DailyFinance.comhttp://www.dailyfinance.comDailyFinance.comhttp://o.aolcdn.com/os/df/2013/img/2-dailyfinance_logo_m.pngDailyFinance.comhttp://www.dailyfinance.comen-usCopyright 2013 Weblogs, Inc. The contents of this feed are available for non-commercial use only.Blogsmith http://www.blogsmith.com/Inside Wall Street: Four Stocks That Could Double Your Moneyhttp://www.dailyfinance.com/2011/04/05/inside-wall-street-four-stocks-that-could-double-your-money/http://www.dailyfinance.com/2011/04/05/inside-wall-street-four-stocks-that-could-double-your-money/http://www.dailyfinance.com/2011/04/05/inside-wall-street-four-stocks-that-could-double-your-money/#commentsFiled under: , ,

investing"Only buy stocks that are likely to hit the fences." That's what a number of seasoned stock pickers say -- and they make a bundle doing just that.

The hot-hand investors don't settle for a 15% or 25% return -- they aim for home runs. More specifically, they are in stock investing to double their money. True, these aren't your run-of-the-mill money managers, but such a feat can be achieved on a regular basis. These stock pickers are, however, rigidly disciplined about sticking to their own hard and fast rules.

Before I mention several stocks that might double your investment dollars, let's name some that actually did just that in about a year.

Stocks That Have Doubled

Novellus Systems (NVLS), TriQuint Semiconductor (TQNT), Holy Corp. (HOC), Mercer International (MERC), and Apple (AAPL) are some of the stocks that doubled within a year, although they represent only a small fraction of the 8,000 stocks that trade in the U.S. Some investors caught them at the right time and reaped 100% gains.

Robert C. Auer, senior portfolio manager at Auer Growth Fund (AUERX) and founder of SBAuer Funds, is one of the few investors who religiously adheres to a "double-your-money" strategy. SBAuer now manages some $235 million, having started with just $2 million in 1999.

"We canvass and screen all stocks trading in the U.S., and applying our dedicated investing principles, we have counted only 114 stocks, so far, that we believe would be capable of doubling in a year -- and we bought shares in all of them without exception," says Auer.

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Auer first purchased 165,100 shares of Novellus on Feb. 10, 2010, at $21 a share, and sold them in March 2011 at $42. It's now trading at $37. In the case of TriQuint, the doubling in price took just seven months. Auer bought shares at $6.57 each and sold them at $13.21 on Jan. 5, 2011. In the case of Holy, he bought at $26.29 in November 2010 and sold when the stock reached $52 on Feb. 2, 2011. With Mercer, it took only three and a half months for Auer to double his investment. He bought shares at $5.89 in December 2010 and sold them on Feb. 15, 2011 at $12.79.

Sticking to Your Investing Principles

Apple is the one stock that got away. Auer wished he had bought shares early on because the stock doubled on several occasions. Auer didn't buy into Apple, however tempting, because it didn't meet one of his three principles for buying stocks: a price-to-earnings ratio below 12. From the time investors caught on to the magic of Steve Jobs and Apple, the stock's price-to-earnings ratio ranged between 14 and 20.

Auer's two other seemingly simple, but tough investing principles are: A company's earnings growth in the most recent quarter should be at least 25% above the previous year, and revenue growth in the most recent quarter should be at least 20% higher than the year before.

"We don't bother to know or decipher what kind of companies they are because we don't want to be distracted by factors other than our three cardinal buying principles," says Auer. So what are some of the stocks that qualify?

Doubling Your Money

Here are four companies that aren't household names but meet Auer's stringent "double-your-money" buying principles:

Cliff Natural Resources (CLF), the largest supplier of iron ore pellets in the North American steel industry, currently trades at $98.25 a share. In its latest quarter, the company posted earnings growth of 98%, compared to a loss a year ago. Revenues jumped 50% during the quarter. Despite such impressive results, the stock is trading at a price-to-earnings ratio of just 11. Auer bought shares at $58.72 a share in August 2010. It's not too far from a double at this point.

Rubicon Technology (RBCN), now trading at $27.46 a share, makes mono-crystalline sapphire used for light-emitting diodes mainly for cell phones and video screens, as well in semiconductor manufacturing and laser imaging. Auer bought shares on Feb. 15, 2011 at $23, then trading with a 10 price-to-earnings multiple. What's impressive about Rubicon is it posted an unbelievable 100% jump in earnings in its most recent quarter, on revenues that leaped about 80%. The stock is now at $26 a share.

KLA-Tencor (KLAC), the world's leading maker of yield-monitoring and process control systems for semiconductor companies, is trading at $47.25 a share. It posted a stunning 393% earnings growth in its most recent quarter, on revenues that advanced 74%. Auer bought shares in early March at $45 a share, then trading with a price-to-earnings ratio of 10.5. Auer says the company expects sales to leap even more because of exploding demand for its products from makers of tablet computers, such as the Apple's iPad, and iPhones.

Cimarex Energy (XEC), an independent oil and gas exploration and production company with operations in the Midwest, Permian Basin, and the Gulf of Mexico, is trading at $115 a share. Its production is 61% natural gas and 39% oil. Auer accumulated shares between $70.46 and $79.82 in November 2010, when its price-to-earnings ratio stood at around 10. The stock is currently trading at $116.87. "It has been a fast-moving stock, and I am sure it's on its way to doubling in price," says Auer.

So far this year, there are only nine stocks that have doubled during the first quarter of 2011, based on Auer's investing guidelines. For investors seeking such huge returns, and who are impressed with Aeur's investing principles and track record, the four stocks among the 114 he has targeted look attractive, indeed.


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]]>Apple AAPLAppleAaplAuer Growth FundCimarex EnergyCliff Natural Resourcesdouble your investmentHoly Corp. HOCHolyCorp.Hocinvesting in stocksinvestment strategiesKLA-TencorMercer International MERCMercerInternationalMercNovellus Systems NVLSRobert AuerRubicon Technologystocks to buyTriQuint Semiconductor TQNTTriquintSemiconductorTqntGene MarcialTue, 05 Apr 2011 10:00:00 ESTInside Wall Street: Interest in Genomic Research Sector Heats Up Againhttp://www.dailyfinance.com/2011/03/30/inside-wall-street-genomic-research-sector-heats-up/http://www.dailyfinance.com/2011/03/30/inside-wall-street-genomic-research-sector-heats-up/http://www.dailyfinance.com/2011/03/30/inside-wall-street-genomic-research-sector-heats-up/#commentsFiled under: , ,

Interest in companies that dominate DNA sequencing and genetic analysis is heating up again.

The leaders in the sector, such as Ilumina (ILMN), Life Technologies (LIFE) and Human Genome Sciences (HGSI), outscored most other biotechs last year. They gave up some of their gains this year as a result of profit-taking, but with the broader market again showing signs of strength, analysts are upbeat on the sector. They regard the decline as just a temporary pullback -- and an opportunity to buy shares at lower prices.

Since I last discussed Ilumina in May 2010, its stock rocketed from $42.16 a share to a 52-week high of $73.96 on Feb. 11, 2011, before retreating to $66. Life Technologies also hit a 52-week high of $57.25 on Jan. 3, but has since backtracked to $50.

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Human Genome Sciences, which was languishing at 45 cents a share in 2009, stunningly skyrocketed to an all-time high of $34.49 in mid-April 2010. It retreated in the following months, but recently approached $30 again after the Food and Drug Administration approved its drug Benlysta for the treatment of lupus.

The one big laggard, Affymetrix (AFFX) -- once the pioneer and early leader in the group -- tumbled from a 52-week high of $8.38 in April 2010 to a low of $3.75 in July 2010. It has since edged back up to around $5 a share amid speculation that it will make an acquisition.

Two Wall Street Favorites

Some observers believe Ilumina and Life Technologies are also looking for acquisitions to buttress their pipelines and upgrade their technologies. A few of the big pharmaceutical companies, such as Merck (MRK) and Novartis (NVS), are also rumored to be looking at a number of companies engaged in DNA and gene analysis research, according to some analysts.

Ilumina, which develops research tools to analyze genetic variations and functions, continues to gain market share, with sales remaining robust despite tough economic conditions, notes Jeffrey Loo, analyst at Standard & Poor's. Ilumina's tools assist researchers in processing the billions of tests necessary to convert raw genetic data into medically valuable information in order to improve drugs and therapies, customize diagnoses and treatments, and potentially cure diseases. Loo rates Ilumina a buy, with a 12-month target of $78.

Loo also has a strong buy recommendation on Life Technologies, with a 12-month target of $68. The company makes instrument systems and software and other lab products that speed up and simplify gene cloning and expression and analysis.

Possible Buyout Target?

One company that is a possible buyout target among the DNA-sequencing biotech group is Wafergen Bio-Systems (WGBS), a leading developer and maker of systems for genomic analysis. Its chief product now on the market is SmartChip technology, which is used for analyzing gene expression. This is ideal for researchers seeking to confirm discoveries from the growing use of next-generation sequencing and to discover and validate biomarkers or gene expression patterns on a single platform, says Wafergen.

"The SmartChip is designed to provide lab researchers, clinicians, and technicians at Big Pharma accurate, highly sensitive and high-throughput gene-expression profiling capabilities," says Alnoor Shivji, chairman and CEO of Wafergen. The SmartChip enables scientists to know which genes or proteins are turned on or off in a given tissue sample in a cheaper, faster and more powerful way, he says. It helps researchers and scientists in their quest to develop new drugs that target specific genes affecting a given disease, adds Shivji. The SmartChip could become the new methodology of choice for industry and academic labs alike engaged in the study of gene expression.

With gene expression analysis now a focus in disease research and drug development, Wafergen could see significant growth in the sale of its SmartChip product over the coming years, says Raghuram Selvaraju, biotech analyst at Hapoalim Securities, in a report. Rating the stock a buy, he notes that with SmartChip's broad applicability, Wafergen "represents an attractive acquisition target for a number of established companies." The leading potential suitors, he believes, are Ilumina and Life Technologies.

Other analysts are betting that Affymetrix, which badly needs a new technology and a product such as the SmartChip, will make a bid for Wafergen.

Elemer Piros, senior biotech analyst at investment firm Rodman & Renshaw, is also bullish on Wafergen. "We remain encouraged about the commercial potential of Wafergen's SmartChip system," says Piros, who recommends its stock, currently trading at 88 cents a share, as outperform, with a 12-month price target of $4.

Wafergen's SmartChips produced revenues in 2010 of $2.2 million, beating Piros' estimate of $1.5 million. He expects Wafergen to invest heavily in research and development in the coming years to be able to offer more advanced products. For 2011, revenues could reach at least $3 million. Before then, Wafergen may get gobbled up by one of the larger companies in the group.




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]]>AFFXAffymetrixbiotechbiotech stocksbiotechnology stocksbuyoutDNA sequencinggenetic analysisGeneticAnalysisHGSIHuman GenomeHuman Genome SciencesILMNIluminaLifemergers and acquisitionsMRKNVSWafergen Bio-SystemsWGBSGene MarcialWed, 30 Mar 2011 07:30:00 ESTInside Wall Street: Bulls Optimistic Despite Disasters and Turmoilhttp://www.dailyfinance.com/2011/03/23/inside-wall-street-bulls-optimistic-despite-disasters-and-turmo/http://www.dailyfinance.com/2011/03/23/inside-wall-street-bulls-optimistic-despite-disasters-and-turmo/http://www.dailyfinance.com/2011/03/23/inside-wall-street-bulls-optimistic-despite-disasters-and-turmo/#commentsFiled under: , , , , , ,

bullsIn these volatile times when so many extraneous events -- the devastation in Japan, the unrest in the Arab world -- are causing edginess among investors, it's surprising that the capital markets aren't seized by more turbulent twists and turns. investors are truly worried, and unsurprisingly, they keep returning to the same skeptical refrain: How long could the stock market avoid a more serious disruption, a deeper pullback?

I will repeat what I wrote here on March 17, when the world seemed ready to fall apart: "This is no time to panic. It's a time for equanimity and a tempered analysis."

Thanks to several introspective, experienced market watchers, the global condition and forecasts of where the U.S. economy and the markets are headed are being laid out within a logical perspective. So what's an investor to do now? What's the update on the world economy and the stock market?

"The Japanese earthquake and tsunami, while a human tragedy, will not derail the global business or equity bull market," declared Jeff Applegate, chief investment officer at Morgan Stanley Smith Barney (MS). He and chief investment strategist David W. Darst wanted to convey in their latest Global Investment Committee report that the attractions of the world of investments haven't been diminished. They were clear and forthright about their continued bullish stance.

Despite the human tragedy in Japan and the ongoing turmoil in the Middle East and North Africa, the global economic recovery and the stock market's bull cycle, are intact, says Applegate. says Applegate.

Accordingly, he says, "we are overweight [in portfolio exposure] to equities, commodities, and REITS (real estate investment trusts), and underweight to cash and bonds." In global equities, "we continue to overweight emerging markets and commodity-sensitive Australian and Canadian markets."

Within the U.S. equities, "we have a tilt toward growth at the style level," and in global bonds, "we overweight corporate investment- grade and high-yield." However, we are underweighted in the developed-nations' sovereign and short-duration debt. And, finally, on inflation linked securities, "we are overweight" in those, says Applegate.

European Policies Head in the Wrong Direction

Portfolio strategists at Goldman Sachs (GS) haven't changed their positive outlook: They're staying with their earnings and price targets for the Standard & Poor's 500-stock index companies.

"While we extend our their deepest sympathies to those coping with the tragedies in Japan, we maintain our S&P 500 earnings per-share earnings estimates and price targets as S&P firms generate only 1% of aggregate sales from Japan," says Goldman strategist David J. Kostin.

Morgan Stanley's Applegate believes that U.S. monetary policy will likely remain highly stimulative, while European monetary policy may become tighter this spring -- a policy direction which he deems unwise. As a result, he expects U.S. GDP growth, which is currently expected to be above 3%, will be better than that of other developed economies, where growth is forecasts closer to 1%. On the other hand, Applegate notes that the growth rate in the emerging markets is expected to be triple that of the developed markets.

