Stock Watch Wednesday, 23 January 2013

by: VFC's Stock House

After an early stutter the markets picked up their pace on Tuesday and closed the day higher yet again. The early action indicates that investors are still maintaining a "wait and see" approach in regards to the earnings season and volatile political climate, but the reports set forth on Tuesday - led by a nice earnings beat for Google (NASDAQ:GOOG) - sparked enough late-day buying to give us some momentum leading into Wednesday's trading session where Apple (NASDAQ:AAPL) will steal the spotlight. An earnings beat by Apple, or even enthusiastic guidance, could fuel investor optimism enough to land Wednesday in the green column, too. Barring any unforeseen developments, nothing should pop up politically that would stand in the way of a continued uptrend, given the White House's reported agreement with the Republican proposal of a short term debt ceiling extension. Since investors look satisfied with the pace and health of the global economic recovery, trading patterns should remain glued to earnings news, at least for the time being.

As always, as the major news play out, there's room for a few individual stocks and stories to keep an eye on ... here are just a few of them for Wednesday, 23 January, 2013 ...

Earnings: Wednesday belongs to Apple, everything else will just be secondary news, thanks to the hype and attention that has surrounding AAPL trading as shares dropped to as low as well under five hundred bucks earlier this year. A pessimistic report from the tech giant could hurt for the short term and send shares below the five hundred dollar mark rather quickly, but upbeat earnings and guidance that would provide proof that Apple's products are still in as high demand as they always were may spark a rebound rally and keep shares trading healthily above five hundred. Investors look to be straddling that mark, if nothing else using it as a psychological barrier, in preparation for Wednesday's report. Results that look to be nothing more or less than in-line with expectations would likely keep shares trading in their current range.


Latest Microsoft Buzz Revolves Around Dell Acquisition

Microsoft (NASDAQ:MSFT) is making news this week after it was revealed that the company may be willing to invest up to three billion dollars as part of an acquisition deal for Dell, Inc. (DELL). This announcement was unexpected, but didn't alter investor impressions one way or the other as shares traded flat on the day. The move could be viewed as another push by Microsoft to further infiltrate the hardware market after building its empire mostly on Windows-based software. While such moves into hardware - with the Surface tablet, for instance - will help diversify the business, it could also strain relations with existing customers who utilize Microsoft software on their own respective hardware platforms, as outlined by Bloomberg early Wednesday.

The investment could turn into a savvy one for Microsoft, given that its value is relative chump change to the cash reserves held by the company and could return financial gains significantly more than the original investment, but Bloomberg's concerns of potentially alienating an existing customer base in order to move further into the shrinking PC market may prove inconsequential to the long term strategic plan - unless Microsoft and its investment partners can concentrate Dell into a next-generation hardware giant that incorporates MSFT software on its platforms.

Still, it's yet to be seen how such a move would effect relationships with current partners who would then become competitors, so for the time being, investors are taking the "I'll believe it when I see it" approach to gauging this deal, judging by the lackluster trading action.

Over the short term, this deal is likely to play as a non-factor, but as MSFT continues on a path of resurgence after years of being overshadowed by other players in the tech sector, the stock still looks like a decent "accumulate the dips and hold" play for the long term retirement portfolio. The spare cash allows the company to jump into any deal at any given time that management feels could either benefit the bottom line or the long term strategic plan, as demonstrated by the Dell talk. A story to watch this week.

RIMM Flies Higher On BB10 Hype

Research In Motion (RIMM) shares flew thirteen percent and two bucks higher on Tuesday and have investors eyeballing a move to twenty, given the momentum built during the past few trading sessions. RIMM is now sitting at levels nearly triple where they were trading during last year's lows as the launch of the BlackBerry 10 looks to return the company to its glory years. While a solid speculative investment based on rebound potential when the stock was well under the ten dollar mark, RIMM is now trading at levels that assume the rebound is complete. That could be dangerous for investors chasing the run, rather than being in before it materialized, if consumers don't embrace the new platform with open arms. It's likely that the most significant gains RIMM will make during the recovery period have already been realized, given the near triple in price over a short period of time. That's not to say that the run wont' continue, as a move to twenty is likely, in my opinion, but we may be looking at levels now that are no longer speculative and where a buy is made strictly with the bet that BB10 will become a blockbuster. The safer approach may be to view RIMM as an 'I'll believe it when I see it' play, given the hype that is surrounding the stock right now after its notable run. Regardless of the confidence, expect volatility as the day, swing and momentum traders take their quick and significant profits and move on to the next quick winner as those looking at the future potential of the BlackBerry resurgence consolidate positions moving forward. It's also possible that the shorts will move in after such a run, but the threat of a very positive BB10 launch could keep them at bay for a while longer. A hot one to watch for the remainder of the month. Congrats to those that jumped in at the lows and are sitting on bank on a beach right now.

