ALL opened this morning at $44.55. So far today the stock has hit a low of $44.21 and a high of $46.95. As of 12:15, ALL is trading at $45.98, up 75 cents(1.7%). The chart for ALL looks neutral and S&P gives ALL a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $42.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 9.9% return in just five weeks as long as ALL is above $42.50 at October expiration. Allstate would have to fall by more than 7% before we would start to lose money. Learn more about this type of trade here.
ALL hasn't been below $42.50 at all in the past year and has shown support around $45 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ALL.
I am not sure that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will make it through the month as public companies. Barron's quoted an anonymous senior official -- who sounds an awful lot like Hank Paulson to me -- that unless Fannie and Freddie could raise at least $10 billion each, the government would bail them out while wiping out common shareholders and eliminating the preferred dividend. Since then, investors have been dumping shares of Fannie and Freddie like there's no tomorrow.
Who wins and who loses if Fannie and Freddie's shareholders are wiped out? As I said on CNBC's Power Lunch this afternoon, the winners are investors who shorted Fannie and Freddie years ago and are now reaping enormous profits. I also think that some Wall Street investment banks will win big as they get the job of selling off Fannie and Freddie's pieces. The losers are their biggest common and preferred shareholders -- including some well known mutual funds.
The winners are:
Jim Rogers, Rogers Holdings - Rogers originally shorted Freddie and Fannie in March 2006 and appeared on Bloomberg on November 20, 2007 to discuss why he did it and where he thought their stocks would go.
Doug Noland, Prudent Bear - As I posted, since the late 1990s, Noland's research has concluded that Freddie and Fannie would "shudder" when the US credit bubble eventually burst. Noland has profited from the short bets he made -- but he says it is emotionally painful to watch them fail.
After hitting a one-year high of $63.73 in May, the stock hit a one-year low of $44.56 last week. ALL opened this morning at $49.45. So far today the stock has hit a low of $47.92 and a high of $49.46. As of 1:40, ALL is trading at $48.23, up $0.62 (1.3%). The chart for ALL looks neutral but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just 3 weeks as long as ALL is above $45 at April expiration. Allstate would have to fall by more than 6% before we would start to lose money.
MOST NOTEWORTHY: Cott Corp, Hartford Financial, Allstate and Valero Energy were today's noteworthy upgrades:
Lehman upgraded Cott Corp (NYSE: COT) to Equal Weight from Underweight citing recent management changes, a focus on CSD business, and new product discipline.
Bernstein believes the entire non-life insurance group is oversold and that it is time to buy; the firm upgraded Hartford Financial (NYSE: HIG) and Allstate (NYSE: ALL) to Outperform from Market Perform.
Valero Energy (NYSE: VLO) was raised to Buy from Hold at Deutsche Bank on valuation with the stock trading at a -30% discount to NAV while the asset market for U.S. refineries is strong.
OTHER UPGRADES:
Goldman added Cisco (NASDAQ: CSCO) to its Conviction Buy List.
Allstate Corp. (NYSE: ALL) stock is declining this morning after competitor Loews Corp. (NYSE: LTR) reported a fourth-quarter profit, excluding investments, of 81 cents per share, 26 cents below analysts' forecast of $1.07 per share. LTR blamed the disappointing earnings on a 50 percent decline in profit at its CNA Financial Corp (CNA) insurance affiliate, which could be a bad sign for ALL. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ALL.
After hitting a one-year high of $63.73 in May, the stock has hit a new one-year low today. This morning, ALL opened at $46.56. So far today the stock has hit a low of $45.30 and a high of $46.60. As of 11:05, ALL is trading at $45.89, down 68 cents (-1.5%). The chart for ALL looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
MOST NOTEWORTHY: UBS AG, Commerzbank , Trico Marine Services, Optimal Group and Mediacom were today's noteworthy upgrades:
JP Morgan upgraded shares of UBS AG (NYSE: UBS) to Overweight from Neutral on valuation, as they believe the risk/reward is now attractive.
Commerzbank AG (OTC: CRZBY) was upgraded to Equal Weight from Underweight at Morgan Stanley, as they believe the company has eliminated much of the uncertainty on asset quality.
