"Today, one of the fastest growing fronts in defense is in cyberspace. And while cyber war this doesn't involve tanks and fighter squadrons, its ability to disrupt an enemy can be just as effective," says Steve Christ.
The editor of The Wealth Advisory explains, "That leads us to our newest recommendation -- a diversified technical services company calledSAIC, Inc. (SAI).
"A report released in December by Input predicts that federal investment in cybersecurity will reach $13.3 billion by 2015, up from $8.6 billion in 2010. That's a compound annual growth rate of 9.1%, nearly twice the rate of other government IT spending.
Investors nervous about the possibly stalled economic recovery -- or worse, the beginning of the latter phase of a double-dip recession -- were not pleased with last week's housing numbers. Things were perhaps ameliorated somewhat by durable goods order numbers and a revised GDP that weren't as bad as expected, but that didn't stop the Dow from dipping below 10,000 later in the week, before fighting its way back above the benchmark to end the week, thanks largely to Fed chair Bernanke's comments on Friday.
Though the end of August is usually quiet, this week lots more economic data are due out, including more housing numbers: The Case-Shiller Home Price Index for June on Tuesday, construction spending numbers for July on Wednesday, and NAR's pending home sales for July on Thursday. There's not expected to be much to get excited about in these numbers.
Barclays upgraded GlaxoSmithKline (GSK) to overweight from equal weight and said investor concerns regarding Advair and Avandia are overdone.
Leerink upgraded Bristol-Myers (BMY) to outperform from market perform, citing management's pipeline execution. Shares were also upgraded at Citigroup this morning to buy from hold.
Goldman upgraded Medco Health (MHS) to buy from neutral and raised its price target on shares to $76 from $67. The firm cites valuation and expectations that earnings will accelerate in 2H10 driven by a stronger generic outlook.
U.S. Steel (X) was upgraded to neutral from sell at UBS.
Blyth (BTH) was upgraded to hold from underperform at Jefferies.
IPC The Hospitalist Co. (IPCM) was upgraded to buy from hold at Deutsche Bank.
Soleil upgraded Potash (POT) to hold from sell due to valuation. The firm maintains a $100 price target for shares.
FBR Capital upgraded Arkansas Best (ABFS) to market perform from underperform after the company reached a tentative agreement with the Teamsters to amend its existing contract to include a 15% wage concession. The firm has a $34 price target for shares.
Keefe Bruyette upgraded Zions Bancorp (ZION) to market perform from underperform following the company's Q1 results and raised its target for shares to $25 from $17.
Apache (APA) was upgraded to outperform from neutral at Macquarie.
MGM Mirage (MGM) wasupgraded to conviction buy from buy at Goldman.
Monster Worldwide (MWW) was upgraded to outperform from neutral at Credit Suisse.
While SAIC (SAI) provides technical services for a variety of sectors, the core business is still in defense and homeland security. However, the company is starting to have troubles finding growth.
In the latest quarter, revenues increased 7% to $2.68 billion and earnings came to $123 million, or $0.31 per share, up from $120 million or $0.29 per share in the same period a year ago. The consensus was $0.32 per share.
Summer is winding down and so is another earnings season. Most of the S&P 500 have reported results for the past quarter, but there are still a few things of note coming up this week.
Car sales in the United States might be struggling, but in China, they are moving product. Passenger vehicle sales spiked 48% last month, its biggest gain since February 2006. Chinese buyers picked up 872,900 cars in June 2009, according to the China Association of Automobile Manufacturers, and total auto sales (with buses and trucks included) climbed 36% to 1.14 million year-over-year.
Government officials are proclaiming the country's "downward slide" over, and aggressive goals are being set. The full 2009 vehicle sales forecast was raised from 10.2 million to 11 million, as sales for the first half of the year were up 18% year-over-year to 6.1 million.
As the calendar quarter winds down, let's take look at some of this coming week's biggest expected earnings gainers.
Analysts surveyed by Thomson Reuters expect Memphis-based Fred's Inc. (NASDAQ: FRED) to report fourth-quarter earnings of $0.22 per share, 36.4% higher than a year ago, and revenue of $472.5 million, down 4.4%. For the full year, the forecast is for a profit of $0.66 per share on revenue of $1.8 billion, compared to $0.52 per share and $1.8 billion in the previous year. The discount retailer beat or met earnings estimates in the past three quarters. The long-term EPS growth forecast is 14.0%, which is better than the industry average and that of larger rival Walmart Stores Inc. (NYSE: WMT), and the forward PE ratio estimate is 15.0. In the third quarter, the company had more cash than debt. The consensus recommendation of analysts is to buy FRED. The share price has risen 2.7% since the beginning of the year to $11.05.
As is the case in the corporate world, government agencies have "go to" consultants. So far as the U.S. defense community is concerned, there is an outfit in San Diego that is on the list.
SAIC, Inc. (NYSE: SAI) provides scientific, engineering, systems integration and technical services to all branches of the U.S. military, agencies of the Department of Defense, the intelligence community, the U.S. Department of Homeland Security and other U.S. Government civil agencies. The firm also offers technology-driven consulting services to the oil & gas, utility and pharmaceutical industries. SAIC employs more than 44,000 people, in over 150 cities worldwide. Lockheed Martin (NYSE: LMT) is a major competitor.
The firm pleased investors last week, when it reported Q2 EPS of 24 cents and revenues of $2.2 billion. Street analysts had been looking for 21 cents and $2.17 billion. Management also guided FY08 EPS to 83-88 cents (85 cent consensus) and FY08 revenues to $8.7-$9.0 billion ($8.79B consensus).
