magicJack Vocal Tec (Nasdaq: CALL) - The Magic is Back

Shares of magicJack Vocal Tec (Nasdaq: CALL) were among the market’s leading gainers last Friday, on news of strong fourth quarter sales of the company’s latest Internet telephony device. The shares also got extra lift from a second simultaneous announcement, as the company canceled a dilutive share offering. The unexpected sales provided the needed operating capital in the offering’s stead. Shares of CALL were up 18% on the day, placing the company among the market’s leading gainers.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: Nasdaq: ALSK, NYSE: T, Nasdaq: ATNI, NYSE: BCE, NYSE: CTL, NYSE: CHT, NYSE: CBB, Nasdaq: CNSL, Nasdaq: EONC, Nasdaq: EQIX, Nasdaq: FRP, Nasdaq: FTR, Nasdaq: HTCO, OTC: IAGI.PK, Nasdaq: CALL, Nasdaq: SHEN, Nasdaq: SURW, Nasdaq: TWTC, Nasdaq: UNTK, NYSE: VZ, NYSE: VG, Nasdaq: WWVY, Nasdaq: WIN, Nasdaq: AMCX, Nasdaq: ASCMA, NYSE: CVC, Nasdaq: CHTR, Nasdaq: CMCSA, Nasdaq: CRWN, Nasdaq: DTV, Nasdaq: DISCA, Nasdaq: DISH, Nasdaq: LBTYA, Nasdaq: LNET, NYSE: SJR, Nasdaq: TIVO, Nasdaq: VMED.

See my review of the old magicJack

The Magic is Back

It appears the magic may in fact be back for magicJack (Nasdaq: CALL). The company announced Friday that its latest product, the magicJack Plus, is basically selling like hotcakes (whatever that means), with approximately 365K units sold in the last 30 days. The original magicJack device needed to be plugged into a computer connected to the internet to make use of it, but the magicJack Plus connects directly into the internet line. Thus, you do not have to keep your computer on 24/7 to make or receive phone calls. It’s a major upgrade in technology and utility value, and the price is likewise higher, retailing at $69.95, versus the $39.95 price for the original magicJack.

Because of the strong sales, the company expects to have a cash store of approximately $50 million by next month. Thus, it was able to kill its planned share offering. Not only did it do so, but the company will renew its share repurchase program as well. It’s an interesting shift in capital management that I find telling about the management team’s forecasting prowess. That means that both upside and downside surprises are highly possible in the future as well. Such unreliability and uncertainty likely burdens the company’s valuation a bit.

Internet telephony has been an interesting market to follow. We saw Vonage (NYSE: VG) dive after its high profile IPO in the middle of the last decade. However, Vonage’s product price point probably was not or is not far enough off the major telecoms to stick, in my view. VG shares still rose in sympathy with CALL Friday, up 7.3%, to $2.36. Likewise, Skype, now owned by Microsoft (Nasdaq: MSFT), did well enough but never caught on with the broad populace. Perhaps it was just too early or maybe the tech savvy needed to use it was too much for an older demographic of American citizens. It’s clear, though, that with the evolution of technology usage, Internet telephony will be an easy learn. Meanwhile, magicJack just made it easy enough for even non-tech savvy seniors to use.

Eventually, the Verizon’s (NYSE: VZ), AT&T’s (NYSE: T) and Sprint Nextel’s (NYSE: S) of the world will feel threatened by internet telephony and magicJack, if they aren’t already. I’ve noted that the price difference between Verizon’s independent internet service and internet and telephone service bundle is marginal, leaving me to question whether “the jack” would really offer worthwhile savings given the convenience trade-off of the first model. I suspect Verizon and other internet providers have priced this way for this very reason. You can get cheaper internet service from the big boys of the industry, but you get less bandwidth in return. Now this second product model by magicJack presents a different story, and given that the ability to port your old number has finally arrived, the game may be on.

