Is GE About To Stir Up The Medical Arena?

With the worst of the credit crunch over and plenty of cheap candidates, General Electric (NYSE:GE) may be about to become more active with acquisitions. With some oblique comments from a senior executive, it would seem that this American conglomerate is once again about to leverage its considerable capital resources. Investors may want to consider the sorts of companies that GE may be looking at as potential targets.

Sticking to the Knitting
Although GE is a frequently-mentioned name in the guessing game of healthcare acquisitions, the company is actually rather focused and consistent with its healthcare business. GE is a significant presence in the imaging, diagnostics, life sciences and healthcare IT spaces. By and large, the company steers away from interventional products, so the likelihood that GE would buy a company like Stryker (NYSE:SYK) is quite low.

Cancer Therapy
Although GE is not active in interventional medicine, Varian (NYSE:VAR) might be a logical way for the company to make that transition. An argument could be made that Varian's radiation therapy systems would be a natural extension of GE's diagnostic imaging products. Along similar lines, TomoTherapy (Nasdaq:TOMO) or Accuray (Nasdaq:ARAY) could get some consideration, though TOMO may be too small and Accuray too novel.


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Another Mediocre Johnson & Johnson Quarter

Johnson & Johnson (NYSE: JNJ) seems to be making a habit of the "miss on the top, beat on the bottom" earnings report. While I am somewhat pleased to see the company finding new levers to pull for profitability, the absence of top-line growth is a festering long-term issue.

Overall revenue dropped about 1% to $15B - a touch below the consensus guess of $15.2B. The details, though, are interesting.

Consumer sales fell sharply, down almost 11%, as the company really suffered for those recalls and manufacturing suspensions. Pharmaceutical sales, though, were pretty strong at nearly 5% growth. Performance in devices was mostly mediocre-to-negative, with just 1% growth.

Below the top line, nothing really changed all that much from last year. The gross margin went down a bit (likely because of those manufacturing problems and recalls), and the company spent more on R&D, but also got a benefit from "other" income. All in all, pre-tax profitability was unchanged as a percentage of sales.

Looking again at consumer health, every single category was down except for Baby Care, and the overall U.S. consumer business was down almost 25% - a pretty stunning drop for a profitable and well-known business. It looks like management really has its work cut out for itself in fixing this business, and I'm not sure they're up to the challenge (repair-work usually takes some amount of dynamism and that seems to be outside the skill-set of this team).

Nothing really jumped out about the performance of the pharmaceutical business, but I was surprised to see just how weak Cordis was within devices. I realize Abbott (NYSE: ABT) has left JNJ in the dust with drug-coated stents, but I had expected a bit more stability. Orthopedics eaked out a gain, while the diabetes business fell. All in all, a mediocre performance.

So, what about this stock? It still seems cheap relative to its cash-generation potential ... but not so cheap as to be compelling. I'm ratcheting down my free cash flow growth expectations to the 2-3% range, due entirely to lower revenue growth in the future. That translates into about 10% upside exclusive of the nice dividend and ongoing buybacks.

If you're willing to assume that JNJ can grow the top line at 4% a year, the valuation goes up to about $80 a share. Maybe the drug and device pipeline support that, but I'm not as confident in that outlook anymore.Still, I would not sell this one today, so I will settle for being a grouchy owner.

Disclosure - I own shares of JNJ

Quick and Dirty on SABMiller

So, SABMiller (Nasdaq: SBMRY) put out a quick trading update today covering volumes for the first half of the year. SAB served up a surprise, with 1% first-half volume growth, which translates into about 3% growth in the second quarter.

Expectations were pretty consistently in the 0-1% and 1-2% range, respectively, so this was a modest beat for SAB. Interestingly, they had a strong quarter in China (which is a low-margin market) and South Africa (which is a very profitable market). Actually, the only market that was not better than expected for them was the U.S. That is not all that surprising - iffy long-term performance was part of the motivation for forging the relationship with Molson Coors (NYSE: TAP) a little while ago.

SABMiller is an unusual company for such well-known brands - it is strong in the growth areas of the world (Africa, Asia, LatAm, Eastern Europe) and relatively weak in the mature, slow-growth markets (W. Europe, North America). That is a big part of why I bought the stock years ago and continue to hold it - SAB is focusing most of its attention on markets where there is a lot of room for market share gains and overall per capita consumption growth.

I suspect that I'm closer to the end of time holding this stock than the beginning, but there still looks to be enough room to run to be worth hanging on for a while. I think the company can deliver quite a few years of high-single digit (if not low-teens) free cash flow growth, and that would make the stock undervalued by about 10%. That is not a lot to get excited about, and not enough for me to suggest others jump in ... but it is enough for me to hang on for now. I might look at this one as a source of cash, though, if I decide to pull the trigger on something like Abbott (NYSE: ABT) or Becton Dickinson (NYSE: BDX (or some new idea altogether).

Disclosure - I own shares of SABMiller

Forget BRIC, It's Time For CIVETS

Wall Street loves sound bites and handy acronyms. Whether it is ROE, NPV or NAV, there is no shortage of handy terms. For growth-oriented investors, BRIC has been one of the most important acronyms of the past ten years. Encompassing the dynamic economies of Brazil, Russia, India and China, BRIC was a guidepost for many investors and there is no questioning the strong stock performance of this group (particularly China and Brazil). (Historically, international investing has worked out well for investors, but this may no longer be the case.

Things change, though, and it may be time for investors to pay more attention to a new name. A civet may be an odd-looking creature (imagine a cross between a raccoon and a cheetah), but the CIVETS could be the next major destination for international investing.

Meet the CIVETS
CIVETS is an acronym, reportedly coined by Michael Geoghegan at HSBC (NYSE:HBC), for Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Investors may think of this as a second-generation of emerging economies, as these countries generally have fast-rising (and young) populations, relatively well-established financial infrastructure, internal stability and a pathway towards significant economic growth and potential co-leadership in their economic spheres.


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Please note - I ordinarily also would have mentioned Turkcell (NYSE: TKC) as part of this group, but I own Turkcell in my own accounts, and therefore cannot mention it within Investopedia articles.

Is Linear A Canary Or A Duck?

Linear Technology (Nasdaq:LLTC) has long suffered from a decided lack of analyst support and enthusiasm. Despite an extensive record of strong financial performance, the company has never put to rest the doubts that its high margins will be whittled away by the likes of Analog Devices (NYSE:ADI), Texas Instruments (NYSE:TXN), Maxim (Nasdaq:MXIM) and a host of foreign and smaller competitors. 

Now, another worry comes into play - whether or not Linear can maintain its business, and whether customers over-ordered during the early stages of this economic recovery. With Linear looking for a sequential drop in revenue into the last calendar quarter of this year, the question is whether Linear is the canary in the coal mine for broad-based analog chip demand, or simply an odd duck with its own unique ship-ahead problems.

The Quarter That WasAll in all, Linear did more or less as expected in its fiscal first quarter. Revenue rose 6% on a sequential basis, and 65% on an annual basis. Gross margins ticked up sequentially by about 60 basis points, and while reported operating margin fell a bit, adjusted operating margin (excluding a legal charge) would have increased sequentially.


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Roche Needs A Shot Of Adrenalin

Paradoxically, a value stock is only a value if there is some growth to the name. True, there is the occasional "wasting asset" stock that is worth more than its current price, but most operating companies need some reasonable amount of growth to deliver that value. That is the problem with Swiss medical technology giant Roche (Nasdaq:RHHBY.PK) these days - while the company has several valuable franchises under its roof, the growth performance has been lackluster and the company seems slow to change this. 


A Look Ahead at a Mediocre Third Quarter
Roche gave investors a preview of results on Thursday. Reported sales fell 3% in local currency terms, which was about 2% below the average analyst expectation. A 2% miss is no reason to panic, but investors should be at least modestly concerned that the business was weaker than expected, more or less, across the board. Pharmaceutical sales were down 5%, as the company saw a fall-off in Tamiflu and very low single-digit growth from its big three of Avastin, Herceptin and Rituxan.

