BCE Inc. (NYSE: BCE) shares are jumping over 10% in premarket trading after Canada's Supreme Court overturned a Quebec Court decision, clearing the way for the $52 billion leveraged buyout by Ontario Teachers' Pension Plan and U.S. private equity firms. The buyers might still negotiate the price down though.
Halliburton (NYSE: HAL) withdrew a $3.6 billion offer for Britain's Expro International after the U.K. oil services firm stuck by a smaller bid from a private-equity consortium.
Some analyst calls this morning:
J.C. Penney Co. (NYSE: JCP) was upgraded by Deutsche Bank to Buy from Hold and the price target upped to $46 from $45.
Motorola Inc. (NYSE: MOT) was downgraded by Piper Jaffray to Sell from Neutral on continued weakness in North American market. The target price was cut to $7 from $9.75. Shares are down over 2% in premarket trading.
First Solar (NYSE: FSLR) price target was upped at Lehman Brothers from $280 to $335. Shares are up over 2.5% in premarket trading.
Gather around the campfire and let me tell you such scary stories Jason's mask would fail to impress you after that.
Of course, the theme that runs in the background of these scary stories is the state of the economy in the U.S., from the housing slump, inflation and soft labor markets to weak dollar, excessive government spending and increasing national debt load and trade gap.
1. Exxon Mobil and Oil
So scariest of all stories is oil. With prices reaching new records nearly daily, gas prices have also zoomed higher, crossing the $4 a gallon mark. Why, then, is Exxon Mobil (NYSE: XOM) exiting the retail gas business. To be sure, BP (NYSE: BP) and ConocoPhillips (NYSE: COP) have either indicated taking such measures or have taken them already. Apparently, gas prices haven't been rising fast enough to keep pace, causing margins to narrow and for cents-earned-per-gallon to be dismal.
One would then think it's a good move by Exxon and the other oil giants to get out of the retail gas business, but I have questions. First, it's alarming that companies with revenues in the hundreds of billions of dollar look for ways to make even more money (even if YTD XOM is down 6.4%). Second, and most important, what could it mean for the consumer? As Doug McIntyre suggested, would the price of gas at the pump increase even more after the sale to private owners than when it was sold under Exxon? Scary indeed.
The history of General Foods can be traced back to the Postum Cereal Company, founded by Charles William Post, inventor of Postum and Grape Nuts, in 1895. Wall Street player E.F. Hutton in time became the chairman, and he initiated a series of acquisitions beginning in 1925: Jell-O, Minute Tapioca, Log Cabin, Hellmann, Calumet Baking Powder, and Birdseye. It was after the Birdseye acquisition in 1929 that the food conglomerate became General Foods.
Among General Foods' many product offerings were Sanka decaffinated coffee and the astronaut's favorite, Tang. General Foods also continued to make acquisitions, including the makers of Kool-Aid in 1953, the Burger Chef restaurant chain in 1968, and Oscar Mayer in 1981.
But late in 1985, General Foods was itself acquired by Philip Morris Cos., which later became Altria Group (NYSE: MO), in the largest non-oil acquisition to date. When Philip Morris acquired Kraft in 1988, the two food companies were merged. In 2007, Altria spun off Kraft Foods (NYSE: KFT), which now owns such former General Foods brands as Jell-O, Kool-Aid, and Maxwell House coffee. And it was announced in late 2007 that Post Cereals, including Grape Nuts, would be sold to Ralcorp Holdings (NYSE: RAH).
Apple Inc. (NASDAQ: AAPL) has managed to cover yet another area of the globe. TeliaSonera AB, Sweden's largest telephone company, said it will start selling the iPhone later this year in countries in the Nordic and Baltic region: Sweden, Norway, Denmark, Finland, Lithuania, Latvia and Estonia.
General Motors Corp. (NYSE: GM), which saw its shares reaching 1982 levels Friday, also saw its shares downgraded by Citigroup from Buy to Hold and cut his price target to $21 from $32. The analyst said "the automaker will likely burn through $7 billion in cash through 2009 and may need to raise more capital."
UBS (NYSE: UBS) shares are plunging 14% in premarket trading after on Monday warned it may record further losses on real estate holdings outside the U.S. It seeks nearly $16 billion from shareholders to repair its balance sheet.