Jefferies upgraded shares of Trico Marine Services Inc (NASDAQ: TRMA) to Buy from Hold and raised their target to $46 from $40 to reflect the growth potential brought on by the company's purchase of Active Subsea ASA.
B. Riley raised its rating on Optimal Group Inc (NASDAQ: OPMR) to Buy from Neutral to reflect the company's proven management team, acquisition of WowWee and strong balance sheet.
Citigroup upgraded shares of Mediacom Communications Corporation (NASDAQ: MCCC) to Buy from Hold on valuation following the recent pullback, as they now think the stock is oversold. Citigroup thinks Mediacom will generate free cash in 2008 and they like the pace of buybacks.
Business Objects (NASDAQ: BOBJ) was downgraded to Neutral from Outperform at Baird following its acquisition by SAP AG (NYSE: SAP).
Wachovia downgraded Allstate Corporation (NYSE: ALL) to Market Perform from Outperform and P&C Insurance (NYSE: PGR) citing deteriorating fundamentals in personal lines.
OTHER DOWNGRADES:
UBS downgraded BEA Systems (NASDAQ: BEAS) to Neutral from Buy.
JP Morgan downgraded Merrill Lynch (NYSE: MER) to Neutral from Outperform.
Sealy Corporation (NYSE: ZZ) was downgraded to Neutral from Buy at Banc of America.
For a sport that just a few years ago was the darling of the blue-chippers, NASCAR has suddenly found love as hard to come by as a meth-addled octogenarian. After Anheuser-Busch (NYSE: BUD) dropped its 25-year long title sponsorship of the race promoter's second-tier series, Subway seemed a lock to take it on.
Now comes news that the restaurant's ardor for the series has cooled, and NASCAR has been forced to revisit formerly spurned suitors such as KFC (NYSE: YUM), Allstate (NYSE: ALL) and Dunkin' Donuts (D'OH!).
Along with the decline in interest has come a drop in price. The value of the sponsorship, once thought to run $30 million a year, has been halved. NASCAR is not the only loser in that drop; the original price included a mandatory ESPN ad buy of around $10 million, a requirement that has been relaxed.
According to Michael Smith in the Sporting News, Subway balked at the lack of exclusivity, a constant source of tension in the race industry where teams, tracks, OEMs and suppliers are also hustling sponsorships for every nut, bolt and beer cozy in the paddock.
NASCAR fans skew 60-40% male, slightly above the U.S. average in the 35-44 year of age category. They are overrepresented in the lower income categories, which would dampen the interest of luxury product companies. One interesting statistic is its popularity among America's fastest growing minority -- Hispanic fans have grown from 3.6% to 8.6% in only a few years. So how about the Taco Bell series? Or The Chipotle (NYSE: CMG) 500?
MOST NOTEWORTHY: Websence (WBSN), RF Micro Devices (RFMD), Fiserv (FISV), Qwest (Q), and OSI Pharma (OSIP) were today's noteworthy upgrades:
JP Morgan upgraded shares of Websence (NASDAQ: WBSN) to Overweight from Underweight ahead of the renewal period starting in the December quarter and expects this momentum to drive shares higher.
RF Micro Devices (NASDAQ: RFMD) was raised to Buy from Hold at Citigroup, who said the Sirenza Microdevices (SMDI) deal gives the company its first real prospect for gross margin expansion in years.
Matrix USA upgraded Fiserv (NASDAQ: FISV) to Buy from Sell, and expects the company to benefit from the Checkfree (CKFR) acquisition.
Lehman upgraded shares of Qwest (NYSE: Q) to Overweight from Equal Weight, citing the hiring of industry veteran Ed Mueller as CEO. The firm believes the new CEO removes an overhang and could lead to a change in strategic direction and significantly increase capital spending.
JP Morgan upgraded OSI Pharma (NASDAQ: OSIP) to Overweight from Underweight based on valuation and upcoming catalysts for Tarceva that should be seen in the next year...
OTHER UPGRADES:
UBS upgraded Allstate (NYSE: ALL) to Neutral from Sell.
Allstate Corp. (NYSE: ALL) opened at $60.40. So far today the stock has hit a low of $59.00 and a high of $60.49. As of 11:00 this morning, ALL is trading at $59.67, down $0.89 (-1.5%).
