MOST NOTEWORTHY: Telefonica, Affymax and Hatteras Financial were today's noteworthy initiations:
Deutsche Bank initiated Telefonica (NYSE: TEF) with a Buy rating and believes concerns of an economic slowdown in Spain are overdone and that company is on track to make 2008 guidance.
Baird assumed coverage of Affymax (NADAQ: AFFY) with an Outperform rating and $25 target. The firm believes the market has discounted the regulatory and commercial prospects of lead compound Hematide, which they believe is a $800M revenue opportunity, and recommends buying shares aggressively in the mid-$20s.
Shares of Hatteras Financial (NYSE: HTS) were started with an Outperform rating and $35 target at Friedman Billings. The firm believes management has the opportunity to stabilize its agency portfolio and generate a return on invested capital of about 20%.
OTHER INITIATIONS:
Caris assumed OmniVision (NASDAQ: OVTI) with a Buy rating and $15 target.
Pioneer Natural (NYSE: PXD) was initiated at UBS with a Buy rating and $110 target.
UBS also initiated CME Group (NYSE: CME) with a Neutral rating and $430 target.
Allied Capital (NYSE: ALD) was assumed with a Buy rating and $14.40 target at Merrill Lynch.
MOST NOTEWORTHY: S1 Corp, CME Group and Elizabeth Arden were today's noteworthy upgrades:
Stephens upgraded shares of S1 Corp (NASDAQ: SONE) to Overweight from Equal Weight after meeting with management to reflect their increased confidence in the company's ability to execute. The firm maintains a $9 target on the stock.
Citigroup upgraded shares of CME Group (NYSE: CME) to Buy from Hold as they find the risk/reward attractive with volumes picking up and consensus estimates at more rational levels. The firm maintains a $485 target.
Oppenheimer raised Elizabeth Arden (NASDAQ: RDEN) to Outperform from Perform on valuation, as they believe the current share price does not adequately reflect potential earnings accretion from the company's licensing agreement with Liz Claiborne (NYSE: LIZ) or restructuring savings.
After hitting a one-year high of $714.48 in December, the stock hit a one-year low of $399.01 in March. This morning, CME opened at $487.00. So far today the stock has hit a low of $476.27 and a high of $487.65. As of 12:40, CME is trading at $481.03, down $8.32 (-1.7%). The chart for CME looks neutral but improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider a June bear-call credit spread above the $550 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 six and a half weeks as long as CME is below $550 at June expiration. CME would have to rise by more than 14% before we would start to lose money. Learn more about this type of trade here.
It has been a tough year for investors. We have been dealing with recession fears, housing market worries, high gasoline prices and a very weak U.S dollar. As much as we would love to say that the worst is behind us, we still could be in for some more rocky times ahead. So its best to try to figure out which stocks would be best to avoid for the time being.
Richard Gibbons wrote up a nice piece over on The Motley Fool that looks at some of the stocks that we would be wise to stay away from at this time. Regardless good or bad times, he is convinced there are always ways to make money, but in order to find the winners, it is also necessary to pull out the losers.
So how can we separate out the winners from the losers?
Gibbons seems to have a simple answer for this. He believes there is really no use in wasting our time trying to separate the winners from the losers as there are so many great cheap stocks that could offer us a chance to make money. Gibbons' advice is to not choose ugly and risky companies that could put our hard earned money at risk. To makes this clear, he uses a baseball analogy, expressing his options for the curve balls instead of the fastballs.
CME Group(NYSE:CME) is recently trading down $45 to $440.26. CME' s clearing member, MF Global-(NYSE- MF) , is recently down $11.10 to $6.23. The CME announced an offer of 0.323 share and $36.00 per share to acquire NYMEX(NYSE:NMX) this morning. CME March 440 straddle is priced at $41.05. CME April option implied volatility of 57 is above its 26-week average of 35 according to Track Data, suggesting larger risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
The 2005 collapse of Refco, one of the largest commodities brokers in the world, was fast and furious. One day it was a high-flying IPO perfect for those who missed out on the CME Group (NYSE: CME) run-up (that ended up continuing). Then it went bankrupt after disclosing hidden losses and concealed debt. The whole mess unraveled in about a week.
On Friday, 59-year old former chairman and CEO Phillip Bennett pleaded guilty to a 20-count indictment including charges of conspiracy to commit securities fraud, wire fraud, bank fraud, money laundering, and making false filings to the Securities and Exchange Commission.
He is likely to spend the rest of his life in prison and also has to turn over $2.4 billion in assets to the government, which could make it tough for him to afford granola bars at the prison canteen. In 2006, the company's art collection was sold by Christie's to raise money for the creditors.
Mr. Bennett is currently confined to his New Jersey home while he awaits sentencing.
CME Group is preliminary talks to buy energy/precious metals market Nymex, CME announced Monday, in a statement.
Under terms being discussed, CME Group Inc. (NYSE: CME), the world's largest derivatives exchange, would pay Nymex Holdings, Inc. (NYSE: NMX) $36 per share in cash and 0.123 of a CME common share, which would value the deal at about $11 billion, Reuters reported Monday.
Nymex shares rose $9.01 to $116.17 on the news, while CME's shares fell $12.77 to $616.01 in Monday afternoon trading.
CME Group was created in July 2007 via the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade in a $9.3-billion deal. Nymex, which is short for the New York Mercantile Exchange, went public in November 2006.