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Grainger Moving To The Next Phase

Companies like Grainger (NYSE:GWW) tend to do quite well in the early phases of an economic recovery. Not only do these companies have to replenish low inventories of components and supplies (worked down below normally desirable levels during a slowdown), but they actively begin expanding production again. The question, though, is what happens when that early cycle is over - companies will continue to order from Grainger as this recovery moves into its next phase, but investor enthusiasm may transition on to the next flavor-of-the-month. (For related reading, see The Best Business To Be In During A Recovery.)

The Quarter that Was
Sales grew 19%, as reported in the third quarter, with the company's U.S. business growing 13% (ex-acquisitions). Volume made up about 9% of that overall growth, with pricing more or less flat. Within the numbers, heavy and light manufacturing were the strongest sectors, while government, commercial and contractor categories limped along at single-digit growth. A little more concerning, though, was the pattern of growth - every month of the third quarter was weaker on a year-over-year basis than the prior quarter. In other words, the company is still logging impressive double-digit growth, but the rate is slowing, and that will certainly perturb some momentum and growth investors. 


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No Recession In High-End Goods

The regular cornerstone franchises of most American malls like Dillards (NYSE:DDS) or J.C. Penney (NYSE:JCP) may not be seeing great consumer interest, but the luxury side of retail seems to be making a solid comeback. This is why, with an update on third-quarter sales Thursday, it's pretty clear that French luxury giant LVMH (Nasdaq:LVMUY.PK) is once again doing well among the well-to-do. 

Double Digits Across the Board
While LVMH only gave a partial update (sales, not profits), that update was nonetheless very positive. Total sales climbed nearly 24% as reported, with organic sales growth of 14%. That was a fair bit better than the already-healthy analyst expectation of 11% organic growth.


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CSX Running Hot On The Rails

If the first earnings report from the railroad sector is any indicator, there is going to be plenty of fundamental support to back up the hot stock performance of recent times. CSX (NYSE: CSX) does not have the best historical reputation, but if this company is doing well it stands to reason that this is going to be a fine quarter for this part of the transportation sector. 

The Quarter That Was
CSX reported that overall revenue rose 16% in the third quarter. Merchandise sales rose 15% (that is basically non-coal rail traffic), while coal revenue was up 23%. Carload volume increased nearly 10% this quarter (not bad), while yields were up about 6% (better!). 

Interestingly, intermodal revenue was up only 6% this quarter - interesting, as that is weaker than recent rail reports have indicated for the intermodal industry. Then again, with Western Europe in something close to hibernation, perhaps CSX's East Coast exposure keeps a lid on that intermodal performance. If that is true, then Union Pacific (NYSE:UNP), Berkshire Hathaway's (NYSE:BRK.A) Burlington Northern, and the two Canadian operators (Canadian Pacific (NYSE:CP) and Canadian National (NYSE:CNI)) could be expected to do quite a bit better on that line. 


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Rails Roll On Into The Fall

Although the railroad sector spent most of the summer chopping along (as did the broader market), between fears of a double-dip recession and the realities of ongoing strength, the fall has been off to a good start. Looking at the rail traffic data provided by the American Association of Railroads, September was another strong result for U.S. carriers and if this keeps up, the stocks will likely continue to find healthy bids. 


The Cars Of September
The data shows that U.S. carloads rose almost 8% on a year-over-year basis in September and achieved the highest average number of carloads per week since October of 2008. Industry-watchers may remember this as the high point before the bottom fell out in this recent recession. In any event, traffic was still down almost 8% from the 2008 level, while carloads did rise 2% on a sequential seasonally-adjusted basis. (For more, see Rails And Supplies Suggest More Volatility) 

What is interesting is that there appears to be a bit of a divergence between the United States and Canada. Although the four non-holiday weeks of this September were some of the most active weeks all year, Canadian traffic is showing less momentum. Now, it is true that Canada never got as bad as the U.S. and the momentum is still positive, but the relative outperformance gap seems to be shrinking a bit. 


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Intel - Stable Will Have To Do For Now

With all of Wall Street's eyes upon it, Intel (Nasdaq:INTC) did what it had to do - the world's largest chip company delivered a quarter that should be good enough to calm some of the near-term fears about the PC and consumer electronic markets. By the same token, though, there is nothing in the guidance or management's commentary to suggest that business will be booming again anytime soon. 

The Quarter That Was
Intel reported that third quarter revenue rose a little more than 3% sequentially (and more than 18% annually) to about $11.1 billion - a number that was slightly higher than the company's earlier disappointing guidance. Within the numbers, Intel reported that PC group microprocessor sales were up more than 2% sequentially, and made up about 57% of the company's revenue base.

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Pfizer's King For A Day

Market commentators have been waiting for some time for Pfizer (NYSE:PFE) to do something on the M&A front. Although Pfizer actually does not have the generic fall-off risk of Lilly (NYSE:LLY) or Bristol-Myers Squibb (NYSE:BMY), the loss of Lipitor to generics is a threat, and analysts have been clamoring for Pfizer to do something to ignite the growth prospects. (For more, see Top-Heavy Pharmaceuticals.)

I am not sure this is quite what anybody had in mind.  

On Tuesday morning, Pfizer announced that it was acquiring smaller pharmaceutical company King Pharmaceuticals (NYSE:KG) in an all-cash deal worth $3.6 billion. This deal values King at $14.25 per share, or a 40% premium to the prior day's closing price.  

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Time To Act Locally On Global Payments?

Fishing for turnarounds is a little like fishing for sharks - get a bit careless and you could find yourself bitten. That is a good warning to keep in mind when perusing the recent earnings report and stock action from Global Payments (NYSE:GPN). While this leading transaction processing service company has a lot of value-type characteristics, its poor margin performance and questionable guidance are warning signs. 

The Quarter That Was
Global Payments certainly did blow away expectations this quarter. Total top line growth was about 7% for this fiscal first quarter, with strong results in the U.S. and Asia somewhat offsetting a pathetic performance in Canada and Europe. That is a feeble performance relative to the likes of Visa (NYSE:V) or Green Dot (Nasdaq:GDOT) (to be fair, these aren't entirely straight up comparisons).

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5 Software Stocks Worth A Closer Look

Software is a huge sector, and like any huge sector there is a mix of wheat and chaff. The trick, then, is to separate the two and focus one's time on the most promising ideas. The following are five above-average software companies that are worth a closer look by investors seeking some technology ideas with solid chances of market-beating performance.

1. Cognizant Technology Solutions (Nasdaq:CTSH)
Cognizant is the youngest of the Tier 1 Indian IT firms (which includes Infosys (Nasdaq:INFY) and Wipro (NYSE:WIT)), and has the added twist of a U.S.-based management. Employee turnover is quite high compared to U.S. software companies, but this is nothing new in this sector. The company has a high reliance on financial services, but recently crossed the $1 billion mark in quarterly revenue despite the uncertain conditions in the sector. Wage and tax pressures in India are concerns to monitor, but recent revenue growth in excess of 40% and increasing analyst estimates suggest solid near-term momentum.

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Foreigners Agree: Eagle Ford Shale Is The Place To Be

The Eagle Ford Shale area in Texas is a hot area for energy development that just keeps getting hotter. As two more deals from Monday highlight, companies from around the world are willing to pay up to get a piece of this potentially significant oil and gas resource in south Texas. 

CNOOC and Chesapeake
China National Offshore Oil Corporation (NYSE:CEO), or CNOOC as it is more commonly known, is shelling out potentially as much as $2.2 billion for a one-third stake in Chesapeake Energy's (NYSE:CHK) Eagle Ford acreage. Chesapeake's holdings total about 600,000 acres and appear to be relatively oil-rich - not an insignificant detail considering the considerable price differences between natural gas and oil these days.

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KLIC Goes Clunk

The semiconductor space is famous for swinging between euphoria and depression with a cyclical irregularity, and semiconductor equipment is arguably even worse. While analysts have been nervous about chip stocks ranging from Intel (Nasdaq:INTC) to Linear Technology (Nasdaq:LLTC) to Silicon Labs (Nasdaq:SLAB), the warning from small equipment company Kulicke & Soffa (Nasdaq:KLIC) is not going to help matters. 