Morgan Stanley continues to expect subdued inflation in most of the developed nations. However, inflationary pressures in the emerging countries are likely to peak in the first half of 2011, they note.

Oil's Minor Volatility Is No Threat

With regard to the dollar, Applegate and his team of economists and strategists believes the currency's trade-weighted weakness is likely over.
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Longer term, "we believe the major developed nation's currencies will depreciate relative to emerging markets' currencies, such as the Chinese yuan, the Brazilian real, and the Indian rupee," predicts Applegate.

The global oil situation is also not too worrisome, in the eyes of Morgan Stanley's strategists. True, the unsettled conditions in Libya and elsewhere in the Middle East have led to heightened volatility in crude oil prices, ranging between $85 and $105 per barrel in the past month. "But as long as this political turmoil doesn't spread to the Middle East-North Africa's primary oil-producing nations, and thus cause a sharp spike in oil prices, this fairly range-bound oil-price volatility should not pose any threat to global business-cycle expansion or, by extension, the global equity bull cycle," says Applegate.

Indeed, in its calculations for this year and next, Morgan Stanley has assumed oil prices will average $100 to $105 per barrel. Those forecasts are largely based on demand forecasts from the emerging countries, which Morgan Stanley predicts will grow in excess of 65%, both in 2011 and 2012.

Stay the Course, and Buy Now

In sum, the outlook for the stock market and the U.S. economy remains bullish, according to the economists and market strategists at Morgan Stanley Smith Barney and Goldman Sachs.

"In our judgment, recent developments do not warrant a significant change in investment strategy," says Applegate. "So we reaffirm our tactical preference for global equities over global bonds and cash, as the time horizon for our tactical views is about 12 months."

Over at Goldman Sachs, Kostin and his team note that "we expect the Japan earthquake will have limited impact on U.S., growth." Still, he cautions that a "disruption of more than a few weeks in the supply of key components, such as auto parts or semiconductors, could have a more meaningful negative effect on U.S. output, although once again this would be temporary."

In all, there are a lot of reasons why the bull cycle should remain intact, and as I said last week, the downdrafts that have resulted from the recent calamitous events should provide buying opportunities for stout-hearted long-term investors.


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]]>bahrainbahrain protestsbull marketbull market forecastBuy and HoldColumnsDollaregyptFederal ReserveGDPGDP GrowthinflationJapanjapan earthquakejapan nuclear crisisjapan tsunamilibyalibya protestsLibya uprisingloose money policyoil pricesoutlookrealrupeesaudi arabiastocksunrestweak dollaryuanGene MarcialWed, 23 Mar 2011 15:00:00 ESTInside Wall Street: Turbo-Charged Investment Managinghttp://www.dailyfinance.com/2011/03/23/inside-wall-street-turbo-charged-investment-managing/http://www.dailyfinance.com/2011/03/23/inside-wall-street-turbo-charged-investment-managing/http://www.dailyfinance.com/2011/03/23/inside-wall-street-turbo-charged-investment-managing/#commentsFiled under: , , , ,

Wouldn't it be just wonderful -- even miraculous -- if you could discover a highly experienced investment manager with a super-turbo performance record -- and who delivers bountiful gains? In these volatile times, that would be a godsend.

Well, that's what a young outfit called Marketocracy aims for -- in good times or bad. However, it isn't your usual type of asset manager. It's one of the few incubators of experienced and stand-out investors on the Internet, whose performance Marketocracy monitors, to determine which of them are the best stock pickers. Those who excel are chosen by Marketocracy to undergo a rigid and lengthy screening process before they are given assets to manage and held accountable to produce great gains.

High-Octane Returns

That's a tall order, especially since Wall Street is littered with so-called hot and smart investors who have flamed-out and fallen during economic downturns or market crashes. That's one reason why Marketocracy founder and CEO Ken Kam, who formed the company in July of 2000, makes sure the investors he picks have demonstrated proven, long-term staying prowess. Prior to forming Marketocracy, Kam founded and served as CEO of Firsthand Funds in the 1990s -- and eventually ran a $1billion mutual fund portfolio.

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"The most convincing evidence of investment skill isn't just a college resume or pedigree but a long-term track record," says Kam. "We find the best stock pickers in the world and hold them personally accountable for results." Each of them has their own versatile investment strategies, he says -- and the only common theme are the solid results they produce.

The result: high-octane returns. If an investor had invested, say, $10,000 in Marketocracy-managed portfolios at the beginning of April 2005, he or she would have more than doubled the money, producing a total of $26,000 by April 2010. Compare that to Standard & Poor's meager gain, where your $10,000 investment would have increased to just $11,000 in the same time period, says Kam.

SWAN and ART

Marketocracy's chosen portfolio mangers' two principal portfolios, named SWAN, or "Sleep Well At Night," and ART, for "Absolute-Return Team," have produced extraordinary results since their inception. The SWAN portfolio posted a yearly gain of 23.1% from Dec. 31, 2000, through Dec. 31, 2010, vs. the S&P's 6.1% return. And the ART portfolio did even better, posting an annual gain of 26%, compared with the S&P's 4.1%.

Still, investors should keep in mind that nothing is guaranteed in stock investing, and past great performance doesn't mean it could be repeated. The best maxim to remember, in each case, is "investor beware." The stock market is a battleground of ideas, and various factors come into play that often create volatility.

Apple, Bank of America, China Media Express

What are Marketocracy's managers' current stock picks? They now hold a total of 150 stocks in its portfolios. Three of the top SWAN stocks are Apple (AAPL), Bank of America (BAC), and China Media Express Holdings (CCME). And among the ART team's top choices are Novo Nordisk (NVO), MasterCard (MA), and Northgate Minerals (NXG).

Everybody knows that Apple's stock has been on fire, rocketing from a 52-week low of $199.95 a year ago to a high of $364.90 on Feb. 16. It has since eased to $339 on March 15, reflecting the market's drop resulting from the nuclear crisis in Japan following a devastating earthquake and tsunami there. Even so, Marketocracy's managers are convinced it is one stock that will continue to reward investors -- which should allow them to sleep well at night, despite the market's volatility. The recent release of Apple's iPad 2, reported to have sold more than 500,000 during the first weekend they were available in the market, has added allure to Apple's already enticing stock. Some analysts predict the stock will hit $450 to $500 a share in 12 months.

Bank of America, on the other hand, has been depressed, but its current appeal is precisely because of that -- its much-emaciated market valuation, caused in part by its huge mortgage-loan problems. The stock traded as high as nearly $20 a share in mid-April of 2010, but it later got deflated to as low as $10 in late November. It has since rebounded to $14. Easily, the stock could snap back to its 52-week high of about $20, predict some analysts. Any good news about Bank of America at this time should lift the stock to much higher levels, they argue.

China Media Express is among the least-recognized stocks among Marketocracy's picks, but the Hong Kong-based company operates an interestingly lucrative business. It sells advertising on in-bus television programs, shown in more than 20,000 inter-city express buses serving China's most economically active cities. Its stock is trading at $11.87, down from a 52-week high of $23.97. Some big global companies are among China Media's clients, including Toyota (TM), China Telecom (CHA), and Siemens (SI).

Novo Nordisk, Mastercard

Among the ART portfolio stocks, Novo Nordisk, a global health care company with more than 87 years of leadership in diabetes care, is the world's leading producer of insulin. This Swedish company is also a leader in hemophilia, growth hormone, as well as hormone therapy for women. Its ADRs (American Depositary Receipts) are traded on the New York Stock Exchange and have been one of the fast-advancing stocks. It has bolted to $123 a share as of March 21 -- after hitting a 52-week high of $129.26 on March 4 -- up from a 52-week low of $73.16 on May 24, 2010. Analysts remain optimistic that the stock is still far below its peak levels. Earnings are also on a fast growth track. Analysts project profits for 2011 of $5.39 a share, leaping in 2012 to $6.18, up from 2010's $4.38.

MasterCard, famous for its ubiquitous credit cards, is a global leader in transaction processing with nearly 30 million business locations worldwide. And it hasn't stopped expanding. According to Zaineb Bokhari, an analyst at Standard & Poor's, there are numerous long-term growth opportunities for MasterCard -- including further expansion overseas, increasing the growth of its debit card business, and boosting its mobile payments and prepaid card operations. Rating the stock a buy, Bokhari has a 12-month price target of $267 a share. Currently trading at $247, the stock is up from a 52-week low of $191 on Sept. 13. The big driver behind the stock's climb is MasterCard's rapid earnings growth. Bokhari forecasts MasterCard will earn $16.20 a share in 2011, way up from 2010's $14.05, and 2009's $11.16.

Northgate Minerals

Northgate Minerals is Marketocracy's small-cap bet in gold and copper mining. The company, which has operations in Canada and Australia, is one of the old-timers in the mining business, dating back to its start in 1919. Its stock climbed to a 52-week high of $3.54 a share on Sept. 21, but profit-taking and a net loss posted in its fourth quarter pulled the stock down to $2.75 a share as of March 21. But analysts see the stock bouncing back to at least its old high as they expect Northgate to get back to profitability this year. The analysts' consensus estimate for 2011 earnings is 5 cents a share, followed by a big jump to 21 cents in 2012.

For investors who like their money scrupulously handled by experienced managers with a hands-on grip on their portfolios' goals and holdings, Marketocracy should fit the bill, with its "master" managers' proven track record in producing robust long-term gains.


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]]>appleARTbank of americabeat the marketColumnsinvestingInvesting adviceMarketocracymastercardmoney managementMoney Managersoutperformoutperforming fundsstock picksstocksSWANGene MarcialWed, 23 Mar 2011 07:30:00 ESTInside Wall Street: Putting Mergers and Acquisitions to Work for Youhttp://www.dailyfinance.com/2011/03/19/inside-wall-street-putting-mergers-and-acquisitions-to-work-for/http://www.dailyfinance.com/2011/03/19/inside-wall-street-putting-mergers-and-acquisitions-to-work-for/http://www.dailyfinance.com/2011/03/19/inside-wall-street-putting-mergers-and-acquisitions-to-work-for/#commentsFiled under: , , , , , , , , ,

stocksMergers and acquisitions seem to be taking the business world by storm, with buyout and merger transactions -- which jumped some 23% in 2010 from 2009 -- up an additional 24% in just the first two months of this year.

According to analysts at mega investment bank Goldman Sachs (GS), stronger global economic growth and continued low interest rates, plus companies' attractive valuations and high cash hoards among U.S. corporations and private equity funds, have combined to create the perfect conditions for a flurry of M&A activity since October of 2009.

"We see continued upside to the M&A cycle and remain core buyers of the theme across our Americas coverage," Goldman Sachs analyst Robery Borouherdi notes in an M&A report released Friday.

Leveraged Buyouts to Keep Growing

Leveraged buyouts, or LBOs, appear to be one of the most attractive deals in the making. "With about $400 billion in unlevered private-equity cash and a favorable deployment backdrop, we expect the pace of LBO activity to continue," Boroujerdi says in a report.

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All together, the companies that Goldman covers have cash balances that have cumulatively grown 50% since 2007. In the past two quarters alone, their gross balances have grown more than 10%.

The Goldman study lists companies that are potential buyout targets, as well as possible strategic acquirers, based -- in part -- on their profitability and cash stash. The study also highlights 33 stocks that could benefit from the mushrooming M&As.

Stocks Poised to Gain from M&A

The following companies top the list of companies with at least a 30% chance of getting involved in M&A activity, according to Goldman estimates:
  • Alexion Pharmaceuticals (ALXN), which develops drugs to treat autoimmune disorders, among other diseases, and is currently trading at $94 a share.
  • Cabot Oil & Gas (COG), a natural-gas exploration company now trading at $48 as share.
  • Mead Johnson Nutrition (MJN), which makes nutritional products for infants and children and trades at $55 per share
  • Abercrombie & Fitch (ANF), a major apparel retailer trading at $53 a share.
  • Huntington Bancshares (HBAN), which operates 600 Huntington National Bank branches and sells at about $7 a share.
  • Varian Semiconductor Equipment (VSEA), the world's largest designer and maker of ion-implantation equipment used to modify semiconductor wafers' electrical properties, currently trading at $44 a share.

Among the potential acquirers that Goldman Sachs lists are Google (GOOG), with net cash holdings of $31.5 billion at the end of 2010; Apple (AAPL), with $27 billion; Cisco Systems (CSC), with $25 billion; Intel (INTC), with $19 billion; Johnson & Johnson (JNJ), with $10.7 billion; Qualcomm (QCOM), with $10.5 billion; and Chevron (CVX), with $5.8 billion.

Private Equity Also Could Benefit

Several publicly traded private-equity firms also are well positioned to benefit from the M&A trend, including leveraged buyouts, the Goldman team says. These include:

1. Blackstone Group (BX), one of the world's largest private-equity firms and alternative-asset managers with nearly $100 billion of assets under management. With $16.5 billion in cash assets, Blackstone is Goldman's top listed top alternative asset manager and currently trades at $16.59 a share.

2. Kohlberg, Kravis & Roberts (KKR), a private-equity outfit specializing in acquisitions, leveraged buyouts, management takeovers and other investments, KKR has $13 billon of "dry powder" that it could set off to help finance deals and is now trading at $16.53 a share.

3. Evercore Partners (EVR), an investment boutique with a global franchise that provides advisory services for mergers and acquisitions, restructurings, divestitures and financing, and is currently trading at $30 a share.

Large institutional investors already have exposure to many of these companies for reasons other than their M&A appeal. But for investors seeking to catch potential M&A plays, these stocks could be a way to get into the game.


