Weekly Market OverviewThe week began with a bust today after the Dow dropped 100 points when news that sales of new homes unexpectedly fell to a 7-year low in February. This sparked concerns that the poorly performing housing market might derail economic growth. The housing market was so far off of forecasts that even with the bad weather, it caused enormous concern. The market recovered, however, as the technology sector moved higher. The week will likely remain just as mixed as the economy's health remains uncertain.
Top 10 Stocks to Watch this WeekFundamental AnalysisOur top five stocks to watch for fundamental investors are:
- Cost-U-Less, Inc. (CULS)
- There are two hedge funds currently involved with this stock, both
calling for the company to put itself up for sale. One of the hedge
funds has even said it would make an offer. If the two hedge funds are
successful in lobbying management, the company should sell for at least
$12 per share - a 40% gain. (More CULS articles...)
- Temple Inland Inc. (TIN)
- The company announced last week that it would be following Carl Icahn's
advice and breaking up the company. Shares spiked over 14% on the news,
up almost 30% since we first began coverage! We believe that the value
unlocked in these transactions will exceed the premium seen today;
however, it may take awhile for these actions to materialize.
- Ceridian Corporation (CEN)
- Bill Ackman propposed that Ceridian spin off its Comdata division
since the two share almost no synergies. Moreover, he said that the
segment was being held back by the parent company. This is another
great spin off opportunity that would help both the parent company and
the child company... and Bill Ackman definitely knows what he is doing!
Meanwhile, those close to the situation say that investment bankers are
trying to find buyers for both businesses - a move which is angering
the two activist hedge funds. Last week, Ackman sued the company,
demanding that they release letters between Board Directors that they
believe contains evidence supporting their thesis that the company has
been having problems. (More CEN articles...)
- Applebees International Inc. (APPB)
- The Breeden Partners recently filed a series of Schedule 13Ds
suggesting that the company improve several defficiencies, including
its excessive executive compensation. If these issues are appropriately
addressed, it could help the company save millions and increase their
share price significantly. (More APPB articles...)
- Electro Scientific Industries (ESIO)
- Nierenberg Investment Management first lobbied this company to take
several actions to return shareholder value. Since then, they have been
joined by another hedge fund. Combined, these two should have enough
leverage to at least warrant a response by management. If they are
successful, it could mean special dividends or other measures aimed at
unlocking value. (More ESIO articles...)
Technical AnalysisOur top four stocks to watch for technical analysts are:
- Conocophilips (COP) - Intermediate-term bullish head and shoulders bottom.
- Coldwater Creek Inc. (CWTR) - Intermediate-term bullish megaphone bottom.
- Cubist Pharmaceuticals (CBST) - Long-term bullish head and shoulders bottom.
- Hancock Fabrics Inc. (HK) - Long-term bullish double bottom.
- Sonic Foundry Inc. (SOFO) - Intermediate-term bullish symmetrical continuation triangle.
Stock of the Week : Discover Financial Services (DFS)Morgan Stanley recently offered additional details on its pending spin-off of Discover Financial Services - owner of the Discover credit card business. the company is a leading credit card issuer and electronic payment services company with
one of the most recognized brands in the U.S. financial services. Since
its inception in 1986, the company has grown to become one of the
largest card issuers in the United States, with more than 50 million
cardmembers and $45.7 billion in managed receivables as of November 30,
2006. They are also a leader in payment processing, as they are only
one of two credit card issuers with its own U.S. payments network and
the only issuer whose wholly-owned network operations include both
credit and debit functionality. In 2006, the company processed mroe
than 3 billion transactions through their own network and the PULSE
network. Overall, Discover's revenues (net interest income plus other
income) have increased over the last three years, from $4.5 billion in
2004 to $5.1 billion in 2006, making them a substantial player in their
market. This is definitely an "IPO" worth putting on the calendar - due to take place in the third quarter!
Read More on SECInvestor.com…Filing of the Week : Form 10-KMost
investors look to 10-K filings when looking for information about a
company.
These filings are classified as "Annual Report" filings that encompass
a company's yearly financials and relevent information. They contain an
overview of the company, how they did last year, a detailed overview of
their financials, and management discussion and analysis. Newer 10-Ks
may also contain executive compensation discussion and analysis. These
filings are required reading before investing in any company!
You can easily track these SEC filings with e-mail and RSS alerts using
SECFilings.com!
Tip of the Week : Peek into Hedge Fund Portfolios
Hedge
funds are required to report their annual holdings in a Schedule 13F
filing with the SEC. These filings give detailed insight into what
companies the hedge fund is holding and how much they have at stake in
each. It can be an important clue into which companies may be targetted
next for buyouts, mergers, spin-offs, or other strategic transactions
that can generate value for shareholders. Overall, these are filings
that are definitely worth keeping an eye on!
Final WordsThe
economy seems to be turning to the upside lately with little volatility
compared to last week.
Good luck
trading!