A Mid-Cycle Pause?
Kulicke & Soffa gave investors a classic good news-bad news press release. The good news was that the September quarter was quite strong and revenue is going to be on the high end of guidance. In the "what have you done for me lately?" world of Wall Street, though, the bad news about the December quarter is far more significant. KLIC management said that the December quarter would be "significantly" below the September quarter, and on the basis of past KLIC-speak, that could mean a 20% sequential drop or more.

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Alexza Gets A "No" From The FDA

Gotta love the FDA these days, don't you? I always thought the initials stood for "Food and Drug Administration" but apparently I was wrong; FDA now means "Forget Drug Approvals" (or perhaps "F*ck Drug Applicants" for those suitably inclined...).
 
Alexza Pharmaceuticals (Nasdaq: ALXA) is the latest company to run afoul of the agency's safety obsession, announcing the receipt of a complete response letter for its submission for Staccato Loxapine (aka Adusuve) - a fast-acting inhaled drug to deal with acute agitation in patients with severe schizophrenia and/or bipolar disorder. This is a relatively serious and common problem, and the existing therapies are tricky - it is not easy to give a shot to an unwilling patient, nor make them swallow a pill.

According to Alexza, and its partner Valeant (NYSE: VRX), the FDA was concerned about some safety issues seen in early Phase 1 studies and the absence of a "human factors study" for how people might use the technology.

The safety issues basically relate to some short-term changes in lung function seen immediately after administering the drug. Gee... an inhaled drug alters lung function upon use? I'm shocked! What's more, none of Alexza's late-stage studies showed any worrisome adverse respiratory effects - short-term issues occurred, but they either resolved themselves promptly, or could be handled with a normal asthma inhaler. 

Now, a word on the human factors study ... Basically, the FDA apparently wants some sort of study to see what happens when Staccato Loxapine is put into the hands of the Ralph Wiggum's of the world .Will they stick it up their nose? Perhaps they will try to administer it in their ears, or become confused and think it's an exciting new suppository formulation.

I don't mean to be flippant, particularly, for those Alexza shareholders getting hammered today, but I'm getting a little fed up with how the FDA runs these days. A human factors study could have been requested years ago, and I frankly think its ridiculous to just assume that the people who will administer this (mostly orderlies and nurses in in-patient mental treatment facilities and perhaps prisons) can't figure it out with proper training. 

I am not a doctor, and I am not intimately familiar with the specifics of Alexza's safety data, so perhaps there is a legitimate reason for concern. Even still, I can't help feel that the FDA has become actively hostile towards the pharmaceutical industry and new drug applications. This is not the first time that I've seen the agency spring a "gotcha" on a company - asking for an additional trial that could have been requested years ago, or taking issue with data from early studies. I mean, if those Phase 1 safety studies were so problematic, why did the agency allow them to progress to Phase 3?

Hell, the company even ran additional safety studies in special populations, and the FDA didn't see the need for a panel meeting. 

So, what now for Alexza?

I've been interested in this biotech for a while, as I thought loxapine would be an interesting niche drug and a good test case for the company's inhalation technology. Now, though, I do not know what to think. The company froze development on migraine formulations that look interesting, but will require a lot of money to develop. Can Alexza raise those funds now (either through partnership or capital raising) with the FDA putting them on ice?

And what about that fast-acting insomnia compound (AZ-007)? The FDA is arguably even more paranoid about insomnia drugs, so who knows what sort of clinical trials they will demand from Alexza.

With cash on hand and effective technology, the stock probably has a floor somewhere in the $1.00 - $1.50 region. I think the stock is worth more than that, but the company will not be getting those milestones from Valeant any time soon and who knows what sort of supplementary studies ALXA will have to agree to perform.

If you really want to live wild, I can understand buying these shares on today's inevitable crushing decline. After all, the freaking drug *WORKS* and I do believe these safety issues can get ironed out. If you cannot handle a LOT of risk and uncertainty, though, it may be better to step aside at least until the company can lay out what it has to do to convince the FDA to grant approval.

Copper ... It's Back

Gold gets all the attention, but copper has staged a pretty remarkable recovery from its early summer lows. After bottoming out below $2.80 a pound, the December contract is near $3.70 and the highs of 2008 are in sight. Considering just how useful copper is in so many industrial, construction and communications applications, an ongoing global economic recovery should be a solid demand driver.

Most of the major copper producers have already run up in concert with the price of the metal, but investors may want a refresher course on the major players with an eye toward buying the inevitable dips.

Freeport-McMoRan (NYSE: FCX)
These are the fat times for Freeport-McMoRan, as this company is not only a major copper producer, but a major gold miner as well. At current prices, the 83 billion pounds of copper and nearly 34 million ounces of gold in Freeport's reserves are worth over $800 per share. Of course, that does not include the costs of extracting those resources (nor the risk of lower future prices), but it should give investors a sense of the magnitude of Freeport's resources. Freeport has long since diversified its reliance upon its Indonesia mine to a tolerable level, and the company produces more than 10% of the world's annual copper output. (For more, see Taking A Shine To Copper.)

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Will Amylin Succeed Where Other Obesity Drugs Fail?

With Vivus (Nasdaq: VVUS) and Arena (Nasdaq: ARNA) going down in flames during FDA panel meetings for their obesity drugs, and Orexigen (Nasdaq: OREX) widely expected to incur a similar fate, the near-term outlook for effective obesity drugs is poor.

Enter Amylin (Nasdaq: AMLN).

Amylin is best known for Byetta, the first-of-its-kind GLP-1 receptor agonist analog. Also known as exenatide, Byetta was derived from research on gila monster spit and has been a relatively successful drug for Amylin and its partner Lilly (NYSE: LLY). Now investor attention has moved on to the company's long-acting version of exenatide called Bydureon. Due to be approved by the FDA any day now, this should be a formidable competitor in a billion-dollar-plus market.

But that is not all that makes Amylin interesting. The company has a promising combination drug therapy for obesity that is currently not getting very much attention. In a 26-week Phase 2 study, a combination of pramlintide and metreleptin showed significant weight loss efficacy - patients in the highest dose group had an average weight loss of 11% (about 22 lbs). Better still, the effect endured in a subsequent 26-week follow-up, while placebo patients experience weight re-gain.

Takeda partnered with Amylin for obesity drugs back in 2009, and the companies are putting this combo therapy into a Phase 3 trial. What makes this even more encouraging is that side-effects were pretty moderate (some injection site reactions and nausea) and there was apparently none of the psychological or cardiovascular effects that so worry the FDA. On top of that, half of the active combination (pramlintide) has been on the market for years, marketed as Symlin by Amylin for Type 1 and Type 2 diabetes. It is not a very successful drug, but the safety profile is pretty well known now, and that should help the FDA's comfort level if the drug makes it that far. 

Now, this is an injected drug combo and that is going to limit the popularity to some extent. Still, I have to think that an effective weight loss aid is going to overcome needle-fear for a meaningful percentage of the target population.

Best of all, this could be the *only* new approved drug (if it gets approved, of course) on the market ... and that could be worth literally billions. So even if Amylin has to deal with competition in the GLP-1 space (and they do), they could have an arguably more lucrative drug on their hands if this combo works.

Oh, and for those who might be wondering ... yes, metreleptin is related to the work on the leptin hormone that Amgen (Nasdaq: AMGN) did years ago (remember the "fat mouse" and the "skinny mouse"?). As it turns out, leptin is not very helpful or effective as monotherapy, but it seems to have some pretty compelling synergies when given with some other compounds. If this works, Amgen will get a piece of the pie, though not a very large one.

I am not sure that I would buy Amylin just for this obesity drug candidate. Then again, it could very well be an important answer to the inevitable question of "ok, now what?" that will spring up once Bydureon is on the market. Of course, Lilly may just elect to take them out before then.

