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.
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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.
"The weak start to 2008 has left many investors scrambling for a safe haven in which to stash their cash," notes Jocelynn Drake, who sees the defense sector as one such haven.
The analyst with Schaeffer's Investment Research explains, "The recent losses suffered by many of the defense-sector components has brought them back to long-term support, creating potentially strong buying opportunities."
"In addition, they are all currently resting right near support at their ascending 10-month moving averages. These stocks have benefited from this long-term support level and could use their respective trendlines as springboards to launch them on the next leg of their uptrends.
"What also makes these stocks very appealing from a bullish perspective is that short-term options players are very skeptical of the stocks' outlooks. As a result, options speculators have loaded up on bearish bets toward these securities in an attempt to call a top to their rallies.
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
Using a proprietary quantitative system to review 5,000 stocks based on over 100 variables, Chuck Carlson has honed in on a few "standouts" -- citing Morgan Stanley (NYSE: MS), Lockheed Martin (NYSE: LMT), PepsicCo (NYSE: PEP) and Chevron (NYSE: CVX) as top blue chip bets for the current market environment.
The editor of The DRIP Investor explains, "Financials have had some rough sledding in recent months as a result of problems in the sub-prime market and the overall tight credit environment. Within that group, however, Morgan Stanley offers an excellent opportunity."
He notes that earnings in the latest quarter were impacted by problems in the credit markets, and the slowdown in mergers and acquisitions could adversely impact investment banking business going forward.
Nevertheless, he contends, the stock is discounting a lot of the problems in the industry. He says, "I remain a fan of these shares and recommend that investors take advantage of the price pullback to initiate positions."
Carlson adds, "One sector with several quality picks is industrials. Among the top stocks in the group, I especially like Lockheed Martin. I expect defense spending to remain at high levels, which is good news for the company's defense-related operations."
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."
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Defense contractor Lockheed Martin (NYSE: LMT) posted .gif){kind=logo}
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