Weekly Market OverviewU.S. stocks took a small break last week and began this one on a mixed note. A series of economic reports came out today suggesting that even though gasoline prices spiked 10% in April, the CPI only rose 0.5%, meaning that inflation is still under control. Economic analysts remain uncertain, however, as to just how long core inflation will remain under control, especially as rents put pressure on the economy. So, what does this mean for U.S. stocks? Well, any rise in inflation will cause prices to be more expensive for consumers. This means that domestic customers will spend less money while foreign importers will likely increase their buying - good news for manufacturers but bad news for domestic retailers.
Top 10 Stocks to Watch this WeekFundamental Analysis- Brinks Company (BCO)
– The Brink’s Company remains on our watchlist since both MMI and
Pirate Capital still hold significant stakes in the company. The
company recently announced higher than expected earnings along with a
dividend increase. We are still waiting to hear about the activist
situation.
- Ceridian Corporation (CEN)
– Bill Ackman’s activist play also continues to hold appeal with us
since the breakup could unlock substantial value. We have not seen an
announcement of an official date, but as of March 13th, Pershing Square
is still engaged in a proxy contest with the company’s board of
directors. Recently, Pershing Square lost its battle to obtain questionable letters, but vowed to continue pursuing its objectives.
- Hexcel Corporation (HXL)
– OSS Capital demanded today that the company engage an investment bank
to explore strategic alternatives. The company’s shares are worth $14
per share above the current market price if priced at its peers’
levels. All we are waiting on is the support of the board of directors!
- Applebees International (APPB)
– Breeden Capital Management first approached Applebees several months
ago suggesting that the company put itself up for sale. Two weeks ago, the
company announced that it had received several takeover offers and
would review the bids before taking final offers. Recently, the company also agreed to yield two board seats to activist investor Breeden Partners.
- Universal Power Group (UPG)
– 3V Capital Management announced last week that they weren’t pleased
with the company’s valuation. They recommended several changes that
they hope would enhance shareholder value. We are still waiting on more
details and a response from the company, but this was definitely a
stock worth following!
Technical Analysis- Mobility Electronics (MOBE) - Long-term bullish bottom triangle.
- Darden Restaurants (DRI) - Intermediate-term bullish upside breakout.
- Syntax-Brillian (BRLC) - Intermediate-term bullish symmetrical continuation triangle.
- Centex Corporation (CTX) - Intermediate-term bullish head and shoulders bottom.
- Silver Wheaton (SLW) - Long-term bullish continuation diamond.
Stock of the Week: Ceridian Corporation (CEN)We
believe
that this Ceridian is a stock worth a second look in today's market.
Everyone knows that Pershing Square and Relational Investors are
attempting to force Ceridian to spin-off its Comdata unit, which could
unlock millions in value. However, the company recently announced that
it has hired an investment banker and those close to the situation are
saying that these bankers are approaching private equity and corporate
buyers who may be interested in acquiring the whole company. Meanwhile, the hedge fund lost its legal battle demanding the disclosure of letters sent to the board from two management personnel that were recently fired. Tempers are also high since the company has yet to set its annual meeting - where Pershing Square will be able to conduct its proxy solicitation to replace the company's board. But when this finally happens, CEN a stock worth
watching closely!
Tip of the Week : Leverage Up with LEAPs
LEAPs are Long Term
Equity Anticipation Options - or options that have an expiration date
set years in the future instead of mere months. Many popular stocks
offer these options for long-term shareholders that would either like
to leverage up or hedge against their open position. The options
themselves can offer investors increased leverage if they are confident
in the stock's future - after all, options are cheaper than buying the
underlying stock. Alternatively, some investors find it useful to use
these options to hedge against other long-term plays - most notably,
long-term shorting. Shorting stocks can be risky in the event of a
sudden strike of good fortune for the company, so these options can be
used to limit the downside for those speculators. Either way, LEAPs are
an excellent tool that every investor should check out!
You can find and track these SEC filings on
SECFilings.com!
Final Words
Everyone continues to watch the Federal Reserve as it contemplates the inflation and interest rate situation. Clearly, any unexpected changes would make a large impact on several key sectors that have been driving the recent growth. Meanwhile, there seems to be no slowdown in the M&A action that has propelled the markets to new highs in April - so always be on the lookout. Good luck trading!