All in all, I think you can buy Amylin here and do pretty well. And who knows? Amylin wouldn't be the first example of a company to win a battle (in this case, a next-gen obesity drug) when most handicappers didn't even have them in the running.

Disclosure - I own shares of Amylin.

FinancialEdge: 4 Things To Know About Earnings Season

Just like nature, Wall Street has its own cycle of seasons, and with the calendar now in October, companies are gearing up to report their next round of earnings. Given that earnings can dramatically influence a stock's price (over both the short and long term), it is clearly an important part of every investor's schedule. With that in mind, here are a few points to consider as the markets gear up for the next earnings cycle. (For more, check out Strategies For Quarterly Earnings Season.)

1. It's All Relative … to Expectations
Earnings season is when individual investors get a reminder of just how thoroughly the short-termism of Wall Street has infiltrated the markets. A company can report a devastatingly bad quarter and professional investors will cheer so long as it was 2 cents less devastating than commonly expected. Likewise, a company can report a spotless quarter and excellent growth, but coming in a penny or two shy of the published number - or, even worse, the dreaded '"whisper number'" - and tumble.

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Will The Market Show Faith In An Aluminum Recovery?

In the metals market today, details matter. Iron ore giant Vale (Nasdaq:VALE) is near a 52-week high, as are major gold producers like AngloGold Ashanti (NYSE:AU) and Newmont Mining (NYSE:NEM); copper companies like Freeport-McMoRan (NYSE:FCX); and diversified mining giants like Rio Tinto (NYSE:RTP). (For background reading, see A Beginner's Guide To Precious Metals.)

Unfortunately, Aluminum companies are not feeling the love. Spot prices on the London Metal Exchange have recovered nicely from early summer lows, but aluminum giant Alcoa (NYSE:AA) is trading closer to the bottom of its range than the top. Will solid third-quarter results and improving underlying trends start a new move up in the stock, or will Wall Street stay in a "show me" mode a while longer? 


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http://stocks.investopedia.com/stock-analysis/2010/Will-The-Market-Show-Faith-In-An-Aluminum-Recovery-AA-VALE-AU-NEM-FCX-RTP-BA1008.aspx

Constellation Brands Not Going Nova Yet

People may drink through good times and bad, but that is no guarantee that they will remain loyal to the same brands. Not only have overall economic conditions hurt Constellation Brands (NYSE:STZ) since the beginning of the recession, but ongoing turbulence in consumer preference has made for unstable results.

The Quarter that Was
All things considered, this leading wine maker actually had a pretty solid fiscal second quarter. Reported sales dropped 2%, but this was due in part to the sale of the company's U.K. cider business. On an organic basis, sales were actually up 2%. Going a little further, wine sales grew 4% in the U.S., Europe and Australia, while spirit sales were down 15%. 


Please click below for the complete article:
http://stocks.investopedia.com/stock-analysis/2010/Constellation-Brands-Not-Going-Nova-Yet-STZ-DEO-CEDC-BUD-TGT1008.aspx

Helen Of Troy Has A Few Pimples

Helen of Troy (Nasdaq:HELE) is one of those surprisingly volatile stocks that seems much more turbulent than the underlying business would suggest. After all, how much year-to-year volatility should there be in curling irons and cookware? Nevertheless, this is a stock that has given investors numerous trading opportunities over the years. 

The Quarter That Was
The company's fiscal second quarter saw revenue growth of 8%, as the company's houseware business (fueled by the popular OXO brand) grew 10%. In comparison, the personal care business (which is about twice as large) had growth of 7%. Overall, that was a minor miss (about 5%), relative to Wall Street expectations.

Although the top line performance was a bit lacking, the company more than made up for it in expense leverage. Gross margins jumped more than 300 basis points, and adjusted operating income was up 34% from last year. That in turn meant a better than 300 basis point improvement in operating margins, and margins are once again on the higher end of the company's long-term historical range. 


To read the full piece, please click the link below:
http://stocks.investopedia.com/stock-analysis/2010/Helen-Of-Troy-Has-A-Few-Pimples-HELE-PG-UL-CHD-CL1008.aspx

Looking Ahead To Four Chip Stock Earnings Reports

Earnings season is here again, and it is time to take a look at how some of the major chip stocks may fare. Investors should remember that buying stocks ahead of earnings reports can lead to a lot of volatility in a portfolio, so proceed accordingly.    

Advanced Micro Devices (NYSE:AMD)
Reporting date: October 14, 2010
Current average EPS estimate:  7 cents (25 est.)
Current average revenue estimate: $1.61 billion (27 est.)
Estimate trend: Down 7 cents per share (50%) from 30 days ago

Advanced Micro pre-announced its quarter (or rather, revised guidance) in late September, guiding revenue expectations to a drop of 1-4% on a sequential basis. Sales of PCs and notebook computers have been weak this quarter, and AMD does not appear to be gaining. Investors will of course be interested in hearing the company's commentary on near-term PC shipment trends, but even more attention may be put on the company's plans for the Llano chip.

The Llano is set to be the first mainstream fusion chip, with an expected release in the third quarter of 2011. This chip will combine the functions of a general microprocessor with a graphics processor and could theoretically be some threat to Nvidia (Nasdaq:NVDA). 


Here's the full article:
http://stocks.investopedia.com/stock-analysis/2010/Looking-Ahead-To-Four-Chip-Stock-Earnings-Reports-AMD-INTC-LLTC-QCOM-NVDA1008.aspx

A Small Bank Deal With A Big Premium

The M&A scene for U.S. banks has been big on rumors (like Santander (NYSE:STD) and M&T Bank (NYSE:MTB)) and the acquisition of small, failed institutions, but there has been relatively little in terms of willing deals among two solvent parties. Old National Bancorp (NYSE:ONB) shook that up in a big way on Wednesday by buying Monroe Bancorp (Nasdaq:MROE) at a sizable premium. 

The Deal
At the time of the announcement, Old National was offering almost $84 million in stock to acquire Monroe Bancorp, a deal that works out to 1.275 shares of Old National for every share of Monroe. At the prices of each stock prior to the open of trading Wednesday, that represented an eye-popping 148% premium for Monroe shares. The deal does include a collar, though, such that if Old National's stock moves above $10.98, Monroe shareholders will get $14 of Old National shares.

Although the deal was designed with a target price of $13.35 in mind for Monroe shares, as of this writing the market has pushed Monroe's price up to only about $11.30. Do not let the "only" mislead, however; that still represents over 100% appreciation for the stock. At this price, the trailing price-to-book ratio is 1.27; a strong premium relative to larger Midwestern banks like Fifth Third (Nasdaq:FITB), TFS Financial (Nasdaq:TFSL) or Marshall & Ilsley (NYSE:MI). 


Please go to Investopedia and read the full article:
http://stocks.investopedia.com/stock-analysis/2010/A-Small-Bank-Deal-With-A-Big-Premium-MROE-ONB-STD-MTB-FITB1008.aspx

Looking Ahead To Industrial Supplier Earnings

As the calendar has turned into October, it is time once again to prepare for the cycle of earnings reports that will follow the end of the calendar third quarter. The third quarter was a rather strong period for the stock market, as the S&P 500 rose nearly 11%, even though there was a constant drumbeat of worry about the possibility of a double-dip recession. 

Looking at the industrial supply market, there are reasons to be optimistic about the third quarter. Rail traffic continues to recover, which can be read in more detail in this article, suggesting that industrial activity is solid. Likewise, the recent ISM report highlights ongoing growth in the manufacturing sector, even if at a slower pace. In particular, 13 of the 18 reported industries showed growth in September, with the exceptions being wood products, printing and nonmetallic minerals contracting. While the slowing pace of orders, the growing level of inventory and the reversal of backlog are concerning indicators for the fourth quarter, the third quarter appears to have been a good one for manufacturers, and presumably the companies that supply them. (For more, check out Economic Indicators: Purchasing Managers Index.)

