Monday, October 30, 2006

AllianceBernstein Holding (NYSE: AB)

AllianceBernstein Holding LP (AB) looks like a good long term investment. I would wait for the stock to pull back before going long. AllianceBernstein provides investment management services for pension funds as well as the retail investor with mutual funds and managed accounts. If you are bullish on the stock market, then this is the stock to own. AllianceBernstein pays out all of its earnings in dividends.

Current Yield: 4.70%
Expected Annual Growth: 12%
P/E: 21

Note: I have no position in (AB) as of 10/30/06

Thursday, October 26, 2006

What's Wrong With Checkfree (CKFR)?

Checkfree (CKFR) has a great business model. Yet management has underperformed in growing the online transaction business. I have written positively about Checkfree before. But now Checkfree is on my watch list. Management has produced two terrible quarters back to back. They botched earnings in early August and the stock fell from $43 to $37 overnight. In October management guided below consensus and the stock dropped 7%.

"The company found a difference between quarters that begin with long months, vs. those that begin with short months, Kight said. As a result, the first and fourth quarters of the company's fiscal year have lower transaction volumes." 10/25/06

Message to Management: "Stop making excuses and start executing or else shareholders will call for a change."

Note: I have no position in CKFR

Wednesday, October 25, 2006

Qlogic's Success Should Benefit BRCD & ELX

I was considering going long Qlogic Corp. (QLGC) before they reported earnings. After reading several analysts reports I decided to stay on the sidelines. I was clearly wrong and so were most of the analysts. Most analysts believed that Qlogic's valuation is limited to 20X forward earnings. That was one dollar of upside before the close yesterday. The market liked Qlogic's report (up 8%) and rivals Emulex (ELX) and Brocade (BRCD) should benefit when they report.

Note: I have no position in ELX, BRCD, or QLGC
This is not investment advice. Invest at your own risk.

Tuesday, October 24, 2006

High Flyers

The airlines are probably one of my least favorite sectors. Brand loyalty no longer exists, no airline has premium service, and most airlines are constantly fighting with labor unions. But there are three airlines worth investing in.

The first one is RyanAir Holdings ADR (Nasdaq: RYAAY) . Don't let the long ticker symbol scare you away. On average RYAAY trades 209,000 shares per day on the Nasdaq. RyanAir is expected to grow at least 16% per year for the next five years. They only fly 737-800's between Ireland and Continental Europe. RyanAir has discovered how to run a profitable airline. Read this article on how RyanAir will be profitable by offering flights for free.

The other two airlines that are work investing in are GOL (GOL) and Copa Holdings (CPA).

Monday, October 23, 2006

Watch the Exchange Stocks

I owned shares of the Nasdaq Stock Market Inc. (NDAQ) for a short period of time in 2005 & 2006. I would consider buying back shares in NDAQ on a pullback. I am also bullish on NYSE Group (NYX), International Securities Exchange (ISE), and the Chicago Merc (CME). The Intercontinental Exchange (ICE) needs to pull back under $75 before I would buy. Also keep an eye out for the Nymex IPO, which may go public in 2006. Eventually, a Nymex/ICE merger seems likely.

Recent Deals
NYSE & Euronext??
CME proposed merger with CBOT (October 2006)
ICE buys NYBOT (September 2006)
NYSE merged w/Arca (March 2006)
Nasdaq bought Inet (April 2005)

Sunday, October 22, 2006

IBD Free Access & Earnings

Investors Business Daily is having a free access week (October 23-27) sponsored by TradeKing. I am an annual subscriber to IBD and recommend checking the website out during free access week.

There are a plenty of earnings to watch on Monday: Amgen (AMGN), AT&T (T), Ford (F), Kimberly Clark (KMB), Kraft (KFT), Netflix (NFLX), Texas Instruments (TXN), and Western Union (WU).

Friday, October 20, 2006

Akamai (AKAM) Buying Opportunity

Akamai Technologies (AKAM) is up over 140% YTD. Many of us have missed this one. Akamai has pulled back to its 50-Day moving average. The current closing price of $46.19 looks like a nice entry point. I would set a stop-loss around $42.50.

As of 10/20/06, I have no position in AKAM. This is not investment advice. Invest at your own risk.

Wednesday, October 18, 2006


On October 6th I told readers to look into Johnson & Johnson (JNJ). Today JNJ hit another 52-week high. Readers could have made a quick 4.7%. For the risk averse, Nabi Biopharma (NABI) is up 14% since I mentioned it and NeoPharm (NEOL) is up a HEFTY 41%. Nice work Big Ben! I wish I had followed my own advice.

