According to the Wall Street Journal, former American International Group Inc (NYSE: AIG) CEO Maurice R. "Hank" Greenberg is pressing the troubled insurer to turn the company around. He says that he and other major shareholders have "deep concern about the persistent and seemingly endless destruction of value at AIG."
Hybrid Capital Second, a Morgan Stanley (NYSE: MS) investment vehicle, increased its stake in internet start-up Livedoor to 18.15% from 12.76% in March, the Financial Times reported, superseding the company's founder, Takafumi Horie.
OTHER PAPERS:
After it incurred $3.2B of bad debts in the first three months of the year, the Telegraph reported that Knight Vinke, an HSBC Holdings Plc (NYSE: HBC) shareholder, has renewed calls for the bank to shed its U.S. consumer finance business.
After hitting a one-year low of $88.86 in August, the stock hit a one-year high of $113.74 in October. LMT opened this morning at $103.99. So far today the stock has hit a low of $103.79 and a high of $108.00. As of 12:45, LMT is trading at $107.08, up $3.29 (3.1%). The chart for LMT looks bearish but improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $95 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 6.4% return in just two months as long as LMT is above $95 at June expiration. Lockheed Martin would have to fall by more than 11% before we would start to lose money.
Defense contractor Lockheed Martin (NYSE: LMT) posted strong earnings this morning for its first quarter of $1.75 per share, well ahead of the $1.63 analysts had been expecting.
Looking at the quarter's revenue figures, we see a nice year-over-year jump, climbing to $9.98 billion from $9.28 billion. In addition, the company lifted its full-year earnings forecast by 10 cents to $7.15 to $7.35 per share.
The company had good earnings, and lifted full year estimates, so why is the stock falling in today's action? It could be in reaction to the fact that the company's biggest division, its jet business, showed a drop in sales in the period. During the quarter, this business fell since Lockheed is in the middle of a transition from its older fighter jets to newer models such as the F-35 and F-22.
Scientists at NASA plan to put one of the twin Mars rovers to sleep and limit the activities of the other robot to fulfill a NASA order to cut $4 million from the program's budget, mission team members said Monday.
The project, which was originally supposed to run for three months, is now in its fourth year, successfully exploring the terrain of Mars. It costs NASA about $20 million to keep the project going, but due to budget cuts, the space agency is forced to put its child up for adoption, so to speak. As of yet, no billionaire has stepped up to the plate, but I am hoping that someone will soon.
For the cost of a few of your average modern missiles, we are abandoning a program that has been one of NASA's most visible and productive projects.
President Bush recently submitted a $3.1 trillion dollar budget to congress with the biggest proposed increases in defense spending, and homeland security. The Pentagon would get a $35 billion increase to $515 billion for core programs, about 7% with war costs additional (but how much is additional?) This further supports my investment posture for this year and next that the defense sector is the place to be as I posted earlier today and many times over the past few months -- the BIG BUYS.
Some of our big defense contractors, all of which should benefit to some degree include: Boeing (NYSE: BA), General Dynamics (NYSE: GD), Lockheed Martin (NYSE: LMT), Northrop Grumman (NYSE: NOC), Raytheon Company (NYSE: RTN), and United Technologies (NYSE: UTX). I am not suggesting that you jump into these stocks immediately, but you should add them to your watch list. Perhaps, for some investors dollar cost averaging into them over six months would make sense. Each has a varying degree of exposure to defense spending. For example, United Technologies is the parent of Sikorsky helicopters which makes the Black Hawk. Lockheed Martin and Boeing make fighter jets. Raytheon makes defense electronics and missile while General Dynamics and Northrop Grumman supply warships to the US Navy. Northrop also makes aerial vehicles that are being used in the Iraq War.
Lockheed Martin Corporation (NYSE: LMT) shares are trading higher today after competitors Northrop Grumman (NYSE: NOC) and General Dynamics (NYSE: GD) both posted positive earnings reports today, in the wake of LMT's positive release yesterday. Additionally, Lockheed announced today that the company was awarded a $52.5 million contract to provide next generation convoy trainers to the US Marines. 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 LMT.
Lockheed stock has shot up over the past three months, hitting a one-year high of $113.74 earlier this month. LMT opened this morning at $106.16. So far today the stock has hit a low of $106.15 and a high of $108.90. As of 11:05, LMT is trading at $108.70, up $1.73 (1.6%). The chart for LMT looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $90 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 8.7% return in just 3 months as long as LMT is above $90 at January expiration. Lockheed would have to fall by more than 17% before we would start to lose money.
The company reported net earnings for the quarter of $766 million, up from $629 million in the same quarter of 2006. Diluted EPS for the quarter was $1.80, well above analyst expectations of $1.64 and up from $1.46 in 2006. The performance supports the company's July updated projection that 2007 EPS will reach $6.70-$6.85.
Most impressively, each of the four business segments comprising Lockheed reported gains. Operating profits for Aeronautics was up 12.4%, primarily due to strong combat aircraft sales. Electronic Systems rose 12.3% due to missile and maritime sales. Information Systems and Global Services climbed 9.1% as the company's combat support services realized higher volume, and Space Systems finished 10% over same quarter 2006 thanks to satellite and missile systems sales.
In September, the company announced a 20% dividend increase for the second quarter of 2007, as well as increasing its buyback program by 20 million shares.
With a weak dollar, the emergence of new economies around the world interested in developing national defenses, and renewed interest in space programs, the company seems to have found the sweet spot in numerous markets. Investors seem to agree. The stock was up by 0.46% in early trading, to $107.70.
