its jawboning to push it to act in a contrary way just to demonstrate its independence. (ETF: EWJ)
• UBS hires McCann to rebuild Americas unit. UBS (UBS) named Robert McCann - former chief of Merrill Lynch's brokerage unit - to head its Americas wealth management businesses. UBS has been hurt by a tax dispute with the U.S. government, not to mention bad bets on auction-rate securities, writedowns, and capital outflows. McCann dispelled rumors the unit may be up for sale: "I had to go to court against two of my former employers to be able to work with UBS. I would have not done that if the whole goal was to sell the company." Analysts say the unit remains 'strategically challenged,' and are skeptical a new helmsman can combat the negative implications of UBS's loss of its status as banker to the ultra-secretive.
• Utex leads bidders for GE Security. Sources say United Technologies (UTX) has emerged as the frontrunner for GE's (GE) fire alarm and surveillance systems unit, which it put on the block earlier this year. A deal would bolster United's strategy of locking in revenue streams by offering multi-year service contracts for equipment and systems in commercial buildings. GE is thought to want about $2B for the unit.
• EU approves Pepsi bottlers merger. PepsiCo (PEP) received the European Commission's blessings for its $7.8B deal to buy Pepsi Bottling Group (PBG) Tuesday, despite some overlap in their businesses. "The proposed transaction would not significantly change the market structure. Consequently, the Commission concluded that the transaction would not raise competition concerns," it said.
• Europe lending dries up. Euro zone private-sector loans fell 0.3% from a year ago, the first contraction on record, but economists said a slight rise in month-over-month lending was a sign credit in the area was slowly beginning to flow again. "The year-on-year fall is going to catch everyone's imaginations, but that's a lagging indicator of what's been going on," Fortis's Nick Kounis said. Loans to households rose by €14B from August, the fifth sequential increase.
• Data point to bumpy recovery. Regional reports Monday suggested the economy is approaching levels associated with the end of recession, but isn't exactly surging to new highs. Chicago Fed's national activity index (.pdf) fell to -0.81 from -0.65 in August, with production/income making the only positive contribution. Still, the index's three-month moving average makes quite a strong case for a V-shaped recovery. Dallas Fed said Texas-area factory activity declined, and its production index moved into negative ground after leveling the month before. The Chicago Fed's manufacturing index (.pdf) rose 1% to 82.3, but remains 15.7% lower than a year ago.

