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BlackRock's Bob Doll: Bears Are Too Negative
Tweet Share on Facebook March 31, 2008 Comment (1)Some encouraging words from BlackRock's Bob Doll:
Although economic data continues to be weak, we still believe that the bears are too negative. By our analysis, payroll figures, unemployment levels, manufacturing data and retail sales numbers, while hardly robust, do not signal recessionary levels. Additionally, monetary and fiscal stimulus has been aggressive, exports continue to provide a strong tailwind and corporate balance sheets remain flush with cash, which should help with liquidity. At this point, we expect first-quarter gross domestic product to be up slightly and expect that the second quarter will be helped by the pending tax rebate checks.
From a markets perspective, we said a couple of weeks ago that stocks were entering a bottoming process. The important low that occurred in mid-January was echoed on March 17, and we think conditions are looking more positive.... Looking ahead, we believe the extent to which the markets are able to absorb additional bad economic news will determine whether equities are in a base-building phase (as we think) or whether the action since late January represents a temporary reprieve. There will, no doubt, be an ongoing stream of weak data to test the markets, but we remain optimistic that the positive factors we have cited support our contention that markets are in a bottoming process.
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Invest in Pro Wrestling?
Tweet Share on Facebook March 28, 2008 Comment (3)Zacks makes the case for investing in World Wrestling Entertainment (ticker symbol WWE). "The company isn't just about a wrestling show on television anymore. It is a completely integrated entertainment company," writes analyst Tracey Ryniec. The company's divisions include live and televised entertainment, consumer products, digital media, and WWE films (direct-to-DVD movies, not theatrical releases).
WWE's strategy, writes Ryniec, involves branding its SuperStars, then leveraging that brand to "boost television ratings, wrestle up more buyers for pay-per-view shows, increase ticket sales at live events, and spark Internet traffic." WWE is also pushing into Latin America and Asia, and it recently boosted its dividend by 50 percent (currently, the stock is yielding 7.7 percent).
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Having Faith in Tech
Tweet Share on Facebook March 28, 2008 CommentConsider how deeply technology will penetrate developing countries, writes David Kirkpatrick of Fortune. "While we may seem to be living in grim economic times, tech companies are facing a future that is anything but grim. If you take the global view—and what technology company doesn't?—there really isn't much uncertainty. While things could slow down for a year or two, there is nowhere to go but up—way up," he writes. So who are the winners?
Among companies I believe are likely to benefit from these trends long term are globally-oriented ones including wireless equipment and phone-makers Qualcomm, Nokia, LG, and Samsung; infrastructure providers Cisco and Juniper; multi-faceted large tech companies IBM and Hewlett-Packard; telecommunications operators Deutsche Telecom, Telefonica, Vodafone, and BT; software firms Microsoft, Oracle, Symantec, VMware, and Salesforce.com; Internet companies Google, Yahoo, eBay, Amazon, and Facebook; and diversified global media companies News Corp., Time Warner (which owns Fortune and CNNMoney.com), Bertelsmann and the about-to-be-created Thomson Reuters.
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Motorola Split: Breaking Up Is Hard to Do
Tweet Share on Facebook March 26, 2008 CommentThe tone is mournful over at Portfolio's Tech Observer, where Kevin Maney says Motorola's plan to spin off its handset division "smells more like the death of a great American company." He discusses the company's beginnings as the Galvin Manufacturing Corp. in 1928, founded by brothers Paul and Joseph Galvin (and later renamed "Motorola" to suggest sound in motion). Says Maney: "Motorola's individual businesses might do fine. Perhaps they'll surprise everyone and bounce back. But at the moment, the split seems like a giant step back from greatness—and maybe a step toward that place where you'll find other once-iconic names like Polaroid, Westinghouse, and Sears."
Meanwhile, PC Magazine asks: Can Motorola's handset business stand alone? Deal Journal wonders if the move is just a "cosmetic rearranging" meant to appease investor Carl Icahn.
Separating the mobile phone business isn't a cure-all, writes Morningstar analyst Michael Hodel: "The unit continues to burn cash and lose market share as it struggles to design compelling new products and create a cost structure suitable to effectively serve high-growth markets like India and China. This move adds little to the firm's capabilities in these areas."
