Saturday, November 5, 2011

[Barrons] MGM Stock Drops After Earnings; Unlucky or Unprofitable?

MGM International (MGM) slid 6% in midday trading after falling as much as 9.9% earlier in the day, following a mixed earnings report.

MGM lost 25 cents per share in the quarter on $2.23 billion in revenue. Analysts had been expecting a 14-cent loss on $2.22 billion in revenue. On an EBITDA basis, MGM reported $444 million versus expectations for $451 million. Revenue per available room on the Las Vegas strip rose 13%. the company sees total RevPAR rising 10% in the current quarter.

The company appears to have been relatively unlucky at the table games, one analyst noted.

“The miss vs. our estimate was primarily from Las Vegas, where EBITDA was $10M lower than we projected,” writes FBR Capital Markets analyst C. Patrick Scholes. “Management noted the overall table games hold percentage at its domestic resorts in 3Q was near the low-end of the normal range of 19-23%. However, they did not quantify the EBITDA difference between the 3Q result and what it would have been with a more normal hold percentage.”

Investors may be concerned about the company’s expansion plans in Macau, which could pressure margins going forward. MGM is building a new resort on the Cotai strip in Macau, which could open in 2014.

[Investor Place] Euro zone calamity is no match for this solid dividend investment

The Greeks are going to hold a referendum. Hold that, no they’re not. If this isn’t the closest thing to a madhouse, I don’t know what is.

Fortunately, the news from back home has been considerably more upbeat.? Thursday morning, the Labor Department reported that initial jobless claims dropped by 9,000 in the week ended Oct. 29 to 397,000. Any number below 400,000 suggests that more workers are being hired than laid off — a positive for overall economic growth.

I told you yesterday: “The year-end stock rally is still under way and will probably get back on track within a few days.”

With Thursday’s bounce above 12,000 for the Dow, that prognosis continues to unfold.

However, I caution you not to get carried away as share prices climb. Already, I’m picking up signs that the sky is definitely not the limit for this resurgence.

Corporate insiders are taking advantage of the market bounce to sell at a brisk pace. In the past week, officers and directors of America’s publicly traded businesses executed six sell transactions in their companies’ stock for every purchase. That compares with a normal ratio of between 2- and 3-to-1.

It will take several more weeks of heavy selling before the insiders flash a red light. By early to mid-December, though, if present trends remain in force, we could be looking at another significant market top.

Be careful with new stock purchases. Insist on real, tangible evidence of value, such as an abnormally low P/E ratio or an aberrantly high dividend yield.

One stock with a particularly tempting dividend right now is Clorox (NYSE:CLX). During the spring and summer, takeover speculation swirled around the maker of bleach, Glad bags and Brita water-filtration systems.

At one point, activist investor Carl Icahn actually proposed buying the company for $80 per share.

However, Icahn! has sin ce backed away, and the takeover groupies have exited the stock.? The resulting decline in the share price presents an opportunity for patient, long-term investors like me.

Clorox has many of the attributes I’m seeking.? It’s a collection of steady, recession-resistant businesses — and get a load of that dividend! At Thursday’s closing price, the stock paid 3.7%. For every dollar invested in CLX, you’ll collect about 80% more income than you would with a 10-year Treasury note.

What’s more, CLX has raised its dividend 34 years in a row, with the latest increase (last May) a healthy, inflation-beating 9%.

[Money Show] How to Spot and Trade Divergences 

By using momentum indicators to spot divergences, traders can uncover early signals about changing trends in any market.

Because trends are composed of a series of price swings, momentum plays a key role is assessing trend strength. As such, it is important to know when a trend is slowing down. Less momentum does not always lead to a reversal, but it does signal that something is changing, and that the trend may consolidate or reverse.

Price momentum refers to the direction and magnitude of price. Comparing price swings helps traders gain insight into price momentum. Here, we'll take a look at how to evaluate price momentum and show you what divergence in momentum can tell you about the direction of a trend.

Defining Price Momentum

The magnitude of price momentum is measured by the length of short-term price swings. The beginning and end of each swing is established by structural price pivots, which form swing highs and lows. Strong momentum is exhibited by a steep slope and a long price swing. Weak momentum is seen with a shallow slope and short price swing (see Figure 1 below).


Figure 1

For example, the length of the upswings in an uptrend can be measured. Longer upswings suggest that the uptrend is showing increased momentum, or getting stronger. Shorter upswings signify weakening momentum and trend strength. Equal-length upswings means the momentum remains the same.

Price swings are not always easy to evaluate with the naked eye; price can be choppy. Momentum indicators are commonly used to smooth out the price action and give a clearer picture. They allow the trader to compare the indicator swings to price swings, rather than having to compare price to price.

[The Street] Corporate Bond ETFs Over Treasury

Here at the FRED Report, we have had some really good forecasts the past two years, and a few that have been correct but not in a timely manner. One market that has been challenging for us this year is Treasury bonds, but things may finally be starting to go our way.

Our forecast has been for TLT to peak (and at lower levels, 100 - 105), and for LQD to outperform. We have held to this view through the market turbulence in the summer, and our reasoning has been that as fear comes out of the markets, Treasuries would fall (and rates rise).

Corporate bonds have looked much better to us as an investment, and we note that the performance of LQD has started to kick in. You can see that LQD is starting what could be a significant breakout to the upside.


Our latest recommendation is to switch HYG to PHB. We show daily charts of these, and note that PHB is much more stable, although HYG is more liquid in terms of daily volume. Both came neatly off of the bottom in early October. As you can see from the charts, HYG has been more volatile, but PHB is performing a bit better on a relative basis. This switch should dampen volatility in bond portfolios. In addition, as fear leaves the markets -- these high yield markets should trade more like bonds and less like stocks. Such an environment should benefit PHB as well.

[Barrons] Bank of America Exploring Issuing Common Stock

Bank of America (BAC) said in a regulatory filing that it is exploring the idea of issuing common stock that it would exchange for preferred shares and trust preferred capital debt securities in private transactions. BAC shares fell 1.7% after hours.

The announcement is on page 10 of the the company’s 10-Q that it just released.

The uncertainty in the market evidenced by, among other things, volatility in credit spread movements, makes it economically advantageous at this time to consider retirement of issued junior subordinated debt and preferred stock. As a result of these matters, we intend to explore the issuance of common stock and senior notes in exchange for shares of preferred stock and, subject to any required amendments to the applicable governing documents, certain trust preferred capital debt securities (Trust Securities) issued by unconsolidated trust companies, in privately negotiated transactions. If we pursue the exchange of Trust Securities, we would immediately use the purchased Trust Securities to retire a corresponding amount of our junior subordinated debt that we previously issued to the unconsolidated trust companies. These transactions would increase Tier 1 common capital and, on an after-tax basis, reduce the combined level of interest expense and dividends paid on the combined junior subordinated debt and preferred stock. The senior notes and common stock would be recorded at fair value at issuance, which is expected to be less than the par and carrying value of the preferred stock and/or junior subordinated debt, which would result in theexchanges being accretive to earnings per common share for the period in which completed.The ultimate impact on earnings per common share is not expected to be significant for periods subsequent to the exchange and will not be known until the level of earnings per common share for the period and the exact combination of exchanged preferred stock and Trust Sec! urities are known.We will not issue more than 400 million shares of common stockor $3 billion in new senior notes in connection with these exchanges.”

[The Street] Andy Rooney of '60 Minutes' Dies

By David Bauder

NEW YORK -- Andy Rooney so dreaded the day he had to end his signature "60 Minutes" commentaries about life's large and small absurdities that he kept going until he was 92 years old.

Even then, he said he wasn't retiring. Writers never retire. But his life after the end of "A Few Minutes With Andy Rooney" was short: He died Friday night, according to CBS(CBS), only a month after delivering his 1,097th and final televised commentary.

Rooney had gone to the hospital for an undisclosed surgery, but major complications developed and he never recovered.

"Andy always said he wanted to work until the day he died, and he managed to do it, save the last few weeks in the hospital," said his "60 Minutes" colleague, correspondent Steve Kroft.

Rooney talked on "60 Minutes" about what was in the news, and his opinions occasionally got him in trouble. But he was just as likely to discuss the old clothes in his closet, why air travel had become unpleasant and why banks needed to have important-sounding names.

Rooney won one of his four Emmy Awards for a piece on whether there was a real Mrs. Smith who made Mrs. Smith's Pies. As it turned out, there was no Mrs. Smith.

"I obviously have a knack for getting on paper what a lot of people have thought and didn't realize they thought," Rooney once said. "And they say, 'Hey, yeah!' And they like that."

Looking for something new to punctuate its weekly broadcast, "60 Minutes" aired its first Rooney commentary on July 2, 1978. He complained about people who keep track of how many people die in car accidents on holiday weekends. In fact, he said, the Fourth of July is "one of the safest weekends of the year to be going someplace."

More than three decades later, he was railing about how unpleasant air travel had become. "Let's make a statement to the airlines just to get their attention," he said. "We'll! pick a week next year and we'll all agree not to go anywhere for seven days."

In early 2009, as he was about to turn 90, Rooney looked ahead to President Barack Obama's upcoming inauguration with a look at past inaugurations. He told viewers that Calvin Coolidge's 1925 swearing-in was the first to be broadcast on radio, adding, "That may have been the most interesting thing Coolidge ever did."

"Words cannot adequately express Andy's contribution to the world of journalism and the impact he made -- as a colleague and a friend -- upon everybody at CBS," said Leslie Moonves, CBS Corp. president and CEO.

Jeff Fager, CBS News chairman and "60 Minutes" executive producer, said "it's hard to imagine not having Andy around. He loved his life and he lived it on his own terms. We will miss him very much."

For his final essay, Rooney said that he'd live a life luckier than most.

"I wish I could do this forever. I can't, though," he said.

He said he probably hadn't said anything on "60 Minutes" that most of his viewers didn't already know or hadn't thought. "That's what a writer does," he said. "A writer's job is to tell the truth."