Earnings: Tue. Before Open

• ACGO Corp. (AGCO): Q3 EPS of $0.13 beats by $0.09. Revenue of $1.4B (-32.7%) in-line. (PR)
• AK Steel (AKS): Q3 EPS of $0.06 beats by $0.05. Revenue of $1.04B (-51.7%) in-line. Shares +1.1% premarket. (PR)
• Avery Dennison (AVY): Q3 EPS of $0.82 beats by $0.25. Revenue of $1.55B (-10.2%) vs. $1.47B. "While the rate of volume decline in the third quarter improved compared with the first half of the year, this was largely due to a slowdown in inventory reductions. Our end-markets remain soft, and we continue to be cautious about the pace of their recovery." (PR)
• BE Aerospace (BEAV): Q3 EPS of $0.36 beats by $0.04. Revenue of $460M (-21.8%) in-line. Expects a substantial increase in earnings and revenue in 2011. (PR)
• Boyd Gaming (BYD): Q3 EPS of $0.09 misses by $0.01. Revenue of $398M (-6.6%) vs. $411M. "While visitation levels remained fairly constant, spend per visitor continues to be down significantly year-over-year, as consumers are still being cautious with their spending." (PR)
• BP (BP): Q3 earnings of $4.67B (-47%) vs. consensus of $3.25B. Sees 2009 costs down by $4B vs. a previous $3B. Total production +6.9%. Shares +5% premarket. (PR)
• Canadian Pacific Railway (CP): Q3 EPS of $0.85 beats by $0.07. Revenue of $1.09B (-14%) in-line. (PR)
• Celanese (CE): Q3 EPS of $0.58 beats by $0.15. Revenue of $1.3B (-28.5%) in-line. (PR)
• CommScope (CTV): Q3 EPS of $0.61 beats by $0.05. Revenue of $750M (-29.4%) vs. $784M. (PR)
• Convergys (CVG): Q3 EPS of $0.27 beats by $0.04. Revenue of $765M (+13.2%) vs. $653M. (PR)
• Corn Products International (CPO): Q3 EPS of $0.70 beats by $0.07. Revenue of $971M (-10.5%) vs. $983M. (PR)
• EarthLink (ELNK): Q3 EPS of $0.28 beats by $0.03. Revenue of $174M (-24.4%) in-line. Net subscriber losses of 146K, down from 149K in Q2 and 275K a year ago. Shares +3.8% premarket. (PR)
• Del Monte (FDP): Q3 EPS of $0.61 beats by $0.24. Revenue of $766M vs. $819M. (PR)
• FirstEnergy (FE): Q3 EPS of $1.11 beats by $0.06. Revenue of $3.4B (-12.8%) vs. $2.96B. (PR)
• FPL Group (FPL): Q3 EPS of $1.38 misses by $0.03. Revenue of $4.47B vs. $4.96B. Shares -3.1% premarket. (PR)
• Honda (HMC): FQ2 profit of ¥54B (-56%) beats consensus by ¥11B. U.S. vehicle sales -25% to 300K. Sees full-year net income of ¥155B, almost triple its previous forecast, and global sales of 3.4M, up 3.2%. (Bloomberg)
• Hospira (HSP): Q3 EPS of $0.90 beats by $0.21. Revenue of $1.01B (+8.9%) vs. $0.94B. Shares +3.7% premarket. (PR)
• IAC/InterActiveCorp (IACI): Q3 EPS of $0.34 beats by $0.21. Revenue of $337M (-8.9%) in-line. Shares +1.3% premarket. (PR)
• Iconix Brand Group (ICON): Q3 EPS of $0.31 beats by $0.03. Revenue of $59.4M (+7.7%) vs. $53.9M. Shares -1.3% premarket. (PR)
• Johnson Controls (JCI): FQ4 EPS of $0.52 beats by $0.01. Revenue of $7.87B (-15.5%) in-line. (PR)
• L-3 Communications (LLL): Q3 EPS of $2.12 beats by $0.27. Revenue of $3.84B (+4.9%) in-line. (PR)
• Life Technologies (LIFE): Q3 EPS of $0.73 beats by $0.11. Revenue of $805M (+2.7%) vs. $791M. Shares +4.1% premarket. (PR)
• Sonic Automotive (SAH): Q3 EPS of $0.21 misses by $0.03. Revenue of $1.52B (-5.9%) in-line. (PR)
• TD Ameritrade (AMTD): Q3 EPS of $0.26 beats by $0.04. Revenue of $658M (+1.3%) vs. $630M. Avg. client trades +35% to 411K/day. Used 70% of net income to buy back shares at average of $11.94/share. Shares +1.4% premarket. (PR)
• Textron (TXT): Q3 EPS of $0.12 vs. consensus of -$0.03. Revenue of $2.55B (-26.6%) in-line. Sees full-year EPS of $0.33-0.63 vs. consensus of -$0.06. (PR)
• Under Armour (UA): Q3 EPS of $0.52 beats by $0.08. Revenue of $270M (+16.2%) vs. $250M. Shares +1.6% premarket. (PR)
• United States Steel (X): Q3 EPS of -$2.11 beats by $0.76. Revenue of $2.82B (-61.5%) vs. $2.72B. Shipment volumes and operating rates increased significantly from the very low levels of Q2. Remains cautious in its outlook for end-user demand, as customer order rates have decreased from Q3. Shares +4.4% premarket. (PR)
• Valero (VLO): Q3 EPS of -$0.39 misses by $0.06. Revenue of $19.5B (-45.8%) vs. $18.8B. Refining margins continued to suffer from a combination of weak demand for refined products and high inventories. Shares +0.6% premarket. (PR)
• Wynn Resorts (WYNN): Q3 EPS of $0.33 beats by $0.18. Revenue of $773M vs. $743M. Shares +1.9% premarket. (PR)