For the full article, please continue on to:
http://stocks.investopedia.com/stock-analysis/2010/Looking-Ahead-To-Industrial-Supplier-Earnings-AIT-GWW-FAST-WCC-CAT-CMI1008.aspx

Industrial-Strength Performance At RPM

Specialty chemicals is one of those catch-all categories that seems convenient but is actually pretty worthless in practice. Cytec (NYSE:CYT), WR Grace (NYSE:GRA), Solutia (NYSE:SOA) and RPM International (NYSE:RPM) all carry this label, but the similarities are few and far between apart from a general exposure to rising input costs. Nevertheless, looking a little deeper sometimes pays off, for while RPM needs a better housing market to really do well, the stock could be an attractive dividend-plus-capital-gains story for patient investors. 

The Quarter That Was
RPM's fiscal first quarter results require a little bit of explanation. As reported, sales were down about 2%, but this is a case where "as reported" is not very accurate. The company elected to deconsolidate its Specialty Products Holding Company subsidiary and allow it to go into bankruptcy to help resolve asbestos liabilities. Not only does that take away some units like Day-Glo and Dryvit, but it also makes historical comparisons misleading. 


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http://stocks.investopedia.com/stock-analysis/2010/Industrial-Strength-Performance-At-RPM-RPM-KRA-SHW-FOE-CYT-SOA-GRA1008.aspx

Acuity Brands Still Waiting For The Turn

Non-residential construction is still in a dark place, and that has kept the prospects for Acuity Brands (NYSE:AYI) dim as well. Even still, this leading lighting company has managed to tread water through difficult times and could be relatively close to a turning point. 

The Quarter That Was
The company's fiscal fourth quarter was another tough one, but Acuity nevertheless managed to surprise and surpass the analyst expectations. Revenue rose 5%, helped by a 6% boost in volume. Although the companies' quarters do not line up evenly (Acuity has a August year-end), this result is somewhat mixed relative to rival lighting companies - Hubbell (NYSE:HUB.A) had nearly 11% growth in the last quarter, while Cooper (NYSE:CBE) had a little more than 5% growth.

Please click below for the full article:
http://stocks.investopedia.com/stock-analysis/2010/Acuity-Brands-Still-Waiting-For-The-Turn-AYI-HUB.A-CBE-SSD-NCS1008.aspx

One Small Step For Novartis ... One Slightly Larger Step For Cepheid

Interesting little news item from molecular diagnostics company Cepheid (Nasdaq: CPHD) last night. The company announced a collaboration with drug giant Novartis (NYSE: NVS) to use its GeneXpert system to develop and market a test for BCR-ABL expression in patients with a type of leukemia called Philadelphia chromosome-positive chronic myelogenous leukemia.

Detecting the Philadelphia chromosome is currently the definitive means of diagnosing CML, and that is usually accomplished with FISH or standard PCR. With the GeneXpert system, though, it may be possible to do perform the tests more quickly, more efficiently, and closer to the patient - a hospital may or may not have a regular PCR machine on hand (or the personnel to use it), but could almost certainly use the simpler, more user-friendly GeneXpert system in its place. It may also be the case that monitoring the expression of BCR-ABL is useful in assessing or fine-tuning therapy for these patients. 

In any case, this is not a transformative deal for Cepheid (or Novartis). Cepheid had talked about expanding into cancer diagnostics before, and this may simply accelerate and smooth the process a bit. Even still, I believe molecular diagnostics will have a major role to play in oncology as more and more is learned about the genetic/proteomic basis of the disease (in all its forms) and how that information pertains to treatment.

Cepheid is a great stock for the watch list. Even though I believe in the company's future, I would have to swallow hard to buy it at today's levels.

Immucor Investors Out For Blood

It's not uncommon for Wall Street to strike unspoken bargains with certain companies in the healthcare space; If companies provide reliable, by-the-numbers performance, they will receive rich valuation multiples in return. That deal worked well for specialty diagnostics company Immucor (Nasdaq:BLUD) and its shareholders for many years, but has fallen apart since the company was beset by problems starting in 2009. Although the company had been making some progress, this latest quarterly report is likely to send the stock straight back to the penalty box for some time. (For background reading, see The Ups And Downs Of Biotechnology and Investing In The Healthcare Sector.)

The Quarter That Was
Immucor reported that sales rose only 1% for the fiscal first quarter, falling slightly short of the average estimate on the Street. Although the company saw decent growth in instrument sales (up 18%) with the ongoing launch of the Neo, traditional reagent sales fell 9%. That's a problem given that this figure represents almost 60% of total revenue. Capture reagent sales did better, though, with 18% growth. What was more worrisome was the company's shortfall in instruments and the lower guidance for system sales throughout the year. New machine sales fuel future reagent sales, so a reduction in system sales has broad implications for future profits.

For the full article, please click here:
http://stocks.investopedia.com/stock-analysis/2010/Immucor-Investors-Out-For-Blood-BLUD-BIO-GENZ-BSX-ABT-GPRO1007.aspx

I hope these guys get it all sorted out. I followed the stock as an analyst, and there are some very good people working there. 

By the way, Johnson & Johnson (JNJ - which I own) is the other half of the U.S. blood typing duopoly. Because I own the stock, I could not mention that in the piece...

REITs With Yield And Upside

As a general rule, there are only two common reasons to own real estate investment trust (REIT) shares - the normally above-average yields that these companies pay and the diversification benefits of incorporating real estate into a portfolio. In some cases, though, REITs can also provide above-average capital appreciation for risk-tolerant investors willing to buy in when things still look difficult. 

Although the REIT sector has generally recovered since the worst of the fall of 2008 and spring of 2009, the recovery seems to have flattened out this year. Does that mean it is time for investors to consider this sector again, or is the uncertain state of the economy an argument for waiting a little longer?

Hospitality Properties Trust (NYSE:HPT)
With a healthy-looking 8% yield, this owner of hotels and travel centers (truck stops) would seem to be another way to play the eventual recovery in economic activity, particularly business and leisure travel. Unfortunately, the mid-priced travel industry is still taking its licks and operators like Marriott (NYSE:MAR) continue to struggle to fill rooms. Overcapacity in the hotel space and an inability of operators to meet minimum rent thresholds are certainly threats to the dividend, but risk-tolerant investors might look to this idea as a double play on both income and economic recovery. 

Please click the link to read the full piece:
http://stocks.investopedia.com/stock-analysis/2010/REITs-With-Yield-And-Upside-HPT-LRY-DRE-MAR-SPG-SLG-PSA1007.aspx

Viva La TV!

While debates and arguments about immigration often dominate any conversation about the growing influence of Spanish-speakers in the United States, the reality is that the Spanish-speaking market is major growth market today. With that in mind, Grupo Televisa's (NYSE:TV) recent deal with Univision looks like a classic win-win deal for both parties. 

The Deal
On Tuesday, Televisa announced a $1.2 billion deal with Univision that will further solidify the long-term relationship between these often fractious partners. With the deal, Televisa will get a 5% equity stake in Univision and debentures that can be converted into a further 30% piece of Univision. This is not the first time that Televisa has had an ownership stake in the largest distributor of its programming - prior to Univision's acquisition by private equity, Televisa was a minority investor. 


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http://stocks.investopedia.com/stock-analysis/2010/Viva-La-TV-TV-CBS-TWX-NIHD-DISH1007.aspx

Yum! Brands Looking Pretty Tasty In China

How many investors have looked into Yum! Brands (NYSE:YUM) enough to know that it is so very close to being as much of an emerging markets play as an operator of quick service restaurants in developed countries? The story of how this company saw the growth potential of China and other markets long ago and positioned itself accordingly is a great story for another day, but for now the earnings at this global restaurant operator are what should be in focus. 

The Quarter That Was
Overall sales climbed 3% for the third quarter, reaching almost $2.9 billion. Somewhat remarkably, China is now the largest revenue contributor to the firm - revenue from China rose 20% to about $1.2 billion, while U.S. revenue dropped 8% to $970 million. China's same-store sales grew 6%, and while this benefited from the company's involvement in an exposition, the overall momentum is simply stronger than that of rivals like McDonald's (NYSE:MCD). Elsewhere, the company saw international same-store sales growth of 1%, and similar 1% growth in the United States.