True to his occasional crotchety nature, though, he complained about being famous or bothered by fans. His last wish from fans: If you see him in a restaurant, just let him eat his dinner.

Rooney was a freelance writer in 1949 when he encountered CBS radio star Arthur Godfrey in an elevator and -- with the bluntness millions of people learned about later -- told him his show could use better writing. Godfrey hired him and by 1953, when he moved to TV, Rooney was his only writer.

He wrote for CBS' Garry Moore during the early 1960s before settling into a partnership with Harry Reasoner at CBS News. Given a challenge to write on any topic, he wrote "An Essay on Doors" in 1964, and continued with contemplations on bridges, chairs and women.

"The best work ! I ever d id," Rooney said. "But nobody knows I can do it or ever did it. Nobody knows that I'm a writer and producer. They think I'm this guy on television."

He became such a part of the culture that comic Joe Piscopo satirized Rooney's squeaky voice with the refrain, "Did you ever ..." Rooney never started any of his essays that way. For many years, "60 Minutes" improbably was the most popular program on television and a dose of Rooney was what people came to expect for a knowing smile on the night before they had to go back to work.

Rooney left CBS in 1970 when it refused to air his angry essay about the Vietnam War. He went on TV for the first time, reading the essay on PBS and winning a Writers Guild of America award for it.

He returned to CBS three years later as a writer and producer of specials. Notable among them was the 1975 "Mr. Rooney Goes to Washington," whose lighthearted but serious look at government won him a Peabody Award for excellence in broadcasting.

His words sometimes landed Rooney in hot water. CBS suspended him for three months in 1990 for making racist remarks in an interview, which he denied. Rooney, who was arrested in Florida while in the Army in the 1940s for refusing to leave a seat among blacks on a bus, was hurt deeply by the charge of racism.

Gay rights groups were mad, during the AIDS epidemic, when Rooney mentioned homosexual unions in saying "many of the ills which kill us are self-induced." Indians protested when Rooney suggested Native Americans who made money from casinos weren't doing enough to help their own people.

The Associated Press learned the danger of getting on Rooney's cranky side. In 1996, APTelevision Writer Frazier Moore wrote a column suggesting it was time for Rooney to leave the broadcast. On Rooney's next "60 Minutes" appearance, he invited those who disagreed to make their opinions known. The AP switchboard was flooded by some 7,000 phone calls and countless postcards were sent to the AP! mai l room.

"Your piece made me mad," Rooney told Moore two years later. "One of my major shortcomings -- I'm vindictive. I don't know why that is. Even in petty things in my life I tend to strike back. It's a lot more pleasurable a sensation than feeling threatened.

"He was one of television's few voices to strongly oppose the war in Iraq after the George W. Bush administration launched it in 2002. After the fall of Baghdad in April 2003, he said he was chastened by its quick fall but didn't regret his "60 Minutes" commentaries.

"I'm in a position of feeling secure enough so that I can say what I think is right and if so many people think it's wrong that I get fired, well, I've got enough to eat," Rooney said at the time.

Andrew Aitken Rooney was born on Jan. 14, 1919, in Albany, N.Y., and worked as a copy boy on the Albany Knickerbocker News while in high school. College at Colgate University was cut short by World War II, when Rooney worked for Stars and Stripes.

With another former Stars and Stripes staffer, Oram C. Hutton, Rooney wrote four books about the war. They included the 1947 book, Their Conqueror's Peace: A Report to the American Stockholders, documenting offenses against the Germans by occupying forces.

Rooney and his wife, Marguerite, were married for 62 years before she died of heart failure in 2004. They had four children and lived in New York, with homes in Norwalk, Conn., and upstate New York. Daughter Emily Rooney is a former executive producer of ABC's "World News Tonight." Brian was a longtime ABC News correspondent, Ellen is a photographer and Martha Fishel is chief of the public service division of the U.S. National Library of Medicine.

Services will be private, and it's anticipated CBS News will hold a public memorial later, Brian Rooney said Saturday.






Friday, November 4, 2011


[Investor Place] These companies dug into their past to try to find success

If at first you don��t succeed … well, try doing what made you a success in the first place. “Bringin’ it Back” appears be the motto of an increasing number of companies — given the state of the economy, that��s not a surprise.

But going back to one��s roots is not easy and is no guarantee of success. Walt Disney��s (NYSE:DIS) ABC network just canceled ��Charlie��s Angels,” which was one of the most iconic TV series of the 1970s — and should have been left there. And Sears Holdings‘ (NASDAQ:SHLD) Kmart brought back “blue-light specials” in 2009 after an 18-year absence, and that hasn’t done much to turn things around — while same-store sales rose 0.7% in 2010, Kmart��s same-store sales fell 1.7% in the first quarter and were flat in Q2.

Still, it’s difficult to ignore the temptation to retry something that worked before. MySpace’s new owners are trying to rekindle the once-explosive social network’s success, and heck, someone is even trying to bring back the DeLorean — a success as a pop culture icon thanks to “Back to the Future” but a business failure.

These five companies couldn’t resist and have either succeeded or are waiting for the payoff as they try to “bring it back”:


The Wendy��s (NYSE:WEN) hamburger chain has struggled in the years since the 2002 death of founder Dave Thomas, who became a celebrity from his time as the company��s TV pitchman. When billionaire Nelson Peltz acquired the chain in 2008, Wendy’s stock had shed almost three-fourths of its 2012 value, and it dropped another 25% from that point through this year. To help revitalize the company, Wendy’s is invoking the name of its late founder.

Last month, Wendy’s rolled out its new burger, dubbed “Dave’s Hot and Juicy.R! 21; And while the burger’s moniker is a throwback to a much better time, the sandwich is a complete revamping of a decades-old recipe. Wendy��s sweated every detail of the burger, which features a bigger patty, buttered bun and extra cheese. USA TODAY even pointed out that the company consulted a ��pickle chemist.�� Whether the new burger will help boost Wendy��s bottom line is not clear.



Back in the administration of George W. Bush, only the cool kids had a Motorola (NYSE:MMI) RAZR flip-phone. Millions of them were sold from 2004-07. Then, the RAZR faded into oblivion after Apple (NASDAQ:AAPL) introduced the iPhone in 2007, and Motorola eventually replaced it with its own smartphone, the Droid, in 2009.

This month, Motorola announced it would be bringing back the RAZR name and pairing it with the aforementioned Droid. The pairing of old and new will use Google��s (NASDAQ:GOOG) Android operating system and boast 1 GB of RAM and 16 GB of storage — and it will be made out of the takes-a-licking synthetic fiber Kevlar. So far, the verdict from experts is cautiously optimistic. Wired magazine noted, ��With the solid performance, suite of accessories and fantastic industrial design, it’s only the somewhat unattractive interface that lets the Motorola Razr down.��


Casual clothing chain Gap Inc. (NYSE:GAP)’s namesake Gap stores have fallen on hard times.?North American same-store sales?are dropping this year and have fallen at least 5% in six of the last seven years. Gap has made numerous attempts to jolt the company back to life, including a logo change that lasted a week and, most recently, a clever but otherwise ineffective advertising campaign.

This month, Gap announced a two-pronged approach! to find ing its footing. The company will close 200 North American stores while opening 30 stores in China by next year. And the Gap also will go back to its roots — “high-quality jeans and casual clothes with an American aesthetic,” according to a Reuters report. The Gap hopes to build positive momentum behind its popular 1969 brand of jeans, bring back more bold colors and even simplify floor sets.


The German automaker played the nostalgia game once, and now it’s doing it again — with a twist. In 1998, Volkswagen (PINK:VLKAY) introduced the ��New Beetle,” whose design was inspired by the company��s best-selling ��Bug�� that was available in the U.S. from 1949 to 1979. The company sold 50,000, 80,000 and 80,000 more units in its first three years. However, the company’s annual number dwindled to less than 15,000 by 2009, and the Beetle was discontinued in 2010.

The 2012 Beetle will be the “new” New Beetle. Volkswagen promoted the vehicle in Super Bowl commercials and gave them away to members of the audience of the ��Oprah Winfrey Show.�� According to Auto Week, the Beetle is expected to sell 50,000 to 60,000 units in the U.S. annually. Some analysts expect the company to topple Toyota (NYSE:TM) as the world’s largest automaker

News Corp.

After News Corp.��s (NASDAQ:NWS) Fox network canceled ��Family Guy��in 2002, the show developed a cult following. Reruns featuring the foul-mouthed Griffin family saw 1.9 million viewers, easily besting the rest of the programming on Cartoon Network’s late-night Adult Swim block of shows. And the first DVD volume of shows sold 1.6 million copies in 2003, making it the top TV DVD of the year, and the second volume sold another million copies.

Viewer love for “Family Guy” was so pronounced that Fox brought the show back after an unprecede! nted thr ee-year hiatus. The show even poked fun of Fox, rattling off the 29 shows that had aired and been canceled during the interim. Since then, ��Family Guy�� has led or been among Fox’s top-rated shows.

As of this writing, Jonathan Berr does not own any shares of the aforementioned stocks. Follow him on Twitter at @Jdberr.

[The Street] Oil and Drug Splits - Deals to Watch

Abbott Laboratories (ABT) said Wednesday it will split itself into separate into two publicly traded companies; one focusing on medical products and the other on pharmaceuticals research and development. Abbott said that its medical products division will continue under its heritage name founded in 1888, and the research division will form a new publicly traded stock, not yet named. To make the split, current Abbott shareholders will be given stock in the new publicly traded company when it files an initial public offering.

Shares rose over 4.5% in early trading to $54.85. The company's stock has risen more than 10% this year outperforming the S&P 500. It also increased its quarterly dividend from 44 cents a share to 48 cents in April. In its announcement of the split, Abbot said that the dividend of the combined companies will match current levels and that the decision to spin its drug R&D division won't affect earnings-per-share.

