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Monthly Archives: February 2012

U.S. Equity Preview: USTR, TBNK, VPFG, HIT, FRP, DAR, & CBL


CBL & Associates Properties Inc. (CBL) : The real estate investment trust that owns shopping centers boosted its quarterly dividend by 1 cent to 22 cents a share.

Darling International (DAR) : The meat- and bone-meal processor may gain as much as 25 percent after its acquisition of Griffin Industries for $872 million boosts sales and profit, Barron’s reported in its “The Trader” column.

FairPoint Communications Inc. (FRP) (FRP US): Standard & Poor’s revised its outlook on the Charlotte, North Carolina-based communications-services provider to negative from stable, saying its earnings before interest, taxes, depreciation and amortization margin is low compared with peers. The negative outlook means S&P may cut the company’s B credit rating.

Hitachi (HIT) : The U.S.-traded shares of the Japanese electronics maker are poised to rise as it sells less profitable assets and boosts earnings on telecommunications, rail systems and power grids, Barron’s reported.

Territorial Bancorp (TBNK) and ViewPoint Financial Group (VPFG) : These regional banks may advance as their simple business models and low risk attract takeover bids, Barron’s reported in its “The Trader” column, citing Mark Zahorik of Keeley Asset Management in Chicago.

United Stationers Inc. (USTR) : The board of the Deerfield, Illinois-based distributor of business products approved the repurchase of an additional $100 million of its shares.

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Gapping Up and Down This Morning

Gapping up 

TBET +129.2%, PCS +8.7%, RIG +3.1%, LOW +3.1%, BP +2.4%, BPAX +27.2% , CHTP +8.0%,  CQP +7.2%,  DNDN +2%,  BP +2.4%

Gapping down

HBC -3.9%, RBS -3.2%, IBN -3.2%, LYG -2.7%, ING -2.0%, CS -2.0%, DB -1.8%, UBS -1.5%,  NVS -4.4%, AZN -1.4%, SNY -0.9%,  CBRX -17.8%,  CRM -0.4%,

FBC -9.3%, NOK -5.2%, AIXG -3.4%, ERIC -1.9%, BRCM -1.8%, NFLX -2.7%

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Upgrades and Downgrades This Morning


American Campus Communities Inc. (NYSE: ACC) Raised to Buy at Argus.
American Electric Power (NYSE: AEP) Raised to Buy at Jefferies.
Arcelor Mittal (NYSE: MT) named as Bear of the Day at Zacks.
Citigroup, Inc. (NYSE: C) Added to U.S. Focus List at Credit Suisse.
Digital Realty Trust, Inc. (NYSE: DLR) Cut to Sector Perform at RBC.
Dunkin Brands Group, Inc. (NASDAQ: DNKN) Started as Buy at Citigroup.
Genuine Parts Co. (NYSE: GPC) named as Bull of the Day at Zacks.
Interpublic Group of Companies, Inc. (NYSE: IPG) Raised to Buy at Deutsche Bank.
LaSalle Hotel Properties (NYSE: LHO) Raised to Outperform at Wells Fargo.
Sears Holding Corporation (NASDAQ: SHLD) Maintained Underperform at Credit Suisse.
Stone Energy Corporation (NYSE: SGY) named as Value Stock of the Day at Zacks.
Tyco International. Ltd (NYSE: TYC) Raised to Outperform at Credit Suisse.
United Rentals Inc. (NYSE: URI) Started as Buy at Citigroup.

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The Top Ten Stocks Sought After by Mutual Funds



Interesting chart here from Goldman Sachs on large-cap mutual fund holdings…



Goldman Sachs


The left column shows the top 10 stocks that funds like relative to their weight in the S&P 500.

So in other words, mutual funds are overweight Dow Chemical, to the tune of 16 basis points. Technically, funds own a lot more GE shares (top of the right column) than Dow Chemical, but compared to GE’s weight in the S&P 500, mutual funds are relatively skeptical of it.

The whole top 10:

  • Dow Chemical
  • Union Pacific
  • Lockheed Martin
  • Potash
  • Celanese (a high-tech materials company)
  • Waste Management
  • FedEx
  • Precision Castparts (high tech parts)
  • Canadian National Ralway
  • Praxair (industrial gasses)

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See How a Calculator Brain, AKA a Person With a High IQ, Invests

YOU don’t have to be a genius to pick good investments. But does having a high I.Q. score help?

The answer, according to a paper published in the December issue of The Journal of Finance, is a qualified yes.

The study is certainly provocative. Even after taking into account factors like income and education, the authors concluded that people with relatively high I.Q.’s typically diversify their investment portfolios more than those with lower scores and invest more heavily in the stock market. They also tend to favor small-capitalization stocks, which have historically beaten the broader market, as well as companies with high book values relative to their share prices.

The results are that people with high I.Q.’s build portfolios with better risk-return profiles than their lower-scoring peers.

Certainly, caution is needed here. I.Q. tests are controversial as to what they measure, and factors like income, quality of education, and family background may not be completely controlled for. But the study’s results are worth pondering for their possible implications.

The paper, by Mark Grinblatt of the University of California, Los Angeles, Matti Keloharju of Aalto University in Helsinki and Juhani Linnainmaa of the University of Chicago took advantage of some unusual data. The crucial numbers came from, of all places, Finland.

Why there? Two reasons. First, Finland requires all able young men to perform military service. As a result, the authors were able to obtain I.Q. test scores of all of men conscripted in Finland from 1982 to 2001.

