How should you invest $10,000 in the coming year? The question was posed to some of Wall Street's most respected seers by syndicated columnist Andrew Leckey, whose Successful Investing column appears in over 150 newspapers.
Here, courtesy of The Bull & Bear Financial Report, 9 leading Wall Street experts -- Elaine Garzarelli, Richard Crippps, Sheldon Jacobs, Don Phillips, Richard Yamarone, High Johnson, Mark Johannessen, Curt Weil, and Paul Nolte -- offer their answers to the $10,000 question.
"Amid relentless volatility in 2007, every participant last December produced an increase over the past 12 months. Our pundits for a second consecutive year are spreading their bets because there are so many economic and political wild cards in the coming presidential election year.
A fund affiliated with restaurant super-investor Nelson Peltz has acquired a 14% stake in Cheesecake Factory (NASDAQ: CAKE), sending shares of the dining chain up 10% on Wednesday.
The company said that it "has had a preliminary conversation with Triarc (Pelz's firm) already, and looks forward to continuing that dialogue."
According (subscription required) to the Wall Street Journal, "Mr. Peltz has bought stakes in several other restaurant and food companies, includingWendy's International Inc.(NYSE: WEN) and H.J. Heinz Co (NYSE: HNZ). At those companies, he has pressed directors and executives to sell brands, increase marketing or otherwise change their strategies in an effort to raise their stock prices. Mr. Peltz has said he prefers to work with existing management to effect change, though in the past his involvement has prompted reshuffling of company management and boards."
Cheesecake Factory has struggled to provide investors with strong returns over the past few years, and was scraping a multi-year low before the Petlz announcement sent the stock up.
It's a bad sign for restaurants: they're handing out coupons in an effort to lure reticent diners, who are nervous about gas prices, the economy and, of course, housing.
According to the USA Today, Ruby Tuesday is offering $5 off two dinner entrees, IHOP (NYSE: IHP) franchisees are handing out two-for-one coupons, Darden's (NYSE: DRI) Smoky Bones is giving diners $5 off $15 orders, and T.G.I. Friday's is giving $5 "Bonus Bites" to those who purchase $25 gift cards.
So what's an investor to do? High gas prices and housing woes are most likely to weigh on the minds of middle-class consumers -- a wealthier diner probably isn't going to let his restaurant plans be interrupted by transportation costs.
Cheescake Factory (NASDAQ: CAKE) has seen its share prices slide as traffic growth has slowed. The company has scaled back its expansion plans and is using the extra cash to repurchase stock. Higher dairy prices have affected gross margins but, long-term, there's a lot to like here. The company has a strong brand, lots of room for expansion, and a much higher average check than a lot of the fast casual chains that are struggling.
A mall operator's efforts to prevent the chain from opening in a competitor's location underscores the company's strength: Cheesecake Factory is a destination in a way that lesser chains like Applebee's and Friday's aren't.
A mall developer affiliated with Cheesecake Factory (NASDAQ: CAKE) just got $74 million richer after a jury found that the owner of the Glendale Galleria Mall attempted to block the chain from opening a location in the competing mall. And that's just the beginning.
According to The New York Times, "The Galleria's owner, General Growth Properties, is also facing the prospect of substantial punitive damages because the jury found the company acted with "malice, oppression or fraud" by interfering with negotiations between the restaurant chain and Caruso Affiliated Holdings, the developer of the new shopping center. The punitive damage phase begins on Tuesday."
With the restaurateur's shares languishing near a multi-year low, this could be a good time to look anew at this once-hot growth stock.
The company enjoys phenomenal per-store sales and profitability -- they're nearly always full and the food is pretty expensive -- and currently has around 123 stores. There could be a lot of growth left to be had here. And it all comes at just 20 times earnings.
And the lawsuit also highlights the company's competitive strength: The brand is strong enough that General Growth Properties sought to stop the company from opening a location at a rival's mall. Can you imagine this happening with Applebee's or a similar second-tier chain? This lawsuit shows just how powerful of a draw Cheesecake Factory is.
Cheesecake Factory Inc. (NASDAQ: CAKE) shares are trading higher today after an analyst with SunTrust Robinson Humphrey upgraded CAKE from Neutral to Buy. If you think that the company 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 CAKE.
After hitting a one-year high of $29.78 in April, the stock hit a one-year low of 21.45 on Friday. CAKE opened Monday morning at $22.03. So far today, the stock has hit a low of $21.98 and a high of $22.42. As of 11:05, CAKE is trading at $22.27, up $0.61 (2.8%). The chart for CAKE looks bearish and steady, while S&P gives the stock a 3 STARS (out of 5) neutral rating.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $20 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 5.3% return in just seven weeks as long as CAKE is above $20 at December expiration. Cheesecake Factory would have to fall by more than 10% before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: The restaurant sector, American Semiconductor and First Solar were today's noteworthy initiations:
Friedman Billings resumed coverage of Cheesecake Factory (NASDAQ: CAKE) and Yum! Brands (NYSE: YUM) with Outperform ratings and a $30 target and a $46 target and Applebee's (NASDAQ: APPB) with a Market Perform rating and $25.50 target.