The important question to ask is what strategy will the telecom giants employ to crush this emerging competition. Well, the big box players are well positioned to do so, given that they control the internet. However, I could see the cable providers, who are also providers of bandwidth, like Time Warner Cable (NYSE: TWC), Cablevision (NYSE: CVC) and Comcast (Nasdaq: CMCSA) having interest in acquiring a magicJack in order to provide a more competitive bundle package against the telecom players’ offerings. Thus, the new magicJack might be more than just a nifty product for a thrifty spender. Its shares and those of similar servicers might find broad appeal one way or another. Given that a recent census poll showed about half of America is poor, and given the number appears to be increasing, even the worst case scenario seems to present an expanding market opportunity.

There’s just one analyst following the company, based on Yahoo Finance data. His EPS estimate for 2012 appears to be $1.83, which puts its P/E ratio at 13.1X as of Friday. While EPS growth looks to approximate 71% in 2012, the long-term growth estimate is 17.5%, again based on Yahoo Finance and its data providers. Based on this thumbnail, the stock would appear undervalued. The question is, can Internet telephony, and more importantly, the MagicJack, really replace standard telephone service? It once seemed unlikely, but there certainly is a market of bargain seekers willing to try it out, and that market is expanding as economic difficulties continue. Meanwhile, the technology just got easier to operate.

I suspect there is untapped value in recurring revenue not currently being maximized. Today, you buy the magicJack and have telephone service all year long, and then are asked to pay the same amount the following year to continue using the service (though the company stretches that revenue across the year). I suspect that an acquirer would create value by raising the monthly charge tied to magicJack usage through the year. So, while lowering the revenue received currently through telephone service provision, they could also add value to the acquired service and position more competitively against the big three telecom providers. I see this as a clear opportunity for the cable industry, but bad news for the savvy consumer now benefiting from his "jack".

The stock’s chart seemed to show market disinterest until volume picked up in 2010. The cure for questions is earnings growth, and earnings visibility is a new development here. As earnings grow now, and with a P/E near single digits, there would be little stopping the share price following earnings per share higher. The company managed to sell 8 million of its original magicJacks® into a market of roughly 100 million households. This newest product is far superior and the economics more attractive. Its appeal can reach a broader span of Americans, in my view. So, I am a short to medium term fan of magicJack shares (Nasdaq: CALL) and recommend them for aggressive, emerging growth and micro to small cap portfolios.

Editor’s Note: This article should interest investors in Alaska Communications Systems Group (Nasdaq: ALSK), AT&T (NYSE: T), Atlantic Tele-Network (Nasdaq: ATNI), BCE Inc. (NYSE: BCE), CenturyLink (NYSE: CTL), Chunghwa Telecom (NYSE: CHT), Cincinnati Bell (NYSE: CBB), Consolidated Communications (Nasdaq: CNSL), eOn Communications (Nasdaq: EONC), Equinix (Nasdaq: EQIX), FairPoint Communications (Nasdaq: FRP), Frontier Communications (Nasdaq: FTR), Hickory Tech (Nasdaq: HTCO), IA Global (OTC: IAGI.PK), magicJack VocalTec (Nasdaq: CALL), Shenandoah Telecommunications (Nasdaq: SHEN), SureWest Communications (Nasdaq: SURW), tw telecom (Nasdaq: TWTC), UniTek Global Services (Nasdaq: UNTK), Verizon (NYSE: VZ), Vonage (NYSE: VG), Warwick Valley Telephone (Nasdaq: WWVY), Windstream Corp. (Nasdaq: WIN), AMC Networks (Nasdaq: AMCX), Ascent Media (Nasdaq: ASCMA), Cablevision (NYSE: CVC), Charter Communications (Nasdaq: CHTR), Comcast (Nasdaq: CMCSA), Crown Media (Nasdaq: CRWN), DIRECTV (Nasdaq: DTV), Discovery Communications (Nasdaq: DISCA), DISH Network (Nasdaq: DISH), Liberty Global (Nasdaq: LBTYA), LodgeNet Interactive (Nasdaq: LNET), Shaw Communications (NYSE: SJR), TiVo (Nasdaq: TIVO) and Virgin Media (Nasdaq: VMED).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