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ETFs Are Going Nuclear
Tweet Share on Facebook March 26, 2008 Comment (1)Soon, there will be two exchange-traded funds that invest in nuclear energy. On April 3, PowerShares expects to launch the Global Nuclear Energy ETF, which will be tied to an index of 66 stocks that includes reactors, utilities, construction, technology, equipment, service providers, and fuels. "Since 2001, nuclear power plants have achieved lower production costs than coal, natural gas, and oil," said Bruce Bond, PowerShares president and CEO, in a statement. "We believe higher oil prices, rising standards of living, and demand for cleaner sources of energy are favorable trends powering worldwide growth for the nuclear energy industry."
The PowerShares ETF will join the Van Eck Nuclear Energy ETF, which has been around since August. That fund tracks an index made up of 38 companies worldwide that participate in uranium mining, enrichment, and storage; nuclear plant infrastructure; fuel transportation; and energy generation, as well as equipment.
In other ETF news, troubled Bear Stearns managed to launch the first actively managed exchange-traded fund, which began trading Tuesday. The Current Yield Fund YYY resembles an enhanced money market fund, according to the story, and investments include U.S. government securities, corporate debt, mortgage-backed and asset-backed securities, munis, and a few other goodies.
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Best and Worst of the Little Books
Tweet Share on Facebook March 26, 2008 Comment (2)There are now so many books in the "Little Book" investment series that it's hard to keep them straight. Luckily, someone has done that for me. Here, the Simple Dollar reviews all five books and weighs in on the best and worst of the bunch.
John Bogle's The Little Book of Common Sense Investing wins for "best investing advice," thanks to its simple premise of investing in index funds. "Bogle's is really the only one yet that has truly convinced me of the benefits of that strategy," says Simple Dollar. Chris Browne's The Little Book of Value Investing gets a nod for "most worthwhile read," because it's essentially a more easily digestible presentation of the concepts in Benjamin Graham's The Intelligent Investor.
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Why Bear Stearns Was Saved
Tweet Share on Facebook March 25, 2008 Comment (3)At the New York Times, Dealbook's Andrew Ross Sorkin sees the hand of the Federal Reserve in JPMorgan's sweetheart price for Bear Stearns. Aggressive deal makers on the government's payroll include Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and Tim Geithner, head of the New York Fed.
Sorkin writes: "In case there is any confusion about who was pulling the strings behind the scenes of JPMorgan Chase's acquisition of Bear Stearns, the curtain was lifted Monday. By raising its bid—with the grudging approval of the Fed—to $10 a share, from $2, JPMorgan exposed what had long been whispered about but no one dared to say aloud: the Fed is officially in the deal-making business."
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Citigroup: Yahoo Is a Buy
Tweet Share on Facebook March 25, 2008 Comment (3)In a morning note, Citi's Mark Mahaney upgrades Yahoo to a buy as its stock trades below Microsoft's initial offer of $31 a share.
He lists two reasons it's unlikely Microsoft will walk away from the deal:
1) Despite 3-4 years of making online advertising a key strategic priority, MSFT has yet to demonstrate traction—its share of U.S. Online Advertising was flat to slightly down in '07 (7.5% vs. 7.6% in '06); 2) Google's share of U.S. Online Advertising has significantly increased (35% in '06 to 40% in '07) & the DoubleClick acquisition could materially ramp its display ad biz; and 3) No other step could potentially address the scale/liquidity challenge of MSFT's ad platform.
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Banks Beat Back Subprime Losses
Tweet Share on Facebook March 25, 2008 CommentBillions in subprime write-downs couldn't stop China's top banks from growing at rates that would make Bank of America (or Bear Stearns) blush.
For 2007, the Bank of China's net profit climbed 31 percent. At the Industrial & Commercial Bank of China, which hosted the world's largest initial public offering in 2006, profits rose 65 percent. Both are state owned, and both wrote down more than $1 billion because of mortgage and credit losses.
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Citigroup Makes a Case for 'Crumbling Commodities'
Tweet Share on Facebook March 24, 2008 Comment (13)Citigroup's Tobias Levkovich says commodity prices appear to be "on the verge of correcting meaningfully as deleveraging in various asset classes continues to play out." Such a correction could spill into investments in areas such as agriculture, mining machinery and energy equipment, seed and fertilizer stocks, and alternative energy, Levkovich wrote in a note to clients:
"A number of catalysts may be coming together to end the current commodities craze, including the likelihood that developed economies' industrial activity will be weaker than expected by midyear, that China trims production to alleviate pollution before the Beijing Olympics, and that the dollar faces possible currency intervention as Europe and Japan try to maintain export competitiveness, and potential American job losses end inflation fears."