American Superconductor (NASDAQ: AMSC) was initiated with a Buy rating and $33 target at Jefferies, as they believe repeat orders for wind turbine electrical systems could drive rapid revenue growth from 2008-2010.
CIBC resumed coverage of First Solar (NASDAQ: FSLR) with a Sector Performer rating, as they believe shares are already pricing in the company's 2009 EPS potential.
OTHER INITIATIONS:
Morgan Stanley resumed coverage of Cablevision (NYSE: CVC) with an Underweight rating.
US Steel (NYSE: X) was initiated with a Sector Performer rating and $117 target at CIBC.
JP Morgan started SunPower (NASDAQ: SPWR) with an Overweight rating and Evergreen Solar (ESLR) with a Neutral rating.
How can a company emerge from bankruptcy and then, just about immediately, start looking for acquisition candidates? Isn't that like heading to The Cheesecake Factory, Incorporated (NASDAQ: CAKE) after the gastric bypass?
And yet Delta Air Lines, Inc. (NYSE: DAL) CEO Richard Anderson says the company is on the prowl. According (subscription required) to The Wall Street Journal, "Activist shareholders have been stirring the pot, too. Pardus Capital management, a big holder of UAL and Delta, is agitating for consolidation behind the scenes, a person familiar with the matter says. Meantime, an Icelandic investment fund has started pressing for change at AMR, which prompted the U.S.'s biggest carrier this week to say it is exploring options, including the splitting off of its frequent-flier business."
In most scenarios, it's a lot better to be the shareholder being bought out than a shareholder in the company doing the buying. This would appear to be no exception. With more labor-friendly forces likely to be taking control in Washington, and no end in sight to soaring gasoline prices, the airline industry is likely to face major challenges going forward.
Mergers and acquisition have a way of making problems worse, not better.
Cheesecake Factory Inc. (NASDAQ: CAKE) today reported second quarter earnings of $23.7 milion, or 33 cents per share compared with $23.4 million, or 30 cents, a year earlier. Revenue rose 16% to $373.2 million. Comprable sales rose 1.1 percent. The company beat Wall Street forecasts of 31-cent profit and revenue of $372 million. (Story to follow) Click here for the earnings release.
Banc of America downgraded shares of both Nike and Foot Locker to Neutral from Buy, as the firm believes industry pressures in the U.S. could more than offset the potential turn in Europe and benefit from the 2008 Olympics.
Cowen downgraded shares of ADTRAN, Bookham and Tellabs to Neutral from Outperform.
Goldman Sachs also downgraded shares of Tellabs, to Sell from Neutral, as the firm believes the stock fully discounts the expected sales and margin improvement.
OTHER DOWNGRADES:
Allergan Inc (NYSE: AGN) was downgraded to Equal Weight from Overweight at Morgan Stanley citing limited upside.
Lehman downgraded shares of The First American Corporation (NYSE: FAF) to Equal-Weight from Overweight on increasing risk to the company's title margin and regulatory concerns.
Matrix USA downgraded shares of Lowe's Companies Inc (NYSE: LOW) to Buy from Strong Buy on valuation.
MOST NOTEWORTHY: Armor Holdings and Cheesecake Factory were the most notable upgrades this morning.
Lehman Brothers upgraded Armor Holdings (NYSE: AH) to Overweight from Equal Weight, following details of the President's $100B 2007 defense budget supplemental.
Raymond James upgraded Cheesecake Factory (NASDAQ: CAKE) to Outperform from Market Perform following the company's better than expected forth quarter comps and revenues.
OTHER UPGRADES:
Shares of Novel Inc (NASDAQ: NOVL) were upgraded to Outperform from Market Perform by JMP Securities; the firm said Novell's release of Open Enterprise Server 2 may help stop declines in the combined Netware/OES product lines.
Jefferies upgraded shares of Endo Pharmaceuticals Hlds (NASDAQ: ENDP) to Buy from Hold, with a $35 target, to reflect improving Opana prescriptions and the resolution of the Penwest dispute, which the broker believes removes uncertainty and adds earnings visibility.
A fund affiliated with restaurant super-investor Nelson Peltz has acquired a 14% stake in 
It's a bad sign for restaurants: they're handing out coupons in an effort to lure reticent diners, who are nervous about gas prices, the economy and, of course, housing.
.gif){kind=logo}
.gif){kind=logo}
Should you sell into today's rally? Yes, if you think there are more surprises to come (I do)
The week in preview: Mulling over techs, financials
'Crash-and-burn economy?' 'Bailout beer bust?' What should we call America's economic disaster?