eBay a Short-Term Sell and Long-Term Buy

Shares of eBay (Nasdaq: EBAY) fell roughly 5% after hours Wednesday, following the company’s third quarter results. eBay’s earnings per share were in line with the analysts’ consensus forecast. However, just meeting expectations is not good enough for a company that has a consistent record of beating the Street. Yahoo Finance indicates eBay exceeded expectations for at least the last four consecutive quarters heading into Q3. Furthermore, the company’s guidance for the coming quarter and the full year were not impressive when compared with the consensus of analysts’ views for the shares. Thus, eBay (Nasdaq: EBAY) joins Apple (Nasdaq: AAPL), IBM (NYSE: IBM), VMware (NYSE: VMW) and Cree (Nasdaq: CREE) in resetting investor expectations and equity valuations.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include: Nasdaq: AAPL, Nasdaq: CREE, NYSE: IBM, NYSE: VMW, NYSE: ATV, Nasdaq: AMZN, OTC: ARIS.OB, Nasdaq: BIDZ, Nasdaq: DLIA, Nasdaq: DANG, Nasdaq: EBAY, Nasdaq: GAIA, Nasdaq: IACI, Nasdaq: LINTA, Nasdaq: OSTK, Nasdaq: PCCC, Nasdaq: STMP, Nasdaq: VVTV and Nasdaq: VITC.

eBay a Short-Term Sell and Long-Term Buy

eBay beat the Street on the top line, making $2.97 billion against expectations for $2.91 billion, based on Factset data. eBay reported a 32% increase in revenue against the prior year quarter, attributing its growth to each of its business segments. However, investments made to assimilate acquisitions and market the brand, and some difficulty with the learning curve on mobile business led it to only earn the $0.48 per share (on a non-GAAP basis) that analysts were looking for. According to Yahoo Finance, over the last four quarters, eBay beat estimates by between 2% and 11%. Thus, expectations for the same were likely built into the company’s valuation, and so were squeezed out of it on Wednesday evening. However, by 8:00 PM ET, and after the conference call concluded, the stock had mitigated its decline to minus 4%.

The company’s Payments business generated a 32% net revenue increase, to $1.107 billion. Within Payments, its merchant services business grew sharply in Q3, with net total payment volume rising 36%. eBay’s signature Marketplaces operations generated a 17% net revenue rise, to $1.653 billion. Within this segment, its international gross merchandise volume exceeded the rate of growth in domestic volume, growing 18% to $9.078 billion. The company’s GSI business, the operations just acquired in Q2, generated $203 million in net revenue.

A key problem with the quarter, as far as investors indicated Wednesday evening, was the contraction of the operating margin. Also, it looks as though the margin will hold stubbornly lower than the comparable period through Q4 as well. eBay’s net operating margin was squeezed to 25.3% on a non-GAAP basis in Q3, from 28.7% last year. Executives on the call attributed the contraction to acquisitions, including of GSI, and to business mix. Increasing business via mobile phones played at a higher cost than was expected to be the case. As the company moves up the learning curve, according to executives on the conference call, things should improve. The effective tax rate was also unfavorable against the prior year comparison, but the company’s executives focused their discussion on costs, and assurances of expected improvement over coming quarters. eBay also experienced a higher effective tax rate and completed its share repurchase program in the quarter.

When it came to guidance, eBay raised its outlook, but it seems not enough to satisfy investors. The company guided for a Q4 revenue range of between $3.2 billion and $3.35 billion, but the average of the two points was a bit short of the analysts’ consensus, which according to Yahoo Finance, sits at $3.3 billion. Also, the company’s fourth quarter EPS forecast for between $0.55 to $0.58 matches poorly against the consensus estimate for $0.58. eBay’s full year 2011 revenue forecast for between $11.5 billion and $11.6 billion sits well against the analysts’ consensus estimate for $11.51 billion. However, the company’s EPS forecast range of between $1.98 and $2.01, which is a penny higher than previously forecast, only encompasses the analysts’ consensus view for $2.00. Again, investors were likely looking for more.