After hitting a one year high of $66.14 in December, the stock has been trading slightly lower over the past six months, with support just below $60. The stock is testing that support today, as shares fall in the wake of a weaker-than-expected earnings report. The company reported earnings per share of $1.76, a tick below the $1.80 expected by Wall Street analysts, citing declining homeowner premiums for the fall. Technical indicators for ALL are bearish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $65 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 13.6% return in just 3 months as long as ALL is below $65 at October expiration. ALL would have to rise by 8% before we would start to lose money.
ALL has never been above $65 except for a few days in December and has shown resistance around $62 recently. This trade could be risky if the company's earnings turn out to be better than they seem after closer study, but even if that happens, this stock could have trouble getting over $64, where it topped out in April and May.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ALL.
When Warren Buffett announced he wanted to use between $40 and $60 billion to buy a company several days ago, picking a target for the billionairest of all billionaires became the favorite pastime of financial writers everywhere -- and our bloggers were as eager as anyone else to come up with just the thing for the guy who already has everything (and everything, in this case, includes bunches of shares of companies as diverse as dull sheetrock manufacturerUSG Corp. (NYSE: USG) to hip shoe companyNike Inc. (NYSE: NKE)).
Of course, Buffett's needs are unique. First of all, the company has to be both big and a good value -- no 80x P/E multiples for Warren. It has to be a relatively simple business (I'm thinking nanotech is out), have a good management team and no dark and dirty secrets (so sub-prime lenders are probably off the list). Finally, the company should have solid, long-term competitive advantages.
Sheldon Liber suggests a couple that might make the grade: Allstate Corp. (NYSE: ALL), the insurance company, which at about $38 billion in market capitalization and a 7.8x P/E ratio fits both the "big" and "cheap" qualifiers. Plus, we all know that Warren Buffett loves insurance companies, and given its retail approach, it's not much of a competitor with longterm portfolio company GEICO. Emerson Electric (NYSE: EMR) also seems a good candidate with its $37 billion market cap and 19x P/E ratio -- but is it simple enough? Its business is, according to Hoover's, making "a host of electrical, electromechanical, and electronic products, many of which are used to control gases, liquids, and electricity." Hmmm.
When Gary Sattler suggests Warren might buy General Electric Co. (NYSE: GE)'s plastics division, it's a good concept (simple, well-managed) but the price is way too low at around $10-12 billion. A commenter, however, brings up a good replacement in Lowe's Companies Inc. (NYSE: LOW); it has a $47 billion market cap and a reasonable P/E ratio of 15.5x. What's more, it has none of the bad-management baggage of competitor Home Depot Inc. (NYSE: HD). Does it have a "moat," though? I suppose that's a question for Warren. He does own some of each company, meaning that he's already emotionally invested in the sector (a plus) although it's obvious from our near-tie in the Battle of the Brands that neither holds a substantial consumer-facing edge competitively.
If you are an Allstate Corp. (NYSE: ALL) customer in California for homeowners' insurance, you have a new reason to hate insurance companies. The company is going to halt new homeowners and landlord package insurance policies in the state.
Here is the quote from the company: "Allstate is taking responsible action now so that the company will continue to be in a strong position to help protect customers in California and across the country. This new strategy helps protect our existing customers and provides an alternative to California consumers looking for new property insurance policies."
TRANSLATION: We don't want the risks of mudslides, earthquakes, brushfires and replacing drastically overpriced house values.
Back in 1982 I was a third-year broker/branch manager with Dean Witter Reynolds (remember that name?) when the announcement came across the tape that Sears, Roebuck, and Co. would in one fell-swoop buy Dean Witter and Coldwell Banker, the real estate giant. Wow, Sears was diversifying in a huge, dramatic way. That move spawned the expression "buy your stocks where you buy your socks!" Dean Witter brokers, Allstate agents (Sears already owned Allstate) and Coldwell Banker agents, all to be found within a Sears department store. The whole thing was a flop, but it took nearly ten years to figure this out.
In the mix, Sears CEO and chairman, Ed Telling, selected a young McKenzie & Co. consultant to run the triumvirate. His name was Philip Purcell and he brought an intelligence and energy to the job second to none. He carefully explained that the glue to the whole thing working out masterfully would be the launch of the Discover card. The Discover card was launched in 1984 with a mega advertising and marketing campaign. If you had a pulse, you got a card.
