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Analyst Upgrades/Downgrades

Bankruptcy Experts Warn About Companies in Media, Defense, and Coal Industries

“NEW YORK (Reuters) – Mid-market defense contractors as well as media and coal companies could be at risk of tumbling into bankruptcy in 2013, credit market guru and New York University professor Edward Altman said on Thursday.

With the U.S. government mulling significant cuts to the defense budget, smaller companies that contract with the government for defense projects could suffer, Altman told a group of restructuring professionals at his 12th annual Corporate & Sovereign Credit Market Outlook luncheon.

Altman is known for establishing the so-called “Z-score” method of predicting a company’s bankruptcy risk.

He did not name defense companies he thinks could be bankruptcy candidates, but he said the problems likely would hit smaller firms and that larger ones are not in danger.

In an interview with Reuters after his speech, Altman said the coal industry is expected to continue to suffer as natural gas remains a cheaper energy alternative. One major player in that industry – Patriot Coal Corp (PCXCQ.PK) – filed for bankruptcy last year, blaming in part the glut of natural gas.

Altman said media companies will also face challenges as specialized online media outlets gain strength.

“The Internet media world is getting very crowded,” Altman said in the interview….”

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$FB Momentum Continues as Analyst Cite Positive Developments

“SAN FRANCISCO (MarketWatch) — Once regarded as a weakness, Facebook Inc.’s mobile business is increasingly being viewed as holding the potential to deliver formidable strength for the social media giant.

This much was evident as Raymond James analyst Aaron Kessler raised his rating Monday on Facebook to outperform from market perform, citing “expectation for increasing monetization driven by mobile, new ad formats, and international.”

Shares of Facebook scheduled to report fourth-quarter financial results after the closing bell on Wednesday, traded up nearly 3% in recent action, after Sterne Agee analyst Arvind Bhatia reaffirmed a buy rating.

Both analysts cited Facebook’s mobile momentum — once referred to as “mobile mojo” by another analyst after the company reported that 14% of its total ad revenues were now derived from its mobile business.

That was a big deal since FacebookFB +2.89%  had been taking heat for not having a clear path to growing its mobile advertising.

That was a factor behind a disappointing initial public offering that turned into a big flop last year. While they’ve recovered of late, Facebook’s shares are still down 15% from its IPO price of $38 a share.

The shares’ recent jump — up nearly 50% in the last three months — is mainly due to rising optimism about its online ad business, particularly its ability to make money out of its growing base of mobile users….”

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Value Investor Aswath Damodaran Kicked $APPL to the Curb Near The Top, Now He Sees Value

“Aswath Damodaran, the legendary NYU finance professor, started accumulating shares of Apple in 1997.

And just under a year ago, he dumped the stock.

“I sold because I’m very uncomfortable with the other people who are holding Apple shares right now,” he said in an April 2012 appearance on Bloomberg Television. “The new investors of Apple scare me.  They’re momentum investors.  They’ve shifted the game. Once stocks become a momentum play, intrinsic value goes out the window.”

Apple was trading above $600 per share back then.  And today it’s right around $440.

And in a new blog post, Damodaran has revealed that he is bullish once again.

“Based on my estimates, and they could be skewed by my Apple bias, at its current stock price of $440, there is a 90% chance that the stock is under valued,” he writes….”

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Economists Polled Are Now 36% More Hopeful of U.S .Growth for 2013

“Economists are increasingly, but still cautiously, optimistic about growth in the year ahead with the hiring expected to pick up in coming months.

A quarterly survey by the National Association for Business Economists released Monday shows half of the economists polled now expect real gross domestic product _ the value of all goods and services produced in the United States _ to grow between 2 and 4 percent in 2013. That’s up from 36 percent of respondents who felt the same way three months earlier.

About half expect sluggish or negative performance, down from 65 percent in October.

The latest survey was conducted between Dec. 20 and Jan. 8 and asked 65 economists and others who use economics in the workplace about conditions at their firms or industries. It found that 34 percent of firms now expect to expand their payrolls in the next six months, the highest percentage since April of last year. Meanwhile, 2 percent said they expect their companies to cut payrolls through layoffs, while 14 percent see payrolls trimmed through attrition….”

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Analysts Take $TM’s Earnings Estimates Higher on Currency Strength

“Twelve analysts covering Toyota Motor Corp. (7203), Japan’s largest manufacturer, have raised their earnings estimates for next fiscal year as the yen dropped against all major currencies in the past month. By contrast, shares of Hyundai Motor Co. (005380) and Samsung Electronics Co. (005930) fell after the South Korean exporters voiced concerns about the rising won….”

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The IMF Cuts Global Growth Forecasts Again

 

“The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery.

