Weekly Market Overview

U.S. stocks began the week mixed today as investors sort through a wide range of data showing not only tame inflation but also weak spending, manufacturing and construction data. Some investors are looking for a mild correction after a record run in April finally starts to slow down. Certain sectors are still looking ripe for consolidation, however, including online advertising and derivative exchanges. Investors should carefully watch these two sectors while keeping a close eye on earnings reports, which should give us some hints as to whether a correction is forthcoming.

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’s annual meeting is slated for May 4, 2007. Hopefully, we’ll see some action on the part of the activists then!
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.
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!
4. Applebees International (APPB) – Breeden Capital Management first approached Applebees several months ago suggesting that the company put itself up for sale. Last week, the company announced that it had received several takeover offers and would review the bids before taking final offers. While we don’t know what these bids are priced at, we do know that they exist.
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. Juniper Networks (JNPR) – Long-term bullish head and shoulders bottom.
2. Foundry Networks (FDRY) – Intermediate-term bullish symmetrical continuation triangle.
3. Patterson-UTI Energy (PTEN) – Intermediate-term bullish megaphone bottom.
4. Sohu.com (SOHU) – Intermediate-term bullish head and shoulders bottom.
5. Edge Petroleum (EPEX) – Intermediate-term bullish head and shoulders bottom.
   

Stock of the Week: Applebees International (APPB)

Applebees is our stock of the week this week since it is somewhat of a sure play. Shortly after activist shareholders demanded that they explore strategic alternatives, they came back with several potential bidders. Not only do we know that these bids will likely come in at a substantial premium, but there is also room for a potential bidding war since we know that there are more than one entities interested. Given the recent strength of the M&A market combined with the help of activist shareholders looking for an exit strategy, APPB is definitely a stock to watch closely over the next month!

Tip of the Week: Watch the Insiders

Insider transactions can provide very unique insight into exactly where the company is headed. After all, the insiders know the company best! The key to effectively deciphering insider transactions is determining which transactions are worth noting. While stock grants, awards, bonuses and options are all reported, only open-market transactions are worth following. This is simply because it involves the insider spending and risking their own hard earned cash. To find these transactions, simply look for transaction code “P” or “S”, which indicate open market buying and selling.

You can find and track these SEC filings on SECFilings.com!

Final Words

The economy remains uncertain as investors watch earnings and economic reports to try and see if a correction is due after April’s impressive run. By focusing on unique situations and sectors, investors can still profit in any market!

Weekly Market Overview
The markets ended mixed today despite Friday's positive employment report that many traders hoped would provide a boost this week. Earnings season officially begins tomrrow as many investors analyze corporate profits despite expectations being below 10% for the first time in 15 quarters. Meanwhile, oil prices started off the week a little rough, falling $2.77 to $61.51 per barrel. While there wasn't any specific news to explain the decline, many believe that it is simply a return to the norm after the UK vs. Iran premiums. Economically, we are also looking at a higher trade deficit for February and a lower University of Michigan consumer sentiment for April as compared to March. Inflation concerns, however, have been relatively stead, remaining at 3%. Combined, this still implies economic uncertainty that will take some time to clear before we establish a clear trend.


Top 10 Stocks to Watch this Week
Fundamental Analysis
Our top five stocks to watch for fundamental investors are:

1. 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...)
   
2. 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...)
   
3. 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...)
   
4. 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...)
5. Brinks Company (BCO) - Both MMI Investments and Pirate Capital have sizable stakes in this company. The two hedge funds are seeking to breakup the company in either a change-of-control transaction (outright sale) or through a recently proposed spin-off, which would break the company into two pieces worth approximately $1.15 billion a piece. The two agree that the intrinsic value of the shares stands approximately 25% higher than current levels. (More BCO articles...)
   

Technical Analysis
Our top four stocks to watch for technical analysts are:

1. Finisar Corp (FNSR) - Intermediate-term bullish double bottom.
   
2. DirectTV Group Inc. (DTV) - Intermediate-term bullish symmetrical continuation triangle.
   
3. Janus Capital Group Inc. (JNS) - Intermediate-term bullish upside breakout.
   
4. Axcelis Technologies Inc. (ACLS) - Long-term bullish upside breakout.
   
5. Safeguard Scientifics Inc. (SFE) - Intermediate-term bullish continuation diamond.
   

Stock of the Week : Pioneer Natural Resources (PXD)
Pioneer Natural Resources (NYSE:PXD) jumped nearly 10% on Wednesday amid speculation that the company will spin off some of its assets in an effort to boost their stock price. The rumors took off after the company announced that it would consider creating a Master Limited Partnership - or MLP - for some of its exploration and production assets. Many analysts believe that a spin off has the potential to unlock significant value and raised their price targets for the company. Spin offs not only provide the parent company with excess cash, but the new entity also provides a great opportunity as spin offs generally outperform the overall market during their first year. The excess cash at the parent company can then be used for share buybacks, special dividends, or other methods to unlock shareholder value. While no definitive announcement has been made, this is definitely a stock worth watching as any spin off could mean significant share appreciation for PXD shareholders!