The complete article can be found by clicking on the link below:
http://stocks.investopedia.com/stock-analysis/2010/Yum-Brands-Looking-Pretty-Tasty-In-China-YUM-MCD-DPZ-PZZA-AFCE1007.aspx

Single Digits ... But Not Growth Midgets!

In theory, the price of a stock should be irrelevant to its prospects. In practice, though, there are always investors looking for low-priced stocks that could significantly boost the returns in their portfolio. Although we strongly urge investors to avoid the penny stock casino, there are some single-digit stocks that could be worth a further look. 

Atmel (Nasdaq:ATML)
Investors had to wait quite a while for this long-struggling chip stock to get moving, but it has done quite well so far this year. While expectations may have gotten ahead of reality in the short term and there could be some inventory risks in the company's industrial and automotive business segments, there is a lot to like about this company. Not only does the company have a good microcontroller business, but the company's maXTouch product for touchscreens has done well with customers like HTC, Samsung and Motorola (NYSE:MOT). Touchscreens are here to stay, and that could vault Atmel back into the ranks of a growth semiconductor company.

 
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http://stocks.investopedia.com/stock-analysis/2010/Single-Digits-But-Not-Growth-Midgets-ATML-SEAC-FSII-LSCC-PIR-DIS-MOT1007.aspx

M&T Bank, Santander, and Allied Irish - The Latest

Well, here's an idea that I really had not considered.

Amidst all of the speculation about whether Santander (NYSE: STD) would buy Allied Irish Banks' (NYSE: AIB) stake in M&T Bank (NYSE: MTB) as part of a play to buy all of M&T, Allied Irish took a different path. I had wondered recently whether or not Allied Irish would shop the stake to other banks or whether M&T might band together with Berkshire Hathaway (NYSE: BRK.A) to buy it back from Allied Irish.

Instead, Allied Irish is basically floating the stake into the public markets via a mandatory convertible note that converts into those M&T shares.

It's an interesting move. I am not sure whether it is the best way to maximize the value of that stake for Allied Irish, but it is a relatively quick way of converting that into capital. What's more, it is safe to assume that none of the potential corporate bidders were going to do the deal without a discount, so Allied Irish probably accepted the idea that "fair value" was not going to be full price.

For M&T, this is probably a big load off of their minds - with that stake no longer likely to go to Santander, the near-term pressures to talk about a deal likely dry up. That is not to say that M&T could not still be in play or that Santander suddenly loses interest, but it seems a lot less likely now than before.

Monsanto - Hopefully This Is It

The old saw on Wall Street is that bad news come in threes, so maybe Monsanto (NYSE: MON) has finally finished this craptastic cycle of underperformance and reset expectations. Monsanto's fiscal fourth quarter wasn't great, but it could have been worse and investors seem reasonably pleased with the guidance for the next year.

Monsanto reported sales growth of 4% for the quarter, with 7% growth in seeds offsetting 1% growth in the herbicide business. Given all of the angst and hand-wringing about Round-Up, I was a little surprised to see even that much growth there.

That herbicide business did hurt margins, though, as a big jump in seed gross margin (54% vs. 46%) was not enough to power an overall improvement. Instead, company-wide margins fell to 44% from 46%.

Looking to the next year; management forecast a range of EPS for 2.72 to 2.82; below the consensus of 2.82 but apparently good enough for many investors - the stock was indicated up about a point in early trading.

As for the current big worry, the yield of the SmartStax seeds, the jury is still out. Some early results seem to indicate that SmartStax is underperforming the older triple-stacked seed by 4.7 bushels per acre - a big underperformance relative to target of 15 bushel outperformance. Now, the data is still really early (not statistically significant) and there are signs of optimism - I found some data (from Illinois, I think) that showed a double-digit improvement in SmartStax versus the triple-stacked. So, it's not looking great yet, but the story is not over.

Interestingly, for all the talk of a rebound in DuPont's (NYSE: DD) Pioneer business, the data is not all that favorable. I found some data from Purdue that indicated that Monsanto had a nearly 5 bushel-per-acre advantage over Pioneer/DuPont. Now, that is down a lot from the 14+ advantage in 2009, but it is not as though DuPont is outperforming in overall productivity. Still, that is a limited sample and we will not know for a while what the real numbers are for these competitors.

I am absolutely talking my book here, but I still think risk-tolerant investors can buy Monsanto and make a lot of money over the next few years. I know I have complained about Monsanto a lot and suggested that it is a risky idea, but it is also an undervalued stock. I think this stock is worth at least $70 here unless the bottom falls out ... and given the company's incredible R&D assets, I just do not see that happening. So, I do think you can buy it here and prosper long-term ... but be prepared for some frustration and aggravation along the way.

Disclosure - I own shares of Monsanto

Actel - A Logical Deal For Microsemi

Microsemi (Nasdaq: MSCC) has definitely been on an acquisition binge here of late, and now the company is adding Actel (Nasdaq: ACTL) to the stable. Microsemi announced this morning that it was buying Actel in an all-cash deal; offering $20.88 a share. That is not too bad of a premium to pay for MSCC shareholders like me, and the $430 million net cash price will be covered in part by term loan facility and revolver from Morgan Stanley.

Actel specializes in low-power FPGAs and there should be some definite synergies with Microsemi's existing business. In particular, Actel's radiation-tolerant chips should fit in nicely with Microsemi's communications, space, and satellite businesses. Moreover, because Actel is relatively specialized and focused, I do not think Microsemi needs to worry about now competing with Altera (Nasdaq: ALTR) or Xilinx (Nasdaq: XLNX) - two much larger competitors in the overall FPGA segment of the semiconductor market.

Actel was, and is, a largely unknown semiconductor company. It is a small company (note the $430M net price) with effectively no analyst coverage. Nevertheless, the company has been reporting some better quarters of late and seems to have some momentum in the business ... but results have been a little erratic historically. Sales have grown pretty consistently over the past decade, but operating margins have been all over the place (not unusual for semiconductor companies, especially the smaller ones).

All in all, it looks like a good (and logical) deal for Microsemi. I'm a little surprised when companies start showing bursts of acquisition activity, but so far MSCC's deals have made sense and this Actel acquisition should be pretty accretive for the company, and relatively soon at that. Over the longer term, this should deepen (and broaden) MSCC's existing business relationships and may open the door to some new product/market opportunities for the company.

I suppose Actel shareholders might be annoyed at the relatively modest premium for their shares, but that is what happens when a company flies below the radar. If nothing else, maybe Actel shareholders should think about taking the cash from Microsemi and reinvesting it in Microsemi shares - the company is doing well, the business is an intriguing combination of "niche" and "growth", and the stock should still have some room to run.

Oh, by the way ... Lattice Semiconductor (Nasdaq: LSCC) is eerily similar to Actel in a lot of respects (an FPGA company, similar market cap, etc.). I'm not predicting a buyout here, but for anybody looking for "the next Actel", the similarities are there...

Disclosure - I own shares of Microsemi.

Does Watson Get Bought On Monday?

I wonder if we are going to see an announcement on Monday that Watson Pharmaceuticals (NYSE: WPI) has agreed to sell itself.

Watson traded pretty flat for Friday until a little after 3:00pm, when it shot up about a point. Granted, a one-point move on a $40+ stock is no big deal, but the timing makes me wonder. It is not that unusual to see a stock telegraph this kind of new on the preceding Friday, and WPI is widely considered to be one of the relatively few prime acquisition targets left in the generics space.

Although Watson chose not to pursue the growth-by-acquisition strategy like Teva (Nasdaq: TEVA) and Mylan (NYSE: MYL) and has focused on producing solid free cash flow and ROIC, investors do not always appreciate that sort of discipline. More than that, generics is a volume business where scale matters (when Wal-Mart (NYSE: WMT) starts a dive for the bottom with $4 prescriptions, that can happen...) and Watson is now behind in that regard.