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]]>acquisitionacquisition targetacquisitionsanalystanalyst forecastsanalystsappleChevronciscogoldmanGoldman SachsgoogleintelInvestingInvesting adviceinvesting tipsInvestmentinvestorJJJohnson & Johnsonjohnson and johnsonm and amamergermergersmergers and acquisitionsQualcommStockstock marketstocksGene MarcialSat, 19 Mar 2011 09:00:00 ESTInside Wall Street: Japan Crisis Is a Buying Opportunity for the Stout-Heartedhttp://www.dailyfinance.com/2011/03/17/japan-crisis-stock-buying-opportunity-brave-investors/http://www.dailyfinance.com/2011/03/17/japan-crisis-stock-buying-opportunity-brave-investors/http://www.dailyfinance.com/2011/03/17/japan-crisis-stock-buying-opportunity-brave-investors/#commentsFiled under: , , ,

Wall StreetDon't panic. That's the first thing to keep in mind as the headlines shout that the global economic risk from Japan's nuclear crisis is rising.

Understandably, investors are running scared. The violent force of the earthquake and tsunami that devastated parts of Japan and raised the specter of a nuclear crisis could easily spell more trouble down the road for the global economy. Indeed, warnings now abound of a more turbulent and depressed market ahead.

The decline in global equity prices that started on Feb. 18 and got "exacerbated on March 15 by the fear of a worst-case scenario unfolding in Japanese nuclear power plants still needs to play itself out, and will have further to run," cautions Sam Stovall, chief investment strategist at Standard & Poor's.

That makes sense. But let's not forget: When there's gloom and doom in the air, there's also opportunity -- a rare chance to jump on stocks whose prices have been quickly pulled down due to panic among jittery traders. In spite of the market's current sharp decline, nothing fundamental suggests the end for equities has begun, as some commentators are now starting to proclaim.

Crisis Will Keep Fed on Accommodative Course

When the market rebounds -- and it definitely will -- it will be with a forceful kick that should equal the market's snap back after 9/11, and could conceivably catapult the Dow Jones industrial average back to the all-time high of 14,164.53 it hit on Oct. 9, 2007. The Dow closed on Wednesday at 11,613.30, down 242.12 or 2.04%.

In the meantime, investors should keep cool and calm. Look at the situation this way: The U.S. economic recovery is in full stride, and this shock to the Japanese economy can only result in more encouragement for the Fed Chief Ben Bernanke to make sure the U.S. economic recovery doesn't stall, which will mean continuing the Fed's policy of accommodation and loose money.

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"S&P's Equity Strategy thinks the U.S. Federal Reserve Board will conclude that low short-term interest rates will help combat the global uncertainty," says S&P's Stovall. What's more, he adds, the Fed's recent statements on the state of the economy "may even increase speculation of a third round of quantitative easing, which would likely aid commodity and equity prices."

Splashy events such as the crisis in Japan or the turmoil in the Middle East invariably distract investors away from the gains the economy has achieved in the past year and a half. In times of geopolitical conflicts abroad and acute emergencies, technical analysts who follow the charts reigning supreme in assessing what's really happening to the equity and bond markets. But investors should pay more attention to the improving market fundamentals: Corporate earnings continue to be strong and the rebounding economy is gaining strength.

Technical analysts, who are skilled at assessing what may lie ahead based on past market trends and patterns, tend to fuel even more of what's already happening. When the market is in full decline, as it is these days, they tend to become more bearish and warn of how much lower it could go. The same thing happens when the market is on the upswing: They tend to calculate how much more upside there is. That's why wise investors should combine both fundamental and technical analysis in probing the market's motions.

An Oversold Scenario Developing

The first thing investors should do when the rest of the investing world is losing its clarity amid utter confusion is to draw up a list of the specific stocks they'd want to buy at bargain prices. Jump in as the Dow or S&P 500 head south. But make sure you have studied the fundamentals of those companies and the technical behavoirs of their stocks before pulling the buy trigger.

Right now, we know the market could still go lower, and that's when more opportunities should be seized by investors. Hopefully, they've already taken profits from the stocks that advanced during the bull market. Proceeds from those sales can fund their purchase of those now under-priced stocks.

Alec Young, analyst at Standard & Poor's international equity strategist, believes an "oversold" scenario may be developing in the international markets -- and the Japanese market in particular -- which could be exploited by short-term traders looking to take advantage of the falling prices.

In the U.S. equity market, "we recommend sticking with more cyclical sectors, as a recovery from this pullback would likely benefit those stocks and groups that were hit the hardest," says S&P's Stovall.

This Too Shall Pass

Investors should not lose track of what's important: the resilience of the U.S. economy. When investors refocus on this and away from what's happening in Japan and the Middle East, the shares of companies involved in the recovery, like those cyclical stocks, will be the market's front-runners once again.

Even before the massive disaster engulfed Japan, the markets were already showing signs of wariness and weariness. Not a few market analysts had been predicting a significant market downturn after a year of massive gains for equities. Obviously, the triple calamities of earthquake, tsunami and nuclear crisis in Japan were not being factored into any analyst's equations.

What should be in the equation as we look at markets now is that this, too, shall pass. Investors with the stomach for the ride should play the coming market rebound.

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]]>accommodationbahrainbear market forecastbull market forecastbuy stocks nowColumnsfedfederal rFederal Reserve Chairman Ben Bernankeinvesting tipsInvestment opportunitesjapan earthquakejapan nuclear crisisjapan tsunamilibyaloose money policymarket fundamentalsmarket timingmiddle eastmiddle east protestssaudi arabiaTechnical AnalysisGene MarcialThu, 17 Mar 2011 06:30:00 ESTInside Wall Street: Looking to the Bio-Defense Sector as Nuclear Fears Mounthttp://www.dailyfinance.com/2011/03/16/inside-wall-street-looking-to-bio-defense-sector-as-nuclear-fea/http://www.dailyfinance.com/2011/03/16/inside-wall-street-looking-to-bio-defense-sector-as-nuclear-fea/http://www.dailyfinance.com/2011/03/16/inside-wall-street-looking-to-bio-defense-sector-as-nuclear-fea/#commentsFiled under: , ,

The calamitous earthquake and subsequent tsunami in Japan should now call attention to an almost-ignored group of young biotechs. Known as the bio-defense group, these companies develop treatments for, among other things, exposure to radiation resulting from nuclear accidents or attacks.

The sector attracted a lot of interest after 9/11 and a number of companies emerged to develop protective biodefense drugs and products. But with the waning of dark headlines about terrorist threats, investors have tended to put them on their low-priority list.

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That may be about to change. The growth potential of these little-known companies could be huge. The U.S. government remains concerned about a surprise terrorist strike, and has stepped up funding for the development of treatments in the event of a chemical, biological, or nuclear attack. However, the funding thus far has been fairly small and hasn't stirred much excitement on Wall Street. But events in Japan will no doubt refocus interest in these companies -- investors usually pay attention when the headlines get scary.

From Unknown to "Must Own"

Some analysts are anticipating a scramble among large institutional investors for these biodefense stocks following the Japanese earthquake. Also known as "anti-terrorism" biotechs, they will be touted as the next "must-own" stocks as the threat of a meltdown in Japan's nuclear reactors looms large.

Whether or not they really are "must-own" stocks, they do deserve a place in investment portfolios, considering the undiminished threat from al-Qaeda, the raging problems in the Middle East, the relatively cheap valuations, and now, of course, the tragedy in Japan.

Among such companies are Siga Technologies (SIGA), which is developing therapeutic products for biological warfare defense, including an orally administered antiviral drug that targets viruses such as smallpox; Aeolus Pharmaceuticals (AOLS), which is developing medicines against acute radiation syndrome in the lungs and gastrointestinal tract; and Cleveland BioLabs (CBLI), which is developing protectants against the effects of radiation leaks, and a number of anti-cancer drugs.

The U.S. government is the largest source of funding for academic institutions and biotech companies conducting biodefense research and producing vaccines and immunotherapies directed at potential agents of bio-terrorism.

The government's concern is reflected in the 2004 passage of the BioShield Act, which created Project BioShield to fund countermeasures against a chemical, biological, radiological or nuclear attack. The project has set aside $5.6 billion for the next 10 years for the government purchase of next-generation medical countermeasures, including improved vaccines, diagnostics, and therapeutics. The budget includes grants from the Department of Health and Human Resources to biotechs developing such bio-defense products. That $5.6 billion budget may now look insufficient. Already, there is talk among some senators for the need to bump up the nation's preparedness in the wake of the nuclear crisis in Japan.

Siga Technologies

Siga Technologies has been one of the largest recipients of government grants and contracts. Since 2003, it has been awarded grants of about $64 million and contracts for its lead smallpox drug candidate worth about $75 million. That's one reason why Siga's stock bolted to a 52-week high of $15.66 a share on March 8, 2011, from a low of $6.03 on June 9, 2010. Although the stock has sagged to around $12 since then, some analysts believe the stock could climb to the low $20s, primarily because of the government's confidence in Siga's smallpox antiviral drug. The Department of Health has informed Siga that it might seek to procure 1.7 million doses of its smallpox drug, which analysts estimate would bring as much as $500 million in revenues for Siga.

Aeolus Pharmaceuticals

Aeolus Pharmaceuticals is still very much below the radar screen of investors as it's a micro-cap stock with a tiny market value of $30 million. But its stock has tripled from 25 cents in late June 2010 to 75 cents this week. It spurted briefly to an all-time high of $1.10 a share in late February, when the Department of Health's Biomedical Advanced Research and Development Authority (BARDA) unit awarded the company a five-year $118 million contract to further develop its product, AEOL-1050, for the treatment of Acute Radiation Syndrome.

The contract provides an initial grant of $10.4 million in the first year-period, and up to an additional $107.5 million in other options that BARDA could choose to exercise. Thereafter, procurement contact for its AEOL-1050 product for the U.S. Strategic National Stockpile could follow once the Food and Drug Administration's approves such a procurement under an emergency scenario, which some analysts value at several hundred million dollars.

In addition to the product's lead indication as a medical countermeasure against acute radiation, Aeolus is also pursuing its potential commercial opportunities as an adjuvant to cancer radiation therapy to prevent or limit the side effects of radiotherapy, says Aeolus CEO and President John McManus. The product is also being studied by the National Institute of Health's NIAID unit (National Institute of Allergy and Infectious Diseases) as a countermeasure against exposure to chlorine and sulfur mustard gas, he adds.

Specifically, AEOL-1050 is a broad catalytic ant-oxidant designed to reduce stress, inflammation, and subsequent tissue damage from radiation exposure. The company says the product could have a profound beneficial impact on people who have been exposed to, or are about to be exposed to high doses of radiation. AEOL-1050 has already performed well in animal safety studies. It has shown statistically significant survival efficacy in an acute radiation-induced lung injury model, according to McManus. Aeolus has completed two Phase 1 clinical trials in 50 patients, demonstrating the drug to be safe and well tolerated, he adds.

Mark Lappe of Efficacy Capital, a major investor in Aeolus, says the company's lead product, AEOL-1050, has "multi-billion dollar opportunities" as a medical countermeasure to radiation chemical exposure as hundreds of thousands of people would be affected if a nuclear detonation or radiological attack occurred in any major city in the U.S.

In a nuclear attack, people who are less than a mile away could survive the initial blast, but they would suffer damage in the lungs, gastrointestinal tract, and bone marrow. BARDA is seeking a treatment for civilians against such damages. McManus says AEOL-1050 did well in preventing lung damage in tests on mice, rats, and monkeys, which was in part why the company won the BARDA contract.

Cleveland BioLabs

Cleveland BioLabs was awarded a $45 million contract in September by the Deptartment of Defense's Biological and Medical Systems to develop and stockpile its chief product, Protectan CBLB502. It is a "radioprotectant" molecule with multiple medical uses to reduce injury from acute stresses, such as radiation and chemotherapy. The company says the molecule mobilizes various natural-cell protecting mechanisms that induce protection and regeneration of stem cells in bone marrow and intestine.

CBLI's stock soared to a 52-week high of $9.60 Monday morning -- from a 52-week low of $2.80 on June 9, 2010. Some large institutional investors have already acquired stakes in Cleveland BioLabs, including EOS Partners, which owns a 2% stake, and Goodnow Investment Group, with 1.3%.

In view of the deepening nuclear crisis in Japan, Wall Street will undoubtedly take another look at this small biodefense group.


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]]>Aeolus PharmaceuticalsbiotechsCleveland BioLabsColumnsinstitutional investorsjapan earthquakejapan nuclear meltdownJapan nuclear plantsjapan tsunaminuclear power plantsnuclear threatradiation exposureSigaGene MarcialWed, 16 Mar 2011 06:30:00 ESTInside Wall Street: An Insurance Veteran's Tips for Stocks in a Complex Industryhttp://www.dailyfinance.com/2011/03/09/insurance-veterans-tips-for-insurance-stocks/http://www.dailyfinance.com/2011/03/09/insurance-veterans-tips-for-insurance-stocks/http://www.dailyfinance.com/2011/03/09/insurance-veterans-tips-for-insurance-stocks/#commentsFiled under: , , ,

Gene Marcial's Inside Wall StreetSome stock groups are harder to divine than others, and among those that are tough to figure is the complex insurance industry. Even pros who have been involved in the business for many years concede that insurance stocks aren't easy to grasp. Among the reasons is transparency, which they aren't known for. That's partly because of opaque accounting practices common in an industry that thrives on taking various kinds of risks.

Even Wall Street veterans like Ray Dirks, who was an insurance analyst at Goldman Sachs in the 1960s, admits it's no cakewalk to sort out which insurers -- life or property/casualty -- are sound long-term choices, primarily because of the lack of clarity in their convoluted operations. Among them, according to Dirks, are American International Group (AIG), Conseco (CNO) and Life Partners Holdings (LPHI). Dirks, who now heads his own investment outfit, Ray Dirks Research, has shorted these stocks.

That doesn't imply, however, that he's down on the entire insurance group. In fact, Dirks is bullish on several, led by Aflac (AFL), a major provider of supplemental life and health insurance in the U.S. and Japan, now trading at $56 a share; Hartford Financial Services Group (HIG), one of the largest U.S. multiline insurance companies, currently selling at $28; Progressive (PGR), a large U.S. auto insurer, now at $20; Phoenix (PNX), a major provider of life insurance, annuities and investment products, currently at $2.52; and eHealth (EHTH), a leading online source of health insurance provided by its network of 150 insurers, trading at $13.