Earnings: Mon. After Close

• Arris Group (ARRS): Q3 EPS of $0.25 beats by $0.01. Revenue of $276M (-7%) vs. $274M. Shares +0.7% AH. (PR)
• Baidu.com (BIDU): Q3 EPS of $2.16 beats by $0.35. Revenue of $187M (+39%) vs. $188M. Sees Q4 revenue of $174M-180M vs. $203M. Shares -13.1% AH. (PR)
• Cabot Oil & Gas (COG): Q3 EPS of $0.41 beats by $0.05. Revenue of $207M (-15%) vs. $205M. (PR)
• DryShips (DRYS): Q3 adjusted EPS of $0.27 beats by $0.07. Revenue of $228M (-30%) vs. $210M. Shares -0.3% AH. (PR)
• Flextronics International (FLEX): FQ2 EPS of $0.13 beats by $0.04. Revenue of $5.8B (+1%) in-line. Sees Q3 EPS of $0.14-0.16 vs. $0.13. Shares +2.7% AH. (PR)
• Health Management Associates (HMA): Q3 EPS of $0.10 beats by $0.01. Revenue of $1.1B (+6%) in-line. Shares -1.1% AH. (PR)
• Masco (MAS): Q3 EPS of $0.08 misses by $0.01. Revenue of $2.1B (-17%) vs. $2B. Sees full-year adjusted EPS of $0.12-0.22 vs. $0.07. Shares -0.1% AH. (PR)
• Plum Creek Timber (PCL): Q3 EPS of $0.12 beats by $0.04. Revenue of $294M (-29%) vs. $274M. Sees Q4 EPS of $0.12-0.17 vs. $0.12, and full-year EPS of $1.39-1.44 vs. $1.35. Shares +0.6% AH. (PR)
• SL Green Realty (SLG): Q3 EPS of $0.98 in-line. Revenue of $250M (-7%) vs. $224M. (PR)
• Vertex Pharmaceuticals (VRTX): Q3 EPS of -$0.71 beats by $0.10. Revenue of $25M (-21%) vs. $30M. (PR)
• VF Corp. (VFC): Q3 EPS of $1.94 misses by $0.01. Revenue of $2B (-5%) in-line. Shares -7% AH. (PR)

Today's Markets

Asia's markets dropped strongly on Tuesday, but Europe is above breakeven at midday, and futures are flat after a U.S. pullback Monday.

With the September options expiration approaching us in just 4 days, I thought I would outline some trade ideas on stocks I wouldn't mind going long (with the exception of AIG), that would return good percentages in just 4 days. When using the buy/write option strategy, it is important that you are willing to hold the security in case it is below the strike price at options expiration. I have put together a list of stocks/ETFs which will return a nice percentage gain if they are above the strike price as of September options expiration, but will also protect (lower cost basis) to the downside in case the stock/ETF sells off slightly and expires below the strike price. The list below is a very tall one, and for your convenience I have ranked the securities in order from the largest percent return to the least. To learn more about the buy/write option strategy, risks, pricing, calculations, other strategies, and options in general, click here.

Note that higher beta securities return higher percentages due to their levels of implied volatility, and because they are riskier.

Equity REITs have made a strong move lately. We have expressed our doubts about the wisdom of that move (Are REITs Ahead of Themselves?), and wonder about the quality of the underlying trusts.

click images to enlarge

Q2 2009 Earnings Call

July 28, 2009 2:00 pm 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)

At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our Market Condition Summary to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

Commercial Real Estate is a big fear and unknown question that is just waiting to either kill or rally our economy and equity markets. However all the news we hear about the commercial space these days is bad, worse, and terrible. Just last week U.S. office market vacancy rate reached 15.9% in the second quarter, the highest level in four years, and rent fell by the largest amount in more than seven years as demand remained weak, according to a leading real estate research firm.

Click here to read Part 1.

On Friday, we attended Day Two of IMN's 10th Anniversary US Real Estate Opportunity & Private Fund Investing Forum in New York City. The event is oriented toward the real estate fund, developer, and LP communities. We published a brief Day One summary the other day and expand on key takeaways in this article. Day Two included additional panel discussions that covered many topics related to both challenges and opportunities facing private equity and the commercial real estate industry.

Yesterday, we attended Day One of IMN's 10th Anniversary US Real Estate Opportunity & Private Fund Investing Forum in New York City. The event is oriented toward the real estate fund, developer, and LP communities. Conference organizers relayed to us that approximately 900 persons picked up badges yesterday, down approximately 25% from last year, which we believe is a good showing considering the environment. As a point of comparison, we note that Gartner, Inc. (IT) reported that 1Q09 attendees declined 46% Y/Y for 12 events (unchanged Y/Y) to 2,858. Clearly, many persons remain keenly interested in figuring out how to work through current commercial real estate challenges and best participate in distressed opportunities.