"Today's news is a significant event for Abbott, and reflects another dynamic change in our company's 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns," said Miles D. White, chief executive of Abbott in a statement announcing the deal.

Abbott expects the deal to close at the end of 2012 and said in its statement that the board of directors has not yet approved the split, which is also pending approval from the IRS for its tax free nature. Abbott also expects one-time charges while the split is completed, to be quantified later. It did not yet announce any financial advisors.

In its most recent quarter ended in September, Abbott announced that earnings and operating income had fallen by more than 50% from levels in the period a year earlier. The company's net income was $4.6 billion in 2010, below $5.7 billion earned a year earlier, but revenue grew to a record $35.1 billion. In 2010, Abb! ott boug ht European pharmaceutical and vaccines giant Solvay for roughly $6.6 billion in a push to expand its reach into Eastern Europe and Asia.

The split will divide Abbott's $35 billion in annual revenue almost equally among the two publicly firms. Currently, the diversified medical products company has approximately $22 billion and the research-oriented pharmaceutical company has nearly $18 billion in annual revenue, the company said in its press statement.

Currently Abbott employs nearly 90,000 people and markets its products in more than 130 countries. Its history traces back to Wallace Abbott, who in the 19th century founded the giant that first generated sales from a Chicago drug store and the development 'dosimetric granules.' It invented Chlorazene, which was used to clean the wounds of U.S. soldiers in World War 1, according to the company's website.

According to the split announcement, the diversified medical products company will consist of Abbott's branded generic pharmaceuticals, devices, diagnostic and nutritional businesses -and will retain its name. After the split, Abbott will continue to target double-digit earnings-per-share growth and a push into emerging markets. Currently, the division gets more than 40% of sales in emerging markets and is the leading pharmaceutical company in India.

The research-oriented pharmaceutical company will includes Abbott's current portfolio of drugs including Humira, Lupron, Synagis, Kaletra, Creon and Synthroid - and has $18 billion in annual revenue. In its pipeline, the company said it is in phase 2 or 3 development of compounds for as immunology, chronic kidney disease, Hepatitis C, women's health, oncology, Multiple Sclerosis -- and Parkinson's and Alzheimer's diseases. Anti-inflammatory arthritic injection Humira is currently the division's top-selling drug with $6.5 billion in annual sales.

Current chief executive White will stay on to run the diversifi! ed medic al products company, while Richard A. Gonzalez and executive of the pharmaceuticals division will become chief executive of the new publicly traded pharmaceutical company

Late Tuesday, Williams (WMP) said it will scrap its plans to IPO its WPX Energy division, creating two separate publicly traded companies in a tax free spinoff. The energy pipeline and exploration company now expects to split itself into separate publicly traded pipeline and exploration & production companies.

It had expected to sell 20% of WPX Energy in an IPO that would raise roughly $750 million.

Shares in Williams rose nearly 2% to $29.63 a share in early trading, the company is up nearly 20% year to date.

The change of strategy, announced in April, was a result of volatile stock markets and a tough market for selling new shares. Williams Chief Executive Alan Armstrong said, "The continued instability and weakness in equity markets, especially for new issuances, makes the IPO of WPX Energy appear unattractive in the near term."

The announcement makes William's split more defined than the previous WPX Energy IPO. With the spinoff Williams shareholders will retain their ownership of its North American midstream and natural gas pipeline business; and will be given common stock in WPX Energy, the exploration and production company with a focus in oil shale and gas explorations in the Bakken and Marcellus shale's. The new E&P company will trade on the New York Stock Exchange under the ticker WPX.

At the Value Investing Congress on Tuesday, Adam Weiss of Scout Capital Management said that Williams should split into separate pipeline and exploration companies. He said in a split, the two companies could be worth as much as $47.50 a share. Weiss highlighted that pipeline investors like stability, while exploration investors like capital intensive projects to build oil and gas reserves - making shareh! olders d esires in a combined company 'asymmetric.'

In 2010, Williams and Williams Pipeline Partners (WPZ) announced a restructuring valued at $12 billion where the Tulsa, Oklahoma company would contribute pieces of its pipeline, midstream and interests in Williams Pipeline Partners to Williams Partners - creating a master limited partnership. It was a change in strategy pursued by newly elected chief executive Armstrong, who replaced Steve Malcolm. Under Armstrong, Williams has raised its dividend 85%. In 2010, on the restructuring, Williams reported its first annual loss since 2003.

Both splits are a tack in strategy to make the company smaller and more manageable. This year Williams bid for pipeline company Southern Union (SUG) but lost to a $5.7 billion July bid by Energy Transfer Partners (ETP).

In its announcement of the split Williams said that Ralph Hill will become chief executive of the new exploration and production company, and that the split companies should retain their investment grade credit ratings.

Barclays Capital (BCS) and Citigroup (C) and JPMorgan (JPM) acted as financial advisors on the spin plan.

[The Street] Cramer - Sovereign Crisis Impact Overblown?

Some things never get old, or discounted for that matter. That's how I am feeling about the sovereign debt crisis.

You put it past you for a couple of days and a lot of money is made. Not a little, but a lot. And then it comes back and bites you again because it can't be solved easily. The fact is, though, we are beginning to recognize that it will be solved, it just won't be solved well and in a way that is satisfying to anybody.

In other words, get used to it, it will play out, it will hurt people BUT IT MIGHT NOT HURT AS MANY STOCKS AS YOU THINK.

I am taking this posture because I like to see how players react to the same stimuli over and over. In other words, whenever the futures are down off of Europe, do the same people who missed the big rally hold their hands up, point fingers and say "I told you so?"

That's been the pattern every time. And then, after a couple of days, we make some pretty darned good moves, UP, not just down. As I looked over the charts this weekend I was struck by how many of them have been soaring, just doing fabulously. I am talking about major moves in anything with a yield as well as, last week, anything tech. I am talking about rallies in stocks like Colgate(CP), Perrigo(PRGO), Bed Bath & Beyond(BBBY), Nike(NKE), McDonald's(MCD), Costco(COST), The Hershey Company(HSY), Amazon(AMZN), Kimberly Clark(KMB), Procter Gamble(PG) and Coca-Cola(KO), just to name a few. These are rallies that cannot be cynically dismissed by people who say "I told you so."

All I can tell you is I wish I owned all of them for my trust because it would be hard NOT t! o be hav ing a good year. Some have just rallied back to the lines of resistance, like the cyclicals, the transports. Others, like the utilities, have acted like junior growth stocks, the moves have been so terrific. Put simply, there is enough there that is working to call into question those who are saying "here we are again, be prepared to lose it all back," because that would require some horrendous selling, not just the futures down as much as they have been on any given day, like Monday.

Last Monday I said you could short and short all strength, and then Tim Geithner told us that there will be no more Lehmans. The press reports would have you believe he was booed from the stage and Lehman here we come. I think, though, you have to think of all these pieces as one puzzle: an intractable problem that is being worked out sloppily and terribly while many stocks work their way higher right through it because we are NOT going to have a Lehman moment where gobs and gobs of capital will be destroyed.

That's what you have to focus on today. That's what you have to focus on when the futures take out whatever key levels that technicians are thinking about. Although I bet that almost no one will.

At the time of publication, Cramer was long KO.

[iStockAnalyst] Wall Street To Open Higher After Durables Data; Hot Stocks - FDO, JBL, ACTS, MKC, AMZN

U.S. stock futures pointed to a higher open on Wednesday as Finland's parliament approved changes to the euro-zone bailout fund and as investors awaited data on durable-goods orders.

On the economic front, data on U.S. new orders for manufactured goods in August decreased $0.2 billion, or 0.1 percent, to $201.8 billion as demand fell for primary metals, motor vehicles and large defense products excluding aircraft, the U.S. Census Bureau said Wednesday. This decrease, down two of the last three months, followed a 4.1 percent July increase. Excluding transportation, new orders decreased 0.1 percent. Excluding defense, new orders decreased 0.1 percent.

Ahead of the opening bell, Dow industrial average futures were trading higher by 0.49 percent, or 54 points, to 11,174. Nasdaq 100 futures were up 0.41 percent, or 9.25 points, to 2,263. Standard & Poor's 500 futures were trading higher by 0.45 percent, or 5.25 points, to 1,174.75.

Hot Stocks of the Day: FDO, JBL, ACTS, MKC, AMZN

Family Dollar Stores Inc. (NYSE: FDO) on Wednesday reported fourth quarter FY 2011 sales of $2.13 billion, up 9.1 percent, from $1.95 billion in the fourth quarter FY 2010. Net income per diluted share in the fourth quarter FY 2011 increased 17.9 percent to $0.66 per share compared with $0.56 per diluted share in the fourth quarter FY 2010. Net income for the quarter was $79.8 million, up 8 percent, from $74 million in the comparable quarter last year. FDO was trading higher by 1.40 percent to $54.94 in pre-market trading today.

Jabil Circuit Inc. (NYSE: JBL) on Tuesday after the closing bell reported fourth quarter FY 2011 financial results. The company reported net revenue of $4.3 billion for the quarter, up from $3.9 billion in the same quarter last fiscal year. Net income for the quarter was $136.3 million, or $0.62 per share, compared with $112.1 million, or $0.52 per share, in the fourth quarter FY 2010. JBL is trading higher by 9.32 percent! to $19 in pre-market trading on Wednesday.

Shares of Action Semiconductor Co. Ltd. (Nasdaq: ACTS) could see some heavy trading Wednesday after the company raised its third quarter FY 2011 revenue forecast late Tuesday. The company now expects to report revenue of $15 million to $15.5 million, up from a prior outlook of $12 million to $13 million. ACTS last traded at $1.95, up 7.14 percent, on Tuesday.

McCormick & Co. Inc.