Second, Finland had a wealth tax, and its citizens had to report their investment portfolios to the government. This means the authors could compare the men’s I.Q. scores and their investing habits, as well as link those factors to other individual data. Similar data sets aren’t available in other countries, however, so we may not want to generalize too much.

Still, the results are interesting. The authors didn’t claim that people with high scores had some kind of monopoly on stock-picking genius. What they did contend was that these people tended to follow basic rules of successful investing….”

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Emerging Economies Will Try to Challenge an American World Bank Chief

“MEXICO CITY (Reuters) – Emerging economies said on Sunday that they will challenge a tradition that has placed an American at the head of the World Bank for decades, as the Obama administration shows sensitivity to the need for change at global institutions.

Emerging economies said it was time to break a decades-old tradition that has long shut out candidates from the developing world and kept an American at the head of the World Bank and a European leader at the International Monetary Fund.

The problem emerging economies face is finding a candidate willing to challenge the United States, which is the largest and most influential shareholder in the World Bank and IMF.

“I am sure the United States will nominate an excellent candidate but it is imperative that the process this time be contestable,” said Amar Bhattacharya, director of the G24 Secretariat, whose members include major developing and emerging economies.

“There are very strong candidates in the developing world. It is important, therefore, that emerging and developing countries make every effort to identify suitable candidates from the developing world,” he added.

Bhattacharya said emerging and developing countries would try to come up with a list of candidates by the deadline for nominees on March 23.

The politically-thorny issue of whether the leadership of the World Bank should be reserved for an American was not formally raised during G20 meetings of finance ministers in Mexico City at the weekend.

But U.S. Treasury Secretary Timothy Geithner privately sounded out ministers from emerging economies on the sidelines on qualities necessary to head the World Bank, but did not say who the U.S. candidate might be, senior G20 official told Reuters…..”

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Despite Austerity and Bailouts Europe Faces Default Risk That is 9 Times Higher Than Treasuries

“The bailout that rescued Greece from a looming default has failed to restore confidence in credit markets, where traders are paying nine times more to insure European government bonds than they are for Treasuries.

While European stocks are off to their best start since 1998, the relative cost of credit default swaps has risen to a record, more than double the July level, according to CMA. To obtain 130 billion euros ($175 billion) in aid to help pay interest on bonds due March 20, Greek Prime Minister Lucas Papademos agreed to reduce debt to 120.5 percent of gross domestic product by 2020 from about 160 percent last year.

While chances of defaults and the breakup of the euro may have diminished, investors are no longer rewarding European governments for reducing spending to cut debt as their economies shrink. U.S. bond yields have stayed near record lows and growth is accelerating as President Barack Obama uses a different strategy, more than doubling the amount of outstanding debt to $10 trillion to fuel the recovery.

“Bond markets don’t believe in the same story that stock markets do,” Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $18 billion, said in a Feb. 22 interview. “Countries are still saddled with huge debt, are facing either economic downturn or recession.”

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China is Expected to Double Rare Earth Exports as Prices Begin to Rebound

“China, the biggest supplier of rare earths, may almost double exports this year and meet quotas set by the government as lower prices stimulate demand.

Chinese exports were 49 percent of the government-alloted quota in the first 11 months of last year because the slowing global economy sapped demand, the Ministry of Commerce said in a Dec. 27statement. Overseas sales quotas may be virtually unchanged this year at 31,130 metric tons, based on Bloomberg calculations.

“Export quotas may be met this year as overseas demand recovers,” Wang Caifeng, a former official overseeing the rare- earth industry with the Ministry of Industry and Information Technology, said in an interview in Beijing. “High prices last year had deterred purchases and led to inventories depletion. Smuggling also hampered exports through illegal channels.”

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The Oil Rally Takes a Break as The IMF Warns on Global Growth

“Oil fell, halting its longest rally in two years, after a warning from theInternational Monetary Fund on the global economy sparked concern that prices have climbed too fast.

Futures slid as much as 1.4 percent in New York after seven days of gains. Oil’s relative strength index signaled that the longest winning streak since January 2010 may have been exaggerated. The world economy is “not out of the danger zone” amid fragile financial systems and rising oil prices, IMF Managing Director Christine Lagarde said yesterday. Prices gained the most in two months last week amid tensions with Iran, OPEC’s second-biggest producer.

“A correction is well overdue,” said Andrey Kryuchenkov, an analyst at VTB Capital in London who predicts that prices will hold at about current levels this week. Oil’s “relentless push higher could only be explained by pure supply-side fears.”

Oil for April delivery fell as much as $1.53 to $108.24 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.53 at 12:40 p.m. London time. The contract gained 1.8 percent to $109.77 on Feb. 24, the highest close since May 3. Prices increased 6.3 percent last week and are 12 percent higher the past year….”

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G-20 Nations Decide Not to Help Europe and Their Sovereign Debt Woes

“European leaders shift their focus this week to bolstering the euro region’s debt-crisis firewall after the Group of 20 nations rebuffed their call for help.

The decision by G-20 finance ministers to fend off pleas for assistance pending an increase in the euro-area backstop puts the onus onGermany, the biggest national contributor to bailouts, to overcome its resistance to doing more.

With a parliamentary vote on a second Greek aid package looming in Berlin today, German Chancellor Angela Merkel’s government must now decide whether to back plans at a March 1-2 European Union summit to combine rescue funds and produce a potential firewall of 750 billion euros ($1 trillion).

Europe “doesn’t really need any outside money,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in an e-mail. “It needs their own policy makers, especially Germany, to show leadership.”

Finland votes on the same package on Feb. 29 while the European Central Bank is preparing to issue a second round of unlimited three-year loans to help shore up the region’s banks….”

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