Read More on SECInvestor.com…


Filing of the Week : Schedule 14A
Schedule 14A tells you that the company is filing proxy materials. Normally, this occurs when the company is about to hold its annual meeting, so these filings can be somewhat standard and boring. For example, the company may recommend that you vote your proxy votes on the re-election of the incumbant board members. However, in activist investor situations, Schedule 14/A's (or their derivatives) may be filed to show shareholder proposals, such as the nomination of a new slate of directors or removal of a poison pill. Occasionally, these filings can contain fights between the company and the hedge fund, as the company is allowed to write letters to their shareholders explaining their position and reasoning behind their recommendations in the 14A's. Overall, while most of these filings are routine and relatively uninteresting, every once in awhile there is one that may be of interest to those looking at activist investing situations!

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 Words
The economy is still uncertain as many investors look towards tomorrow's earnings for more clues as to its direction. Regardless, there are certainly many opportunities out there to profit for investors willing to dig a little deeper to find hidden value. Good luck trading!

Weekly Market Overview
The markets rose slightly today fueled by renewed by yet another merger Monday. Tribune agreed to be sold to real estate mogul Sam Zell, KKR agreed to buy payment process First Data, and Xerox agreed to acquire Global Imaging in three mega transactions. Meanwhile, investors are hoping that the second quarter will bring less volatility and more certainty than has been seen during the first quarter of the year. There are still housing troubles as New Century Financial officially went into bankruptcy today; however, many are predicting that the boarder market will rise more than 9% by the end of the year. Other looming hazards in the economy include slowing corporate earnings growth and a rise in energy prices on account of Iran and further conflicts in the Middle East. Albiet choppy, there are still plenty of opportunities for investors to get involved in the markets!


Top 10 Stocks to Watch this Week
Fundamental Analysis
Our top five stocks to watch for fundamental investors are:

1. 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...)
   
2. 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...)
   
3. 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...)
   
4. 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...)
5. Brinks Company (BCO) - Both MMI Investments and Pirate Capital have sizable stakes in this company. The two hedge funds are seeking to breakup the company in either a change-of-control transaction (outright sale) or through a recently proposed spin-off, which would break the company into two pieces worth approximately $1.15 billion a piece. The two agree that the intrinsic value of the shares stands approximately 25% higher than current levels. (More BCO articles...)
   

Technical Analysis
Our top four stocks to watch for technical analysts are:

1. PMC Sierra Inc. (PMCS) - Intermediate-term bullish diamond bottom.
   
2. Checkpoint Systems Inc. (CKP) - Long-term bullish continuation diamond.
   
3. Magma Design Automation Inc. (LAVA) - Long-term bullish continuation diamond.
   
4. Enzon Pharmaceuticals (ENZN) - Intermediate-term bullish continuation triangle.
   
5. Borland Software Corp. (BORL) - Intermediate-term bullish diamond bottom.
   

Stock of the Week : Brinks Company (BCO)
Renewed attention on Brink's by two large activist hedge funds have caused us to take a second look at this target company. We know that Brink's currently represents Pirate Capital's largest holding, worth over $260 million. Moreover, we know that BCO is also owned by MMI Investments. Combined, these two shareholders have been pressuring the company for some time now to take action and unlock value for shareholders through (1) a sale of the company, (2) a spin-off, or (3) a leveraged recapitalization of the company. MMI's recent 13D filing may soon be followed by Pirate Capital as both hedge funds are under increasing time constraints to unlock value for their own limited partners. These factors make BCO this weeks stock to watch!

Read More on SECInvestor.com…


Filing of the Week : Form 10-K
Most 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 Words
The economy is still uncertain as many investors look towards second quarter results for more clues as to its direction. Regardless, there are certainly many opportunities out there to profit for investors willing to dig a little deeper to find hidden value. Good luck trading!