(NYSE: MKC) today reported third quarter FY 2011 sales of $920 million, up 16 percent, compared with $794 million in the third quarter FY 2010. Net income for the quarter was $92 million, or $0.69 per share, compared with $102.4 million, or $0.76 per share, in the same quarter last year. The reported earnings beat Wall Street's estimate of $0.64 per share. MKC last traded at $47.69, up $0.19 percent on Tuesday. Inc. (Nasdaq: AMZN) is expected to unveil its first tablet on Wednesday. The company scheduled an event in New York City for Wednesday morning. However, it did not give any further details about the event. Analysts believe that it will launch its tablet today. AMZN was trading higher by 1.20 percent to $226.89 in pre-market trading today.

Global Markets: FTSE, CAC40, DAX, Nikkei 225, Straits Times, Hang Seng, Shanghai Composite Index, BSE 30

Asian markets closed mostly lower today. Singapore's Straits Times closed lower by 0.91 percent, or 24.74 points, to 2,701.17; China's Shanghai Composite closed down 0.95 percent, or 22.99 points, to 2,392.06; India's BSE 30 closed with losses of 0.47 percent, or 78.01 points, to 16,446.02; and Hong Kong's Hang Seng closed lower by 0.66 percent, or 119.49 points, to 18,130.55. Japan's Nikkei 225 was the lone gainer with gains of 0.07 percent, or 5.70 points, to 8,615.65.

European indexes were trading mixed mid-day Wednesday. Britain's FTSE 100 was trading lower by 0.25 percent, or 13.41 points, to 5,280.64. Germany's DAX was trading ! up 0.56 percent, or 31.35 points, to 5,659.79. France's CAC40 was trading lower by 0.20 points, or 5.95 points, to 3,017.43.

Oil slips below $84 mark ahead of US economic data

Ahead of the opening bell, crude oil was trading lower by 0.90 points, or 1.07 percent, to $83.55 per barrel. Gold stood at 1,654.70, up 4.10 points, or 0.25 percent on Wednesday.

In the currency market, the euro was trading higher by 0.52 percent to 1.3659 against the U.S. dollar. The dollar was trading lower at ��76.3850, down 0.45 percent against the Japanese yen. The British pound is trading higher by 0.20 percent to $1.5662 against the dollar on Wednesday.

On Tuesday, Wall Street closed sharply higher. The Dow Jones industrial average closed with gains of 1.33 percent, or 146.83 points, to settle at 11,190.69. The Nasdaq ended higher by 1.20 percent, or 30.14 points, to 2,546.83. Standard & Poor's 500 ended higher by 1.07 percent, or 12.43 points, to 1,175.38.


[WallstCheatSheet] Private Sector Added 91,000 Jobs in September

Private sector job growth continued at a steady pace in September, led by the service-producing sector and small businesses, according to an Automatic Data Processing (NASDAQ:ADP) report released Wednesday.

According to this morning’s report, payrolls increased by 91,000 in September, compared to 89,000 in August after a slight downward revision to the initial 91,000 reported for August. September’s figure beat economists’ expectations by roughly 16,000.

��The recent trend in private employment…remains moderate, and probably is below a pace consistent with a stable unemployment rate,�� said Joel Prakken, chairman of Macroeconomic Advisers. ��Moderate growth in employment is consistent with the recent deceleration of GDP.��

Small-business employment rose 60,000 in September, while medium businesses added 36,000 jobs and large businesses eliminated 5,000. The service-producing sector added 90,000 net jobs, while goods-producing employment only rose by 1,000.

The ADP’s monthly report on private-sector payrolls provides some guidance on the U.S. Labor Department’s job estimate, which will be released on Friday, and includes information on both private- and public-sector payrolls. State and local governments have been consistently cutting jobs since the financial crisis.

Friday’s Labor Department employment report is expected to show moderate growth, just enough to keep the unemployment rate steady at 9.1%, which would nonetheless be an improvement upon employment in August, when the economy added zero net jobs.

[iStockAnalyst] Tenneco Retains Buy Rating At Deutsche Bank

Analysts at Deutsche Bank maintained Buy rating on the shares of Tenneco Automotive Inc. (NYSE: TEN) with a price target of $44, as they believe that the latter's fiscal 2011 third quarter operating results were weaker than expected.

In its FY2011 Q3, Tenneco reported a significant increase in net income to $30 million, or $0.49 per diluted share, versus $10 million, or $0.17 per diluted share, in third quarter 2010. On an adjusted basis, net income also increased to $42 million, or $0.67 per diluted share, versus $24 million, or $0.39 per diluted share, a year ago. Its EPS was in-line with DB analysts estimate of $0.67 and better than Wall Street consensus of $0.66. DB analysts state that the Q3 results would have been weaker than expected excluding a $0.11 per share benefit for lower stock related competition. The company's revenue of $1.77 billion was slightly below DB analysts' estimate of $1.7 billion despite higher substrate revenue. They state that most of the downside was driven by lower incremental margins. The Q3 incremental operating margin was 11.9 percent was lower than analysts' estimate of 15.5 percent. DB analysts state that they had been expecting incremental margins in the 15 percent-16 percent range FY2010 second half, due to improved European and Asian results. The European and Asian EBIT margins did in fact improve sequentially, with each region posting double digit year-on-year incremental margins. Unfortunately, North American margins weakened due to manufacturing inefficiencies and higher material costs. The company estimates that these costs were a $10 million or $0.10 of EPS, headwind in Q3. Management expects these headwinds to moderate in Q4, but they are nonetheless likely to be drag on results for a few quarters. DB analysts' believe that investors now largely appreciate Tenneco's revenue growth opportunity; the company's ability to convert this revenue growth to the bottom line remains the key impediment to achieving higher valuation but unfortun! ately, i t appears that investors will have to continue to wait for evidence of the company's ability to achieve mid-teens incremental margins. DB analysts reduce TEN's FY2011 and FY2012 EPS estimates to $2.63 and $3.80, from $2.82 and $3.90, respectively. They reduce EBITDA to $610 million and $712 million for FY2011 and FY2012 to $633 million and $730 million, respectively.

On a year-to-date basis, Tenneco's share performance was -17.88 percent, and as compared to Standard & Poor's, it has an YTD share performance of -16.60 percent.

Tenneco engages in the design, manufacture, and sale of emission control and ride control products and systems for commercial and specialty vehicle applications. It has a market capitalization of $2.04 billion with a P/E ratio of 16.020. It has more than 60 million outstanding shares.

Shares of Tenneco were up 1.68 percent or $0.56 to trade at $33.85.



[Seeking Alpha] Abbott Pharma Has A Right To Be Worried

So Abbott (ABT) is spinning off the pharma business into a separate company - did anyone see that coming? (I take a day away from the computer, attending a meeting, and this happens). Let's look at this plan and try to figure it out.

First off, this is obviously a reaction to worries about prospects for the pharma side of Abbott's business. The medical devices side is doing fine; it's not like the high-flying pharma organization is trying to toss out a sandbag or something. A lot of that worry is probably centered around the long-term prospects for Humira, which is operating in an increasingly crowded space and accounts for a rather large share of revenues all by itself.

So in that sense, this is a move peculiar to Abbott. But the thinking behind it is common to all the large drug companies, as this Wall Street Journal story details. It's just that various companies are running off in various directions in response. You have some saying "Gosh, we've just got to get back to our core business and do pharma better", while others say "Gosh, we've got to diversify - let's get some consumer products in here, some medical devices, animal health, anything less crazy than drug discovery". And even allowing for the fact that these companies are starting off from different places, with different levels of difficulty, it seems clear that no one really has a strategy that's convincing enough even to themselves. Something Has to Be Done, so everyone's doing Something, and hoping for the best.

But in this case, you have to worry that the (so far unnamed) drug company that Abbott's spinning off will have its work cut out for it. The new company will be getting, what, three quarters of its revenue from Humira? That's a rough situation for any company with any drug, much less a drug that's heading into white water. And how much of the rest of the revenues are from TriCor and Niaspan, both of which face patent expirations? ! I know t hat they have things in the clinic, sure, but it's hard to see how this new company doesn't shed jobs at some point. I had a series of worried e-mails waiting for me last night from Abbott pharma people, and I think that they're right to be worried. I'd be very glad to hear counterarguments, let me tell you.

No, when you look at it, the company seems to have decided that amputation is just the cure that they needed. The fact that the Abbott name is staying with the medical devices company is all you need to know.

Plenty of indicators suggest the metal has seen its peak

World stock markets are down on renewed worries of a Greek default. Adding fuel to the fire, President Barack Obama��s proposal to levy a new tax on millionaires — dubbed the ��Buffett Rule�� after it was suggested by billionaire superinvestor Warren Buffett — has drawn a sharp rebuke from Congressional Republicans and threatens to unleash more political instability on a crisis-weary public. And U.S. homebuilders, citing the effects of never-ending foreclosures, are even more despondent than feared, according to the latest edition of the National Association of Home Builders/Wells Fargo Housing Market Index, which was released on Monday.

With the finance world appearing to teeter on the edge of disaster, one might expect that standby crisis hedge — gold — to rise.

Yet a funny thing happened. The price of gold actually fell sharply.

The spot price of gold has continued to drift lower after surging to new, all-time highs above $1,900. As this article is being written, the price has fallen to $1,778 and appears to have lost all momentum.

Gold��s recent weakness comes even as competing crisis hedges have lost their luster. The Swiss National Bank took a sledgehammer to the Swiss franc two weeks ago, pledging to lower its value against the euro. The tactic worked, sending the franc down nearly 10%. U.S. Treasuries — considered by many to be the ultimate safe haven for their liquidity — now yield far too little to be attractive for most investors. The 10-year T-Note yields a miniscule 1.95%.

Gold��s recent action should be deeply disturbing to gold bugs or to anyone using gold as a refuge from the market��s volatility.

