Tyco International (TYC - option chain) shares are rising today on news that Standard & Poor's will add TYC to its S&P 500 index after the close of trading on August 26. The stock will replace Smith International (SII), which will be acquired by Schlumberger (SLB). 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 TYC.
TYC opened this morning at $38.61. So far today the stock has hit a low of $38.16 and a high of $38.88. As of 11:55, TYC is trading at $38.35 up $1.61 (4.4%). The chart for TYC looks neutral and S&P gives TYC a neutral 3 STARS (out of 5) hold ranking.
U.S. stock futures advanced Monday morning, pointing to a higher open for Wall Street as overall positive sentiment about the economy was further fueled by a deal between oil services companies Schlumberger and Smith International, and by Lowe's upbeat results.
Investors are looking to extend last week's rally to its fifth day after last week sentiment was boosted by several economic indicators indicating the U.S.'s recovery is strengthening. There are no major economic data coming out Monday, but M&A activity usually lifts investors' spirits.
RBC Capital upgraded Fidelity National (FIS) to outperform from sector perform. The firm upgraded the stock due to valuation, and its belief that the company will clear up issues related to its merger on its Analyst Day, scheduled for Dec. 7. The firm set a $28 target on the stock.
Citigroup upgraded Smith International (SII) to buy from hold, citing the sell-off in shares following its 28M share equity offering. Note that Smith International priced 28M shares Tuesday at $26.50.
Wells Fargo upgraded DynCorp (DCP) to outperform from market perform. The firm upgraded the stock on valuation, and because it believes that the impact on DynCorp of a possible indictment of PWC will be minimal, if any.
Rockwell (ROK) was upgraded to overweight from neutral at HSBC.
Omega Healthcare (OHI) was upgraded to outperform from market perform at JMP Securities.
Analog Devices (ADI) was upgraded to conviction buy from buy at Goldman.
Barclays upgraded Exxon (XOM) to overweight from equal weight based on a higher production growth outlook. The firm, which raised its target to $92 from $90, expects Exxon to have organic growth of more than 3% in 2010 and an average growth rate of 2.6% between 2009 and 2013.
Kaufman Bros. upgraded Palm (PALM) to buy from hold citing the recent pullback in shares and indications that Verizon (VZ) will carry webOS phones as early as 1H10. The firm has a $16 target on the stock.
Piper Jaffray raised Medicis (MRX) to neutral from underweight and raised its target to $20 from $16. Following a management meeting, Piper said they have increased confidence in Soldyn risk and LipoSonix's safety profile.
Illinois Tool Works (ITW) was upgraded to buy from neutral at UBS.
Devon Energy (DVN) was upgraded to outperform from market perform at Wells Fargo.
Carmike Cinemas (CKEC) was upgraded to buy from neutral at Merriman.
Sierra Wireless (NASDAQ: SWIR) was upgraded at Jefferies to Hold from Underperform following Q3 results. The firm believes the Wavecom acquisition integration is progressing better than expected and finds the valuation attractive at current levels. The firm raised its price target to $10 from $5.
Boston Properties (NYSE: BXP) was upgraded to Buy from Hold at Deutsche Bank to reflect the company's recapitalization and better-than-expected occupancy. The firm raised its target to $69 from $46.
Wyndham (NYSE: WYN) was upgraded to Outperform from Market Perform at FBR Capital after the shares sold off following the company's Q3 results. The firm raised its target to $23 from $15.
Human Genome (NASDAQ: HGSI) was upgraded to Overweight from Neutral at JPMorgan. Target was raised to $25 from $14.
Urban Outfitters (NASDAQ: URBN) was upgraded to Overweight from Market Weight at Thomas Weisel as they expect a "meaningful sales and earnings improvement in Q4." Target was raised to $39 from $32.
Methanex (NASDAQ: MEOH) was upgraded to Buy from Neutral at UBS, citing improved methanol demand following the Q3 report. Target was raised to $19.50 from $17.
Buffalo Wild Wings (NASDAQ: BWLD) was upgraded at Raymond to Market Perform from Underperform.
Today started out strong with a weaker dollar ahead of tomorrow's FOMC meeting. We have a slew of data coming out the rest of the week and tomorrow's commentary on securities purchases and liquidity programs should likely beat out the notion that rates are still staying at near-zero percent.