The IMN Forum covered virtually all topics facing the commercial real estate industry. Key takeaways include the following: (1) conflicting view that we’re both entering a period of tremendous buying opportunities, yet also a long way from the bottom as mountains of debt come due and can’t be refinanced amidst deteriorating fundamentals; (2) government support to financial institutions could be delaying distressed sales and preventing market clearing prices; (3) reluctance of note holders (e.g. banks) to take losses (related to point #2); (4) property deal flows near all-time lows, although perhaps somewhat better than several months ago; (5) not surprisingly, fundraising is difficult and fund structures are changing; and, (6) well capitalized REITs may be relatively better positioned to lead the way through the next several years.

The most fascinating thing about the run up in the markets since the beginning of March is the extent to which it has been led by the sectors that had been the most beaten down - for example retailers, financials, REITs and early cyclicals. In contrast, even though just about everything is up from the early March levels, companies that people associate with stability, such as consumer staples, have actually trailed the market.

With the massive dilution in the sector plus Federal Reserve backing, it appears things like rental rates and occupancy percentages are meaningless. Perhaps my throwing in the towel will mark the top, but as I scanned the Commercial Real Estate sector chart after chart this weekend, all I saw were 'bullish' set ups. Stocks above all moving averages and bouncing on each test of a support. If I were truly genius, I would of been going long or be going long today in fact.

I covered the SL Green (SLG) short a week ago, and now am going to jettison the remaining 3; this was part of a basket of names, and I did not have much left. All together I have roughly 1.5% in these 3 names, but for now, all corrections are supported by key moving averages which are not the type of charts I prefer to short. These are all material losses, but most of the damage was done in April on these positions. Since then, I've just had small positions waiting for the market to turn down... which apparently is now a Black Swan event.

With the Federal Reserve indeed following through last week on the lobbyists' months-long push to include legacy commercial real estate debt into their TALF program[Feb 23, 2009: Fed May Need to Recast TALF on Commercial Real Estate] [Jan 13, 2009: Bailout Nation Continues in Commercial Real Estate Land - "Lemme In on that Money"] [Dec 22, 2008: Wall Street Journal - Property Developers Ask for Government Bailouts], the REITs are very happy campers. It took 6 long months, but the central bank finally broke. You just have to love a country where lobbyists have access to the Fed, but the people cannot even audit it. Cronyism 101.

I didn't bother posting it because we've been telegraphing this move for many months, and as I wrote the blog entry, that little piece of throw up starting shooting up my throat... remember the end game folks - the Federal Reserve is now a massive hedge fund and when your attention is elsewhere in 2011-2013 (enjoying a new bubble they create with easy money) they will suffer large losses from everything they are backstopping. Notice the "truth in labeling" - 'toxic' has been replaced with 'legacy'... but trust me, it all smells the same.

Can you hear the high- fiving across Washington D.C. and New York? The plan is going splendidly - create nitwit stress test (that everyone passes and the students of the test can negotiate the results) to create "confidence", allow companies to flood the market with stock at much higher prices (less dilution) [May 8: DryShops Joins the Dilution Parade], allow insiders to dump their shares on the public, and let the oligarchs profit with hundreds of millions of underwriting fees.

It almost feels normal again... Wall Street is back - business as usual. Now you see why there is good reason for that "consistent bid" under the market...

Guess Mack-Cali (CLI) figures better late than never, especially when you have the REIT dilution powerhouse behind you. CLI yesterday announced it will issue a total of 7,475,000 shares with Merrill (BAC) as lead underwriter. Use of proceeds: "To repay borrowings under its unsecured revolving credit facility" which has as syndication agent...pause... Bank Of America.

Unfortunately the $180 million of max proceeds will not really help BofA with their total bank exposure... Curiously CLI is not even covered by the dynamic ML REIT duo of SS (Schmidt-Sakwa). Which does not mean the two have not been busy - here are their latest actions over just the past 3 days - finding the mildly optimistic report is harder than Where's Waldo:

Q1 2009 Earnings Call

April 28, 2009 2:00 pm ET

• BoA, Citi likely need more capital. Regulators reportedly told Bank of America (BAC) and Citigroup (C) that the banks may need to raise additional capital based on early stress test results, with a capital shortfall in the billions of dollars at Bank of America. Sources say both banks, unsurprisingly, object to the preliminary findings and plan to present regulators with detailed rebuttals. Analysts also expect Regions Financial Corp. (RF), Fifth Third Bancorp (FITB) and Wells Fargo (WFC) to be among the banks most likely to need capital. Premarket: BAC -12.2%, C -8.5% (7:00 ET).
• Unstressful stress tests. Elizabeth Warren, head of the Congressional Oversight Panel for TARP, is worried the adverse scenario being used to test banks' health is 'disturbingly close' to current economic conditions, and that there may need to be a second set of stress tests if the economy worsens. She also expressed her disappointment that the government's description of its methodology lacked critical details. Warren wants to see enough details provided by the Federal Reserve to allow outsiders to run their own versions of stress tests. "The stress tests will make a terrific contribution if they are tough and transparent," she said. "If they are not, they will be useless."
• GM's survival plan looks shaky. General Motors (GM) presented its final plan to restructure outside of bankruptcy by cutting debt, eliminating over 21,000 more U.S. jobs and nationalizing itself by giving majority control to the government. The company said it will file for bankruptcy if its proposed debt swap fails to reduce $27B in bond debt by around 90%. Analysts doubt the debt exchange will succeed, and bondholders blasted the terms of the deal, setting GM up for a likely bankruptcy. In response to the nationalization proposal, which would put 89% of the company in the ownership of the government and the UAW union and present the government with several potential conflicts, a White House spokesman clarified "it is not our desire to either own or run one of the auto companies." Shares -2.5% premarket, after a 20.7% gain yesterday (7:00 ET).
• UAW to get 55% Chrysler stake. The tentative agreement reached between Chrysler and the United Auto Workers union would eventually give the UAW 55% ownership in a restructured Chrysler. Chrysler will also issue a $4.59B note to the health-care trust fund that the union will manage for retired workers. Fiat will 'eventually' end up with a 35% stake, while the government and Chrysler's secured lenders will get 10% ownership. Separately, Daimler agreed to give up its remaining 19.9% stake in Chrysler and pay up to $600M into the automaker's pension fund.
• BP profit fall prompts spending cuts. BP's (BP) Q1 net income fell to $2.56B ($0.14/share) from $7.09B ($0.37/share) the year before, prompting the oil company to cut its 2009 spending target for a second time to less than $20B. Despite the profit slump, the company still beat analyst estimates with adjusted earnings of $2.58B vs. $2.2B consensus. BP raised its quarterly dividend 4% to $0.14 per common share. Shares +1.9% premarket (7:00 ET).
• SEC freezes financier's assets. The SEC froze the assets of financier Danny Pang and two of his firms, accusing Pang of defrauding investors of hundreds of millions of dollars. Regulators say Pang faked his resume, forged documents, pledged unrealistic returns and paid investors with cash raised from new ones.
• Deutsche posts profit on I-bank income. Deutsche Bank (DB) returned to profitability in Q1 with net income of €1.19B as trading income rose at its investment bank. Investors remain concerned about the possibility of future writedowns and as earnings from so-called stable businesses missed analysts' expectations. CEO Josef Ackermann agreed to extend his contract by three years. Shares -4.0% premarket (7:00 ET).
• Citi to sell Japan units. Citigroup (C) will reportedly sell most of its Nikko Cordial Securities Inc. and Nikko Citigroup Ltd. businesses in Japan to Sumitomo Mitsui Financial Group (SMFJY.PK) for over ¥500B ($5.2B). Citigroup paid ¥1.6T for Nikko Cordial in January 2008. The Nikkei newspaper says a deal will be announced by the end of the week.
• IBM, Brocade deepen ties. IBM (IBM) and Brocade Communications Systems (BRCD) are strengthening their relationship, and IBM will rebrand ethernet switching and routing products made by Brocade as IBM products and sell them to mutual corporate customers. The move comes amid increasing rivalry between IBM and Cisco (CSCO).
• Swine flu fears continue. The World Health Organization raised its alert level to phase 4 as suspected cases of swine flu rose worldwide, and said containment of the outbreak is not feasible. Fears about the possible pandemic pushed down share prices of travel stocks for the second day in a row.
• Amazon buys e-book firm. Amazon (AMZN) added to its growing portfolio of e-book offerings with the acquisition of Lexcycle Inc., a company that makes a popular e-book reading application for the iPhone (AAPL). Terms of the deal were not disclosed.
• McDonald's reaches drinks deals. Dr. Pepper Snapple Group (DPS) and Coca-Cola (KO) reached deals with McDonald's (MCD) to give the beverage companies' brands a wider presence in McDonald's stores.