While I hesitate to definitely say the gold bubble has burst (the market gods tend to punish those who would be so vain), it is becoming increasingly likely that this is the case. You can never say with certainty until after the fact, but the anecdotal evide! nce sugg ests the peak — if we haven��t seen it already — is near. Let��s take a look at a few indications that that��s the case:

  1. ?European central banks are buying gold again. The Financial Times reported on Monday morning that European central banks have become net buyers of gold again for the first time in more than two decades. These bankers buying gold near its all-time highs above $1,900 were the same people who couldn��t get rid of their gold fast enough when it was trading below $300 per ounce. This shocks even me. While I��m not surprised to see emerging-market central banks go down this route — Mexico, South Korea and Thailand have all been big buyers this year — even a cynic like myself expected the Europeans to have learned their lessons. In any event, given central bankers�� record of dismal timing, investors should use this as a contrarian indicator to bet the other way.
  2. Gold appears to be overvalued relative to other precious metals. The price of platinum will generally trade at a significant premium to that of gold; as recently as five years ago, the platinum price was nearly double the gold price. This makes sense, as platinum is far rarer and has far more industrial uses in addition to its role as jewelry. Yet today, gold is more expensive than platinum. Why? Because platinum is not being aggressively hoarded by speculators and by investors searching desperately for a safe haven. Gold��s traditional use as jewelry has been in steep decline for years, even while record amounts of it are being salted away in bank vaults for ��investment purposes.�� This doesn��t mean that the price will fall tomorrow, but it should raise questions about the durability of a bull market in gold.
  3. The smart money has started to lose interest. George Soros made quite a splash earlier this year when he exited his rather large position in gold.?While no one should mindlessly ape the trading moves of another inve! stor  212; even one as talented as Soros — it still can pay to take note of what the all-time greats are doing. If Soros no longer sees value in gold, it is fair to ask: Why should we?
  4. It��s all about The Donald. I include this one more for comic appeal than anything else. Donald Trump made headlines last week by accepting $176,000 in gold bullion as a security deposit from a new tenant. In his comments to The Wall Street Journal, Trump said, ��It��s a sad day when a large property owner starts accepting gold instead of the dollar. �� If I do this, other people are going to start doing it, and maybe we’ll see some changes.��

While Mr. Trump has made billions as a property developer, he also has a habit of putting his foot in his rather large mouth. It would only be appropriate if this blustery political rant marked the top of the bubble. Add Trump��s little publicity stunt to the ��bear�� column for gold.

The gold bubble appears to have sprung a small leak. It could still be patched, of course, and we could see the bubble expand a little more before it pops. But given gold��s recent lackluster performance in the face of continued crisis, I wouldn��t bet on it. Once the bubble begins to deflate in earnest, the gold bugs are not likely to fare any better than Miami condo speculators or dot-com true believers.

Charles Lewis Sizemore, CFA is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. Sign up for a FREE copy of his new Special Report: ��3 Safe Emerging Market Stocks for a Shaky Market.��

Thursday, November 3, 2011

These companies are playing out like Grimm fairy tales

If only 20/20 hindsight came with a time machine, then we’d never lose any money in bad investments. Fortunately, there is this thing called due diligence that is supposed to help us avoid those entanglements in the first place. Sometimes, however, that isn’t enough. You must always keep a close eye on your company’s story, and that story changes from quarter to quarter, and even on a daily basis.

I’ve found four companies whose stories are turning into Grimm fairy tales with horrifying endings. Sell them before the book closes:

Sprint Nextel

Sprint Nextel (NYSE:S) is a terrifying tale. There’s nothing worse than owning a commoditized business, unless it’s a really expensive business to run. That’s the fate that befalls Sprint Nextel. Not only must it compete with massive companies like AT&T (NYSE:T) and Verizon (NYSE:VZ) but it must do so amid flat revenue, declining free cash flow and annual losses.

Sprint is expected to report losses at least through 2012, and it doesn’t even pay a dividend. At $2.88 per share, there isn’t much reason to short, nor is there any reason to buy. But if you are holding on waiting for a miracle, the only one you’ll get is a buyout by some other entity for a tiny premium, if any. And with $18 billion in debt, I wouldn��t even count on that. Sell Sprint.

MGM Resorts

MGM Resorts (NYSE:MGM) looked like it might be able to reverse course this past year, but the company just isn’t making enough money with $6.3 billion in annual revenues to make a dent in its $12.6 billion in debt. That debt is mostly the result of the massive CityCenter complex in Las Vegas, which cost more than $9 billion and went up just as the financial crisis hit.

Worse, MGM has almost $1 billion in debt coming due duri! ng the n ext year, and it might have to draw on its credit facility to pay that off. There are loan covenants to meet, and money to spend to keep the properties they have up to snuff. All that takes away from what cash flow the company can generate. MGM is a definite sell, and might even be a short.


Netflix (NASDAQ:NFLX) has been the poster child on poor management as of late. The company is in a box because the DVD business is slowly going to be replaced by streaming video. Eventually — not today, but in the next few years — DVDs will be gone. The problem is that whereas Netflix can buy a DVD, then rent it out as often as it likes, it must pay hundreds of millions (or billions) of dollars for multiyear licensing rights to stream content.

Netflix doesn’t have enough money to do that, and with competitors like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) having much, much deeper pockets, Netflix eventually will lose that battle. The stock already is down 60% from its recent highs. I think there is more downside. Sell, and maybe even short it if you can stomach the volatility.


IMAX (NASDAQ:IMAX) faces secular challenges to its business. The trend is for people to enjoy entertainment where they want, when they want — namely, at home, on DVD, with streaming media, Internet content, video games, you name it. Box-office sales (volume) have been down almost every year of the past 10. IMAX’s revenue share deal with the studios requires numerous blockbusters to have any meaningful impact on revenues, and those movies also must belong to specific genres that give people reasons to see films in IMAX — for the extra premium they pay — in a troubled economy, to boot.

Those films will be limited, so IMAX theaters will spend most of every year without fi! lms addi ng meaningfully to the bottom line. Revenue from installing new systems will be finite, and if China should implode, those revenues will be cut short by cancellations. IMAX is a sell.

Time is factoring against all of these companies. IMAX probably has the longest shelf life, and you might find swing trades there. Netflix is a long-term short. MGM might have a chance, but right now, things aren’t looking good. Sprint might be able to tough it out because of its free cash flow, but why put money there when you can put it somewhere else?

As of this writing, Lawrence Meyers did not own a position in any of the aforementioned stocks.

Meredith Whitney: Goldman Sachs and Morgan Stanley Need a Price Trimming

Financial stocks (NYSE:XLF) have been under fire recently. Several major banks, including Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) reached new 52-week lows last week. ?Now, more trouble is on the way for the two banking giants.

Analyst Meredith Whitney, who last year called for hundreds of billions of dollars in municipal bond defaults, is now cutting her third quarter estimates for both Morgan Stanley and Goldman Sachs. ?Whitney cut her Q3 estimate for Morgan Stanley from 53 cents to 28 cents per share. ?She also reduced the fiscal year 2012 forecast from $2.50 to $2.14. ?Barclays (NYSE:BCS) cut Morgan Stanley’s Q3 estimates last week from 43 cents to only 12 cents per share. ?Barclays also announced that Goldman may report a loss of 35 cents per share for the third quarter. ?Furthermore, Whitney slashed her Q3 estimates for Goldman Sachs from $3.39 to only 31 cents. ?She also cut the Goldman’s fiscal year 2012 forecast by nearly half, $15.30 down to $7.85.

Earlier in the day, KBW cut its price target on Goldman (NYSE:GS) from $185 to $155. ?The firm also cut its price target on Morgan Stanley (NYSE:MS) form $28 to $24. ?Goldman is?s getting ready to increase its cost-cutting initiative even after $1.2 billion in cost cuts this past summer. It is probable that these cuts will cause even more job losses. Possibly somewhere around 1,000 jobs lost.

Bloomberg reports, “Goldman Sachs was the most profitable U.S. securities firm in Wall Street history before converting to a bank in September 2008 after the collapse of smaller rival Lehman Brothers Holdings Inc. ?The fourth quarter of 2008 was the only time since Goldman Sachs went public in 1999 that the firm has reported a quarterly loss.” ?In addition to Barclays, Bank of America (NYSE:BAC) is also expecting Goldman to report a loss.

Zumiez, Yahoo: After-Hours Trading

Shares of Zumiez(ZUMZ) zoomed higher in late trades Wednesday after the sports apparel retailer boosted its quarterly earnings outlook and reported strong same-store sales growth of 10.1% for September.

The stock was last quoted at $21.30, up 13.4%, on after-hours volume of nearly 80,000, according to The shares gained 6% to $18.79 in the regular session.

After the close, Everett, Wash.-based Zumiez said it now expects earnings of 40 to 41 cents a share in its fiscal third quarter ending this month on sales of $150 million to $152 million. The company's prior forecast was for a profit of 37 to 39 cents a share in the October period. The current average estimate of analysts polled by Thomson Reuters is for earnings of 39 cents a share on revenue of $149.3 million.

Zumiez said its outlook is based on expectations for same-store sales increasing in the mid-single digits for the third quarter.

For the five weeks ended Oct. 1, the company's total sales rose 18.3% to $52.9 million from $44.7 million.

Wall Street is split on Zumiez with 10 of the 20 analysts covering the stock rating it as a hold, and the median 12-month price target sitting at $22, offering little upside from current levels.


Shares of Yahoo(YHOO) weakened after Wednesday's closing bell, giving back some of its 10%-plus gain in the regular session following a Reuters report that Microsoft(MSFT) was mulling an acquisition bid.

The report has since been shot down by other outlets, however, and it's already been well known that Yahoo plans to explore its strategic options since Carol Bartz was dropped as CEO early in September.

Yahoo shares were last quoted at $15.38, down 3.5%, on volume of 3.7 million, while Microsoft's stock ticked up a dime in late trades to $26.01 on volum! e of 1.4 million, according to

Also moving in the extended session was Bank of America(BAC), which continued to experience problems with its Web site for a fifth day on Wednesday. After tacking on a penny in regular trading, the stock lost 13 cents, or 2.3%, to $5.64 after the close on volume of 2.4 million.