In the early 1990s, Sears realized the "synergies" of Dean Witter, Dean Witter , and Coldwell Banker just was not working according to the dream. The dream took on a new look as all three companies were spun off or went public. The association with Sears became just a memory. Then in 1997, Phil Purcell engineered the coup of coups: merging "Main Street" Dean Witter with glitterati firm Morgan Stanley (NYSE:MS). Phil was named CEO, another masterful coup. All the while, the Discover card was building itself into a formidable business. The Morgan Stanley white shoe bankers "certainly did not have one in their wallets" was the quote most often heard as the Morgan bankers were annoyed with this low-level credit card.
Goodrich profits increased on a jump in sales of aircraft equipment to Boeing and Airbus. The company said margin expansion associated with sales growth and improved operating efficiencies are primary reasons for a continued positive outlook.
International Paper Company (NYSE: IP) 47c vs. 35c
The company's profits rose on a gain from the sale of its U.S. forestlands and a strong operating profit from its industrial packaging unit. IP is transforming operations to focus on its global uncoated papers and packaging business.
Starwood Hotels & Resorts Worldwide (NYSE: HOT) 92c vs. 73c
Higher room rates helped to contribute to a strong quarter for the parent of hotel chains including St. Regis, Westin and Sheraton. The company has been enjoying strong travel demand and limited growth in supply. It has also been selling hotels and retaining management contracts to free up cash.
The video game publisher had a 38% drop in quarterly profit but beat Wall Street targets, overcoming investor anxiety that holiday shortages of new video game consoles would hurt sales. Shares rose 6% on the news. Company CFO Warren Jenson said EA was entering a growth period.
Kiplinger's has a clever article which pits Chicago against Indianapolis, not on the gridiron in Miami, but on the business playing field. Kiplinger's analyzes leading companies in five industries and concludes that Chicago beats Indianapolis:
Health care, point Indianapolis. Kiplinger's likes Indianapolis's Eli Lilly & Co. (NYSE:LLY) over Chicago's Abbot Laboratories (NYSE:ABT) arguing that LLY's more profitable, has a deeper pipeline and sports a higher yield.
Insurance, tossup. Kiplinger's thinks Indianapolis's Wellpoint Inc. (NYSE:WLP) and Chicago's The Allstate Corporation (NYSE:ALL) both have strong double digit growth and solid investments.
Retailing, point Indianapolis. Kiplinger's tilts toward Indianapolis's Simon Property Group Inc. (NYSE:SPG) over Chicago's Walgreen Company (NYSE:WAG) contending that SPG's an outstanding REIT while WAG is just an average big drugstore chain.
Manufacturing, point Chicago. Kiplinger's favors Chicago's The Boeing Company (NYSE:BA), Motorola, Inc. (NYSE:MOT) and Illinois Tool Works Inc. (NYSE:ITW) and suggests that Indianapolis has no players worth mentioning.
Dining, point Chicago. Kiplinger's prefers Chicago's McDonald's Corporation (NYSE:MCD) over Indianapolis's The Steak n Shake Company (NYSE:SNS), concluding that MCD's margins and stock are rising while SNS's are flat.
I agree with Kiplinger's analysis of the victors in each industry. Of all the stocks in this group I like Allstate and McDonald's the best.
I'll be rooting for Chicago to win this year's Super Bowl since it's going against the team that took the New England Patriots out of the running this year. Kiplinger's is calling it Bears 27, Colts 16.
Allstate (NYSE: ALL - option chain) shares are rising today as early reports are showing that the damage from Hurricane Ike over the weekend was not as bad as feared. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ALL.
I am 
.gif){kind=logo}
.gif){kind=logo}
.gif){kind=logo}
For a sport that just a few years ago was the darling of the blue-chippers, NASCAR has suddenly found love as hard to come by as a meth-addled octogenarian. After 
When Warren Buffett 
Is the market always right?
Comfort Zone Investing: How this all might play out
Stock picks and pans for troubled times: AAPL, COST, EWBC, IBM, YUM, PG ...