Censured, Not Praised

Why should any one pay attention to Dirks? Well, he's probably one of the best insurance analysts around. Dirks's name ended up enshrined in the U.S. law books because of a landmark 1983 decision by the Supreme Court on his expose in 1973 of an insurance fraud committed by a large insurer, Equity Funding. Dirks blew the whistle on Equity's scam, which used fake profits to boost its stock price. The company fooled its auditors, Wall Street analysts and industry watchdogs -- until Dirks, tipped off by a disgruntled insider, exposed the scam. As an analyst, Dirks felt compelled to inform his clients about the fraud.

But instead of praising Dirks, the Securities and Exchange Commission censured him for "tipping nonpublic information" to his clients concerning Equity Funding, in "violation" of federal securities laws. Dirks fought the SEC's action all the way to the Supreme Court, which rendered a decision in his favor after 10 years of trials.

The court ruled Dirks wasn't guilty of insider trading because for a recipient of a tip to be guilty, argued the court, he or she must have sought to profit from the tip. The court found no evidence that Dirks made a dime from his actions. The Supreme Court's decision is now known as the Dirks Law on insider trading, which presumably will be invoked in the huge current insider-trading case against Raj Rajaratnam, the billionaire founder of hedge fund Galleon Group.

That's a lengthy way to introduce Dirks, but it's important to establish his credibility.

Low Double-Digit Growth

On his buy rating on Aflac, Dirks says it's the best time to buy the stock, currently trading at just 11 times his 2011 earnings forecast of $6.35 a share. He sees the company sustaining a yearly growth rate of 13% for the next several years. Aflac earned $4.95 in 2010 on revenues of $20.7 billion. He has a 12-month price target of $78 a share, in part because he sees Aflac as one of the companies benefiting from the changes mandated by the new health care reform law.

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Also bullish on Aflac, Edward A. Spehar of Bank of America Merrill Lynch says that after raising its operating per-share earnings at a 17% rate over the past five years, he expects low double-digit growth to continue for the foreseeable future. Spehar rates Aflac a buy, with a higher 12-month price target of $83 a share.

Hartford Financial, notes Dirks, is one of the traditional insurers with a respected reputation among companies that provide investment, life and property/casualty insurance products. Trading at just seven times his 2011 earnings forecast of $4.05 a share, Dirks figures Hartford could trade at 11 times his 2012 earnings estimate of $4.75 a share, or a price target for next year of $50 a share. Hartford earned $2.48 a share in 2010, on revenues of $22.3 billion.

Progressive, like Aflac, advertises heavily to promote its products, often using humor in its TV commercials to educate the public on how to buy insurance products on autos and other vehicles, including motorcycles, heavy trucks and vans. Dirks figures its stock, up from a 52-week low of $16.95 in early March 2010, to $20 on Mar. 8, 2011, should hit $29 in 12 months. The stock is cheap, says Dirks, trading at 12.5 times his 2011 earnings projection of $1.70 a share. He says Progressive has the capacity to sustain a yearly growth rate of about 12%.

An Internet and China Play

Phoenix, one of the oldest U.S. insurers dating back to 1851 (then named American Temperance Life Insurance), provides its products and services to high-net-worth customers through a network of financial professionals and consultants. Dirks says the price is right for this stock, which struggled after collapsing in 2008 from $14 a share to $1. That was after State Farm Insurance dropped Phoenix from State Farm's list of insurance products marketed by its agents. Phoenix has been in the red since then, but Dirks expects the company's new management team to get back to profitability this year. He forecasts earnings of 60 cents a share for 2011, and sees its stock rising to $4.26 a share in 12 months.

eHealth, a novel kind of an insurer, sells its products, primarily individual and family insurance plans, on the Internet. It also offers policies for small business and short-term health insurance products. The big potential for growth will come from China, says Dirks. That could be a huge market for a small insurer like eHealth, he says. The little known insurer, he figures, is cheap at its current price of $13 a share, down from its 52-week high of $18.98 on May 18, 2010. Dirks has a 12-month target of $18.50, based on his 2011 earnings estimate of 60 cents a share in 2011 and $1 in 2011. It earned 73 cents in 2010.

One bull on eHealth is Bank of America Merrill Lynch, which recommends it as a buy. Its analyst, Nat Schindler, notes that the company faces no direct competition and has strong growth prospects. The stock, he adds, is an investment in the greater use of the Internet for selling products and services, including individual health insurance.

Some large institutional investors are already big stakeholders in this small-cap insurer, including BlackRock Institutional Trust, which owns 7.7%; Wellington Management, which holds 5.9%; and J.P. Morgan Asset Management, with 5.4%.

Although insurers haven't been on top of Wall Street's favored list during the economic downturn, some of them could provide insurance for strong gains during the recovery that's now in an upward swing.

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]]>aflacColumnseHealthEquity FundingHartford Financial Servicesinsider tradinginsurance fraudinsurance stockslife insurersphoenixprogressive insurancepropertycasualty insurersRay DirksGene MarcialWed, 09 Mar 2011 07:30:00 ESTInside Wall Street: This Tiny Stem Cell Biotech Has the Vatican's Backinghttp://www.dailyfinance.com/2011/03/07/neostem-stem-cell-research-vatican-backing/http://www.dailyfinance.com/2011/03/07/neostem-stem-cell-research-vatican-backing/http://www.dailyfinance.com/2011/03/07/neostem-stem-cell-research-vatican-backing/#commentsFiled under: , , , ,

Gene Marcial's Inside Wall StreetThe fiery subject of medicine based on human stem cells usually evokes roiling controversy, often generating more questions than answers. So, stem cell therapies have yet to catch on among investors -- and on Wall Street. No wonder a tiny company like NeoStem (NBS), which focuses on stem cell research and its medical applications, continues to be underappreciated, if not ignored.

And yet it has attracted several big-name investors that are intrigued by some unexpected events, including the Catholic Church's surprising embrace of NeoStem's research and NeoStem's foothold in China's vast health care market. The Vatican has decided to invest $1 million in NeoStem, a biopharmaceutical company developing proprietary cellular therapies. NeoStem is aiming to become a single source for the collection, storage and manufacture of adult stem cells -- rather than embryonic stem cells from aborted fetuses -- for cell-based medicine and regenerative science.

What's the Vatican's interest in NeoStem? In particular, the Church is very interested in the company's work on adult stem cells, and what they imply on theological and philosophical grounds.

"A Fundamental Shift"

"It's the Vatican's first-ever contractual collaboration with an outside commercial venture to advance adult stem-cell research," says Rev. Tomasz Trafny, of the Vatican's Pontifical Council for Culture. In a public statement in New York last May when the Vatican quietly made public its involvement with NeoStem, Rev. Trafny said the Vatican's charitable foundation, STOQ International, will make a commitment of $1 million to start its collaboration with NeoStem. It will spearhead, he said, an educational campaign to generate awareness of the "cultural relevance of such a fundamental shift in medical treatment options, particularly with regard to the impact on theological and ethical issues."

Explaining further, Rev. Trafny said the initiative will partner NeoStem's and the Vatican's charitable organizations to expand research and raise awareness toward adult stem cell therapies, and to explore their clinical application in the field of regenerative medicine, as well as the cultural impact of such research.

Considering the potential implications of scientific investigation, medical applicability and the cultural impact of research on adult stem cells, "we view the collaboration with NeoStem as a critical effort," says Rev. Trafny. "We are particularly excited about NeoStem's VSEL [very small embryonic-like] stem cells technology," he adds.

VSEL stem cells have physical characteristics typically found in embryonic stem cells. In 2007, NeoStem acquired a technology focused on VSELs that has an ability to detect cells found in different types of tissues that could interact with a specific organ to help in repairing damaged or diseased tissues.

A Three-Day Conference in Rome

The Vatican isn't the only big backer. On Jan. 13, the U.S. Defense Department awarded NeoStem $1.7 million to help fund the company's research in using its VSEL technology for the treatment of osteoporosis and improve bone health.

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One of the highlights of the Vatican-NeoStem partnership will be a three-day international conference, to be held at the Vatican in November, on adult stem cell research, including NeoStem's VSEL stem cell technology.

"This technology opens the door to the possibility of achieving the positive benefits associated with embryonic stem cells without the ethical or moral dilemmas and other negative effects associated with embryonic stem cells," says Dr. Robin Smith, NeoStem's chairman and CEO. For more than 40 years, she says, physicians have been using adult stem cells to treat various blood cancers. But only recently, she notes, has the promise of using adult stem cells to treat other diseases begun to be realized.

The Vatican-NeoStem collaboration hasn't yet generated much enthusiasm from Wall Street or the medical community. But it did nudge some large U.S. institutional investors to take a look at NeoStem. Among those that have bought its shares are BlackRock Institutional Trust, which has acquired a 1.22% stake; D.E. Shaw, which purchased 0.91%; State Street Global Advisors, which now owns 0.60%; Northern Trust Investment, with 0.33%; and Vanguard Group with 0.24%.

Rising 12-Month Targets

"We think an investment in NeoStem is a good way to participate in the growing potential of stem cells, where a significant breakthrough could happen over the next five years," says Shiv Kapoor, biotech analyst at investment firm Morgan Joseph. And it's also a great way to benefit, through NeoStem, from the large and growing Chinese health care market, he adds. In 2009, NeoStem acquired 51% of Suzhou Erye Pharmaceuticals in China, which produces a series of antibiotics, including penicillin and cephlasporins. Suzhou in 2009 generated revenues of $11 million and $6 million in earnings. "We expect the Chinese pharmaceutical business to grow at least 20% over the next decade," says Kapoor.

NeoStem is licensed to use stem cell-based orthopedic technology in Asia and has now set up a program in China to offer orthopedic treatments using adult stem cells through a network of hospitals. "NeoStem is developing one of the best cell therapy platforms in the industry," which includes stem cell storage, banking, and autologous stem cell-based treatments, says Kapoor. He rates NeoStem's stock, now trading at $1.49 a share, a buy with a 12-month target of $3.50.

Yale Jen, biotech analyst at investment firm Maxim Group, also rates NeoStem a buy, but with a higher 12-month price target of $5 a share. The stock remains undervalued, says Jen, based on the increasing revenues generated by its stem cell operations in China and the advancement of its VSEL technology.

An Enhanced Portfolio of Services

NeoStem has now become a global one-stop-shop on cell therapy, says CEO Smith, as a result of its January acquisition of Progenitor Cell Therapy, a privately owned cell therapy company that owns cell manufacturing and storage facilities. As a contract manufacturer, Progenitor was a big factor in the success of Dendreon (DNDN) in its manufacture of Provenge, the first autologous cellular immunotherapy to get U.S. Food and Drug Administration approval for the treatment of metastatic prostate cancer. Provenge has since become a blockbuster drug.

The purchase of Progenitor enhances NeoStem's portfolio of services and allows the in-house development of all stages of regenerative therapeutics, notes Reni Benjamin, biotech analyst at investment firm Rodman & Renshaw. He says that on a sum-of-the-parts analysis, NeoStem, which he rates as outperform, is worth $3 a share.

The company's regenerative medicine franchise, he adds, provides it with "a blockbuster potential." He figures that although NeoStem will remain in the red through 2011, revenues have ballooned. They jumped from $11.6 million in 2009 to an estimated $69.9 million in 2010. For 2011, Benjamin forecasts revenues will leap even more, to $93.4 million.

There's little doubt that NeoStem will start attracting more institutional and individual investors seeking to participate in the still-evolving field of stem-cell therapies. As NeoStem solidifies its leading role in that still underappreciated sector, it seems likely to emerge as a suitable way to invest in the nascent field of stem cell therapy.


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]]>adult stem cell researchadult stem cellsbiotechbiotech stocksColumnsDendreonembryonic stem cell researchFDAneostemprovengestem cell researchstem cellsvaticanVaticans Pontifical Council for CultureGene MarcialMon, 07 Mar 2011 07:30:00 ESTInside Wall Street: How Goldman Is Playing the Coming Tide of Generic Drugshttp://www.dailyfinance.com/2011/03/02/goldman-bets-on-generic-drugs/http://www.dailyfinance.com/2011/03/02/goldman-bets-on-generic-drugs/http://www.dailyfinance.com/2011/03/02/goldman-bets-on-generic-drugs/#commentsFiled under: , , , ,

Gene Marcial's Inside Wall StreetGeneric drugs are expected to enjoy a banner year in 2011, prompting some investment pros to reformulate their portfolios to get a jump on the transition.

Viewing the medical industry's enormous drug supply chain, some Wall Street strategists are betting on several wholesale distributors and retail drugstores they believe will get a big advantage from the shift to generics from brand-name drugs.

With over $20 billion worth of brand drugs losing protection starting this year, "generics and specialty [drug] launches will make 2011 an attractive year," says a Goldman Sachs team of analysts led by Matthew J. Fassler. The analysts believe three drug "supply chain" distributors are attractive investments in the current environment.

"We prefer exposure to those linked to hospital and physician use," he says. Generics, he adds, are a common theme in Goldman's coverage in the drug-distribution industry. The other analysts in the Goldman group are Robert P. James, Randall Stanicky and Verdell Walker. They expect the diversified large distributors, in particular, to benefit from several exclusive launches of generic drugs in 2011.

"Best Leverage to Generics"

"We are buyers of Amerisource Bergen (ABC), McKesson (MCK) and Medco (MHS)," says Fassler, who notes that generic launches typically have sparked margin expansion at these large distributors. "We expect this to continue in 2011, given several exclusive launch scenarios," he says.

Among the retail drugstores, Goldman analysts favor Walgreen (WAG), where a focus on existing assets, they argue, is yielding margin improvement and expense control, and CVS Caremark (CVS), which is the retailer that's most leveraged to generics.

Amerisource, whose stock has leaped from a 52-week low of 27 a share on Aug. 31, 2010, to $37 on March 1, is Goldman's favorite distributor, because "its exposure to the independent pharmacy customer gives it the best leverage to generics," according to Fassel. Also, he expects its specialty distribution business to gain from some key specialty generics, including Eloxatin, Gemzar and Taxotere.