Explosive Trace Detection (ETD) / Global Defense:

Investor Presentation Highlights Revenue Possibilities

Shares of Implant Sciences (IMSC.PK) were on the move again on Tuesday, jumping by over ten percent on high volume as investors continued to digest the milestone TSA approval news from last week. IMSC will continue to be a stock to watch on Wednesday, and for the duration of the week, after a presentation given by company officials at the Noble Financial Capital Markets' Ninth Annual Equity Conference in Florida yesterday continued to highlight the potential of the newly-approved Quantum Sniffer (QS)-B220 explosive trace detector to quickly make a splash in the air cargo market. Volume came in strong on Tuesday leading up to the presentation, indicating that new interest may be moving in as the short-term traders bank profits, and a continued high-volumed trend may support a move even higher as the potential of the company becomes known on a more widespread basis. Investors will also await for news of any orders resulting from the approval, but it's already been indicated in recent company presentations that revenue is already significantly growing on a quarter-over-quarter basis. Given the advantages that the Sniffer technology currently holds over the competition already on the market, IMSC continues to look like a ground-floor, "buy the dips" kind of play. Even while bearing in mind the significant gains already realized from the 52-week lows, this one still has room to move higher, considering the multi-billion dollar air cargo screening and ETD market.


McDonald's Reports On Wednesday

Maybe not garnering as much attention as Apple on the earnings front, Wednesday's McDonald's (NYSE:MCD) report could prove just as relevant to the health of the markets and economic recovery as the tech giant. MCD traded down by over ten percent in 2012 - a drop aided by a disappointing earnings report last quarter and a drop in same store sales in October - but have looked solid so far this year as investors anticipate Wednesdays numbers. Shares traded up by a percentage point on Tuesday and investors expect numbers generally in-line with the modestly higher expectations than last quarter. Like AAPL, any significantly better-than-expected numbers has the potential to move the markets. Still the leader of its industry, MCD continues to look like a nice accumulation and "buy the dips" play with eyes towards the long term or retirement portfolio, in my opinion.

Investors Still Await Key Amarin News

Shares of Amarin Corporation (NASDAQ:AMRN) ticked lower again on Tuesday after announcing the publication of additional MARINE and ANCHOR-related data by a popular medical journal. Wednesday should again return flat trading patterns for AMRN, barring a lack of news relating to Vascepa's New Chemical Entity (NCE) status, and ANCHOR patent or the pending launch. Given the potential of Vascepa on the open market - many still consider a potential blockbuster - and the still relevant possibilities of a buyout, any significant drop in the AMRN share price may turn into significant gains down the line if the drug lives up to its potential and/or speculation regarding a buyout picks up again. As previously discussed, Human Genome Sciences was in the relative same position as AMRN - a company with a deflated share price and sporadic buyout rumors surrounding it - when GlaxoSmithKline (NYSE:GSK) swooped in with a deal valued at double where shares were trading at the time. The spotlight may be dimming on AMRN as the hype surrounding the buyout speculation has faded, but it could actually be trading below the radar again - even with a launch pending - making future possibilities intriguing, should the right news hit the wires.

Roundup: International markets traded flat to down on Wednesday and investors looked to take a cautious approach before the U.S. open as a vote on temporarily extending the debt ceiling was slated to take place in Washington. As mentioned, Apple will dominate on the earnings front, with McDonald's a close second. Given that it's largely assumed today's debt ceiling vote will go relatively smooth, leave it to earnings to rule an otherwise uneventful day - barring that surprise market-moving news that sings more loudly than Beyonce's inaugural Anthem.

Disclosure: I am long MCD, IMSC.PK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.