Citigroup upgraded Cooper Industries (NYSE: CBE) to Buy from Hold on valuation as it believes commercial construction concerns are well known. The firm raised its target on shares to $40 from $37, and coupled the upgrade with a downgrade of Rockwell Automation (NYSE: ROK) to Sell from Hold.
Credit Suisse upgraded BJ Services (NYSE: BJS) to Neutral from Underperform following its acquisition by Baker Hughes (NYSE: BHI). The firm raised its target to $17.
Credit Suisse also upgraded Amkor Technology (NASDAQ: AMKR) to Outperform from Neutral and raised its target to $8 from $7. The firm expects Amkor to benefit from near-term strength in the supply chain and the mix shift towards higher value packaging.
Textron (NYSE: TXT) was upgraded to Conviction Buy from Neutral at Goldman.
Siemens (NYSE: SI) was upgraded to Neutral from Sell at UBS.
Stanley Works (NYSE: SWK) was upgraded to Buy from Neutral at Janney Montgomery.
Citigroup upgraded Lennar (NYSE: LEN) to Buy from Hold as it believes the company's near-term liquidity profile is improved following the $400M debt issuance. The firm raised its target price to $12 from $11.
Jefferies upgraded Rowan Companies (NYSE: RDC) to Buy from Hold as it believes jack-up drillers will continue to outperform deepwater names. The firm raised its target price to $27 from $20.
Keefe Bruyette upgraded First Financial (NASDAQ: FFIN) to Market Perform from Underperform to reflect more positive loan data for the Texas banks. The firm raised its target price on shares to $44 from $38.
MGM Mirage (NYSE: MGM) was upgraded to Overweight from Neutral at JP Morgan.
Morgan Stanley (NYSE: MS) was upgraded to Outperform from Market Perform at JMP Securities.
Brinker (NYSE: EAT) was upgraded to Overweight from Equal Weight at Barclays.
The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket.
I'm a long term energy bull -- 10% of my money has been in energy stocks for the last several years and today I maintain that allocation for two reasons. First, I believe in five years, oil and gas prices will be higher than they are today. Second, owning energy is a great hedge against other asset classes like stocks, the US dollar, and inflation.
No one knows which way energy prices will go next week or month so I continually rebalance my portfolio. As my energy stocks rise, I trim them and when they fall, I add to them. If my portfolio goes to 12% energy, I sell them back down to 10% and vice versa.
Now comes the easiest part – which stocks do I pick? Easy you say? Yes – because I don't worry about stock picking due to a miraculous new invention I'll discuss below. I own three energy stocks: the U.S. Oil & Gas Exploration & Production Index (NYSE:IEO), the U.S. Oil Equipment & Services Index(NYSE:IEZ), and S&P Global Energy (NYSE:IXC). Through these three stocks, I own about 200 energy stocks in precise allocation percentages to parts of the energy sector, weighted according to my own preferences – 60% is in IEO, 30% is in IEZ and 10% is in IXC. Why pick stocks when I can own them all? Here's what I mean.
MOST NOTEWORTHY: O'Reilly Automotive, Corning and Lincoln National were today's noteworthy downgrades:
William Blair downgraded O'Reilly Automotive (NASDAQ: ORLY) to Market Perform from Outperform following weak Q1 results, citing the potential for further downward EPS revisions.
Thomas Weisel downgraded Corning Inc. (NYSE: GLW) to Market Weight from Overweight citing balanced risk/reward given the backdrop of a maturing LCD penetration and generational upgrade cycle, and the challenging environment.
Wachovia downgraded Lincoln National Corp. (NYSE: LNC) to Market Perform from Outperform as they believe the weak Q1 market weakness will impact profitability.
MOST NOTEWORTHY: Smith International, Cerner and Coach were today's noteworthy upgrades:
JP Morgan upgraded Smith International (NYSE: SII) to Overweight from Neutral citing better risk/reward vs. group, and upside to estimates from Latin America drilling and its deepwater rig fleet. Note that Oppenheimer downgraded shares of SII based on valuation.
Jefferies believes Cerner Corp. (NASDAQ: CERN) in-line results and solid domestic bookings could alleviate the pressure on shares. Shares were raised to Buy from Hold.