The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report. While the fund projects growth this year increasing from last year’s 3.2 percent pace, it expects the 17-country euro area to shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October.

“Is Europe on the mend? I think the answer is yes and no,” IMF Chief Economist Olivier Blanchard said in a video released with the report. “Something has to happen to start growth.”

For the global economy, “this is better, but it is not great,” Blanchard said at a press conference today. “In particular, the growth numbers are not enough to make a dent to the unemployment rate in advanced economies.”

The IMF foresees Spain leading the contraction in the euro area, while growth slows in Germany, the region’s largest economy.

World Index

The MSCI All-Country World Index fell 0.2 percent to 1,391.21 at 11:00 in New York. It’s climbed 15 percent in the last six months. The euro fell 0.3 percent, trading at $1.3289.

“It’s clear that financial markets are ahead of the real economy. The question is whether they are too much ahead or not,” Blanchard said. “What we know is that it always takes some time for financial markets’ optimism to feed to the real economy and at this stage there are still obstacles to it.”

While measures to stem the debt turmoil last year helped boost financial markets around the world and decrease sovereign bond yields from Spain to Greece, European officials now still face a recession and unemployment at a record 11.8 percent in the euro area. The IMF warned that the region still poses a “large” risk to the rest of the world if efforts under way to strengthen its economies and work on a banking union slip.

Economic Contraction…”

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Analysts Warn to Be Careful About Jumping Into Spain

“Spain’s IBEX 35 Index may have been a laggard last year with a drop of 6 percent but since the announcement of the European Central Bank’s (ECB) bond-buying plan investors have returned to the country and the index has climbed 14 percent.

Analysts have declared that “the worst may be over” and a bailout is “off the cards” but Nicholas Spiro, managing director at Spiro Sovereign Strategy, told CNBC that significant “idiosyncratic” risks are being suppressed and warns of future flare ups.

The Spanish treasury completed another successful bond auction on Thursday with the improved sentiment allowing it to reach around 9 percent of its longer term borrowing needs for the year.

Yields on 10-year benchmark bonds even managed to creep below the 5 percent level last week for the first time since February 2012, well below the 7-plus percent seen in July….”

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Credit Suisse Touts Ag Stocks

“Analysts at Credit Suisse today have initiated coverage on what they call the North American Agricultural Sciences sector with a look a seven fertilizer makers. Some of the companies have performed well over the past couple of years and some haven’t.

The differentiating factor between the good performers and the not-so-good has been the type of fertilizer each company produces. Demand for nitrogen-based fertilizers is expected to grow throughout this year, positioning the two largest nitrogen produces at the top of Credit Suisse’s heap. Phosphate demand is also expected to be higher, but potash prices have been soft and there is little evidence of a positive change….”

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Tom Demark: $AAPL Has Bottomed, And The Stock Should Rally 22%

“Last night on CNBC, widely-followed market timer Tom DeMark told hosts that the bottom was in for Apple stock, which has been subjected to a vicious selloff over the past several months.

DeMark uses a number of indicators for market timing, and he told CNBC they are all aligning strongly in Apple’s favor:

This is something akin to the low we had December 4 on the Shanghai Index, when we turned positive at the exact low.

This looks like a very strong rally of at least 22 percent. We wouldn’t be surprised tomorrow to see Apple gap up above $494 or $495, despite trading lower in the after-market today, and then just move forward right from there and be strong for the next couple of weeks and reach $600. We think the low is in…today or tomorrow.

DeMark told CNBC that his firm turned bearish on Apple right at the top, and the price action in the stock since then is more or less what they would have expected…”

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World Bank: Worst of the Crisis is Over, Global Economy Fragile

“The World Bank just published an update to its latest Global Economic Prospects report.

“Four years after the onset of the global financial crisis, the worst appears to be over,” they write.  “However, the global economy remains fragile, as high-income countries continue to suffer from volatility and slow growth, says the World Bank’s latest Global Economic Prospects, issued today.

“Despite slow growth in high-income countries, prospects for the developing world remain solid (albeit between 1 and 2 percentage points slower than in the pre-crisis period). In order to regain those earlier faster growth rates, developing countries will need to focus on productivity-enhancing domestic policies, to assure robust growth in the long term.”

The report includes updates to the World Bank’s forecasts for growth.  Here are the key estimates and forecasts (June estimates in parenthesis):

  • 2.3 percent global GDP growth in 2012 (down from 2.5 percent)
  • 2.4 percent global GDP growth in 2013 (down from 3.0 percent)
  • 3.1 percent global GDP growth in 2014 (down from 3.3 percent)
  • 3.3 percent global GDP growth in 2015 …”

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