On one hand, Watson has a solid oral contraceptives business and that's good. On the other hand, Watson has a solid U.S. business (#3) but not much overseas and that is not so good. Add in the all-too-common relatively cheap valuations in healthcare, and you have a company that is a good takeout candidate.

Crocs Back From The Dead

There was no shortage of people lining up to cheer the demise of Crocs (Nasdaq:CROX) as the stock plunged from an improbable high near $70 to under $2 in only about one year. This maker of distinctive (some would say ugly) footwear defied gravity and the howls of value-oriented commentators on its way up and there was almost a sense of palpable glee when the bubble burst. 

Well, Crocs-haters may want to avert their eyes because Crocs is not dead. In fact, business seems to be pretty healthy, and that has fueled a rebound for the stock back into the teens. In fact, Crocs' stock has pretty much trounced the field for the past year. The past year has been a very strong one for footwear companies, but Crocs has more than doubled the one-year performance of the likes of Nike (NYSE:NKE), Timberland (NYSE:TBL), Skechers (NYSE:SKX) and K-Swiss (Nasdaq:KSWS).

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http://stocks.investopedia.com/stock-analysis/2010/Crocs-Back-From-The-Dead-CROX-NKE-TBL-SKX-KSWS-DECK-UA1001.aspx

The Vikings Are Coming

Give the Swedes credit - they know what people like when it comes to cheap chic. IKEA has stormed the world with popular (if quirky) flat-pack furniture, and now retailing giant Hennes & Mauritz (Nasdaq:HNNMY) is doing the same in the clothing world. Although H&M is still relatively unknown in the U.S., H&M operates around 2,000 stores around the world and is a major clothing retailer in much of Western Europe. 

The Quarter that Was
H&M continues to post excellent growth as people gravitate toward the company's mix of attractive styling and prices. Total sales were up 14% in the third quarter, with comparable sales up about 11%. The company has opened about 105 new stores so far this year, even though it has mentioned that a slower pace of mall openings has curtailed their near-term store expansion goals somewhat.

Click on the link for the full article:
http://stocks.investopedia.com/stock-analysis/2010/The-Vikings-Are-Coming---With-Fashion-HNNMY-ARO-CHS-BKE-GPS1001.aspx

Danaher Assimilates Another Company

Scarcely any organization outside of Star Trek's Borg have taken the route of growth-by-acquisition quite like Danaher (NYSE:DHR). Fortunately, Danaher is quite a bit friendlier in its approach and typically makes very fair offers to the shareholders of the targeted company. They are at it once again, though, announcing on Wednesday that they would acquire electronic test equipment specialist Keithley Instruments (NYSE:KEI) for $21.60 in cash.  

What Danaher Is Getting?
In paying a net value of about $300 million, Danaher is acquiring a leading niche electronics company with trailing revenue of over $100 million. That is a pretty good premium for Keithley shareholders, at least relative to the current valuation of others in the "scientific equipment" space like Agilent (NYSE:A). Although some shareholders may lament that the company sold itself just as business seemed to be recovering, Danaher is giving them an exit price that has not been seen since 2004. It is entirely possible that Keithley might have had another run in it, but Danaher is offering a risk-free price that should satisfy almost any shareholder. 


Please click the link below to read the complete article:
http://stocks.investopedia.com/stock-analysis/2010/Danaher-Assimilates-Another-Company-DHR-KEI-A-IIVI-RSTI-ITRI-BMI1001.aspx

Performance For Third Quarter of 2010

Up until the last week or so, this would have been a pretty good quarter. Unfortunately, Alnylam (Nasdaq: ALNY) and Monsanto (NYSE: MON) spanked me hard recently, and banks like BB&T (NYSE: BBT), SocGen (Nasdaq: SCGLY) and JPMorgan (NYSE: JPM) have done me no great favors this quarter.

Old standbys FEMSA (NYSE: FMX), MSC Industrial (NYSE: MSM), and Portfolio Recovery (Nasdaq: PRAA) did well, and newcomers like Quest (Nasdaq: QSFT) and Tower Group (Nasdaq: TWGP) contributed as well.

My portfolio "A" : +12.2%
My portfolio "B" : +13.9%
My combined portfolios: +12.8%

S&P 500: +10.7%
Nasdaq: +12.3%
Russell 3000: +11.0%

Ugh ... here's hoping Monsanto and the banks start earning their keep!

Disclosure - I own shares of all the stocks mentioned in this post.

Financial Edge: Easy Ways To Diversify Your Portfolio

Like a great car, diversification is something that almost everybody wants but seems hard to get if you do not have a lot of money to spend. Luckily for investors, there are more options now than ever before for adding diversity to a portfolio. Better still, these options are not all that expensive. (For more, see The Importance Of Diversification.)

Mutual Funds - Old, But UsefulAn actively-managed mutual fund is still an excellent way to diversify a portfolio. By allocating even just one "slot" of a portfolio to a mutual fund, an investor can draw on the accumulated benefit of potentially thousands of stocks, as well as the skill of the management team making the selections. Although some funds still charge loads, many do not and it is not hard to find funds that are likewise efficient with respect to expenses and taxes.


Please read the full column:
http://financialedge.investopedia.com/financial-edge/0910/Easy-Ways-To-Diversify-Your-Portfolio.aspx

Paychex Sees A Slow Road Back

There are plenty of ways in which the U.S. economy is stronger now than it was a year ago, but that does not mean that current conditions make for a rollicking good time. In particular, companies are not yet hiring in a big way, and that is keeping a lid on the recovery of payroll and HR outsourcer Paychex (Nasdaq:PAYX). 

The Quarter That Was
Paychex's fiscal first quarter seems to fit the overall sense of the economy - slight improvement here and there, but nothing close to enough strength to lift the overall sense of gloom (or at least deep concern). Revenue was up 4% (and ahead of expectations), as payroll service revenue rose almost 2% and human resources services-related revenue rose more than 10%. 


The link below will take you to the full article:
http://stocks.investopedia.com/stock-analysis/2010/Paychex-Sees-A-Slow-Road-Back-PAYX-ADP-ECL-RHI-MAN0929.aspx

Wal-Mart Looks To The Long-Term

Give Wal-Mart (NYSE:WMT) credit, in a financial world obsessed with short-term rewards, this massive retailer is not afraid to make long-term investments. While investors will almost certainly continue to pay much more attention to its expansion in China, Brazil and India, Wal-Mart's proposed acquisition of South Africa's Massmart could pay dividends over the long run. 

The Details of the Deal
There is no finalized deal between the two companies, but Wal-Mart is proposing to pay about $4.2 billion for this retailer. That represents about a 10% premium for a company that had long been trading on expectations of a bid from foreign operators. In fact, Massmart's stock was trading a bit higher than Wal-Mart's proposed price - suggesting that investors expect some sort of higher bid to materialize. 


Please click on the link below for the full article:
http://stocks.investopedia.com/stock-analysis/2010/Wal-Mart-Looks-To-The-Long-Term-WMT-WMMVY-KFT-GIS-UL-TGT0929.aspx

Companies With Big MDx Dreams

This is a relatively unusual quiet period in medical technology, as there are so few emerging sectors that are really capturing attention and drawing high stock multiples. One of the areas that still is drawing attention, however, is molecular diagnostics. A subset of the lucrative multi-billion dollar diagnostics market, molecular diagnostics focuses on the use of modern life sciences technology to use genomic and/or proteomic expression information to diagnose or predict disease. (Find an investment that will give your portfolio a shot in the arm. To learn more, check out A Checklist For Successful Medical Technology Investment.)  

Molecular diagnostics (often abbreviated as MDx) has garnered a lot of hope, enthusiasm, and more recently, disappointment. Although many of the leaders in this space are some of the large companies investors might expect (Roche (Nasdaq:RHHBY), et al), there are several small companies that could give risk-seeking investors an interesting play on the space. 