And finally, disappointing quarterly reports were weighing on shares of Christopher & Banks(CBK) and Ruby Tuesday(RT) after the close.

Christopher & Banks' shares lost more than 10% after the Minneapolis women's apparel retailer missed on the top line in its fiscal second quarter and said it expects margins to take a hit in the second half as it becomes "highly promotional" in order to move merchandise.

Ruby Tuesday's stock fell almost 8% on volume of nearly 300,000 after the restaurant operator posted an in-line profit but fell short on revenue, citing heavy competition because of softness in the economy.


The Audacity Of CEF Valuations - ETY And AGD Revisited

From time to time, I like to point out the extreme valuation differences that equity Closed-End funds (CEFs) can get to based on factors that are often ridiculously short-sighted. On January 13th, 2011, I wrote an articleaddressing the conundrum that investors often have on high yielding equity based CEFs which offer "good" distributions vs. CEFs which supposedly offer "bad" distributions.

In the article, I compared four funds from two fund families that have different income strategies they use to offer high yield distributions to investors. Two of the funds use a strategy which offers 100% ordinary income distributions and thus were considered "good" distributions, while the other two funds use a strategy that includes high Return of Capital [ROC] percentages in their distributions and thus, were considered "bad" or "destructive" distributions. As it turned out, the fund's that offered "bad" distributions had in fact, far outperformed the funds that offered "good" distributions when you compared Net Asset Value [NAV] total return performance over similar time frames.

I wanted to re-visit two of the funds' short term and longer term performances and re-emphasize to investors that simply looking at the makeup of a fund's distribution as either "good" or "bad" can belie what is really going on with the funds. I will use the Eaton Vance Tax-Managed Diversified Equity Income fund (ETY) which has a high ROC component in its distributions as one fund and the Alpine Global Dynamic Dividend fund (AGD) which is 100% ordinary dividend income in its distributions as the other.

As I pointed out in the January 13th article, the reason why these funds make good comparisons is that 1) They are both global stock funds with no fixed-income or bond securities, 2) They both came public around the same time in the 2nd half of! 2006. 3 ) They both came public at the same inception price of $20 and the same inception Net Asset Value [NAV] of $19.06 and 4) They both had similar inception yields at around 9.50% and similar current market yields at 12.6% for ETY and 12.2% for AGD. As a result, we should be able to learn a lot about the success or failure of these two funds and their income strategies regardless of the makeup of their distributions. Correct?

Before I go into the performances of these two funds, there are some differences that I should point out. First, ETY, at $1.6 billion in assets, is a lot larger than AGD at $138 million and second, both funds have different global stock portfolios, with ETY more heavily weighted in US stocks at 74% vs AGD at 46%. However, the primary difference between the two funds is their income strategy, and if you are not familiar with how these two strategies work, you can read about them in one of my prior articles.

ETY is an option-income fund,and option-income funds tend to have high Return of Capital (ROC) percentages in their distributions due to their portfolio management. More on that later. AGD is a dividend harvest fund which generates lots of tax-qualified income by "harvesting" multiple dividend periods through active portfolio management. But how have these funds done over time in the area that should really matter to investors, total return?

The following table shows the quarterly total returns of both funds since inception back in 2006. Total distributions for a quarter are simply added back to each fund's Net Asset Value (NAV) and a running Total Dividends, Adjusted NAV and Total Return percentage, is shown. Because ETY went public a few months later than AGD, I used ETY's inception date of November 27th, 2006 as the start date. AGD also started with a $19.06 inception NAV on July 24, 2006, but it had grown to $20.89 by November 27th. Note: Green represents positive quarterly periods and red represents neg! ative pe riods. As you can see, the total return performance is not even close with ETY's NAV, down only -1.7% on a total return basis compared to AGD's at -30.4% over a similar roughly 5-year period. As much negative feedback as I get on the Eaton Vance option-income funds because of their poor market price performances and high ROC percentages, the fact of the matter is their NAV total return performances going back to their inceptions have been excellent. In fact, for most of the Eaton Vance option-income funds, their NAV total return performances not only trounce most other fund families, most even beat the S&P 500. So why is it that the Eaton Vance option-income funds continue to have the widest discounts of all the equity CEF fund families? I can only speculate that because of NAV under-performance for most option-income funds during the ramp-up bull market in 2009 and 2010 which resulted in distribution cuts for many of these funds, that the skepticism continues to this day.

However, virtually all equity CEFs cut their distributions over the past several years, either because of the bear market from late 2007 through early 2009 or due to the ramp-up market recovery from early 2009 to April of this year. AGD, in fact, has cut its distribution twice since 2009 and at a much steeper percentage than ETY; 65% compared to 37%, so I don't understand why investors give AGD the benefit of the doubt and reward it with a current 7.5% premium market price over its NAV, while a fund like ETY, which has far outperformed AGD by any measure, is penalized with a -14.3% market price discount. Does that make sense to you?

Let's look at shorter 1-year NAV performance for both funds in which global markets have had mixed performances. Over the past year going back to October 14th, 2010, ETY's NAV is down a scant -1.6% while AGD's is down -9.9%, again including distributions. How about year-to-date through through October 14th? ETY's NAV is down -5.1% while AGD's NAV is ! down a w hopping -16.1% including distributions. So with those kind of short- and long-term performance statistics, one would think investors would be running for the exits on AGD and instead, bidding up a fund like ETY whose income strategy is actually more advantageous in this volatile up and down market that we've seen for most of 2011. Not really. Here is AGD's 1-year premium/discount chart in which investors seem willing to take another chance on a fund that has had the 2nd worst total return performance of all equity CEFs I follow, 2nd only to its sister fund the Alpine Total Dynamic Dividend fund (AOD). And now, here is ETY's 1-year Premium/Discount chart for a global fund that is essentially flat on a similar 1-year total return basis. This is one of the most amazing things about CEFs. That a global stock fund that by virtually any measure has been an abysmal failure can still find investors willing to buy it at a premium when there are other global stock funds that have higher yields and have held NAV value significantly better over the years go begging at -14% discounts. Would someone please explain this to me. Now I don't own ETY because I think Eaton Vance has even better funds to own, but the difference in how these two global funds are looked upon and valued is so mind-bogglingly ridiculous that it defies logic.

The only advantage AGD has, in my opinion, is its monthly pay feature, but that hardly makes up for its other shortcomings, including a signficantly higher expense ratio at 1.56% compared to ETY's 1.07%. I can only guess that investors must believe that a global market recovery is in the works and now is the time that AGD's portfolio and dividend harvest strategy will finally start outperforming. Maybe so, but if history is any guide, it didn't happen when investors bid up AGD to a 50% premium back in the spring of 2010 when its NAV was at around $7.50 instead of its current $5.50, so why should it happen no! w?

< p>Frankly, I would have to see a market price yield closer to 18% to accept the risk that AGD has shown, and if that's the case, that would put AGD's market price at $4 and a -27% discount to its current $5.49 NAV. Considering that ETY's discount is currently at -14.3% with a higher market yield and significantly better historic performance through up and down markets, I don't think that is inappropriate. So I go back to the distribution make up. Could it be that because AGD's distributions are 100% ordinary income and ETY's are mostly return of capital that investors continue to look more favorably at AGD? Could investors really be so short-sighted? Do investors even realize that ROC can be more tax-advantagous than tax-qualified ordinary income distributions because ROC is considered non-taxable in the period received, though an investor would need to reduce their cost basis by the ROC amount?

In fact, many option-income funds are managed to maximize ROC because of the tax-advantages. How can they do this? By realizing losses in most any market environment, fund managers can often designate much of their fund's distributions as ROC. In a strong up market, funds can realize losses in their options positions, but that can be more than offset by the unrealized appreciation of their stock holdings. Still, distributions can be designated as ROC even while the fund's NAV grows, albeit not as fast as the broader market. In a prolonged weak market, funds can realize losses in their stock positions but that can be partially offset by realized gains in their option positions. Again, distributions can be partially designated as ROC even as the fund's NAV may be holding up better than the broader market.

I know parts of this article may seem confusing to a lot of investors, but let me just conclude by again stressing that investors need to look beyond the simplistic make-up of a fund's distribution to decide whether a fund is a good investment o! r not. Often, it's the funds that no one wants that offer the best investment opportunities.

Disclosure: I am short AGD.

Disclaimer: I am not a tax expert and each investor should consult with a tax professional before making investment decisions based on the information contained in this article. Additionally, I have no relationship with any of the funds mentioned in this article.

Rockwell Collins 4Q net income up 17 percent

CEDAR RAPIDS, Iowa — Aviation and government communications provider Rockwell Collins Inc. said its fiscal fourth-quarter profit rose 17 percent, even though revenue from government contracts fell.

The company said Friday that its net income for the quarter that ended Sept. 30 was $175 million, or $1.13 per share, compared to $150 million, or 94 cents per share, during the same period last year.

Rockwell Collins said its revenue rose 2 percent, to $1.3 billion, compared to $1.27 billion during the prior year period.

Analysts on average expected earnings of $1.14 per share on sales of $1.31 billion, according to FactSet.

Rockwell Collins designs and builds communication systems used by aviation companies and government agencies. Sales in the commercial division rose 9 percent to $517 million during the quarter, while sales to government clients fell 2.4 percent to $779 million.

CEO Clay Jones said 2012 revenue will rely on stronger commercial sales, and the company will try to offset weakness in its government business by boosting its profit margins.

The company said its net income for the full fiscal year was $634 million, or $4.06 per share, compared to $561 million, or $3.52 per share, the year before.

Revenue for the year rose 4 percent to $4.81 billion, from $4.63 billion the year before. Commercial sales were up 13 percent, while government sales fell 2 percent during the year, the company said.

Analysts had expected full-year net income of $4.06 per share on $4.83 billion in revenue.

Shares of Rockwell Collins fell 15 cents to close Friday at $55.81.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Earnings Season Preview: The Top Gambling Stocks to Watch This Earnings Season

Here at the Fool, we love our seasons: football season, flip-flop season, and our favorite -- earnings season. It's that wonderful time of year when we get to celebrate those picks that outperformed and be humbled by those that didn't.