Given eBay’s risk tied to the euro and its questionable forecast for an okay holiday season, which is certainly at risk, there appears to be good enough reason to temper short-term enthusiasm for the shares. However, eBay’s Paypal expansion to point of sale, with a beta test at play with one major retailer this Q4, could set this company’s growth into a higher gear in the next few years. According to Yahoo Finance, the company’s P/E/G ratio sits at 1.4, with growth forecast at 12.1% over the next five years. Thus, it seems to me that its trading range should not vary much in the near-term, with downside cushioned by its potential for greater long-term growth and its upside burdened by current issues. Therefore, while I’m cautious over the short-term, based on cost pressures, macroeconomic risks, and what I see as deteriorating broader market sentiment, I would put eBay in a category of names to look up again on weakness based on its opportunity in the emerging blockbuster point of sale business. Therefore, a hold rating would be in order for this stock today for most investors, and depending on your patience and investment style, I would label it a short-term avoid (weak sell) and long-term accumulate (weak buy).

This article should interest investors in Catalog and Mail Order House stocks including Acorn International (NYSE: ATV), Amazon.com (Nasdaq: AMZN), ARI Network Services (OTC: ARIS.OB), Bidz.com (Nasdaq: BIDZ), dELiA’s (Nasdaq: DLIA), E-Commerce China Dangdang (Nasdaq: DANG), eBay (Nasdaq: EBAY), Gaiam (Nasdaq: GAIA), IAC/ InterActiveCorp (Nasdaq: IACI), Liberty Interactive (Nasdaq: LINTA), Overstock.com (Nasdaq: OSTK), PC Connection (Nasdaq: PCCC), Stamps.com (Nasdaq: STMP), ValueVision Media (Nasdaq: VVTV) and Vitacost.com (Nasdaq: VITC).

The day's EPS reports came from American Express (NYSE: AXP), Xilinx (Nasdaq: XLNX), Abbott Laboratories (NYSE: ABT), Wynn Resorts (Nasdaq: WYNN), St. Jude Medical (NYSE: STJ) and U.S. Bancorp (NYSE: USB). Also look for news from 8X8 (Nasdaq: EGHT), Access National (Nasdaq: ANCX), Amphenol (NYSE: APH), AMR (NYSE: AMR), Amylin Pharmaceuticals (Nasdaq: AMLN), Apollo Group (Nasdaq: APOL), Astoria Fin’l (NYSE: AF), ATMI (Nasdaq: ATMI), Bank of New York Mellon (NYSE: BK), Banner (Nasdaq: BANR), BlackRock (NYSE: BLK), Buffalo Wild Wings (Nasdaq: BWLD), Cardinal Fin’l (Nasdaq: CFNL), Cathay General Bancorp (Nasdaq: CATY), Central Valley Community (Nasdaq: CVCY), Cheesecake Factory (Nasdaq: CAKE), Cirrus Logic (Nasdaq: CRUS), Cohen & Steers (NYSE: CNS), Cohu (Nasdaq: COHU), Comerica (NYSE: CMA), Community Trust Bancorp (Nasdaq: CTBI), Core Laboratories (NYSE: CLB), Covanta (NYSE: CVA), Cubist Pharmaceuticals (Nasdaq: CBST), CVB Financial (Nasdaq: CVBF), CYS Investments (NYSE: CYS), Datalink (Nasdaq: DTLK), DiamondRock Hospitality (NYSE: DRH), E*Trade Fin’l (Nasdaq: ETFC), East West Bancorp (Nasdaq: EWBC), eBay (Nasdaq: EBAY), Edwards Lifesciences (NYSE: EW), Exponent (Nasdaq: EXPO), F.N.B. Corp. (NYSE: FNB), Fidelity National Financial (NYSE: FNF), First Cash Financial (Nasdaq: FCFS), Forward Air (Nasdaq: FWRD), Freeport-McMoRan Copper & Gold (NYSE: FCX), Greenhill (NYSE: GHL), Gulfmark Offshore (NYSE: GLF), Heritage Crystal Clean (Nasdaq: HCCI), IDEX (NYSE: IEX), iParty (AMEX: IPT), Kinder Morgan Energy Partners (NYSE: KMP), Kinder Morgan Management (NYSE: KMR), Knight Capital (NYSE: KCG), Knoll (NYSE: KNL), Lam Research (Nasdaq: LRCX), LaSalle Hotel Properties (NYSE: LHO), Lufkin (Nasdaq: LUFK), M&T Bank (NYSE: MTB), Mastech (NYSE: MHH), Media General (NYSE: MEG), MKS Instruments (Nasdaq: MKSI), Morgan Stanley (NYSE: MS), New York Community Bancorp (NYSE: NYB), Noble (NYSE: NE), Northern Trust (Nasdaq: NTRS), NVE Corp (Nasdaq: NVEC), Piper Jaffray (NYSE: PJC), PNC Fin’l (NYSE: PNC), Polycom (Nasdaq: PLCM), Popular (Nasdaq: BPOP), Raymond James (NYSE: RJF), Riverbed Technology (Nasdaq: RVBD), Rockwood Holdings (NYSE: ROC), S.Y. Bancorp (Nasdaq: SYBT), SEI Investments (Nasdaq: SEIC), Select Comfort (Nasdaq: SCSS), Sensata Technologies (NYSE: ST), SLM (NYSE: SLM), Spartan Stores (Nasdaq: SPTN), Stepan (NYSE: SCL), Stryker (NYSE: SYK), Supervalu (NYSE: SVU), Swift Transportation (Nasdaq: SWFT), Temple Inland (NYSE: TIN), Texas Capital Bancshares (Nasdaq: TCBI), Textron (NYSE: TXT), Tractor Supply (Nasdaq: TSCO), Travelers (NYSE: TRV), Umpqua (Nasdaq: UMPQ), United Technologies (NYSE: UTX), Virginia Commerce (Nasdaq: VCBI), West Corp. (Nasdaq: WSTC), Westamerica Bancorp (Nasdaq: WABC), Westell Technologies (Nasdaq: WSTL), Western Digital (NYSE: WDC), Westwood Holdings (NYSE: WHG), WNS Holdings (NYSE: WNS) and Zhone Technologies (Nasdaq: ZHNE).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Every Dog has its Day - Cisco Systems (Nasdaq: CSCO)