Shares of Coach Inc. (NYSE: COH) were raised to Buy from Hold at Citigroup, citing sales stabilization and compelling valuation.
OTHER UPGRADES:
Medco Health (NYSE: MHS) was upgraded at Oppenheimer to Outperform from Perform.
ThinkPanmure raised VMware Inc. (NYSE: VMW) to Buy from Accumulate.
SunTrust Banks (NYSE: STI) was upgraded to Market Perform from Underperform at Keefe Bruyette.
MOST NOTEWORTHY: Large Cap Oilfield Services, Andersons and Unilever were today's noteworthy downgrades:
UBS downgraded Large Cap Oilfield Services stocks citing a "more sober 2008 outlook." The firm downgraded Smith International (NYSE: SII) and Baker Hughes (NYSE: BHI) to Neutral from Buy, citing delays in offshore growth for the Smith downgrade and execution issues for Baker Hughes.
Banc of America downgraded shares of Andersons (NASDAQ: ANDE) to Neutral from Buy following the company's Q4 results to reflect a lack of visibility on FY08 growth.
Citigroup downgraded shares of Unilever (NYSE: UN/UL) to Hold from Buy to reflect an increase in commodity costs.
OTHER DOWNGRADES:
Lehman lowered PNM Resources (NYSE: PNM) to Equal Weight from Overweight; shares were also downgraded to Hold from Buy at Citigroup.
Friedman Billings downgraded Thomas & Betts (NYSE: TNB) to Market Perform from Outperform.
MOST NOTEWORTHY: Vodafone, Citrix Systems, STMicroelectronics, Symmetricom and Smith International were today's noteworthy upgrades:
JP Morgan upgraded shares of Vodafone Group (NYSE: VOD) to Overweight from Neutral, as they believe the company is benefiting from increased data sales.
Citrix Systems (NASDAQ: CTXS) was upgraded to Outperform from Market Perform at Friedman Billings. The firm's checks indicate that its clear communication strategy and a stronger technology platform behind the Enterprise and Platinum editions is spurring top line growth.
Baird upgraded shares of STMicroelectronics (NYSE: STM) to Outperform from Neutral based on new product cycle, multiple design wins, valuation, and strong Q4 guidance.
Cantor upgraded shares of Symmetricom (NASDAQ: SYMM) to Buy from Hold as they find the valuation compelling and are comfortable with Q1 estimates.
Calyon Securities upgraded Smith International (NYSE: SII) to Add from Neutral following its Q3 report and guidance.
OTHER UPGRADES:
Shaw Group (NYSE: SGR) was upgraded to Neutral from Sell at Goldman Sachs.
RBC Capital upgraded QLogic Corporation (NASDAQ: QLGC) to Outperform from Sector Perform.
Credit Suisse upgraded Amgen (NASDAQ: AMGN) and Weatherford (NYSE: WFT) to Outperform from Neutral.
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Tyco International (TYC - option chain) shares are rising today on news that Standard & Poor's will add TYC to its S&P 500 index after the close of trading on August 26. The stock will replace Smith International (SII), which will be acquired by Schlumberger (SLB). 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 TYC.
U.S. stock futures advanced Monday morning, pointing to a higher open for Wall Street as overall positive sentiment about the economy was further fueled by a deal between oil services companies Schlumberger and Smith International, and by Lowe's upbeat results.
Today started out strong with a weaker dollar ahead of tomorrow's FOMC meeting. We have a slew of data coming out the rest of the week and tomorrow's commentary on securities purchases and liquidity programs should likely beat out the notion that rates are still staying at near-zero percent. 
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The energy debate rages on as oil and gas futures bounce around with 30% corrections. Which side of the energy debate are you on? Bears say that oil and gas prices are coming back down to earth. Speculators and hedge funds bid them up, global demand is slowing and alternative forms of energy will soon replace the fossil fuels we've come to depend upon. Bulls argue that oil and gas supplies are dwindling at the same time that the emerging market economies (China, India, Brazil and 20 others) need more. As their middle class population builds they too will want cars, air conditioning and electricity and demand will increase. Most oil reserves are in countries with unstable governments and when geopolitical events get ugly, prices tend to skyrocket. .gif){kind=logo}
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