Earnings: Tuesday Before Open

• AGCO (AG): Q1 EPS of $0.36 beats by $0.13. Revenue of $1.6B (-11.6%) in-line. Shares -0.7% premarket (8:20 ET). (PR)
• American Greetings (AM): FQ4 EPS of $0.26 beats by $0.01. Revenue of $442.5M (-10.3%) vs. $467.3M. (PR)
• Becton, Dickinson and Co. (BDX): FQ2 EPS of $1.18 beats by $0.02. Revenue of $1.74B (-0.4%) vs. $1.76B. (PR)
• Bemis (BMS): Q1 EPS of $0.43 beats by $0.09. Revenue of $843M (-11%) vs. $873M. Reaffirms FY '09 guidance, sees EPS of $1.50-$1.70. (PR)
• Bristol-Myers Squibb (BMY): Q1 EPS of $0.48 in-line. Revenue of $5.0B (+2.5%) vs. $5.1B. (PR)
• Celanese (CE): Q1 EPS of $0.08 beats by $0.18. Revenue of $1.15B (-37.9%) vs. $1.25B. (PR)
• Coca-Cola Enterprises (CCE): Q1 EPS of $0.20 beats by $0.15. Revenue of $5.05B (+3.2%) vs. $4.86B. Issues upside guidance for FY '09, sees EPS of $1.24-$1.29 vs. $1.20 consensus. (PR)
• Coventry Health Care (CVH): Q1 EPS of $0.30 beats by $0.05. Revenue of $3.6B (+21.5%) vs. $3.4B. Sees FY '09 EPS of $1.70-$1.90, revenue of $13.59B-$13.99B. (PR)
• EarthLink (ELNK): Q1 EPS of $0.30 beats by $0.03. Revenue of $199M (-24.3%) vs. $203M. (PR)
• EMCOR Group (EME): Q1 EPS of $0.55 beats by $0.22. Revenue of $1.4B (-16.1%) vs. $1.5B. (PR)
• FirstMerit (FMER): Q1 EPS of $0.36 beats by $0.09. (PR)
• FPL Group (FPL): Q1 EPS of $0.90 beats by $0.13. Revenue of $3.7B (+7.9%) vs. $3.6B. Issues upside EPS guidance for FY '09 of $4.20-$4.40 vs. $4.06 consensus. Issues upside EPS guidance for FY '10 of $4.65-$5.05 vs. $4.56 consensus. (PR)
• HCP Inc. (HCP): Q1 EPS of $0.50 misses by $0.03. Revenue of $252M (+2.8%) vs. $256M. (PR)
• Hecla Mining (HL): Q1 EPS of $0.02 beats by $0.08. Revenue of $55M (+45.9%) vs. $48M. Shares -3.8% premarket (8:10 ET). (PR)
• Hospira (HSP): Q1 EPS of $0.60 beats by $0.05. Revenue of $860M (-3.3%) vs. $859M. Issues in-line guidance for FY '09, sees EPS of $2.67-$2.72 vs. $2.67 consensus. (PR)
• Interpublic Group of Companies (IPG): Q1 EPS of -$0.16 beats by $0.04. Revenue of $1.3B (-10.8%) in-line. (PR)