MOST NOTEWORTHY: Popular (BPOP), MRU Holdings (UNCL), CDC Corp (CHINA) and Oscient Pharmaceuticals (OSCI) were today's noteworthy initiations:
Kaufman initiated Popular (NASDAQ: BPOP) with a Hold rating and $13 target, citing the company's direct exposure to nearly $2B of Alt A residential mortgage loans originated by its U.S. operations and approximately $250M of exposure to another $4B of collateralized, securitized mortgage pools.
MRU Holdings (NADSAQ: UNCL) was initiated with a Buy rating and $8.50 target at Roth Capital. Roth Capital believes MRU Holdings is on the threshold of potentially explosive growth in the fast growing segment of the education lending market, that of private loans.
JMP Securities said CDC Corp. (NASDAQ: CHINA) , with its resources and connections in China, has excellent deal flow and has been a disciplined, value oriented buyer, and started shares with a Market Outperform and $10.50 target.
Piper believes Oscient Pharmaceuticals (NASDAQ: OSCI) experienced management team and PCP sales force are competitive advantages and will lead to attractive partners. Piper initiated Oscient Pharmaceuticals with an Outperform rating and $5 target...
OTHER INITIATIONS:
Raymond James started SAIC (NYSE: SAI) with a Market Perform rating.
Morgan Keegan initiated Hilltop Holdings (NYSE: HTH) with an Outperform rating.
Dice Holdings (NYSE: DHX) was initiated with an Overweight rating and $15 target at Morgan Stanley.
RBC Capital initiated VMware (NYSE: VMW) with a Sector Perform rating and $75 target.
MOST NOTEWORTHY: Kenexa Corp (KNXA), CACI International (CAI), SI International (SINT), Tyco Electronics (TEL) and YUM! Brands (YUM) were today's noteworthy initiations:
ThinkEquity started Kenexa Corp (NASDAQ: KNXA) with an Accumulate rating, citing the company's attractive business model that can deliver high-value, high-margin content, but questions the company's plans to compete with best-of-breed vendors.
Banc of America initiated CACI International (NYSE: CAI) with a Neutral, citing the challenging budget environment and margin trends.
Banc of America believes shares of SI International (NASDAQ: SINT) offers a compelling risk/reward given the improving civilian funding environment and upside potential from recent M&A activity, and assumed coverage with a Buy rating and $38 target.
Tyco Electronics (NYSE: TEL) was started with a Hold rating at Deutsche Bank, citing risks to the company's potential turnaround.
Yum! Brands (NYSE: YUM) was re-initiated with an Outperform rating at Friedman Billings on valuation and considers any stock price weakness from the increased costs as a buy opportunity.
OTHER INITIATIONS:
Banc of America assumed the following Government IT Services companies with Buy ratings: SRA International (NYSE: SRX) and SI International.
Inferential Focus, Inc. was the subject of Barron's interview this past weekend. This research driven company combs the world looking for new investment trends.
One emerging trend that could prove profitable for investors is the Department of Defense's need for a new generation of military satellites and communications networks in general. Technology exists, and could easily get into the hands of potential enemies, that can jam communications between U.S. spacecraft and ground stations by messing up the current DOD satellites that serve as central communications point for all these devices. A simple ground station based in any country could potentially mess up the communications of our military.
To solve this potential problem, the DOD has embarked on a $34 billion project to build a whole new global networking system similar to the Internet called GIG, or Global Information Grid. The DOD's goal is to make this network the most secure communications network ever to exist.
The companies that are going to benefit from this build-out are Globecomm Systems Inc (NASDAQ: GCOM), SAIC Inc (NYSE: SAI) and Radvision Ltd (NASDAQ: RVSN). My knowledge about these companies is severely lacking. Please send in comments if you know anything about this satellite build-out or these companies.
MOST NOTEWORTHY: CACI International Inc (CAI), SAIC, Inc (SAI), CenturyTel, Inc (CTL), Honda Motor Co (HMC) and Micron Technology, Inc (MU) were today's noteworthy downgrades:
Morgan Stanley downgraded CACI International (NYSE: CAI) and SAIC Inc (NYSE: SAI) to Underweight from Equal Weight to reflect concerns over an increasingly unfavorable political environment as the risk of reduced funding for federal IT initiatives grows.
Soleil downgraded shares of CenturyTel (NYSE: CTL) to Sell from Hold on valuation and a possibly active hurricane season.
Honda Motor Co (NYSE: HMC) was cut to Neutral from Buy at Merrill Lynch.
Micron Technology (NYSE: MU) was downgraded to Sell from Neutral at Goldman Sachs as the firm believes improvements in DRAM pricing will be short lived and that the company will continue to generate losses given its poor cost structure.
OTHER DOWNGRADES:
CSX Corp (NYSE: CSX) was downgraded to Reduce from Neutral at Calyon on valuation and deteriorating volume.
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Investors nervous about the possibly stalled economic recovery -- or worse, the beginning of the latter phase of a .gif){kind=logo}
While SAIC (
Summer is winding down and so is another earnings season. Most of the S&P 500 have reported results for the past quarter, but there are still a few things of note coming up this week.
Car sales in the United States might be struggling, but in China, they are moving product. Passenger vehicle sales 
As the calendar quarter winds down, let's take look at some of this coming week's biggest expected earnings gainers.
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