PDUFA date for Sanofi-Aventis SA's (NYSE: SNY) Taxotere for induction therapy of locally advanced head and neck cancer prior to chemoradiotherapy and surgery
Yesterday's WSJ's "Heard On The Street" column (subscription required) has published examples of recession-resistant stocks, in order to better-prepare individual investors for a potential additional downturn in the U.S. economy.
We took it a step further. What follows is a more panoramic view of each stock, including chart analysis.
AT&T(NYSE: T): the telecom giant has become a growth company. T's chart is healthy with the stock recently broken out to $42.50.
Lockheed Martin Corporation (NYSE: LMT) shares are trading higher today after the company secured a $20.6 million contract for work on Australian Navy missile systems. Also, a report says that the US Air Force will re-open bidding for a major helicopter contract previously won by Boeing (NYSE: BA). Continued victories in the US legislature by those supporting a prolonged war effort in the Middle East are also sending this stock higher, as well as renewed interest in Iran. If you think that the company won't fall by too much in the coming months due to these events, then now could be a good time to look at a bullish hedged trade on LMT.
After hitting a one-year high of $107.33 in July, the stock has traded mostly within a $10 range over the past three months, climbing gently ever since a brief dip in early August. LMT opened this morning at $102.30. So far today the stock has hit a low of $102.28 and a high of $105.00. As of 11:05, LMT is trading at $104.80, up $2.45 (2.4%). The chart for LMT looks bearish but deteriorating slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
MOST NOTEWORTHY: National Grid, Shire Plc, On Semiconductor and Enbridge were today's noteworthy upgrades:
Deutsche Bank upgraded shares of National Grid (NYSE: NGG) to Buy from Hold as they believe the Keyspan deal will be positive for shareholders.
Goldman upgraded shares of Shire Plc (NASDAQ: SHPGY) to Buy from Neutral and added the stock to their Conviction Buy List on valuation and expected gains in the ADHD market.
On Semiconductor (NASDAQ: ONNN) was upgraded to Outperform from Market Perform at Wachovia on valuation.
Enbridge Inc (NYSE: ENB) was raised to Sector Outperformer from Sector Performer at CIBC World Markets, as the firm sees an attractive 3-year return potential as new projects come into service and expects the stock's relative underperformance to come to an end.
"With all the uncertainty caused by the sub-prime panic, what's needed is a defensive sector, that is, the defense sector, which will do well in any economic scenario," says Richard Lehmann.
The editor of The ISA ETF Investor explains, "The meltdown may moderate and not cause an economic slowdown or it might. Regardless, one sector that we believe is still positioned to do well is aerospace."
To play this sector, the advisor points to the iShares Dow Jones US Aerospace & Defense Fund (ASE: ITA). He notes, "Defense budgets of the world are still increasing and Europe is getting a bit worried about Russia resuming long-range bomber runs."
In addition, he notes, "It doesn't seem the Iraq and Afghanistan wars are going to end any time soon. Development of new weapons systems continue to be well funded and for the most part defense appropriation bills have been passing without much trouble."
Whenever I hear some market pundit who sounds like they've got all of the answers behind the current crisis in the world's financial markets, the classic Frank Zappa line "Look here brother, who you jivin' with your cozmic debris" echos in my head. Zappa's point that people should avoid simple answers to complicated questions is especially relevant today.
The world's major central banks today added more than $137 billion into the banking system, keeping today's loss in the Dow Jones Industrial Average to 31.14 points following a turbulent trading session. This seems like a temporary, albeit expensive, Band-Aid on a very large wound. The bad news is far from over.
For example, Goldman Sachs Group Inc.'s (NYSE: GS) Alpha Fund may be the next hedge fund to implode. So far this year, it has dropped 26%, according to Bloomberg News. The Wall Street Journal (subscription required) points out that many hedge funds will see increased redemptions during August. Bloomberg also reported that many of the big buyout deals that have been announced over the past few months including TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC) will have to be renegotiated.
Are there bargains to be had? Of course, markets act on irrational fear and irrational exuberance. But be careful, sometimes stocks are cheap for very good reason, such as exposure to subprime mortgage securities. It will pay to be selective in your bargain hunting.
Some investors also might want to consider shifting some of their assets into more conservative investments such as municipal bonds, utility stocks such as Exelon Corp. (NYSE: EXC) and defense companies such as Lockheed Martin Corp. (NYSE: LMT).
Don't overdo it, though. Over time, the market will right itself.
Meanwhile, people need to take a deep breath and exhale.
On tonight's MAD MONEY on CNBC, Jim Cramer said that he thinks defense and aerospace is becoming the seventh bull market and that we spend more than anyone else by far on defense. He feels the Democrats would spend a lot on defense to look strong. Cramer chose Lockheed Martin Corp. (NYSE: LMT) last week as a pick, and he really likes Raytheon Co. (NYSE: RTN) because it is the most leveraged name to defense spending, and because it is the cheapest -- according to his growth rate over P/E analysis. He likes its growth, debt retiring, and share buybacks. The first play is Alliant Techsystems (NYSE: ATK) as the largest bullet manufacturer and is big into projectiles of all sorts. Alliant reports Thursday, so Cramer noted to only put on a half position so you don't have the earnings exposure as bad.
Alliant Techsystems has been one of my favorite plays in the sector for longer than I can recall. I even had it as a takeover candidate for a BAIT SHOP stock play, meaning it's potential takeover bait. The largest bullet manufacturer angle makes the company quite predictable, and its propulsion systems for space rockets and weapons systems gives it steady juice. But the secret and test propulsion business could be worth an unbelievable amount. Type in X-43A on a web search or go check it out on Space.com and see what comes up. That's theirs, and the future value for this technology could be astronomical.
Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.
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MAJOR PAPERS:
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Whenever I hear some market pundit who sounds like they've got all of the answers behind the current crisis in the world's financial markets, the classic 
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