Weekly Market Overview
Stocks rallied to close up over 280 points for its best day since 2003 in a further show of volatility among concerns about credit markets and bad home loans. Leading the indexes was the financial sector as shares in AIG, Citigroup and JP Morgan each rose over 3% on the day. Another catalyst appeared to be a comment from a managing director at Standard & Poor who said the market had overreacted to its decision Friday to lower its ratings outlook on Bear Stearns. Perhaps it is just the first round of bargain hunters, but many more are joining the crowd that believes troubles are not as bad as the market has priced.
Top 10 Stocks to Watch this Week
Fundamental 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.
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.
- 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.
- 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.
- 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
- Hudson City Bank Corp. (HCBK) - Intermediate term bullish head and shoulders bottom.
- Investools Inc. (SWIM) - Intermediate term bullish continuation wedge.
- Ebay inc. (EBAY) - Intermediate term bullish continuation diamond.
- Medarex Inc. (MEDX) - Long term bullish continuation diamond.
- Neustar (NSR) - Long term bullish continuation diamond.
Stock of the Week : Temple-Inland (TIN)Temple-Inland
(NYSE:TIN) shares moved up $0.86, or 1.6%, to $54.76 today after the
company announced that it would sell its timberland holdings for $2.4
billion and distribute the money to shareholders via a special
dividend. The move comes amid an Icahn-led restructuring of the company
that many shareholders are hoping can help it unlock value. (Read More)
Tip of the Week : Know Your Peers - Pirate Capital
Pirate Capital is one of the most well-known activist hedge funds in
today's marketplace. Learn more about their management and strategies
they use to unlock value in their investments! (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.