The exchange stocks have been hot issues in the past few quarters as investors have been betting on increased trading activity from hedge funds, higher volatility, and so on.
But just this week, exchange stocks have received a beating harder than the markets as a whole. I believe that if a snapback rally occurs next week, these stocks should bounce back harder than the overall market. Two particular exchange stocks have appealing charts: CME Group (NYSE: CME) and NYSE Euronext (NYSE: NYX). Both of these charts display similar characteristics, as you can see below:
MOST NOTEWORTHY: Red Hat, Capital One and Novo Nordisk were today's noteworthy downgrades:
Banc of America downgraded shares of Red Hat (NYSE: RHT) to Neutral from Buy, despite expectations for solid Q3 results, due to a lack of billings catalysts and their belief that JBoss continues to have trouble gaining momentum.
Capital One (NYSE: COF) was lowered to Hold from Buy at Jefferies, as they expect limited upside until investors have improved visibility on the extent and timing of credit losses.
Merrill downgraded Novo Nordisk (NYSE: NVO) to Neutral from Buy on a lack of near-term catalysts with the company's diabetes and obesity drug-trial data being already presented.
OTHER DOWNGRADES:
Goldman removed CME Group (NYSE: CME) from its Conviction Buy List.
JP Morgan lowered Plantronics (NYSE: PLT) to Underweight from Neutral.
Thomas Weisel downgraded SLM Corp (NYSE: SLM) to Market Weight from Overweight.
They are loved and hated. MasterCard is constantly being sold because it is supposed to be a consumer-spending play. It is not a consumer-spending play; it is a play on the increasing use of plastic over cash worldwide and on the possibility of a fee increase next year, even as the company has been so conservative as to let you think fees are going down. The fact that it isn't down despite Capital One (NYSE: COF) (Cramer's Take) and American Express (NYSE: AXP) (Cramer's Take) shows me maybe some people are getting this distinction.
If Chicago Mercantile Exchange traders are betting right, housing prices in ten key housing markets will continue to drop until 2011 [subscription required], according to the Wall Street Journal this morning. The Miami area is the worst hit and expectations are that it will drop another 27.9% between November 2007 and November 2011. Others expected to fall in the same time period include San Francisco (down 25.9%), San Diego (down 18.6%) Las Vegas (down 18.1%), Los Angeles (down 15%), Denver (down 14.4%), Boston (13.8%), Washington, D.C. (down 13.3%), New York (12.1%) and Chicago (down 6.6%).
The CME contracts are based on expected movements of the S&P/Case-Shiller house price indexes. Trading is light, so this report gives us a less-than-scientific view of what might happen in the housing market. Personally. I believe this might be too gloomy a prediction. While prices do still need to drop in most of the areas currently facing a decline in order to get the markets moving again, I'm not sure they need to drop as much, nor for as long.
MOST NOTEWORTHY: NutriSystem, Under Armour, CME Group, Air France ADS and Kilroy Realty were today's noteworthy upgrades:
NutriSystem (NASDAQ: NTRI) was upgraded to Strong Buy from Buy at Broadpoint on valuation, as they believe all concerns are overdone.
Think Equities upgraded Under Armour (NYSE: UA) to Buy from Accumulate on valuation.
Wachovia upgraded CME Group (NYSE: CME) to Overweight from Market weight, as they expect fed income volumes to benefit from a more active Federal Reserve.
Goldman added Air France (NYSE: AKH) to its Pan-European Conviction Buy List citing valuation following the recent sell-off.
Citigroup upgraded shares of Kilroy Realty (NYSE: KRC) to Buy from Hold on valuation, as they believe concerns are overblown and the company's underleveraged balance sheet can drive growth.
Agrium (NYSE: AGU) volatility is flat as AGU at record high on strong fertilizer demand. AGU, an agricultural retailer and fertilizer producer, closed at $54.38. AGU over all option implied volatility of 39 is near its 26-week average of 38 according to Track Data, suggesting nondirectional risk.
Terra Industries (NYSE: TRA) volatility is flat; TRA is near record on demand for nitrogen. TRA, an international producer of nitrogen products for industry and agriculture, closed at $31.26. TRA is expected to report EPS on 10/25. TRA over all option implied volatility of 52 is near its 26-week average of 50 according to Track Data, suggesting nondirectional risk.
Option update provided by Stock Specialist Paul Foster of theflyonthewall.com.
Progenics Pharmaceuticals (NASDAQ: PGNX) was added to Friedman Billings' Top Picks list and its Outperform rating was maintained. The firm has a high degree of confidence in the success of the MNTX Ph III studies in post-operative ilieus, as well as the FDA approval of the subcutaneous injection in terminally ill patients with opiod-induced constipation around the 1/31/07 PDUFA date.
RBC believes margin expansion will drive long-term appreciation in Tyco Electronics Ltd (NYSE: TEL) and started shares with an Outperform rating and $41 target.
PharMerica Corporation (NYSE: PMC) was initiated with an Underperform rating at Bear Stearns. The firm believes PMC will be pressured by customer losses and generic reimbursement cuts and sees shares trading in $12-$13 range.
OTHER INITIATIONS:
Ryanair Holdings (NASDAQ: RYAAY) was initiated with a Market Outperform rating at Avondale.u
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TheStreet.com's Jim Cramer says these loved and hated stocks aren't likely to fall until January.
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