Here's a peek at what analysts surveyed by Thomson Financial are expecting from companies scheduled to report quarterly results in the first week of June, 2008.
The following companies are expected to post earnings growth, compared to the same period in the previous year:
Take-Two Interactive (NASDAQ: TTWO) up 136.6% (from a loss) to $1.12 per share, on $499.1 million in revenue
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.
MOST NOTEWORTHY: Lululemon, National City and Devon Energy were today's noteworthy upgrades:
Thomas Weisel upgraded shares of Lululemon (NASDAQ:LULU) to Overweight from Market Weight as they believe the company's momentum continues following the strong results; the firm maintains a $43 target on shares.
Bear upgraded National City (NYSE:NCC) to Outperform from Underperform citing favorable risk/reward following reports is is considering a transaction with KeyCorp (NYSE:KEY).
JP Morgan raised Devon Energy (NYSE:DVN) to Overweight from Neutral citing solid organic growth with high rates of returns.
OTHER UPGRADES:
Micron (NYSE:MU) was upgraded at Goldman to Neutral from Sell.
Merrill raised eBay (NASDAQ:EBAY) to Buy from Neutral.
Today's trading activity and major market move can be attributed to one thing and one thing only: The Federal reserve added another $100 billion to the monetary system. What made it so powerful is that the Fed also is allowing AAA/Aaa rated "private label" mortgages rather than just conforming loans to tap the funds and it included all primary dealers rather than just member banks.
What's even more amazing is that the market actually strengthened through the end of the day. The market cheered with huge gains as seen below:
DJIA 12,156.81 (+416.66; +3.55%)
S&P500 1,320.65 (+47.28; +3.71%)
NASDAQ 2,255.76 (+86.42; +3.98%)
10YR-T-BOND 3.596% (+0.158%)
Of the Money Center banks, Wachovia Corp. (NYSE: WB) rose the most of all with a gain of 13.7% to $29.78. lululemon athletica Inc. (NASDAQ: LULU) shares soared a monster 20% to $25.15 after the stock was raised to Outperform at Credit Suisse. Imagine how well it could do if they'd properly capitalize their name (see TOP 10 Pre-Market Calls).
A small company called Access Integrated Technologies, Inc. (NASDAQ: AIXD) saw shares surge by almost 17%, after being up almost 30%, with a $2.92 close after it announced a major deal with four of the major studios for in-theater upgrades over the next 3-years.
Despite a strong day, there were several stocks that rode into 52-week lows. Of the DJIA components, Boeing Co. (NYSE: BA) was the only one of the 30 components that saw shares close down for the day. Maybe protesting that huge air fuel tanker contract wasn't the best choice.
Watch out for World Wrestling Entertainment Inc. (NYSE: WWE) as Jim Cramer will host CEO Linda McMahon on CNBC's MAD MONEY tonight. Will she give him a smack-down?
MOST NOTEWORTHY: DiamondRock Hospitality, Pzena Investment and Vodafone were today's noteworthy upgrades:
DiamondRock Hospitality (NYSE: DRH) was upgraded to Outperform from Neutral at Baird, citing the newly-announced 4.8M repurchase plan, strong balance sheet and valuation.
Keefe Bruyette upgraded shares of Pzena Investment (NYSE: PZN) to Market Perform from Underperform after the company announced February ending AUM.
Goldman added Vodafone (NYSE: VOD) to its Conviction Buy List following the recent weakness as they expect the company to benefit from growth in wireless data.
Ford Motor Co. (NYSE: F) shares are down over 3.5% in premarket trading after the carmaker shares were downgraded by Citigroup from Hold to Sell.
Also, today car manufacturers will release February auto sales figures. A a large decline is expected for the month when compares to year ago sales due to consumers scaling back on discretionary spending as a result of economic conditions. Analysts expect total U.S. auto market is expected to fall some 7% from a year ago. General Motors Corp. (NYSE: GM) sales may decline 14%, Ford's could decline as much as 16% and Chrysler should post 19% lower sales, according to a Goldman Sachs analyst.
Ars Technica surveyed stores across the U.S. over the weekend and found that supplies of Apple (NASDAQ: AAPL)'s recently released MacBook Air is thin to nonexistent. Even shipping times for models bought on Apple's website are 5-7 days with some markets like Boston, Chicago and New York City, San Francisco and Los Angeles store are out of stock. Could it be that the MacBook Air will surprise investors with much higher sales? [Via Fortune].
Meanwhile Bank of America lowered Apple's price target from $180 to $160, keeping its Buy rating on the stock.
One of the first things you learn in economics is that incentives matter -- and that if you get the incentives wrong, the results can be, well, interesting. Exhibit A: the subprime mess.
In an interesting column in this weekend's Wall Street Journal, Herb Greenberg writes (subscription required) about Lululemon (NASDAQ: LULU), where the terms surrounding options grants put top executives in a position to serve the private equity backers rather than other minority shareholders who bought the shares during or after the IPO -- at a much higher price.