Each quarter, we get to arm ourselves with a new set of expectations and estimates to better judge the economic landscape. We may not always nail our bets, but learning about the expectations for a given sector will place investors well ahead of many of their peers. Woody Allen put it best when he observed, "Eighty percent of success is showing up."

With that in mind, here is what you can expect to see out of some of the biggest names in gaming this earnings season just by showing up and staying engaged:


Source: S&P Capital IQ.

The consumer discretionary sector on a whole expects a 7.6% decrease over last quarter's performance, but a 12% increase over the same quarter last year. Considering the lingering sensitivity of consumer spending and the seemingly constant trend of economic fits and starts, this is a bold estimate. Then again, the sector as a whole has rebounded impressively from their consumer dog-day estimates from the last quarter of 2008 -- negative $0.37.

Let's see how some of the notable players in gambling are expected to perform and what to look for in these releases:


Report Date?

Estimated Earnings

Earnings Estimate 90 Days Ago

Year-Ago Earnings?

Wynn Resorts (Nasdaq: ! WYNN  ) Oct. 19 1.18 0.92 0.39
Boyd Gaming (NYSE: BYD  ) Oct. 25 0.02 0.01 0.02
Pinnacle Entertainment (NYSE: PNK  ) Oct. 27 0.16 0.12 0.10
Las Vegas Sands (NYSE: LVS  ) Oct. 28 0.52 0.45 0.34
MGM Resorts (NYSE: MGM  ) Nov. 3 (0.15) (0.13) (0.21)
Melco Crown (Nasdaq: MPEL  ) Nov. 23 0.11 0.05 0.03

Sources: S&P Capital IQ and Yahoo! Finance.

As you can see, analysts are largely optimistic about this earnings season for gaming stocks. Wynn and Melco are slated to rake in earnings more than 200% higher than what they reported last year. By contrast, MGM is expected to continue its streak of losing quarters, with analysts predicting a $0.15 loss per share. What's behind these strikingly different tones?

Winners and losers
There are a lot of reasons to be bearish on MGM. It is overexposed to Las Vegas, particularly through its CityCenter project, but the city as a whole has had a choppy recovery and is on very shaky ground. MGM has an enormous amount of debt, $12.6 billion at last count, and doesn't have any promising growth on the horizon. Our gaming expert, Travis Hoium, covers these factors in better detail in his recent article.

By contrast, Las Vegas Sands is si! tting pr etty. Its brilliantly designed Marina Bay Casino is one of two allowed to operate in Singapore, which is quickly becoming one of the hottest gaming corners of the world. Singapore's two resorts are projected to take in $6.4 billion combined this year -- not far behind the Las Vegas Strip's $6.8 billion peak in 2007 -- and ahead of their current year projection of $6.2 billion. Furthermore, Las Vegas Sands owns the only new casino set to hit Macau in the foreseeable future, the Sands Cotai Central.

Melco is flying high on gaming expectations in Macau, the only market it operates in. And being a pure play in the largest gambling market in the world can be nice. Just recently Macau reported September revenue 39% higher than the same time last year. An investment in Melco at the end of September 2010 until September 2011 would have yielded 63%, compared with the S&P's less than 1%.


Source: S&P Capital IQ.

As you can see, Melco's return is something akin to a roller coaster ride, while the S&P is more like a wheelchair ramp. Depending solely on one market for growth can result in wild swings if anything in that market changes. As evidence, consider the recent speculation of a Chinese economic slowdown that sent Melco's stock tumbling.

When the chips are down
How should investors carry this information with them to earnings season? Personally, I'm going to be focusing on casino diversification by operators, specifically Las Vegas Sands. Operators that rely heavily on one market can see their fortunes change quickly, leaving them holding the bill on massively expensive properties. I'm going to be reading through the gaming industry's earnings to see which operators (if any) have plans to expand by putting up casinos in new markets. Rumor has it that Las Vegas Sands is looking at Miami for future growth.

With any luck, these compan! ies will drop gems on investors by discussing their intentions for new opportunities. If you're looking for other gems be sure to consult this special free report from our Hidden Gems gurus: "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." These are the same analysts who identified Chipotle as a win in early 2009 and have rode it to more than 400% returns today. Fool on!

OncoGenex: Advancing cancer pipeline

John McCamantOncoGenex Pharmaceuticals (OGXI) represents an excellent long-term investment for patient investors.

The company has advanced their pipeline, announcing the start of patient enrollment in a randomized, Phase II clinical trial testing OGX-427, an inhibitor of heat shock protein 27 (Hsp27), in patients with advanced bladder cancer.

The trial is designed to assess the potential survival benefit of combining ��427 with standard first-line chemotherapy, as well as its safety, tolerability and optimal dosing regimen.

Hsp27, which is over-expressed in many cancers, helps tumor cells survive by resisting the effects of anti-cancer treatments, such as chemotherapy and radiation therapy. ?
This international Phase II trial is a double-blind, placebo-controlled, 3-arm, randomized trial that will enroll approximately 180 patients with advanced bladder cancer who have not previously received chemotherapy for metastatic disease and are not candidates for potentially curative surgery or radiotherapy.

Patients will be randomized to receive gemcitabine, cisplatin, and OGX-427 at two dose-levels (600 mg and 1000 mg) vs. gemcitabine, cisplatin, and placebo.

The study will be conducted at approximately 45 cancer centers throughout North America and Europe. ?

In addition, ��427 is currently being studied in an investigator-sponsored, Phase I trial of patients with superficial bladder cancer and an investigator-sponsored, randomized, Phase II trial of men with castrate-resistant prostate cancer who have not received chemotherapy for metastatic disease.

Preliminary data from these two trials are expected to be presented in early 2012.? Previous phase I data for ��427 showed encouraging signs of efficacy in patients with breast, prostate, bladder, ovarian a! nd non-s mall cell lung cancer. That data was presented at the 2010 ASCO. ?

This Phase I data showed anti-cancer activity, safety, and tolerability with ��427 as a single agent and in combination with chemotherapy. ?

We are pleased to see ��427 progress into an additional Phase II trial as Phase II is often where cancer drug development candidates can really show their potential and add market value to the companies developing them.

OGXI has now clearly established a second drug development candidate in its pipeline despite there being no real value currently reflected it its market cap. ?

We are not sure when OGXI will begin to be discovered by Wall Street, but in our opinion, the company is clearly undervalued (market cap less than $100 million). OGXI is a buy. ?

New Zealand Dollar To Benefit From Faster Growth, Inflation

By David Song, Currency Analyst

Fundamental Forecast forNew Zealand Dollar: Neutral

  • NZDUSD: Break of Channel Top Eyes 0.83
  • New Zealand Dollar is Bullish on Dips
  • New Zealand Dollar Puts in for a Cautious Climb after the RBNZ Holds

The New Zealand dollar advanced to a fresh monthly high of 0.8240 and the high-yielding currency may continue to appreciate in November as the central bank drops its dovish tone for monetary policy. As the economic docket for the following week is expected to show a 0.6 percent rise in employment paired with a 0.9 percent expansion in private wages, the developments should increase the outlook for growth and inflation, and the Reserve Bank of New Zealand may show a greater willingness to restore the benchmark interest rate to 3.00 percent as it aims to balance the risks for the region.

After keeping the cash rate at 2.50 percent, RBNZ Governor Alan Bollard said the rebuilding efforts from the Christchurch earthquake is expected to ‘provide significant impetus for demand,’ and went onto say that the a gradual rise in domestic price pressures will require higher interest rates as price growth continues to hold above the 1 to 3 percent target range. In turn, market participants now see borrowing costs increasing by nearly 50bp over the next 12-months according to Credit Suisse overnight index swaps, and the rise in interest rate expectations should carry the kiwi higher as the central bank looks to toughen its stance against inflation. However, we may see the RB! NZ maint ain its current policy throughout the remainder of the year as the fundamental outlook for the global economy remains clouded with high uncertainty, and the central bank may carry its wait-and-see approach into 2012 as policy makers expect to see a ‘modest’ recovery over the near-term.

As growth and inflation picks up, the NZD/USD looks poised to extend the rebound from 0.7471, and the exchange rate should continue to retrace the sharp decline from the end of August (0.8571) as long as risk sentiment gather pace. However, we may see a short-term correction pan out next week as the greenback remains oversold, and the kiwi-dollar may fall back towards the 78.6% Fibonacci retracement from the 2009 low to the 2011 high around 0.8000 as long as the relative strength index holds below 70. - DS

DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article:

Wednesday, November 2, 2011

Once the EU bailout wears off, markets will once again struggle

Global stock markets soared yesterday, with the Dow rocketing almost 340 points, as investors decided to put a jolly spin on the EU’s latest bailout package.

No doubt, the market’s first reaction is partly correct. There are, in fact, some helpful things in the deal.

At long last, European leaders are admitting that Greek government debt isn’t worth anything near face value. Institutional investors, under pressure from the authorities, have agreed to accept a 50% haircut in the value of their Greek bonds.

In effect, Greece will undergo an informal bankruptcy (without saying so). This is an essential first step toward reducing the country’s debt burden to a sustainable level.

The EU is also taking two additional measures, boosting its bailout fund to 1 trillion euros to provide for emergency purchases of sovereign debt and imposing a recapitalization plan on the continent’s banks. However, these tactics may not prove quite as effective as the markets, in their enthusiasm, seem to have believed today.

For one thing, the emergency fund isn’t immediately receiving any fresh cash from EU member states. Instead, it will borrow money, as needed, to buy troubled bonds. In a real crisis, the emergency fund itself might have trouble borrowing at reasonable rates, compounding the panic.

In addition, the recapitalization plan calls for the banks to raise 106 billion euros — about half the amount thought necessary by private-sector experts.

