Weekly Market Overview

U.S. markets started the week on a positive note after a rough week last week that dropped down down below 14,000. The markets were dragged down by subprime issues and a difficult credit market but troubles were eased today after the S&P upgraded JP Morgan's credit rating to AA-minus, saying that concerns about the company's subprime exposure and credit issuers were overrated. Meanwhile, Sowood Capital, a $3 billion hedge fund, announced that it lost 50% of its value last month and would be liquidating the fund - selling its assets to Citadel. So, while the subprime market appears to be partially recovering the credit market still has problems that many hedge funds may end up struggling with. And in the end, this could reduce the deal flow that we have seen prop up the stock market recently - we'll have to wait and see...

Top 10 Stocks to Watch this Week

Fundamental Analysis

1. 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.
   
2. 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. However, news came out today stating that one potential buyer of Ceridian was able to obtain $3.5 billion in debt financing, which is great news for shareholders holding out for a buyout. Meanwhile, shareholders recently won a lawsuit against the company that may level the competitive bidding landscape, paving the way for an increased bid.
   
3. 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! Meanwhile, the company has received several analyst upgrades and sits near its 52-week high.
   
4. Applebees International (APPB) – Breeden Capital Management first approached Applebees several months ago suggesting that the company put itself up for sale. Three 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. The company finally announced a sale today at $2.1 billion - a 4% premium to Friday's close and a substantial increase from when we first mentioned the stock.
   
5. 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

1. Lance Inc. (LNCE) - Intermediate term bullish continuation diamond.
2. Epsey Mfg & Electronics (ESP) - Intermediate term bullish ascending continuation triangle.
3. Sungard Data Systems (SDS) - Intermediate term bullish megaphone bottom.
4. Zoll Medical (ZOLL) - Intermedaite term bullish head and shoulders bottom.
5. Seabright Insurance (SEAB) - Long term bullish continuation diamond.
   

Packeteer Inc. (NDAQ:PKTR) shares moved up marginally today after Chapman Capital disclosed a 9.9 percent stake in the company and demanded that the company immediately hire an investment bank to maximize shareholder value. The wireless application provider has been facing widespread criticism since posting a wide loss during the second quarter of this year. Shareholders are hoping that Chapman can help unlock value through a sale of the company. (Read More)

Tip of the Week : The Mechanics of a Share Buyback

There are a number of ways in which companies can return cash to shareholders other than the usual dividend payments. One of the most common ways is through something called a share buyback. This article will take a look at what a share buyback is and what it means for shareholders. (Read More)

Final Words

The market remains optimistic despite questionable yields and other economic data. While this is good news for investors in the short term, be sure to use caution and only invest prudently.