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Eloxatin, a treatment for colorectal cancer, was the biggest single specialty generic launch in 2010, which contributed 25 cents, or 11%, a share to Amerisource's 2010 earnings. The six companies that produced the generic drug came to an agreement last year with the branded medicine's manufacturer, Sanofi Aventis (SNY), to suspend further production of the drug but to restart making them in August of 2012.

Gemzar, a generic for various cancers, including breast and lung, generating sales of $800 million a year, was launched Nov. 15, 2010. The branded drug is produced by Eli Lilly (LLY). Gemzar sales will be a big boost to Amerisource this year, the analysts say.

Taxotere, a generic drug for breast and prostate cancer, "will be the biggest near-term catalyst for distributors such as Amerisource." The generic, whose branded sales were roughly $1.2 billion a year, could get approval soon, says Fassel. And if approved, the most noticeable impact will be to Amerisource, followed by McKesson, given their 55% and 25% market shares, respectively, in the specialty distribution market," the analyst says.

Enter Generic Lipitor

Among other generics that are scheduled to come to market this year is the one that will replace Pfizer's blockbuster Lipitor, the largest-selling branded drug in the world, with annual sales of $7.2 billion. The maker of the generic version of Lipitor, Ranbaxy Labs, will release the product by November this year. Watson Pharmaceutical is also scheduled to come out with its own generic Lipitor. Medco has disclosed an expected significant impact on its bottom and top lines in December from the generic Lipitor.

Also among other generic versions coming on stream are Concerta, a treatment for ADHD (attention deficit hyperactivity disorder) developed by Watson, scheduled for release on May 1, 2011, whose branded drug generated yearly sales of $1.4 billion; Lotrel, a generic drug for high blood pressure, with branded annual sales of $360 million; and Rythmol, a generic drug to treat irregular heartbeat, whose branded version took in annual sales of $121 million.

Goldman values Amerisource's stock, currently trading at $37 a share, at $42 in 12 months. McKesson, now selling for $79 a share, is worth $84, according to Goldman, which started recommending the stock when it was trading at $72 in late January. Medco, now trading at $62, is up from a 52-week low of $43 in late August 2010. Goldman's 12-month target is $77 a share.

Outside the Health Care Battles

Among the retail drugstore chains, Walgreen and CVS are engaged in extensive store remodeling or repositioning efforts to enhance returns. They're also buying back shares and are likely to hike their dividends, says Goldman's Fassel. Walgreen, whose stock is now trading at $43 a share, is up from its 52-week low of $26 hit in July 2010. Goldman's 12-month target is $46. CVS, now trading at $33 a share after hitting a 52-week high of $37.85 on Apr. 15, 2010, is worth $42, according to Goldman.

In all, the drug distribution and retailing sectors, which didn't get embroiled in the heated battles over the health care reform, are surely attractive investment bets as consumer spending for essential medical needs rises quickly.


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]]>Columnsdrug distribution stocksdrugstoresgeneric drugsLipitorpharmaceutical stocksGene MarcialWed, 02 Mar 2011 07:30:00 ESTInside Wall Street: An Agribusiness Stock With Robust Growth Prospectshttp://www.dailyfinance.com/2011/02/28/syngenta-agribusiness-stock-growth-prospects/http://www.dailyfinance.com/2011/02/28/syngenta-agribusiness-stock-growth-prospects/http://www.dailyfinance.com/2011/02/28/syngenta-agribusiness-stock-growth-prospects/#commentsFiled under: , ,

Gene Marcial's Inside Wall StreetOnce an unknown company to most U.S. investors, Syngenta (SYT) has blossomed and flourished as one of the world's leading agribusiness companies, with a hefty 19% global share in the multibillion-dollar crop-protection market and 11% in seed production. And its stock has streaked to all-time highs in February as it rivals older, big-name competitors DuPont (DD) and Monsanto (MON).

Switzerland-based Syngenta is one of my favorites because of its impressive robust growth story -- and a stock that has continued to climb every year since I first wrote about it for BusinessWeek on Mar. 13, 2006, when it was trading at $28 per American Depositary Receipt (ADR). It has rocketed since to $65 on Feb. 25, after hitting a record high of $67.35 on Feb. 9. Wall Street bulls believe it will keep climbing -- perhaps to $75 or more in 12 months. A total of 11 analysts follow Syngenta, with six recommending a buy and the rest sticking to a hold rating. None advocates selling the stock.

Industrial Corn for Ethanol

Not many companies can boast of such a stunning performance -- especially in the field of agriculture. Prospects are even sunnier ahead as grain and commodity prices continue to escalate. With operations in more than 90 countries, Syngenta is a leading producer of crop-protection products used on a wide variety of crops -- herbicides, insecticides and fungicides -- as well as in fruits, vegetables and flowers. .

The company also develops and invests heavily in research and development to come up with genetically modified seeds. On Feb. 11, the U.S. Department of Agriculture approved one of its products, a genetically enhanced corn, for use in the making of ethanol. Using this "industrial" corn for producing ethanol increases output and reduces the water, energy and chemicals previously needed. Syngenta is taking steps to make sure the special corn doesn't get into the food supply.

Such specialized farm products reflect the innovative spirit at Syngenta. "As a key provider of crop chemicals and seeds, we think Syngenta will benefit as declining arable land per person and rising income levels lead to increased demand for agricultural inputs over the long run," says Jeffrey Stafford, analyst at investment research outfit Morningstar, in a report on the company. Over the short run, he adds, "high crop prices and excellent farmer economics should lead to solid results."

Soybean Yield Increases of 50%

Indeed, with Syngenta's record of innovation, the company has established a "prime position in crop-protection products," observes Stafford. Part of the novel efforts at Syngenta is its recent change in strategy that fully integrates the company's crop-protection and seeds operations. That allows Syngenta to offer farmers a single package and expert advice with both crop-protection and seeds for their specific needs, tailored to their local conditions.

The combined approach not only reduces the cost to the farmer but also results in more efficiency and productivity, explains Syngenta Chief Operating Officer John Atkin. And the single package saves farmers time because just one Syngenta representative offers the two products and combined expertise in one meeting, he adds. At the same time, the integration saves Syngenta about $600 million a year.

The strategy has been in operation in some countries, such as Brazil, the second most important market for Syngenta after the U.S. He says some Brazilian farmers have been able to increase their soybean yield by 50% over their average output. Such results have thus convinced the company to apply the integrated-package strategy worldwide.

"Growth Underpinned by a Multitude of Factors"

According to CEO Mike Mack, Syngenta is determined to continue to outperform beyond 2011 by targeting an earnings margin (before interest taxes, depreciation and amortization) of between 22% and 24%, cash flow return on investment of more than 12% and further market share gains. At a recent conference call with analysts, Mack said those goals reflect the company's confidence in the continued growth of its businesses, as well its ability to pursue a "progressive dividend policy" from a higher base.

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With its stable financial condition and strong balance sheet, the company's free cash flow has increased to $1.2 billion. "The free cash flow will remain robust due to strong demand growth from the emerging markets," notes Ankit Jain, analyst at Standard & Poor's, who rates Syngenta a buy. "We think the solid demand for grain will endure with growth underpinned by a multitude of factors." These include a steadily growing global population, increasing urbanization that has reduced the availability of arable land and the rising demand for animal feed due to increased demand for meat and dairy products, says Jain.

Also a big problem is the "increasingly adverse yield conditions," mostly due to factors such as soil erosion, drought, deforestation and plant diseases, laments Jain.

These factors all bode well for Syngenta, which "has built leadership positions in crop-protection and seeds technologies," says the analyst. He forecasts Syngenta will earn $19.70 a share in 2011 on revenues of $12.40 billion, and $20.60 a share on revenues of $12.87 billion in 2012 -- way up from 2009's earnings of $16.42 on sales of $11.64 billion. One share of Syngenta is equal to five ADRs.

Still Largely Unnoticed

Analyst Andrew Stott of Bank of America Merrill Lynch is impressed with Syngenta's array of products and technology. "The overriding fact remains that Syngenta's broad platform is unrivaled," he says. And he sees significant increases in its dividends. That plus acquisition-led growth could enhance further shareholder returns, says Stott, who has a 12-month price target of $73 a share.

As impressive as Syngenta's fast growth and the masterful stock performance are, not many of the large U.S. institutional investors have yet flocked to it. The few that have bought into the stock include Delaware Management, which has acquired a 1.2% stake, and Wellington Management, which owns a modest 0.6%.

Nonetheless, for investors looking for an agricultural play with a record of almost unbridled growth and a stock that's on the rise, Syngenta looks like a well-grounded and fertile investment bet.


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]]>agribusinessagribusiness stocksagricultureagriculture stocksColumnscommoditiescornDupontethanolfarm productsfoodmonsantoseedssyngentaGene MarcialMon, 28 Feb 2011 07:30:00 ESTInside Wall Street: As Construction Revives, So Is This Equipment Renter's Stockhttp://www.dailyfinance.com/2011/02/23/construction-rebound-is-boosting-rsc-stock/http://www.dailyfinance.com/2011/02/23/construction-rebound-is-boosting-rsc-stock/http://www.dailyfinance.com/2011/02/23/construction-rebound-is-boosting-rsc-stock/#commentsFiled under: , , ,

Here's a little-noted barometer for gauging the economic recovery: the volume of rental activity for industrial and nonresidential construction equipment. That measure is now showing a rebound that's gaining more traction every day.

That's because gear-rental companies are usually among the early beneficiaries of a recovery, and one company that has proved the maxim to be true is RSC Holdings (RRR), the second-largest equipment-rental company in North America. Its business -- and its stock -- have been gaining smartly.

When the economic downturn got rougher last year, shares of companies related in any way to construction -- including those in commercial or heavy industrial sectors -- got clobbered and driven to their lows. RSC sank to a low of $5.99 a share in early March 2010. That's when I highlighted RSC in this column -- after it fell -- on Mar. 3, 2010, pointing out that the company was surely a turnaround candidate because it would be a big beneficiary when industrial production and construction activity picked up along with the recovery.

"Picking Up Steam"

Like clockwork, as evidence of a renewal started piling up last year, RSC was among the first to reflect that rebound, in its sales and earnings. And in its stock price. RSC shares have more than doubled from the lows, closing around $13.30 on Feb. 22, down some 3.5% for the day as the entire stock market took it on chin, thanks to escalating violence in Libya and other Mideast hotspots. Some analysts say the stock has just started to readjust its worth and could climb more. Investment bank UBS analyst Henry Kirn was one of the analysts who boosted his 12-month price target on the stock, to $20 a share from $15.

"Rental trends are picking up steam, and pricing has come back to life," notes Vance H. Edelson, analyst at Morgan Stanley. He says the company's recent fourth-quarter results were "very strong" and consistent with the outlook provided on Jan. 13. Indeed, the annual growth in rental services was the highest for any fourth quarter since 2005, and year-to-year changes have just recently turned positive, notes the analyst.

RSC rents out a diversified line of heavy equipment -- from backhoes and forklifts to air compressors, aerial platform booms, and generators -- to industrial and nonresidential construction customers. During the recession, RSC took the opportunity of preparing for the down cycle's end and the onset of a recovery by cutting costs and investing in new equipment.

"RSC is a well-run rental company that executed on its business plan through the downturn, generating substantial free cash flow and significantly reducing debt," Edelson points out. The company is now gaining from the rebound in demand and the rise in utilization rates.

"We maintain our overweight rating on this best-in-class equipment rental company that's now benefiting from the cyclical [economic] improvement," says Edelson.

Renting Rather Than Buying

RSC President and CEO Erik Olsson exudes optimism about the company's prospects this year and next. Sales growth suffered in 2009, but it started rebounding in 2010, he notes. "For 2011, we see significant volume growth starting in the second half of the year, as demand continues to pick up and pricing stays firm," forecasts Olsson.

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Part of what's driving up business, he says, is the increasing number of industrial and commercial companies that are switching to renting instead of buying their own equipment. The incentive for doing so is the significant cost-savings. That's basically the reason why the trend toward outsourcing rather than keeping and storing a huge inventory of heavy equipment and supplies has caught on, says Olsson. He estimates that renting equipment results in savings of as much as 22% in the first six months of the rental period.

RSC posted a loss of 71 cents a share in 2010 on revenues of $1.23 billion, but analysts are now upbeat and expect the company to be back in the black starting this year.

"All arrows seem to be pointing in the right direction as RSC enters 2011," says David J. Manthey, analyst at investment firm Robert W. Baird. With volume trends strengthening and its customers increasingly renting rather than buying equipment, the company is well positioned for a multi-year upturn, says the analyst.

So, Manthey expects RSC to start making money in 2011, and he estimates it should earn15 cents a share on revenues of $1.48 billion. For 2012, he forecasts a big leap in earnings and sales, to 57 cents on revenues of $1.61 billion. "RSC remains our top idea, and we believe investors should build positions to benefit from the expected multi-year expansion," Manthey advises.

Early to Invest

Analyst Scott Schneeberger of investment firm Oppenheimer says tangible signs in pricing and leading indicators suggest a turn in the nonresidential construction cycle. He rates RSC as outperform, in part because of implications of double-digit 2011 rental volume growth and incremental margins of 60% to 70% in RSC's earnings before interest, taxes, depreciation and amortization (EBITDA).

Interestingly, RSC is still a less known investment play not only on the upturn in industrial and commercial construction but in the economic recovery, which continues to increasingly gain the confidence of both investors and the business community. One large institutional investor that has been early to buy shares is Fairholme Capital Management, which has accumulated a 14.5% stake.

Investors looking to get in on an overlooked recovery play might want to join the prescient strategists at Fairholme.


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]]>Columnscommercial constructionconstruction equipmentconstruction equipment rentalequipment rentalnonresidential constructionrsc holdingsGene MarcialWed, 23 Feb 2011 07:30:00 ESTInside Wall Street: Why You Should Have Intel Inside Your Portfoliohttp://www.dailyfinance.com/2011/02/18/intel-inside-your-portfolio/http://www.dailyfinance.com/2011/02/18/intel-inside-your-portfolio/http://www.dailyfinance.com/2011/02/18/intel-inside-your-portfolio/#commentsFiled under: , ,

IntelIt's only logical that President Obama aims at ensuring continued U.S. leadership in technology, in part by preparing the next generation of Americans to excel in such a challenge and by putting a top priority on high-tech jobs.