Bottom line: Europe has bought itself some time. By early 2012, though, if not before, I suspect that the euphoria will wear off — and global equity markets, including our own, will struggle again.

For now, the surge is on. My best guess is that it will continue into the first half of December, taking the S&P 500 comfortably above 1300 and possibly within striking distance of last April’s highs.

How to p! lay it? With the market now severely overbought on a short-term view, this is an excellent time to shed stocks and mutual funds that offer dubious prospects for 2012.

For Example:

I recommend that you sell Cisco Systems (NASDAQ:CSCO) and?Eli Lilly (NYSE:LLY). Both companies will face strong earnings headwinds in 2012, even if by some stroke of luck the U.S. economy manages to stay above the flat line. In general, some big tech names and Big Pharma players will have trouble keeping up their recent gains in the short-term.

I’m also throwing in the towel on E.ON (PINK:EONGY), the German utility. The stock has enjoyed a 50% bounce off its September low, but the increasingly tough regulatory climate in Germany will hinder E.ON’s results for the next couple of years at least. The utility sector in general is a crowded trade, so consider trimming back in the short-term.

Anything to buy?

With most stocks substantially above near-term support, I would direct the lion’s share of any new money into bonds.

DoubleLine Total Return Bond Fund (MUTF:DLTNX) has held up remarkably well amid the shellacking the Treasury sector has taken over the past three weeks.

Current yield: 7.7%, based on actual year-to-date distributions.

Lashou offers up many similarities for investors

It looks like Groupon��s IPO should get a nice pop on its debut this Friday (at least according to reports from Bloomberg and the Wall Street Journal). So why not a public offering from its Chinese counterpart?

Lashou Group, which filed for an IPO on Friday, offers up to 1,000 daily deals across 500 cities and towns in China. Most of the offers are from restaurants, hotels and beauty shops, with a merchant base is roughly 24,000.

And growth has been torrid. Average monthly unique visitors have soared from 295,000 in the second quarter of 2010 to 29.7 million in the third quarter of 2011. Based on this metric, the company is the No.1 player in the daily-deals business in China.

As should be no surprise, Lashou has borrowed the best practices of Groupon, including generous money-back guarantees, as well as a massive sales force of 3,100 people.

But there is another similarity: losses. For the first half of 2011, the red ink came to $60.5 million on revenue of only $8.9 million.

There��s also the issue of intense competition. According to iResearch, there are more than 1,000 rivals in the daily-deals space in China. They include independent operators �C like, and �C as well as diversified Internet companies, such as Tencent.

Interestingly enough, Groupon tried to buy Lashou earlier in the year for a reported $500 million. It probably would have been a good deal, since Groupon has had troubles getting traction in China. In fact, Groupon may still make another play for Lashou.

If anything, the valuation may be more attractive. Let��s face it: Chinese IPOs have had a tough time in the U.S. Companies like Renren (Nasdaq:RENN), (Nasdaq:YOKU) and Dangdang (Nasdaq:DANG) have suffered big-time drops since their offerings. In light of all this, there may be lots of pressure on the ultimate price of the Lashou deal.

Tom Ta ulli runs the InvestorPlace blog ��IPOPlaybook,�� a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of ��All About Short Selling��?and ��All About Commodities.��?Follow him on Twitter at @ttaulli. As
of this writing, he did not own a position in any of the aforementioned stocks.









Your Guide to Tackling Rising Inflation

On the inflation front, news is not very good -- unless you choose to see it another way, that is. Knowing how to interpret the newly released government inflation figures is critical to making long-term plans for needs such as retirement.

The reason for the confusion: The government issues two inflation numbers. First, the consumer price index -- which the Bureau of Labor Statistics defines as "the measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services." That rose 3.9% in the 12 months ending on Sept. 30. That's a serious jump, and quite a bit more than the long-term average of 3%, as well as the Federal Reserve's desired rate of about 2%. If inflation were to continue at the current rate of 3.9% a year, you might expect a $100 item to cost $139 in 10 years.

Easier to swallow is the figure for underlying inflation, which is just 2%. This figure excludes food and energy costs, which are so volatile they can distort the picture significantly in the short term. Of course, we all spend money on food and energy, so what figure should people care about?

First Horizon National Corp Third Quarter Earnings Sneak Peek

S&P 500 (NYSE:SPY) component First Horizon National Corp (NYSE:FHN) will unveil its latest earnings on Monday, October 17, 2011. First Horizon National, through its banking-related subsidiaries, provides financial services.

First Horizon National Corp Earnings Preview Cheat Sheet

Wall St. Earnings Expectations: The average estimate of analysts is for net income of 16 cents per share, a rise of more than twofold from the company’s actual earnings for the same quarter a year ago. During the past three months, the average estimate has moved up from 12 cents. Between one and three months ago, the average estimate moved up. It has been unchanged at 16 cents during the last month. For the year, analysts are projecting profit of 61 cents per share, a swing from a loss of 22 cents last year.

Past Earnings Performance: The company is looking to top estimates for the third straight quarter. Last quarter, it reported net income of 16 cents per share against a mean estimate of profit of 11 cents, and the quarter before, the company exceeded forecasts by 11 cents with net income of 15 cents versus a mean estimate of profit of 4 cents.

Wall St. Revenue Expectations: On average, analysts predict $359.1 million in revenue this quarter, a decline of 17.3% from the year ago quarter. Analysts are forecasting total revenue of $1.45 billion for the year, a decline of 14.2% from last year’s revenue of $1.69 billion.

Analyst Ratings: Analysts are bullish on First Horizon National as 10 analysts rate it as a buy, one rates it as a sell and 10 rate it as a hold.

A Look Back: In the second quarter, profit rose 13.4% to $20 million (8 cents a share) from $17.6 million (one cent a share) the year earlier, exceeding analyst expectations. Revenue fell 15.6% to $395.5 million from $468.4 million.

Key Stats:

Revenue has fallen in the pa! st four quarters. Revenue declined 13.4% in the first quarter from the year earlier, dropped 10.3% in fourth quarter of the last fiscal year from the year-ago quarter and 12.7% in the third quarter of the last fiscal year.

Competitors to Watch: Pinnacle Financial Partners (NASDAQ:PNFP), Bank of America Corp. (NYSE:BAC), SunTrust Banks, Inc. (NYSE:STI), Wells Fargo & Company (NYSE:WFC), Green Bankshares, Inc. (NASDAQ:GRNB), First Security Group, Inc. (NASDAQ:FSGI), PNC Financial Services (NYSE:PNC), Cadence Financial Corp. (NASDAQ:CADE), BancorpSouth, Inc. (NYSE:BXS), and BB&T Corporation (NYSE:BBT).

Stock Price Performance: During July 18, 2011 to October 11, 2011, the stock price had fallen $2.87 (-30.7%) from $9.34 to $6.47. The stock price saw one of its best stretches over the last year between December 14, 2010 and December 22, 2010 when shares rose for seven-straight days, rising 12.5% (+$1.30) over that span. It saw one of its worst periods between April 6, 2011 and April 18, 2011 when shares fell for nine-straight days, falling 6.8% (-79 cents) over that span. Shares are down $5.27 (-44.9%) year to date.


EU Summit Rally May Not Last 

Last week’s passage of the Eurozone financial rescue plan will impact currency markets this week as traders continue to evaluate its worth. The markets will also be watching the Fed for any news about a QE3 initiative.

As expected, European Union (EU) leaders came up with a sufficiently credible plan to prevent a disorderly default of Greece, recapitalize EU banks, and increase the size of the European Financial Stability Facility (EFSF) in an attempt to quell contagion to other EU sovereign debt.

Risk markets responded with a massive rally on what we think is overexuberance, but also likely due to a huge squeeze on short-risk/long-US dollar (USD) positions. The details of the EFSF expansion, the Greek debt swap, and other mechanisms are still to be worked out over the coming weeks, but market sentiment over the package appears to be fading rather quickly.

No less of an authority than the new president of the Bundesbank, Jens Weidmann, has already called the EFSF expansion into question, telling a conference in Munich the plan is “Not too different from those which were partly responsible for creating the crisis, because they concealed risks.”

His comment hits at the critical issue behind the Eurozone debt crisis; namely, that it’s all about confidence and perception. If markets believe the plan is credible, then it may not even be needed. But if markets don’t buy the notion that more borrowing will solve Italy’s already overextended debt, then even the expanded EFSF won’t be sufficient.

Ultimately, that comes down to growth prospects for the individual debtor nations, and there we think the prospects are daunting to say the least.

European credit markets appear to be already voting with their feet, as core peripheral bond spreads have begun widening again after a mere 24-hour respite. Italian ten-year government bond yields are back over 6%, and Spanish bond yields have reversed their declines from the post-summi! t euphor ia.

US Treasuries rallied on Friday on safe-haven demand, sending ten-year yields lower by about ten basis points (bps) in a potential failure/rejection above the daily Ichimoku cloud.

US stocks look to have stalled for the moment, with the S&P 500 possibly topping below the peak of the 1290 weekly cloud/1300 psychological resistance levels.

Across markets, the rebound in risk assets this past week basically closed the gap from the collapse that started in August (in stocks) and the surge in the USD that started in early September.

While there has been some potentially serious technical damage done to the risk-off trade, we think we’re more at a crossroads than a major turning point. We will be especially alert for indications that the risk rebound is reversing this week. We think the Federal Open Market Committee (FOMC) will need to deliver QE3 for gains to continue (see below for more).

Back to the EU debt crisis; in the weeks ahead, we think there is likely to be a fair amount of cheerleading for the EU package, not the least from Friday’s G-20 meeting, and we expect several commitments of support from key potential investors, like China, Brazil, mid-east, and other sovereign wealth funds; Japan has already signaled willingness to invest.

We’ll be watching the reaction of risk assets on those expected signs of support, and the less risk markets respond favorably, the greater our doubts about the sustainability of the rebound will grow. We will be especially alert to how markets trade to start the week after a weekend spent digesting the full implications of what the EU has actually delivered.