Takeover Target: SBAC Communications (SBAC)

It is time to make some money off cell phone towers. Recently Crown Castle (CCI) offered to buy rival Global Signal (GSL) for $55.95 in stock and cash. The deal was priced at 25x cash flow. The next takeover target is SBAC Communications Corp. (SBAC). SBAC owns over 3,300 cell towers. Rival American Tower (AMT) or privately held Global Tower could be acquirers. Stanford Group Research believes SBAC is worth 35x 2007E Free Cash Flow = $34 per share. On October 9th Lehman Brothers raised their price target on SBAC to $37 and reiterated their "overweight"” rating. Lastly, there is significant open interest (+20,000 Contracts) for the March 2007 $30 Call. The October $25 calls (1,600+ Contracts) have the next largest open interest. SBAC closed at $26.53.

Why Buy SBAC?

* High barriers to entry
* Industry consolidation
* Double digit growth
* Option market (March 07 $30 Calls)
* At least 25% upside

Disclosure: As of 10/18/06 I have no position in GSL, AMT, CCI, or SBAC. I may go long SBAC.

Wednesday, October 11, 2006

Is it time to buy Sprint Nextel Corp (S)?

Currently, Sprint's (S) book value per share is close to $18. The stock is trading just under that price. Sprint faces major challenges in the wireless space as it continues to integrate Nextel customers. Sprint has been hurt by signing up sub-prime credit customers and has a significant amount of "“bad debt."”


Sprint might look attractive to a cable or satellite company for integrating a "“quadruple play"” (wireless, video, internet, and land line). Sprint derives 93% of it revenue from wireless and 7% from long distance.

The popular Motorola RAZR and KRZR will be available in Q4. Sprint has lagged the other wireless carriers in phone selection.

Merger synergies with Nextel will start to impact the bottom line in 2007. Sprint will save with a uniform billing, IT, and customer service system. (Source: SG Cowen)



* $16-$18 value per share
* Stock deserves discount with integration problems and sub-prime credit customers
* Fundamentals continue to get worse
* Limited downside

SG Cowen

* 6X 2008E EBITDA = $29.26 per share
* Catalysts mentioned above

Wachovia Equity Research 9/26/06
SG Cowen Equity Research 9/26/06

Note: As of 10/11/06 I have no position in Sprint Nextel (S)

Yield Curve

Over the past week I began trading in a "hypothetical" commodity account. In this account I initiated a NOB (notes over bonds) spread. I went long the December T-Note futures (TY6Z) and short the December T-Bond futures (US6Z). This spread implies that interest rates will rise and the yield curve will become more "normal." I am also long March Wheat call options and the December Wheat futures. This should be a nice practice account to see how futures markets work.

Free Trades With Strings Attached

The online brokers are getting hammered today. Etrade (ET) and TD Ameritrade (AMTD) are both down over 9% with an hour left in trading. The Bank of America announcement of 30 free trades per month will attract many investors. You still must read the fine print. Option trades are $19.95 plus $1.50 per contract. The free trades are only on stocks and ETF's. Bank of America is giving you something that costs them basically nothing. And no load mutual fund transactions are still $45. In return they are hoping that you switch from your local bank to Bank of America. You also must maintain a $25,000 balance in all of your accounts to receive the free trades. This is a good move by Bank of America. Let's see who is next in line to match this offer.

Note: I am long ET

Monday, October 09, 2006

JP Morgan Upgrades Chipotle (CMG)

As I posted last week, too many analysts were negative on Chipotle Mexican Grill (CMG). Today JP Morgan upgraded Chipotle from neutral to overweight. Chipotle should be back around $60 by the end of the year.

Note: I am long CMG

Friday, October 06, 2006

Drugs & Biotech

After the bell Johnson & Johnson (JNJ) reported positive news about the use of Risperdal for autism. If you are looking for speculation in biotech take a look at NeoPharm (NEOL) and Nabi Biopharmaceuticals (NABI).

As of 10/6/06 I have no position in any of the above stocks.

Thursday, October 05, 2006

Looking for Growth in Chipotle (CMG)

Today I initiated a position in Chipotle Mexican Grill (CMG). Chipolte was spun off from McDonalds during the first quarter of 2006. I personally enjoy eating at their restaurants. Chipotle is definitely popular with the college crowd. Lines are often out the door at the University of Illinois. Chipotle in 2006 has been compared to Starbux (SBUX) back in 1992. The stock has settled around $50 with about 2 points of downside. It seems to be holding $48 fairly well. Two down and ten points of upside. There is also room for upgrades as a fair number of analysts are bearish.

Tuesday, October 03, 2006

Dow Time?

I don't believe the recent rally in the Dow is anything special. It mostly confirms the switch from small and midcap stocks to large cap stocks. Most of the homebuilders and energy related stocks are small or midcap. Over the past few months there has been a shift to more defensive names like P&G (PG), Colgate (CL), (JNJ), Bank of America (BAC), and AT&T (T). REITS should outperform if rates stay low or move lower, as their dividend becomes more attractive.

I still like a few tech names CRM, CKFR, AKAM, GOOG, AAPL.