In the case of Lululemon, CEO Robert Meers saw some of his options vest based on when the private equity backers cashed out. According to Greenberg, "The vested amount would immediately leap to as much as 40% if private-equity investors sold; the actual amount was based on a sliding scale tied to how much they actually made."
Options that vest based on some sort of performance are great. But I'm skeptical of options that vest based on when private equity backers who paid a tiny fraction of what other investors paid for their stake in the company cash out.
I'm wary of companies taken public by private equity firms in general. The buyout shops are masters of the art of "buy cheap and sell dear," and "buying dear" tends to be a great way to lose money in the stock market.
"While this has been an ugly period for equities, we believe an above-average risk/reward opportunity presently exists for the small-cap growth market," says Jim Oberweis, Jr., monoey manager and editor of The Oberweis Report.
He adds, "P/E valuations of our universe of high growth companies are now substantially below average. Most important, our research indicates that such periods are also opportune times to buy." Here, he offers a pair of retail ideas -- Guess? (NYSE: GES) and Lululemon athletica (NASDAQ: LULU).
"While it can be difficult to seize such an opportunity in the face of overwhelming pessimism, those who unemotionally understand the math of historical valuations should reap the rewards of seeing opportunity in the current difficulty.
"In each case, uncertainty at the time led to a large market decline that resulted in stock valuations substantially below historical averages. In virtually every period in which average P/E's for high growth stocks have dropped sharply below the mean, the economic outlook was bleak. It is exactly that pessimism and uncertainty that causes investors to relentlessly sell, creating cheap valuations.
I don't care to try to predict if we're heading into recession or how bad that recession will be. I have no idea where the market will bottom or how long it will take to get there; the one thing I do know is that stocks are going to continue to get wrecked, whether or not we have a short-term bounce. Amazingly, it's been just eighteen days since I warned investors the market would drop 10% in 2008 and now we're already there. I've considered buying quality growth stocks like Mosaic (NYSE: MOS), Monsanto (NYSE: MON), Sigma Designs (NYSE: SIGM), Priceline (NASDAQ: PCLN), BE Aerospace (NASDAQ: BEAV), Vistaprint (NASDAQ: VPRT) and Lululemon (NASDAQ: LULU) on weakness, but their continued downtrending has made them falling knives, aka, too unpredictable for me.
My fellow blogger Lita Epstein has talked about picking up bargains on beaten stocks with strong fundamentals. I disagree with her. While maybe her statement applies to a precious few like Apple (NASDAQ: AAPL) and Amazon.com (NASDAQ: AMZN), I don't care how great those companies are, we're looking at a housing collapse and a massive slowdown in consumer spending which will hurt even the best of companies. For now, forget about stock picks; this is not the time for speculation. If foreign stock markets have tanked this hard on U.S. recession fears, imagine how hard U.S. stocks will get hit -- why not protect yourself and respect the downside for once?
After nailing the top in Apple (NASDAQ: AAPL) and warning investors this would be a painful year, I've been getting hundreds of emails from people asking me what to do next? As if suddenly after two correct predictions, I'm Nostradamus or David Blaine!
Make no mistake, I'm neither a forecaster nor a magician, I'm just a trader who bases his decisions around these key elements: a distrust of everyone and every company on Wall Street (made easier by the likes of MBIA (NYSE: MBI), E*Trade (NASDAQ: ETFC) and Countrywide Financial (NYSE: CFC); a respect, bordering on religion, for charts and a quick trigger finger if the charts turn against me. I know people want longer term predictions, but I believe those to be 100% guessing games and potentially hazard to your investment health. Pregnant women should avoid them at all costs. Just kidding, it's fine for some people, but I like to make my predictions and cash out, so I can enjoy stress-free weekends if you catch my drift.
So, here's what I see right now: two weeks in and we're already halfway to my 10%-down market prediction, and Apple is down 15% (take that you stereotypical cheerleaders, go date some football players)! The markets are definitely rolling over, and while it's usually a long, drawn-out process, the charts seem to have little concern for what's normal as all the major indices have formed perfect head-and-shoulders patterns (a very bearish sign) and investors are rightfully freaking out.
Berkshire Hathaway (NYSE: BRK.A) vice chairman Charlie Munger once said that "It's a finite and very competitive world. All large aggregations of capital eventually find it hell on earth to grow and thus find a lower rate of return ... The one thing we've always guaranteed is that the future will be a lot worse than the past."
An apparel company with a red hot product line and booming growth would appear to be a prime target for Munger's wisdom, and the wolves appear to be circling around Lululemon's (NASDAQ: LULU) high-margin business.