Altria (NYSE: MO) shares are trading higher today, getting a boost from news that menthol is getting special protection in a new bill as Congress attempts to regulate the tobacco industry. Menthol brands, which make up about one-fourth of the US tobacco output, is getting an exemption from a ban on cigarette flavoring like cinnamon and clove. 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 MO.
After hitting a one-year high of $79.59 in January, the stock spun-off Phillip Morris International (NYSE: PM) in March and hit a one-year low of $19.95 early this month. MO opened this morning at $21.57. So far today the stock has hit a low of $21.50 and a high of $21.94. As of 1:00, MO is trading at $21.85, up $0.27 (1.2%). The chart for MO looks bearish and steady, while S&P gives the stock its highest 4 Stars (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $20 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 19.0% return in just four and a half months as long as MO is above $20 at September expiration. Altria would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.
Altria Group (NYSE: MO) shares are trading higher after the company announced it is cutting promotional discounts and raising prices on cigarette brands starting today. This move was made to stem losses from lower cigarette volumes. 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 MO.
After hitting a one-year low of $19.47 in July, the stock hit a one-year high of $24.55 in January. MO opened this morning at $20.75. So far today the stock has hit a low of $20.50 and a high of $20.86. As of 12:40, MO is trading at $20.79, up $0.36 (1.7%). The chart for MO looks bearish but improving, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $19 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 26% return in just four and a half months as long as MO is above $19 at September expiration. Altria would have to fall by more than 8% before we would start to lose money.
MO hasn't been below $19 at all in the past year and has shown support around $20 recently. This trade could be risky if investors rotate out of historically defensive stocks, but even if that happens, this position could be protected by the support the stock might find around $20, where it bottomed out both this past week and back last fall. Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither controls bullish hedged positions in MO.
Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) reported a 64% drop in quarterly profit late Friday. At the company's annual meeting this past weekend, the legendary investor said that while a Berkshire unit has bought portfolios of subprime mortgages (and has frozen resets that were due to send interest rates on those loans higher) he warned investors that housing-market weakness isn't over yet and predicted more losses for banks. At the same time, Buffett said Sunday he will consider investing in the insurance business of U.K. banking giant Royal Bank of Scotland (NYSE: RBS) and is close to buying a medium-sized company in the country.
Hovnanian Enterprises Inc. (NYSE: HOV) estimated on Monday it would take $225 million to $275 million of land-related charges for the that fiscal second-quarter and said that home deliveries dropped 21% to 2,494 homes in the period. The company also turned cash-flow positive faster than it expected and tripled its full-year estimate of cash flow.
After being rejected by Continental Airlines Inc. (NYSE: CAL) last month, United Airlines parent UAL Corp. (NYSE: UAUA) is intensifying merger talks with US Airways Group Inc. (NYSE: LCC), according to The Wall Street Journal. A deal is said could emerge in as soon as 10 days. In light of rising fuel costs, the more than $1.5 billion in potential cost savings and revenue enhancements the companies see from joining forces is no doubt appealing more and more.
Shares of the nation's largest food and beverage maker, Kraft Foods Inc. (NYSE: KFT), have been surging in morning trading despite posting a decline for its first-quarter profit, as its earnings numbers were better than analysts had forecast.
For the quarter, Kraft Foods announced that its profit dropped 13% to $608 million, compared with $702 million a year earlier, dragged down by higher expenses for ingredients. The 2007 earnings results included a one-time interest benefit related to the spin-off from Altria Group Inc. (NYSE: MO). On an adjusted basis, the company posted quarterly earnings of 44 cents per share, slightly higher the 40 cents per share that analysts expected.
The food giant posted solid growth in its first-quarter revenue, which climbed to $10.37 billion, up from $8.59 billion reported in the same period a year ago. Analysts had forecast lower revenue of $9.77 billion in the quarter, according to Thomson Financial. The increase in revenue came as the company benefited from both the weak dollar and gains related to acquisitions.
I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.
I submit for approval the following investment angles for the balance of 2008 and possibly beyond:
Have I suggested investments in water holdings? Yes, I do believe that I have. I believe that going long in water stocks could be an investment hedge of the decade. I also suggest a look into the desalination technology from General Electric Co. (NYSE: GE).
