Weekly Market Overview

U.S. stocks closed higher this week with the Dow moving up in triple-digits triggered by strong results from IBM and oversold conditions from last week (which was the worst first-eight-trading-days-of-a-year run in 17 years!). The markets were also helped by oil, technology, and financial services which all performed strongly. Meanwhile, the rest of the week's tone is expected to be set by banks like Citigroup and others that are expected to report earnings. Obviously, there is a lot of trouble left in the market but it appears as if corporate spending and international growth may be enough to avoid a recession.

Top 10 Stocks to Watch this Week

Fundamental Analysis

1. Tyco Electronics (TEL) - After recently spinning off from Tyco this stock is down almost 10%, but is starting to catch the attention of value investors. The company is trading well below its peers with strong cash flows. It is also a victim of the spin-off effect, which has made it an even greater value to opportunistic investors. We believe that this company will outperform in the long-term.
2. Capital Southwest (CSWC) - Activist investor Ned Sherwood came out with an analysis on this company showing a $200/share valuation. The only thing holding shares back are practices by the company that can easily be changed if they so desire. Unfortunately, the company seems resistant to change now, but this is definitely a stock to watch incase they change their mind.
3. United Online (UNTD) - Classmates.com is one of the fastest growing social networking websites on the Internet and this company plans to spin it off real soon. Investors should keep an eye on this development as spin-offs not only represent great investment opportunities, but the social networking space is red hot with names like Facebook and Myspace in the news constantly.
4. Brinks Company (BCO) - Activist hedge funds Pirate Capital and MMI Investments are still fighting the company to unlock value through a divesture of several key businesses. Given the difficult credit market, some are now questioning whether or not this is possible. However, if credit markets improve and they hedge funds are successful during the next annual meeting, this stock could soar.
5. Ceridian Corp. (CEN) - This activist target has agreed to bend to the pressure of the hedge funds and is definitely a company to watch ahead of its annual meeting where it will fight to retain its incumbant board members. If Pershing Square is successful in installing its own board members, we could see significant share appreciation.
   

1. Novatel Wireless Inc. (NVTL) - Intermediate-term bullish continuation wedge.
2. Cardinal Health Incorporated (CAH) - Intermediate-term bullish double bottom.
3. Banco Bradesco Sa. (BBD) - Intermediate-term bullish continuation diamond.
4. Nasdaq Stock Market Incorporated (NDAQ) - Intermediate-term bullish continuation diamond.
5. Arch Capital Group Ltd. (ACGL) - Long-term bullish continuation diamond.
   

Stock of the Week : Borders Group (BGP)

Borders Group, Inc. (NYSE: BGP) is quickly catching the attention of many investors as it continues to pursue a turnaround strategy that is beginning to show results. The company’s stock is down over 50% since the beginning of 2007 as it continues to struggle against larger competitors and online sales. However, many investors are hoping that newcomer CEO George Jones can successfully orchestrate a turnaround for the troubled bookseller. (Read More)

Article of the Week : Activists Can Fail Too

Many activist investors, like Carl Icahn and Bill Ackman, are well known for taking an activist stance in their investments and producing strong returns. However, the best investors are not always perfect and following them blindly could be a bad idea. Target Corporation (NYSE: TGT) and Sears Holdings Corporation (NDAQ: SHLD) are two recent examples of how activist investors can make big bets in the wrong direction. (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.