• Lazard (LAZ): Q1 EPS of $0.26 misses by $0.57. Revenue of $273M (-20%) vs. $342M. "We have accelerated our major global hiring initiative at the senior level. We are reinforcing our areas of strength, investing in areas of growth, developing new products, containing costs and maintaining liquidity, in order to take advantage of current and future opportunities. Our planning is to have significantly improved revenues during the second half of the year." (PR)
• Level 3 Communications (LVLT): Q1 EPS of -$0.08 in-line. Revenue of $980M (-10.3%) vs. $1.03B. (PR)
• McGraw-Hill Companies (MHP): Q1 EPS of $0.20 beats by $0.02. Revenue of $1.15B (-5.7%) in-line. (PR)
• Nexen (NXY): Q1 EPS of $0.26 beats by $0.13. Revenue of $1.05B (-44%) vs. $1.36B. (PR)
• Office Depot (ODP): Q1 EPS of -$0.10 in-line. Revenue of $3.22B (-18.6%) vs. $3.26B. (PR)
• Paccar (PCAR): Q1 EPS of $0.07 beats by $0.02. Revenue of $1.7B (-52.2%) vs. $1.9B. (PR)
• Petro-Canada (PCZ): Q1 EPS of $0.23 misses by $0.15. Cuts 2009 capex by $600M to $3.4B. Announces a quarterly dividend of $0.20 per common share. (PR)
• Pfizer (PFE): Q1 EPS of $0.54 beats by $0.05. Revenue of $10.87B vs. $11.08B. Sees full-year EPS of $1.85-1.95 vs. consensus of $1.95 and revenue of $44-46B vs. $46.1B. (PR)
• Potlatch (PCH): Q1 EPS of $0.72 beats by $0.14. Revenue of $130M (+15.1%) vs. $112M. (PR)
• Rockwell Collins (COL): FQ2 EPS of $1.03 beats by $0.05. Revenue of $1.1B (-4%) in-line. Issues downside guidance for FY '09, sees EPS of $3.70-$3.90 vs. previous guidance of $4.10-$4.30. See FY '09 revenues of about $4.5B vs. $4.68B consensus. Shares -3.5% premarket (7:40 ET). (PR)
• Scotts Miracle-Gro Company (SMG): FQ2 EPS of $1.25 beats by $0.01. Revenue of $960M (+0.2%) vs. $1.0B. Issues downside guidance for FY '09, sees EPS of $2.20-$2.30. (PR)
• Tellabs (TLAB): Q1 EPS of $0.05 beats by $0.02. Revenue of $362M (-22.1%) vs. $359M. (PR)
• Valero Energy (VLO): Q1 EPS of $0.59 beats by $0.09. Revenue of $13.8B (-50.5%) vs. $19.9B. Shares +2.5% premarket (8:00 ET). (PR)
• Vishay Intertechnology (VSH): Q1 EPS of -$0.16 beats by $0.01. Revenue of $449.5M (-38.7%) vs. $470.6M. (PR)
• Waddell & Reed Financial (WDR): Q1 EPS of $0.22 beats by $0.02. Revenue of $177M (-24.5%) vs. $185M. (PR)
• Waters Corp. (WAT): Q1 EPS of $0.74 beats by $0.16. Revenue of $333M (-10.4%) vs. $338M. (PR)