I'd think it's a good idea to stick with the railroads, such as Burlington Northern Santa Fe (NYSE: BNI). I claim that, with all things given, for now, railroads can't fail. Conversely, I think it's a good time to back away slowly from trucking. I think misery lies ahead there.
EMC Corp. (NYSE: EMC) said its first-quarter profit dipped 14% on acquisition-related charges, but it posted a 17% revenue gain to $3.47 billion that beat Wall Street forecasts. Excluding items, EMC's profit was $477.3 million, or 23 cents per share. Also, VMware (NYSE: VMW) reported a 5% profit rise on faster-than-forecast sales growth. The company is mostly held by EMC. EMC shares are up about 5.5% in premarket trading. VMW shares are up 13.75% in premarket trading.
Philip Morris International Inc. (NYSE: PM), spun off last month by Altria Group Inc. (NYSE: MO) reported first-quarter earnings this morning, posting a 29% increase in profit to $1.87 billion, or 89 cents a share as new varieties of Marlboro cigarettes such as clove flavored ones as well as acquisitions spurred sales in Indonesia, Pakistan and Mexico. The weak dollar also helped boost the bottom line. Revenue climbed 18% to $15.6 billion. The results beat the 78 cents analysts were looking for. Altria reports quarterly results Thursday. While Altria now does all its business in the U.S. where smoking has been on the decline, cigarette companies tend to do well in a weak economy.
Last night we heard that eBay Inc. (NASDAQ: EBAY) is suing Craigslist for unfairly trying to dilute eBay's 28% stake in it by more than 10%. Craiglist today is firing back, saying the online auctioneer's actions are unethical and smelling of a hostile takeover.
JP Morgan downgraded Altria (NYSE:MO) from "overweight" to "neutral" according toBriefing.com. The news service also reports that Morgan Stanley downgraded SLM (NYSE:SLM) to "underweight" from "equal weight."
Lehman Bros. started coverage of NutriSystem (NASDAQ:NTRI) with an "underweight" rating, according to the AP.
Douglas A. McIntyre is an editor at 247wallst.com.
When I saw the news of NTT DoCoMo (NYSE: DCM)'s new mobile phone that emits fragrances, I began wondering what other oddities today's corporate powerhouses may be working on. No financial advice here, these are just some ideas I came up with:
Apple Inc (NASDAQ: AAPL) will unveil headgear that doubles as both headphones and a personal masseuse, giving tantalizing head, neck and shoulders massages.
In an attempt to help with falling click-through rates, Google Inc (NASDAQ: GOOG)'s new mobile phone will be offered free as long as you sign Google's activation agreement requiring you to click on a mobile ad every hour, even while you sleep.
Today's headlines could have read, "Rally on Financial Write-Downs, Go Figure!" Last night we saw a $3 billion preferred offering out of Lehman Brothers Holdings, Inc. (NYSE: LEH) that became a $4 billion offering. Shares were down on the news but after the dust settled the market decided this was a net-net good and shares rose almost 18% to $44.34. Even UBS AG (NYSE: UBS) rallied a sharp 14% to $33.01after it said it was going to take a $19 Billion additional writedown charge and its chairman left the company. Go figure.
The Institute for Supply Management said its index of national manufacturing activity rose to a reading of 48.6 in March, which is still a contraction but not as bad as estimates of about 47.5 from economists. There may be hope that the de-leveraging being seen by financial firms and tightened trading standards may be taking some steam out of the greatly inflated commodities. Crude oil fell $0.74 to $100.84/barrel, but briefly each barrel traded back under the $100 mark. Even gold dropped back below $900.00/ounce level after having seen north of $1,000.00 just last month. Below are the unofficial closing averages for US market index readings:
Before the bell: Wall Street set to rebound boosted by deals
Gather around the campfire and let me tell you such scary stories Jason's mask would fail to impress you after that.
This post is part of a series on some of the most memorable 
Before the bell: Futures mixed after break, ahead of data
Shares of the nation's largest food and beverage maker, 
I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, 
Philip Morris
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
Starbucks: The next McDonald's