According to the Globe & Mail, companies including Roots, La Senza, Nike and, most recently, Calvin Klein, are all trying their hand at high-performance yoga clothing. The piece quotes Robert Gibson, head of research at Octagon Capital Corp.: "Look out, Lululemon. Everyone is getting into the act." Lululemon's success "has made everyone realize there is money to be made in 'performance' clothing. Anyone who can will get into the act. ... More competition is not a good thing."
Whether Lululemon has the chops to stay ahead of very savvy, well-funded competitors remains to be seen. But this is probably the biggest risk factor that the company's shareholders need to be on the lookout for.
Fellow writer Zac Bissonnette highlighted the interesting (but somewhat controversial) story in American Apparel (AMEX: APP) about a week ago. He did a good job of explaining the company itself as well as the perverted CEO.
Although I think the questions surrounding the CEO's "lifestyle" are pertinent, I think they should be overlooked in favor of getting a piece of this high growth name at such an opportunistic time to buy. In short, I think the stock makes sense after a recent pullback.
Fundamentally, American Apparel appears very confusing at first. The older generation of readers is probably very baffled as to why a company that sells light-colored, tight fitting clothes is in the middle of a humongous growth cycle, understandably so. However, I'm more aiming this post towards those members of the younger generation who know just how powerful this concept is.
Brenda Buow of the Globe and Mailtakes a look at the company: its rapid growth, unique products, and unique corporate culture that incorporates New Age concepts like the Law of Attraction. The main challenge for Lululemon seems to be converting its huge success in Canada into the U.S. market -- a move that many companies have failed at.
To be sure, there's a lot to like about Lululemon; the clothing is wildly popular and the company appears to be carving out a strong niche.
But what about the bear arguments? Many Lululemon shareholders have dismissed the red flags Herb Greenberg has raise about resumes as immaterial. And they're absolutely right: Whether Meers left Reebok in 1998 or 1999 will have no effect on Lululemon's future growth.
But with a fast-growth company, management integrity is of paramount importance -- material importance. There appear to be good reasons to doubt Meers' integrity, and his apparent deflection of Greenberg's questions is another red flag.
Citigroup Incorporated (NYSE: C) recently received an unexpected call from a "prominent investment banker" inquiring about a merger with Bank of America Corporation (NYSE: BAC); it was rejected outright, and Citi instead turned to the Abu Dhabi Investment Authority, a part of the Abu Dhabi government, for a $7.5B cash infusion, the Wall Street Journal reported.
As ethanol demands forced up food prices, and with questions about its capacity to be a significant oil substitute, demand has slowed, according to the Wall Street Journal, which doesn't help the prospects of newly public companies such as VeraSun Energy Corporation (NYSE: VSE) and Pacific Ethanol Inc (NASDAQ: PEIX).
The Financial Times reported that the SRM hedge fund increased its stake in British bank Northern Rock to 8.5% yesterday, probably in order to block Virgin Group from taking over the lender. SRM and RAB Capital, with a combined stake in Northern Rock of more than 15%, are backing a rival bid for the bank by British private equity fund Oilvant.
OTHER PAPERS:
A federal agency has subpoenaed Countrywide Financial Corporation (NYSE: CFC), in an attempt to determine whether the company abused the bankruptcy system in two Florida foreclosure cases, according to the New York Times.
WEB SITES:
MarketWatch's Herb Greenberg believes Lululemon Athletica Inc (NASDAQ: LULU) CEO Bob Meers may have "exaggerated a bit" about his job history. While it's true Mr. Meers was employed by Reebok International, he was not president and CEO of the brand for the length of time he stated, nor was he the president of the Rockport shoe and Greg Norman brands.
According to the New York Times, "Kmart said yesterday that it would remove all jewelry advertised as 'lead free' from its shelves after workers at lead monitoring programs who tested the pieces found that some actually contained high concentrations of the metal."
One charm labeled lead-free was 52% lead. What is interesting here is that it raises questions about how much responsibility companies have about products that they source from third-party manufacturers.
Lululemon Athletica Inc. (NASDAQ: LULU) ended up embroiled in a minor scandal after a New York Times piece found that products the company was selling (the material in question was manufactured by a third party) -- labeled as containing seaweed -- actually contained no seaweed. While it sent the stock down as much as 9%, the share price ended up closing higher on the day of the story. Lululemon has since put out a press release refuting the New York Times claim, saying that its products actually do contain what they say they contain.
The legal issues could be murky. But these companies know that consumers aren't going to want to shop at stores in which products are labeled in a misleading way, and so they're taking steps to evaluate manufacturers' claims -- before the New York Times does.
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically 
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I don't care to try to predict if we're heading into recession or how bad that recession will be. I have no idea where the market will bottom or how long it will take to get there; the one thing I do know is that stocks are going to continue to get wrecked, whether or not we have a short-term bounce. Amazingly, it's been just eighteen days since I warned investors the market would drop 10% in 2008 and now we're already there. I've considered buying quality growth stocks like 
After 
Fellow writer Zac Bissonnette .gif){kind=logo}
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