Earnings: Monday After Close

• Albemarle (ALB): Q1 EPS of $0.28 in-line. Revenue of $487M (-27.2%) vs. $559M. (PR)
• Axis Capital (AXS): Q1 EPS of $1.05 misses by $0.06. Revenue of $715M vs. $786M. (PR)
• Baidu.com (BIDU): Q1 EPS of $0.86 beats by $0.10. Revenue of $119M (+41.5%) vs. $116M. Shares +3.4% AH. (PR)
• Compass Minerals (CMP): Q1 EPS of $1.85 misses by $0.29. Revenue of $309M (-18.7%) vs. $384M. Expects weak potash sales through Q2, but says they may pick up in H2. Shares -7.1% AH. (PR)
• DaVita (DVA): Q1 EPS of $0.92 beats by $0.01. Revenue of $1.45B (+7.7%) in-line. Reiterates operating-income guidance. (PR)
• Emulex (ELX): FQ3 EPS of $0.05 beats by $0.01. Revenue of $78.6M (-38.5%) vs. $80.7M. Sees FQ4 EPS of $0.01-0.05 vs. consensus of $0.06 and revenue of $73-80M vs. $82.7M. Shares +2% AH. (PR)
• Fidelity National Financial (FNF): Q1 EPS of -$0.06 misses by $0.18. Revenue of $1.36B (+20.4%) vs. $1.48B. Shares -0.2% AH. (PR)
• Hanesbrands (HBI): Q1 EPS of $0.03 beats by $0.08. Revenue of $858M (-13.2%) vs. $871M. Shares -5.4% AH. (PR)
• Health Management Associates (HMA): Q1 EPS of $0.15 beats by $0.03. Revenue of $1.19B (+3.1%) in-line. Provision for bad accounts was $144M (12.1% of net revenue) vs. $129M (11.2%) a year ago. Shares -1.2% AH. (PR)
• Hexcel (HXL): Q1 EPS of $0.24 beats by $0.05. Revenue of $307M (-10.8%) vs. $334M. "Our previous planning assumption for flat to modest growth seems too optimistic and we are redoubling our efforts to manage costs." Shares +2.8% AH. (PR)
• Jacobs Engineering Group (JEC): FQ2 EPS of $0.88 misses by $0.01. Revenue of $2.98B (+11.7%) vs. $3.13B. Sees full-year EPS of $3.10-3.50 vs. $3.59 consensus. (PR)
• Masco (MAS): Q1 EPS of $0.23 misses by $0.11. Revenue of $1.82B (-25.8%) vs. $1.88B. Full-year EPS guidance in-line. Sees full-year sales down 20-25% vs. a previous mid-to-high teens decline. Shares -1% AH. (PR)
• Meritage Homes (MTH): Q1 EPS of -$0.60 beats by $0.58. Revenue of $231M (-37.8%) vs. $201M. (PR)
• Olin (OLN): Q1 EPS of $0.60 misses by $0.03. Revenue of $401M (+0.4%) vs. $458M. Shares -4% AH. (PR)
• Plum Creek Timber (PCL): Q1 EPS of $0.95 beats by $0.01. Revenue of $470M (+29.5%) vs. $506M. Full-year guidance in line. (PR)
• SL Green Realty (SLG): Q1 EPS of $1.48 in-line. Revenue of $196.5M (+1.4%) vs. $213M. Shares -8.4% AH. (PR)
• Southwestern Energy Company (SWN): Q1 EPS of $0.36 beats by $0.05. Revenue of $541M (+3.2%) vs. $450M. Shares +1.1% AH. (PR)
• United States Steel (X): Q1 EPS of -$3.84 misses by $2.15. Revenue of $2.75B (-47.1%) vs. $3.14B. "Continues to face an extremely difficult global economic environment." Cuts dividend to $0.05 from $0.30. Will offer 18M shares and $300M in notes to pay back debt. Shares -7.4% AH. (PR)
• Weingarten Realty (WRI): Q1 FFO of $0.77 beats by $0.17. Revenue of $149.3M (-1.5%) vs. $146.2M. Shares +2.3% AH. (PR)
• W.R. Berkely (WRB): Q1 EPS of $0.25 misses by $0.12. Revenue of $964M vs. $1.11B. (PR)
• XL Capital (XL): Q1 EPS of $0.63 misses by $0.01. Revenue of $1.53B vs. $1.88B. Sold more than 70% ($1.3B) of the securities related to its Q4 restructuring charge. Shares -5.2% AH. (PR)

Today's Markets

Overseas markets moved lower Tuesday.

It has been feast or famine for us in commercial real estate the past 10 weeks; we made some fantastic gains in February and took some egregious losses in late March and early April. Much of the chatter on the internet is HAL9000s across America (quant funds) took some massive hits in a very crowded (short) trade. This is an incredibly troubled sector, but when too many people are at the party, the fundamentals don't matter for a while and some epic squeezes can happen.

I've decided to once again try my hand in some REITs - we have had a 5 basket short portfolio. Two of those names are now at resistance (SL Green (SLG) and ProLogis (PLD)) while the other 3 we hold in very small stakes are still above a key area (so the moving average is acting as support). So I am going to begin building these 2 names, and then the general index (which is the ETF IYR) with a 3% stake specific to that.

I am VERY gingerly stepping back into the short side in the basket of 5 commercial real estate stocks we hold. We just saw a short squeeze of epic nature and being a participant I am still looking for the teeth that were kicked out of my mouth. Again... gingerly. Of the 5 names SL Green (SLG) indeed has been the weakest (NYC office market party) - other than last Friday when "The Club" pushed up REITs it's been dead man walking.

Right now I don't have a very good feel for this market, because the ethos of the consumer is back - which I highly disagree with - are lending strength to areas of the market I dislike the most over the intermediate term. Then last Friday the market held key level S&P 825 and even the 100 day moving average (832) only to reverse down. Making things ever more tricky is almost every morning we now gap up or down 1-2% so your entire portfolio is marked in one direction or another based on mood swings. So I envision as I build shorts back up, we will gap up 2% Wednesday on some nonsense "better than expected" result and the technical condition will turn back to "bullish". And we'll be in the wrong spot yet again. So to hedge some of these short positions I am trying to slowly build up some long exposure back into individual names that have corrected a bit; which we took profits in last week. I keep waiting for some sideways action within a wide range lasting a few weeks....