So, it's understandable that after his visit to some top CEOs in Silicon Valley on Thursday the President has scheduled a tour of an Oregon Intel (INTC) plant today. There he'll talk with Intel President and CEO Paul Otellini (who's often a critic of Obama but is being named to the president's jobs and competitiveness council) about that ambitious aspiration. And perhaps he'll gain an "Intel Inside" insight into the fast-moving high-tech world. Investors might want to do the same.

After all, Intel is the world's largest manufacturer of microprocessors, the "brain" and central processing unit of a computer system. Intel's products have also worked their way into becoming the "nervous system" in a PC or other computing devices, through its chipsets, or microcontrollers, that are responsible for transmitting data between the CPU and input, display and storage devices.

Intel's products are almost everywhere, with strong leadership in servers, notebook and netbook computers, and consumer-electronics devices that are starting to connect to the Internet. Intel has also developed products for the fast-growing and intensely popular smartphone and tablet computer markets.

A One-Stop Answer for Tech Investors

"Anything that computes and connects to the Internet now becomes part of the total available market that we can go after," said Stacy Smith, Intel's chief financial officer and senior vice president, at the Technology and Internet Conference that Goldman Sachs (GS) sponsored on Feb. 14.

Indeed, anyone seeking to know a significant part of the huge tech world can't go wrong in getting "Inside Intel" and learn what makes it tick, literally and figuratively. Some analysts swear by Intel, arguing that for investors seeking entry in the global growth of technology, Intel is the one-stop answer.

Little wonder that Wall Street is upbeat about Intel. A total of 54 analysts from major investment and securities firms follow the company, and 33 of them recommend buying the stock, while 17 rate it a hold. Only four analysts urge investors to dump the stock. Now trading at $22 a share, the bulls' 12-month price targets range from $25 to $30 a share.

"We like this industry heavyweight, as both a short-term and long-term holding, and investors seeking technology exposure should consider this high-quality equity," says Alan G. House, tech analyst at investment research outfit Value Line. Endowed with a healthy balance sheet, Intel has many interesting products coming on stream in 2011, which, when combined with a strengthening global economy, "augur well for another solid showing this year," he adds.

The Mobile Market Challenge

For all the fierce competition in the industry and complex market forces in technology, Intel is fundamentally strong and in an enviable industry leadership position. "Intel has the best competitive position in our semiconductor universe," says Clyde Montevirgen, the tech guru and analyst at Standard & Poor's. He's impressed with Intel's "strong balance sheet and strong free cash flow, while carrying lower financial and business risks than most other chipmakers," says Montevirgen.

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He notes that what could damp Intel's revenue growth is its still-limited share in the fast-growing mobile markets, although he believes the company will continue to thrive in the PC and server segments. Intel is conscious of its late entry into smartphones and tablets, but the company is determined to succeed where it's still playing catch-up. One of its collaborations in this area is with Google (GOOG) and its Android operating system for smartphones.

"Intel has audaciously claimed its smartphone applications processor, called Medfield, will offer superior performance and longer active battery life" versus its competitors, notes Uche Orji, semiconductor analyst at investment bank UBS. He says Intel expects its Medfield-based smartphones and tablet computers will start shipping sometime this year. Medfield is the next-generation product for Intel's current Moorestown processor, designed for Google's Android smartphones. Qualcomm (QCOM), NVIDIA (NVDA) and Texas Instruments (TXN) are Intel's rivals in this market.

Intel's focus in the second half of 2011 "will be on delivering Medfield, which could put it ahead of rivals," says Vivek Arya, analyst at Bank of America Merrill Lynch. He notes that although it's specifically designed for smartphones, Medfield could also be used for tablets.

"An Upside to Our Intel Model"

"Intel has made Google's Android its top priority," says Arya, noting that Intel is already collaborating with the Internet giant in data centers. So, Android is a natural extension of this relationship. The analyst concedes that Intel has a significant number of strong competitors here, but any progress in mobile phones and tablets would be welcome and "an upside to our Intel model."

Predictably, many of the large institutional investors that are income- and value-oriented have Intel, which provides a dividend yield of 3.6%, in their portfolios. They're led by State Street Global Advisors, which owns a 3.7% stake; Vanguard Group which holds 3.6%; and Blackrock Institutional Trust with 3.3%.

Indeed, as Value Line's analyst Alan G. House points out, Intel is a tech heavyweight that deserves to be inside investors' portfolio.

Also See: Intel CEO to Join White House Council on Jobs

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]]>ChipmakerComputerHigh-tech JobsIntelIntel InsideMobile PhonePaul OtelliniPcQualcommSilicon ValleySmartphoneTabletTablet PcTech InvestingTech StocksGene MarcialFri, 18 Feb 2011 08:45:00 ESTInside Wall Street: A Little Inflation Isn't Slowing Down General Millshttp://www.dailyfinance.com/2011/02/16/general-mills-inflation-analysts-bullish/http://www.dailyfinance.com/2011/02/16/general-mills-inflation-analysts-bullish/http://www.dailyfinance.com/2011/02/16/general-mills-inflation-analysts-bullish/#commentsFiled under: , , , ,

Gene Marcial's Inside Wall StreetEmbrace inflation. That appears to be the buoyant mood at some makers of packaged consumer food. Dire warnings about the advent of higher prices notwithstanding, not everyone in the consumer-staple sector expects to be a sorry victim of inflation.

Count General Mills (GIS) among those who aren't afraid of the inflation bogey. General Mills has met the issue head-on by being the first among the largest U.S. producers of ready-to-eat breakfast cereals and other brand-name consumer foods to raise prices on many of its products. In early January, it boosted prices on snack bars by roughly 7%, in addition to recent price increases on about 50% of its other U.S. retail brands.

The move has, interestingly, elicited kudos from analysts and investors. Wall Street remains upbeat on General Mills. None of the 23 analysts who follow it is down on the stock, currently trading at $36 a share. Nineteen analysts rate it a buy, with 12-month price targets ranging from $41 to $45. The four other analysts rate the stock a hold.

No Major Damage to Margins

"It's time to embrace inflation," notes Judy E. Hong, analyst at Goldman Sachs, in commenting on General Mills' move to ride with rising prices. Rating the company a buy, she says "General Mills remains our top food pick, and the snack bar price hikes reinforce our conviction."

Profit margins aren't likely to be dented as much as some predict. "General Mills is running extremely efficiently, and in fact profit margins can grow despite the increased cost of food," argues Justin Towey, managing director at money-management firm High Tower's Morse, Towey & White Group. General Mills' major competitors have also raised prices, including Kellogg (K) and Kraft Foods (KFT), although Towey says he's "less bullish" on them for other reasons. Analysts argue that their coincident moves to boost prices reduces the risk of any softness in sales volume.

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Wheat and corn combined only represent 14% of General Mills' cost of goods sold, and about 8% of retail prices, assuming a 20% markup, says Towey. That means even a significant jump in costs would necessitate only a modest price increase to offset the impact on margins, he figures.

Towey sees General Mills as a core long-term investment in the packaged consumer-food industry. His target for the stock is $45 a share, and he notes that the stock's dividend yield of 3.1% provides a nice cushion. Steadily rising revenue, earnings, dividends and cash flow growth, combined with its globally recognized brand name, make General Mills a real value in the large-cap consumer-staples group, says Towey.

Indeed, the company's brand-name products, including Cheerios and Wheaties cereals, Green Giant canned and frozen vegetables, and Pillsbury baking products, have attracted hordes of loyal consumers.

Continued Earnings Strength

"We generally like the company's brand strength," says Tom Graves, analyst at Standard & Poor's, who recommends the stock as a strong buy. He thinks the widely popular names will provide some protection against competitive pressure from the less expensive private-label products. The company has opportunities, he adds, to bolster long-term profit margins by focusing on areas such as manufacturing, spending efficiency, global sourcing and an expanded sales mix.

Graves predicts that earnings strength at General Mills will continue. For fiscal 2011 ending on May 31, he forecasts earnings popping up to $2.48 a share, from fiscal 2010's $2.24. In fiscal 2009, the company earned $1.90.

Evidently, the company's sound financial profile enhanced by a comfortable dividend yield have made General Mills a popular stock among conservative, income-oriented investors. Some large institutional investors are already big shareholders, including State Street Global Advisors, which owns a 6.42% stake; BlackRock Institutional Trust, which holds 3.7%; and Vanguard Group, which also owns 3.7%.

In sum, General Mills could be an attractive bet for investors looking for a large-cap stock that could outperform and provide a comfortable refuge, even if inflation does become more worrisome.

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]]>breakfast cerealcheeriosColumnscommodity pricesconsumer pricesconsumer staplesfood pricesfood prices going upgeneral millsinflationpackaged foodswheatiesGene MarcialWed, 16 Feb 2011 07:30:00 ESTInside Wall Street: Two Good Reasons for Clinical Data Shares to Soar Againhttp://www.dailyfinance.com/2011/02/14/two-reasons-for-clinical-data-shares-to-soar/http://www.dailyfinance.com/2011/02/14/two-reasons-for-clinical-data-shares-to-soar/http://www.dailyfinance.com/2011/02/14/two-reasons-for-clinical-data-shares-to-soar/#commentsFiled under: , , , ,

Gene Marcial's Inside Wall StreetSizable and stunning gains from biotech stocks do happen. Even though finding hidden gems in the bewildering sector often bedevils even the most astute investors, a doubling or tripling in price within a relatively short period of time isn't impossible.

One recent example is Clinical Data (CLDA), whose stock quickly doubled in four months from the time I highlighted it in my Oct. 25, 2010 column. I pointed to its potential value with its new antidepressant drug -- and its appeal as a takeover target. Then trading at $18 a share, the stock climbed to a 52-week high of $33.40 a share by Feb. 3, 2011. It has since eased from profit-taking, closing on Feb. 11 at $28.40.

Interestingly, however, some pros believe the stock could again double from where it is today. Of course, still others warn that the stock may have peaked at $33 and could slide down from here.

But one thing to remember is that Clinical Data has wowed investors before, not just by doubling but by tripling in price. In 2007, when the company was in the early stages of developing its chief product, Vilazodone -- an antidepressant that dared to be different from those already in the market -- the stock was trading at just $9. By August 2008, it had raced up to $17.

A Triple-Bagger

The company caught my eye, so I wrote about it on Aug. 4, 2008, in my Inside Wall Street column for the old BusinessWeek magazine, citing the potential worth of Vilazodone and why the stock could continue rising to much higher levels. Indeed, it started ratcheting up, and in just a couple of months had zoomed to $28. That certainly was a triple-bagger.

Thereafter, the stock started to slope downward, hitting $15 as investor impatience mounted toward the drug. To me, that created another opportunity for investors to buy the stock at a big discount. Again, seeing the intrinsic value of Vilazodone and the stock's depressed valuation, I wrote another story, this time in that Oct. 25, 2010 Inside Wall Street column for AOL's DailyFinance (when it was $18 and quickly ran up to its $33 high).

The Food and Drug Administration's approval of Vilazodone on Jan. 21, 2011, was the ultimate catalyst that propelled the stock, by then selling at $26, to the $33 level. Clinical Data changed the drug's name to Viibryd, which the company and analysts believe will be a blockbuster product in a $12 billion market. But that's not the only catalyst for the stock to jump further.

A buyout, which had been rumored for months now, is more possible than ever, and should spice up the stock's appeal.

Big Pharmas Are Circling

Clinical Data Chairman Randal J. Kirk, a billionaire investor who is an old hand in the health care world, is confident that Viibryd will be a big hit. He predicts demand for it would be phenomenal. Analysts already forecast annual sales reaching $1 billion to $2 billion. So the stock could still hit the rafters and double in price again. But before that, a Big Pharma could buy it outright.

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The buzz continues, which Kirk is very much aware of, that at least three major drugmakers are interested in going after Clinical Data mainly because of Viibryd. Among them: Pfizer (PFE), Eli Lilly (LLY) and GlaxoSmithKline (GSK), which are already big players in the antidepressant market. Other drugmakers that also have antidepressants are Merck (MRK) through its acquisition of Schering-Plough, and Forest Laboratories (FRX).

Kirk publicly admits that he isn't averse to selling Clinical Data -- at the right price. The stock's worth hinges on how important Viibryd would be to the suitors. As the first new entry into the antidepressant market in more than 15 years, the drug is enhanced by the fact that several existing therapies are due to lose their patent protection before long.

An important feature of Viibryd is that it doesn't suppress or affect a patient's sexual function. Patients suffering from depression usually experience difficulties with sexual function, which tends to be worsened by antidepressant treatments, says Chrystyna Bedrij, biotech analyst at Griffin Securities, who rates the stock a buy.

In the Catbird Seat Now

Investment firm Piper Jaffray analyst Edward Tenthoff figures Clinical Data is worth at least $47 -- or as high as $75 in a buyout deal. All of the seven major Wall Street analysts who follow Clinical data recommend the stock as a buy.

Some people had speculated prior to the FDA go-signal that a suitor would emerge. But the risk of the FDA rejecting the drug weighed heavily on the suitors, even though at the time they could have bargained for a lower price with Kirk. Now, he's in the catbird seat and probably will be a tough negotiator.

But Kirk is very much inclined to sell the company, of which he is the majority shareholder, with a nearly 50% stake. Why sell? For one thing, he has a lot of money already at stake in it and already has new projects going. One that he's passionate about is his new, still-privately owned company, Intrexon, which is developing a new medical technology platform that helps expedite development of targeted and less toxic anti-cancer drugs. Kirk has already invested $200 million in Intrexon.

As part of building up the company, Kirk last month invested $20 million for a 5% stake in Ziopharm Oncology (ZIOP), which is developing anti-cancer drugs. Kirk plans to advance the launch of Intrexon's tech platform by applying it to Ziopharm's various oncology drugs. Kirk expects to invest $50 million more in Ziopharm.