Please follow the link for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Small-Companies-With-Big-MDx-Dreams-CRA-EXAS-GHDX-NSPH-SQNM-LMNX-CPHD0929.aspx

Unilever's Yo-Yo Diet

It does not seem like it was all that long ago that Anglo-Dutch consumer products giant Unilever (NYSE:UL) (NYSE:UN) was slimming down, centralizing and cutting its product portfolio. Nevertheless, Unilever has decided that it is time to get a little bigger again, and the company is buying Alberto-Culver (NYSE:ACV), a hair and skin care specialist, in an all-cash deal. 

The Terms 
Unilever is proposing to pay $3.7 billion in cash, or $37.50 per share. That is a rather healthy premium for Alberto-Culver. Even granting that the spin-off of Sally Beauty Holding (NYSE:SBH) makes past cash flow performance less predictive, investors have to make some rather exceptional profitability improvement assumptions to make Unilever's price seem sound. On the other hand, this deal will meaningfully expand Unilever's market share and there are solid reasons to think that Unilever's marketing machine will do more to grow Alberto-Culver's brands and international exposure than the company did on its own. 


To continue on to the full piece, please click below:
http://stocks.investopedia.com/stock-analysis/2010/Unilevers-Yo-Yo-Diet-UL-UN-ACV-SBH-CHD0929.aspx

Facts Versus Food

If there is a demand, you can assume that a company will step up to supply it. While the seemingly unstoppable rise in obesity may make one consider how much Americans really care about what they eat, there is undeniably strong interest in so-called "functional foods". It is not enough anymore to just call your product "fresh", "natural", or even "organic" - no, these days consumers want your product to prevent their heart disease, clean their colons and give them shiny, healthy hair. 

Trouble is, the science behind many of these claims is (to be charitable) lacking and seldom meets the standards of the major peer-reviewed journals. Consequently, the FDA and FTC have stepped up their attempts to enforce rules about unsupported nutritional claims. That could be bad news for packaged food companies ranging from Coca-Cola (NYSE:KO) to Unilever (NYSE:UL), as these claims are often baked into the ad campaigns and constitute what the companies hope will be enduring ways to differentiate their product in the aisles at your local Wal-Mart (NYSE:WMT). 


The link below leads to the full piece on Investopedia:
http://stocks.investopedia.com/stock-analysis/2010/Facts-Versus-Food-KO-UL-WMT-K-GIS-KFT-DPS0929.aspx

The Tortured Mating Dance Of M&T and Santander

Even though the right amount of money has a way of smoothing over many differences, it looks like the all-too-logical acquisition of M&T Bank (NYSE:MTB) and Spain's Santander (NYSE:STD) is once again leaning more towards "unlikely" than "likely". With reports out there suggesting that talks once again broke down over an issue of control, it may be time for both parties to move on and pursue strategies that do not involve each other. 

The Story So Far
Both Santander and M&T Bank have acknowledged that the two companies have talked about possible combinations, but so far they have not managed to strike a deal. While M&T is a fine target in its own right, it is probable that Santander's interest originated in the struggles of Allied Irish Banks (NYSE:AIB). Allied Irish owns a large chunk of M&T (about 22%), but desperately needs to clean up its balance sheet and raise capital. Consequently, that stake in M&T is pretty much up for bid. 


Please click the link to read the whole article:
http://stocks.investopedia.com/stock-analysis/2010/The-Tortured-Mating-Dance-Of-MT-And-Santander-MTB-STD-AIB-HBC-USB-PNC-STI0929.aspx

Correction - Got a very nice email from MTB's head of Corp Comm., who pointed out that MTB has not actually officially/formally responded to any of these rumors/stories. So, I have asked the editors at Investopedia to correct the piece to reflect that. 

Monsanto - At What Point Is "Patience" The Same As Stubborness

Well, here's a shocker ... Monsanto (NYSE: MON) is down again.

I swear, this stock spends more time in the toilet than your average Hollywood celebutard.

The cause d'jour is early signs that the company's SmartStax product is not leading to the level of crop yield that the company promised. If true, that will force the company to make good on guarantees (hurting earnings) and it will make them look like jackasses (again) in the face of real improvement at DuPont (NYSE: DD).

I've preached patience before on this one, but I have to say that my patience is waning. True, this is only an early report on yields and there are plenty of crops still to come in. It is not unreasonable to think (hope?) that the trend could reverse and Monsanto could come out of this looking a little better. But then, that's just the sort of excuse-making that you do when you're stuck in a loser-stock.

I'm not selling Monsanto ... yet. I still believe in the long-term thesis and I still think the company's R&D is worth quite a lot. But I have to admit, it is getting harder and harder to hold this one ...

Disclosure - I own shares of Monsanto ... but I think I'd rather own a case of herpes at this point.

Neogen Is No Bad Egg

There seems to be a sad inevitability to food safety scares in the United States. While the latest outbreak revolved around contaminated chicken eggs, it has not been all that long since numerous people were sickened by bad peanut butter, jalapeno peppers, ground meat or scallions. In fact, the CDC estimates that one in four Americans experiences food poisoning every year (those "24-hour flu" cases are far more likely to be food poisoning). 

Given the huge potential consequences to a brand or business being associated with food poisoning, it may be surprising that food safety testing is not a larger business in the United States. Yet, it is big enough to make Neogen (Nasdaq:NEOG) an interesting business. 


Click the link for the full article:
http://stocks.investopedia.com/stock-analysis/2010/Neogen-Is-No-Bad-Egg-NEOG-PFE-ABT-BIO-HSY-GPRO0928.aspx

Please note - a mistake was made in the editing process and an editor accidentally replaced Merck KGaA with Merck (MRK) as the owner of Millipore. I've pointed this out and it should be corrected shortly. 

FinancialEdge: Rising Cash - And Rising Debt, Too

Context is everything - without seeing the big picture, it is easy to get distracted and misled by a little nugget of information. That would appear to be the case when contemplating the balance sheet of "Corporate America". While there has been a fair bit of attention to the rising cash levels of the balance sheets of public companies, there is critical detail that goes missing in many of these stories. Debt is also climbing.

More and More CashA recent article in Bloomberg Businessweek pointed out a significant increase in cash for the S&P industrials. For the second quarter, cash holdings stood at more than $842 billion, up from nearly $837 billion in the first quarter and representing more than 11% of current market value. The information technology sector likewise appears flush with cash, with holdings equivalent to 18% of market value and more than two years' worth of operating income.

Doing some spot-checking here and there would seem to confirm this trend. Cisco (Nasdaq:CSCO) and Apple (Nasdaq:AAPL) have huge amounts of cash on hand, as do Microsoft (Nasdaq:MSFT), Google (Nasdaq:GOOG), Pfizer (NYSE:PFE) and Wal-Mart (NYSE:WMT).


Please follow the link for the full piece.
http://financialedge.investopedia.com/financial-edge/0910/Rising-Cash---And-Rising-Debt-Too.aspx

TIBCO's Scarcity Value

These are pretty good days to be a small software company. With Oracle (Nasdaq:ORCL), SAP (NYSE:SAP) and Hewlett-Packard (NYSE:HPQ) showing a seemingly indefinite willingness to open their wallets to round out their product verticals, valuations for stand-alones has been on the upward march. With an attractive middleware business in service-oriented architecture, TIBCO (Nasdaq:TIBX) has certainly been buoyed by a favorable one-two of an improving IT market and a nice and toasty M&A environment. 

The Quarter That Was
That aforementioned improving IT environment certainly helped TIBCO's fiscal third quarter. Revenue was up 23% (license revenue up 23% and service revenue up 22%), and the company lifted its guidance more than 5% above Wall Street's prior bogey. Although TIBCO beat the revenue guess for this quarter by about 5%, it was not a totally spotless quarter - bears can nitpick that the company did a smaller number of large deals (13 vs. 17 last year) and added fewer new license customers. Still, a beat is a beat, especially when combined with a hike in expectations. 


For the complete piece, please click below:
http://stocks.investopedia.com/stock-analysis/2010/TIBCOs-Scarcity-Value-TIBX-ORCL-MSFT-RHT-CRM0927.aspx