A Veteran Dealmaker

"It's a way of further developing Intrexon's technology while, at the same time, getting involved with Ziopharm, which could become Kirk's new biotech project to build up and expand," says Griffin Securities' analyst Bedrij, who also rates Ziopharm a buy, now trading at $5.77 a share. She has 12-month target of $11 for Ziopharm. For sure, Kirk intends to increase his stake in Ziopharm, says Bedrij.

Indeed, biotech maven and dealmaker Kirk, who has formed new companies that he later sold at huge profits, including New River Pharmaceuticals (bought by Shire Pharmaceuticals in 2007) and King Pharmaceuticals (acquired by Pfizer last year), is already busy steering Intrexon. He'll increasingly invest more time and money in his new company, of which he is president and chairman. So, in effect, Clinical Data is already on the auction block.


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]]>anticancer drugantidepressantsbig pharmabiotechbiotech stocksClinical DataColumnsdrugmakersEli LillyFDA approvalGlaxoSmithKlineIntrexonMerckPfizerRandal J. KirkViibrydVilazodoneziopharmGene MarcialMon, 14 Feb 2011 08:00:00 ESTInside Wall Street: The Case for Google Galloping to $1,200 a Sharehttp://www.dailyfinance.com/2011/02/09/google-stock-doubling-to-1200/http://www.dailyfinance.com/2011/02/09/google-stock-doubling-to-1200/http://www.dailyfinance.com/2011/02/09/google-stock-doubling-to-1200/#commentsFiled under: , , , , , ,

GoogleCan Google's share price double from here? That's not a moon-shot fantasy, nor a ridiculous assumption. In fact, on more than a couple of metrics, some investment pros view the stock as intrinsically inexpensive. Currently trading at $618 a share, which admittedly many skeptics regard as pricey, Google (GOOG) has demonstrated an agility and creativity to excel in innovative products, resulting in an escalating stock price.

At its peak in 2007, Google rocketed to as high as $742 a share from its IPO price of $85 on Aug. 19, 2004. Will the stock ever streak back to that lofty level, or was that the peak? It can keep climbing, according to some investors who have been buying even though its current price of $618 is already near its 52-week high of $642.96 reached on Jan.18.

Over the next 12 to 18 months, Google should bolt to a new high of $1,200 a share, assert Philip D. Tasho, CEO and chief investment officer at Tamro Capital Partners, and Timothy A. Holland, a principal and co-portfolio manager at that institutional management firm, which shepherds some $1.4 billion. "We view Google as the best balance of value and growth in the large-cap technology sector," says Tasho.

An Energizing CEO

How does Tasho arrive at a price forecast of $1,200? He uses a price-to-revenue ratio, rather than just price-to-earnings multiple, as a measure of Google's value and growth indicator. By this measure, Tasho figures that Google is way undervalued. The stock currently trades at a price-to-revenue ratio of 6.7 vs. its historical multiple of 12. At its peak, Google's p-r ratio was 25. Tasho believes the ratio will jump back up to at least 15, which he estimates would translate to a $1,200 price.

Tasho says the naming of Google co-founder Larry Page as CEO (replacing Eric Schmidt, who remains chairman) is a big positive for the company. He expects Page to "inculcate new passion and spark new energy into the company's competitiveness, and sharpen Google's focus on innovation and new technology to further enhance Google's leadership."

In terms of revenues, Google's growth has been phenomenal, rising from $6.1 billion in 2005 to $21.99 billion in 2010. Earnings have also been robust, leaping from $5.20 a share in 2005 to $29.61 in 2010. For 2011, Standard & Poor's analyst Scott H. Kessler forecasts revenues will rise 15%, benefiting from "more spending on Internet advertising, the appeal of search ads, the company's expansion overseas and increasing traction for display and mobile advertising."

Google's business model has been resilient, he adds. "We are constructive on Google's efforts to broaden its offerings, especially with Web applications and mobile services," says Kessler. His 12-month price target is $750 a share.

Android Leapfrogs Apple

By now everybody knows that Google, the world's largest Internet company, is the generic word for finding almost anything on the Web, offering targeted search from billions of Web pages. Its YouTube video unit, acquired in 2006, is the most popular social media outlet of its kind, attracting 2 billion views worldwide, according to Google.

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And its Android smartphone operating system, launched in late 2007, has also caught fire. According to tech consulting firm Gartner, in third-quarter 2010 Android was the fastest-growing operating system in the globe. And tech research firm Comscoref says Android surpassed Apple's (AAPL) iOS in smartphone operating system market share in the U.S. during the same period.

The Android mobile software shows that "Google is a true innovator, with a number of projects in its 'incubator' that could provide huge potential for future revenues," says Tamro Capital's Tasho. Most of the company's upcoming products revolve around mobility and cloud computing, he adds. Some new tablet computers competing with Apple's iPad use Google's Android operating system, including Samsung's Galaxy Tab.

Google has also developed a product called Honeycomb as the next generation of Android for tablets. It's designed with new features, including a 3D user interface and videoconferencing.

$33 a Share in Earnings for 2011?

Wall Street has turned bullish once again on the stock, which most analysts spurned in 2008 when it tumbled to $247 a share. Of the 45 analysts who follow Google, 38 recommend buying the stock and expect it to exceed its old high. Not one advocates selling, while eight analysts rate the stock a hold.

"We believe Google should continue to see strong double-digit growth for the next few years, driven by international [operations], display [ads] and mobile, as well as continued technology improvements," says Mayuresh Masurekar, analyst at securities firm Kaufman Brothers. He forecasts Google will earn $33 a share in 2011 on projected revenues of $26.2 billion, and $38.80 a share in 2012 on revenues of $30 billion.

Predictably, some of the largest institutional investors have zoomed in on Google, led by Fidelity Management, which has acquired a 4.66% stake; Capital Research Global Investors, which owns 3.98%; T. Rowe Price Associates, which holds 3.14%; and Vanguard Group, with 2.88%.

Tech stocks are bound to remain the leaders as the market continues its robust advance. Investors searching for a mainstay company that's fast-growing and innovative may opt for Google's stock after, well, googling Google.


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]]>androidApple iOSApple iPhoneColumnsgoogle honeycombgoogle stockInternet stockssearch enginestech stocksweb searchyoutubeGene MarcialWed, 09 Feb 2011 07:30:00 ESTInside Wall Street: A Tiny Chinese Stock U.S. Investors Should Get to Knowhttp://www.dailyfinance.com/2011/02/07/NIVS-chinese-stock-investors-should-know/http://www.dailyfinance.com/2011/02/07/NIVS-chinese-stock-investors-should-know/http://www.dailyfinance.com/2011/02/07/NIVS-chinese-stock-investors-should-know/#commentsFiled under: , , , ,

Gene Marcial's Inside Wall StreetIt's Chinese New Year's week. Do you have a Chinese stock in your Year-of-the-Rabbit buy list?

Unfortunately, a good Chinese stock is hard to find. That's largely because some of the country's fast-growing and truly successful companies publicly traded in the U.S. are virtually invisible -- even on Wall Street. So, most American investors know little of Chinese enterprises traded here.

Only a few high-profile large-cap entities, such as Baidu (BIDU), a Chinese-language Internet search engine (trading on Nasdaq at $117 a share), or Focus Media Holding (FMCN), China's major advertising company (trading at $26 a share), have caught the eye of major U.S. institutional investors. Wall Street cares little about the swarm of small-to mid-cap Chinese companies that aren't household names, even though some trade in the U.S. Only analysts and money managers who probe the globe for value opportunities get to discover some of the attractive and undervalued, if tiny-cap, Chinese stocks.

Little wonder then that NIVS IntelliMedia Technology Group (NIV), whose consumer-electronic products and brands are widely known in China -- and marketed in some 80 countries -- hasn't attracted much investor attention in the U.S.

A Play on China's Rising Middle-Class Consumer

Based in Guangdong, China, NIVS is listed on the NYSE American Stock Exchange. The integrated consumer-electronics company designs, manufactures and markets a wide array of products, including LCD TVs, music players and digital video set-top boxes, as well the ubiquitous mobile phones. NIVS has also developed a Chinese speech interactive technology, which forms the foundation for the company's "intelligent" audio and visual systems.

NVIS is an investment play on the increasing popularity of electronic devices and gadgets in China aimed at that nation's fast-growing consumer class. NIVS "represents an extraordinary opportunity as China's rising middle class continues to fuel the country's high-growth electronics industry," says Richard Rappaport, CEO and founder of WestPark Capital, a major stakeholder in NIVS. According to McKinsey Global Institute, the growth in urban China's disposable income is projected to reach $36 trillion by 2025.

During the first nine months of 2010, mobile phones accounted for 29% of NIVS's total sales. "This is a significant revenue ramp since the launch of this business in January of 2010," says Amit Dayal, analyst at investment firm Rodman & Renshaw, who rates the stock as "market outperform-speculative risk." It's indicative, he adds, of the strength in handset sales trends in China. Its partnership with China Telecom, one of China's three largest carriers, has already contributed more than $30 million in revenues in 2010.

Exceeding Forecasts

Dayal says his channel checks show that Chinese telecom carriers are preparing to ramp up their sales and marketing efforts for 3G smartphone services in China in 2011. "This should boost demand for higher-end/feature-rich phones to deliver these services," he says, and it should help boost revenues and profit margins at NIVS.

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In the third quarter, the 61% revenue jump from a year ago, to $84.5 million, exceeded Dayal's forecast of $77.7 million. Earnings, however, lagged the year-ago numbers. But Dayal notes that NIVS's core business is performing well, contributing more than $130 million in revenues over the first nine months of 2010, with gross margins of about 22% to 25%.

For all of 2010, Dayal expects NIVS to report earnings of $23.9 million, or 52 cents a share, on revenues of $315 million vs. 2009's earnings of $23.5 million, or 59 cents a share, on revenues of $185.5 million. For 2011, the analyst predicts earnings of $31.5 million, or 64 cents a share, on revenues of $362.2 million.

Dayal's 12-month price target for the stock, which closed at $2.02 on Feb. 4, is $7 a share. NIVS went public in the U.S. in March 2009 at $3.50 a share. It has since tumbled.

A Victim of Guilt by Association

The fact that NIVS has very little institutional following in the U.S. is one reason behind the drop, after initial post-IPO profit-taking hit the stock. Probably more important, the stock has been hurt by a probe initiated by the Securities and Exchange Commission, announced last November, into reverse mergers by some Chinese companies.

"For sure, some of these Chinese companies are engaging in fraudulent accounting," notes investment research outfit Seeking Alpha in a report by Tyler McKendry. NIVS has been a victim of guilt by association, says McKendry, who views shares of the company as a "high-risk, high-reward investment at an attractive price of $2.16."

Investors, he says, must consider that NIVS has shown "exceptional past performance and has great future prospects." The company also has a concentration of insider ownership and accredited investors who have shown confidence in the firm when they bought shares at a price much higher than the stock's current price, notes McKendry.

NIVS Chief Financial Officer Alex Chen, who joined the company in October 2010, says can't he can't explain why shares of NVIS declined so much, except for the impact of the SEC probe. NVIS isn't under investigation, he adds.

An Enticing Entry Point

Looking forward, Chen says he expects nothing but positive news for NIVS, including continued high sales growth. Chen says the company has tightened its financial controls and improved its auditing system following a recent study by Protiviti, an internal audit and business consulting firm, which recommended steps to improve and streamline financial systems.

Of course, NIVS is just one of many Chinese companies that have started to list their stocks in the U.S. exchanges. It won't be easy sorting out which deserve even a first look. On the other hand, NIVS has earned significant investor attention, assets WestPark Capital's Rappaport, because of its "years of experience in China's electronics industry, strong management team and initiatives in the country's booming cell-phone market."

Indeed, on NIVS's valuation and past performance, as Seeking Alpha's McKendry points out, the stock is selling at an enticing entry level at its depressed price. And with China's apparently huge appetite for all sorts of electronics products, NIVS looks like an electrifying bet.

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]]>baiduChinese middle classChinese stocksChinese stocks trading in U.S.ColumnsConsumer ElectronicsFocus MediaNASDAQNIVSGene MarcialMon, 07 Feb 2011 07:30:00 ESTInside Wall Street: Where to Bet on the Resurgence in Energy Stockshttp://www.dailyfinance.com/2011/02/02/inside-wall-street-where-to-bet-on-the-resurgence-in-energy-sto/http://www.dailyfinance.com/2011/02/02/inside-wall-street-where-to-bet-on-the-resurgence-in-energy-sto/http://www.dailyfinance.com/2011/02/02/inside-wall-street-where-to-bet-on-the-resurgence-in-energy-sto/#commentsFiled under: , , ,

Oil well pumpThe Egyptian crisis has predictably stirred up energy stocks, which are once again on the rise and helping power the stock market's recent strength. While the unrest in Egypt has been the latest catalyst behind the group's advance, better-than-expected quarterly results posted by oil giants ExxonMobil (XOM), Chevron (CVX) and ConocoPhillips (COP) also helped energize the oil-patch stocks. The group for the most part had been a laggard before then.

With Brent crude oil prices again hitting higher -- breaking through the $100 a barrel level this week -- the question now is: How high they will go from here? But regardless of whether oil prices remain sharply volatile, energy stocks deserve high priority in investor portfolios, argue some investment pros.

The Attraction of Oil Service Stocks

Stocks representing various subsectors of the industry can still be counted on for long-term returns, according to industry analysts John Keller and Michael Marino of investment bank Stephens. They focus mainly on the small- to mid-cap stocks that they believe offer more value opportunities and where growth could be robust. The analysts look for little-known companies with specific catalysts, such as valuable hidden assets or restructuring prospects. The oil-service stocks, they figure, are where you'll find such attractive situations.

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In that group, Keller and Marino are betting on Helix Energy Solutions (HLX), a Houston-based provider of deepwater construction and maintenance services to the U.S. offshore energy industry. Helix also operates an exploration and production (E&P) unit. One particular appeal of Helix: It's in the midst of a restructuring. It has put up for sale its E&P operations. Helix's E&P assets are worth about $700 million to $900 million, according to Marino.

Its other unit, comprising marine assets -- including a fleet of vessels, barges and remotely operated vehicles -- are worth $2 billion, figures the analyst. With the likely sale of the E&P properties, Helix could evolve into a pure-play service company, and the full value of the marine business would then be recognized.

That's part of the reason why Helix's shares have been on the rise, climbing from a 52-week low of $8.38 on Aug. 25, 2010, to $12.54 on Feb. 1. The Stephens analysts rate Helix as overweight, with a 12-month target of $17.

Global Trends and Cycles

Also a big bull on energy is James Dailey, lead portfolio manager at TEAM Asset Strategy Fund (TEAMX). "Well conceived energy plays are a way to bag big gains over the long haul as the U.S. and global economic recovery continues to accelerate," he says. The long-term bull market for commodities, including oil and natural gas, remains intact and bodes well for energy stocks, notes Dailey.

Part of TEAM's strategy is identifying global trends and economic cycles, and using fundamental, technical and quantitative analyses in selecting stocks or assets that are best positioned to benefit, explains Dailey.

In the current environment, Dailey's top three choices in the oil patch are:
  • Petrobras or Petroleo Brasileiro (PBR), a large integrated petroleum company operating in Brazil and other parts of South America. It's American Depositary Receipts (ADRs), which hit a 52-week high of $47.39 in mid-March 2010, dropped to a low of 31 in October 2010, but then rallied to $37 by Feb. 1.
  • Chesapeake Energy (CHK), the largest independent exploration and production company in the U.S., focused largely on building onshore natural-gas reserves. Its stock, now at about $30 a share, has jumped to a 52-week high.
  • EnCana (ECA), one of North America's leading independent natural-gas explorers and producers, trading at $32 a share, down from its 52-week high of $35.25. Dailey figures the stock could exceed its high in a year.
Part of Petrobras's sharp drop was due to its large $70 billion financing it had to do to pay the Brazilian government for rights to explore and develop up to 5 billion barrels of oil equivalents in certain offshore regions. Petrobras agreed to pay more than $42 billion, or about $8.50 per barrel of oil equivalents, for those rights. One of the world's largest oil-and-gas companies and Brazil's national petroleum company, Petrobras went public in 2000, but it's still majority owned by the Brazilian government. Its ADRs trade on the New York Stock Exchange.

Dailey figures the stock should climb to $50, based largely on rising oil prices and its increasing oil-and-gas production. Petrobras' average oil output in Brazil jumped to a record volume, in December, to 2.21 million barrels a day, surpassing the previous record of 2.02 million set in April 2010. Including its natural gas output, Petrobras' total production in Brazil climbed to 2.49 million barrels in December 2010 -- a monthly record -- up nearly 8% from the total output in December 2009.

A Takeover or Merger Candidate?

Chesapeake, on the other hand, is a perfect play on natural gas, says Dailey. It combines the appeal of a possible takeover deal with its rich assets, which have made Chesapeake the largest producer of natural gas in the U.S. Activist investor Carl Icahn owns some 5.5% of the stock, prompting some investors to assume that Chesapeake could become a takeover or merger candidate. Its big stakeholders are led by Southeast Asset Management, which owns a 12.4% stake.

Dailey sees the stock rising to the mid-$30s this year, based on its aggressive acquisition strategy and continued sale of certain assets. In October 2010, Chesapeake signed a joint venture with China's large energy enterprise, CNOOC. The Chinese company agreed to buy a 33.3% stake in Chesapeake's oil and gas leasehold in the Eagle Ford Shale for $1.08 billion. CNOOC also agreed to fund 75% of Chesapeake's share of drilling and completion costs in the Eagle Ford Shale project.

In short, the sun is again shining on the oil patch. As the oil-and-gas group continues to reenergize, Wall Street is bound to once more pay heed to the huge growth potential of the energy stocks -- and recapture the attention of investors.

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]]>Chesapeake EnergyColumnsencanaenergy stockshelix energy solutionsNatural Gasoil servicesPetroBrasGene MarcialWed, 02 Feb 2011 09:30:00 ESTInside Wall Street: Two Stock Picks for Playing a Labor Market Reboundhttp://www.dailyfinance.com/2011/01/31/two-stock-picks-for-labor-market-rebound/http://www.dailyfinance.com/2011/01/31/two-stock-picks-for-labor-market-rebound/http://www.dailyfinance.com/2011/01/31/two-stock-picks-for-labor-market-rebound/#commentsHow should investors play the challenging but improving job market?

Following the worst labor market downturn in 50 years, with some 8.3 million U.S. jobs lost in 2008 and 2009, the bottom may have finally have been reached. Analysts at Standard & Poor's, for one, believe the worst of the job downturn is over. Both the global and U.S. labor markets, they assert, are in the early stages of a recovery.

After all, in 2010, the U.S. labor market added a net total of 1.1 million jobs -- admittedly still a low number -- but S&P thinks it indicates the worst of the downturn has passed.

That surely spells good news, so some investment pros have been quick to come up with strategies on how to gain from the shifting employment situation. The business services sector, which includes staffing companies that provide permanent as well as temporary help to companies, is bound to be one big beneficiary.

"The Best Performers Through the Next Cycle"

"With our outlook for continued improvement of the economy and the job market, we believe the staffing stocks will remain a central focal point for investors," says T.C. Robillard, analyst at investment firm Signal Hill Capital group. In this environment, the analyst believes the large staffing-service companies Kelly Services (KELYA) and Manpower (MAN) "will be the best performers through the next cycle." Both Kelly and Manpower did well in 2010 as demand for temporary workers started to pick up.

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Kelly places job applicants in a wide range of fields, including finance and accounting, law, education, engineering, health care and information technology. Manpower, on the other hand, is the world's second-largest nongovernment employment services organization. It has about 4,000 offices in 82 countries.

Kelly is S&P's top favorite, and it gives the stock its highest investment recommendation of "strong buy." Kelly's stock has been in an upward swing, closing at $19.50 on Jan. 28 from a 52-week low of $10 hit on Aug. 31, 2010. The strong rally has been propelled by expectations that Kelly will continue to benefit from the pickup in temp hiring as the recovery gets stronger. And more hiring for permanent positions are also expected as the economy gains more ground.

"We see the stock as significantly undervalued," says Michael W. Jaffe, analyst at S&P, who argues that it merits a higher valuation because Kelly's primary nonprofessional client market tends to lead labor marker recoveries. He believes the labor markets are in the early stages of revival, and with the number of nonskilled temp workers -- Kelly's primary market -- increasing in the U.S. during 14 of the 15 months through December of 2010, Jaffe sees demand for Kelly's services rising further.

Adding "Strength to the Story"

Kelly's focus on placing temp workers to fill nonprofessional positions "leaves it very well situated for the current market environment," says Jaffe. Kelly's revenues, very weak in the second half of 2008, started to show signs of recovery in the latter part of 2009. The pickup in demand reflects the early stages of a global economic recovery. "We think the improving trends will continue for an extended period," he adds.

Also bullish on Kelly is Tobey Sommer, analyst at SunTrust Robinson Humphrey, who notes that the higher temp employment rates and "incrementally better labor market data adds strength to the story." He rates the stock as overweight with a 12-month price target of $25 a share, based on forecasts that earnings will jump to $1.25 a share in 2011 from an estimated 69 cents in 2010. Sommer expects profits will jump further to $1.49 in 2012.

Manpower's stock has also been on the rise, climbing from $39 a share in June to close at $64 on Jan. 28, despite challenging operating conditions marked by a very depressed permanent-positions jobs market. "The global staffing giant has rebounded strongly after a dismal 2009, thanks to an improved economic landscape and increased demand for Manpower's services," notes Michael Ratty, analyst at investment research firm Value Line.

Similar to Kelly's improved business, Manpower is positioned to benefit from the economic rebound and "generate a greater percentage of its revenues from higher-margin sources during this [labor market] recovery," says Signal Hill Capital Group's Robillard.

Some Big Names Are Big Stakeholders

He expects the stock to continue its upward trend. Based on its historical average price-to sales multiple and his earnings forecasts, Robillard says the stock could jump to $83 a share in 12 months. Robillard expects Manpower's fully diluted earnings to leap in 2012 to $4.10 a share, way up from an estimated $2.70 in 2011 and from an estimated $1.67 in 2010.

Investors who are uncertain of jumping into such jobs-related stocks might find comfort in the fact that some of the large institutional investors have already done so. At Manpower, the big holders are led by BlackRock Institutional Trust, which holds 9.32% stake; Manning & Napier Advisors, with 7.22%; and T. Rowe Price Associates, with 6.23%. At Kelly, the top three shareholders are Franklin Advisory Services, which owns 7.40%; Dimensional Fund Advisors, with 7%; and, again, BlackRock, with 5.78%.


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]]>Gene MarcialMon, 31 Jan 2011 07:30:00 ESTInside Wall Street: Waste Management Could Strike It Rich in Chinese Trashhttp://www.dailyfinance.com/2011/01/26/waste-management-could-strike-it-rich-in-chinese-trash/http://www.dailyfinance.com/2011/01/26/waste-management-could-strike-it-rich-in-chinese-trash/http://www.dailyfinance.com/2011/01/26/waste-management-could-strike-it-rich-in-chinese-trash/#commentsFiled under: , , ,

Gene Marcial's Inside Wall StreetInvestors have been treating the shares of solid-waste management companies like they were, well, garbage. In the past two years, the trash-disposal companies' stocks have been laggards as fierce competition, the recession and low inflation that prevented companies from raising prices crimped earnings and sliced margins.

But the fundamentals have turned up, analysts say, as volume trends improved starting in 2010 with the onset of an economic recovery. And the outlook for 2011 is even better, with volume expected to turn more positive for some companies as early as the first quarter, notes Michael Hoffman, waste-industry analyst at Wunderlich Securities.

Indeed, starting in early January, shares of Waste Management (WM), the largest solid-waste disposal company in North America, have been jumping to new record highs, rising to more than $37 apiece from a 52-week low of $31 in June. Some pros figure the stock will leap to between $45 and $50 sometime this year. The company's services include collection, recycling, resource recovery and disposal.

The added impetus for the stock's recent rise: China.

Doubling Revenue From Power Generation

Waste Management has been beefing up its investment for global growth, which is expected to accelerate even more this year, and its main target is China. Apart from having become a dividend play and a company that's been repurchasing its own shares and stepping up acquisitions, Waste Management is seen by some investors expanding its presence in the vast Chinese market, where it has already put down stakes.

In March of 2010, Waste Management acquired a 40% ownership for $142 million in Shanghai Environment Group, a leading waste-to-energy company in China. So far, Waste Management has built two plants in the country, with three more under construction. The company has said publicly that its waste-to-energy business in China will be part of an expansion program that would double its revenues from power generation.

Waste Management's waste-to-energy subsidiary, Wheelabrator Technologies, will be the primary growth engine in the international market, said CEO David Steiner in a statement last April when the company first revealed its plan to make a bid for a stake in a Chinese company. The Beijing government has committed to build more than 100 plants that convert waste into electricity over the next five years, and Waste Management expects to participate in that build-out.

"That Means Tremendous Growth"

Investors have started to see the vast potential of Waste Management's entry into China, which analysts say has surpassed the U.S. as the world's largest municipal solid-waste generator. One industry estimate projects that urban areas in China will generate some 490 million tons of municipal solid waste by 2030, up from 190 million tons in 2004.

"All of that means tremendous growth for Waste Management as it boosts its presence in China," says Leo Rishty, editor of the Unique Situations newsletter in Weston, Fla. Rishty focuses on underpriced companies that he believes have unappreciated potential catalysts that could propel their stocks to higher levels. He figures that in 12 months, Waste Management's stock will hit $45 to $50 a share.

Management wouldn't comment on the potential value of the company's China operations. Waste Management spokesman Jim Alderson says the company wouldn't be able to comment on it because it's in a so-called "quiet period" ahead of its next quarterly report on Feb. 17. But he notes that the company has emphasized previously that it "views China as really the market with the most growth opportunity for us."

Well-Defined Growth Prospects

Waste Management is focused on expanding its noncore operations, particularly its waste-to-energy business, notes David R. Cohen, analyst at investment research outfit Value Line. Apart from its acquisition in China, the company also plans to build three such facilities in Europe by the close of 2012, says Cohen.

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"This top-quality stock offers a dividend yield of 3.7%," he says, with its estimated cash flow of $1.2 billion expected to cover most of the elevated levels of dividends, acquisitions and share repurchases. Moreover, Waste Management has well-defined earnings growth prospects up to 2013-2015, notes Cohen.

Overall, management's growth initiatives include investing in waste-based energy production, recycling and new waste technologies, including up to $500 million a year for 10 years to improve the fuel efficiency of its plants.

"We view this as a positive long-term environmental strategy as more methane in landfills is converted into energy," says Stewart Scharf, analyst at Standard & Poor's, who rates Waste Management a buy. He expects the company's organic revenues to rise close to 5% in 2011, up from modest growth seen in 2010, thanks to increasing volume, higher commodity recycling prices, and rising landfill and collection-service prices. For 2011, Scharf expects Waste Management to earn $2.45 a share, up from an estimated $2.05 for 2010, and $2.01 in 2009.

Bill Gates Is a Believer

Wall Street has started to turn bullish on Waste Management, with six of 11 analysts who track it recommending buying the stock. The rest are still on the fence, rating it a hold. But some large institutional investors have taken stakes, including billionaire Bill Gates, whose William and Melinda Gates Foundation owns a 3.71% stake. Other big shareholders are Capital World Investors, the largest stakeholder with 8.8%, and Maori European Holdings with 6.8%.

For investors seeking to participate in the global growth of the rebounding solid-waste management industry, it wouldn't be a waste of investment capital to bet on Waste Management.


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]]>Chinese trashColumnsenergy from trashgarbage collectionwaste disposalwaste managementwaste to energy conversionGene MarcialWed, 26 Jan 2011 07:30:00 EST