Cisco (Nasdaq: CSCO) shares shot up and closed 16% higher Thursday, after the company posted results Wednesday afternoon. Simply put, the long-suffering Cisco beat the beaten down Street estimate, and offered some hope that the company’s simplification plan might create significant economic value in the quarters ahead, and market value by natural progression. The company, which was the poorest pooch of the Dow dog pack, looks to have better days ahead of it now.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: Nasdaq: CSCO, Nasdaq: JNPR, Nasdaq: RVBD, Nasdaq: ARUN, Nasdaq: FNSR, Nasdaq: SMCI, Nasdaq: BBOX, Nasdaq: DGII, Nasdaq: ELON, Nasdaq: EXTR, Nasdaq: GCOM, OTC: HUTC.OB, Nasdaq: LTRX, OTC: LTTC.OB, Nasdaq: NWK, Nasdaq: PTIX, Nasdaq: SWIR, Nasdaq: SILC, Nasdaq: SCMR, Nasdaq: VPF, OTC: ZWBC.PK, OTC: WGAT.PK, NYSE: AIQ, Nasdaq: AONE, Nasdaq: IDSA, Nasdaq: INSM, NYSE: KV-A, Nasdaq: MFNC, Nasdaq: HGSH, AMEX: BHO, NYSE: TLB, Nasdaq: CARB, Nasdaq: TTHI, Nasdaq: AMPE, Nasdaq: CECE, NYSE: IL, NYSE: SOL, Nasdaq: AFFM, Nasdaq: USCR, Nasdaq: TPCG, NYSE: BAC, NYSE: VHI, AMEX: IDI, Nasdaq: CXPO, Nasdaq: EDAC, Nasdaq: IPHI, Nasdaq: TCHC, Nasdaq: ADES, OTC: ALBCF.PK, NYSE: BUD, Nasdaq: BONE, NYSE: BYI, Nasdaq: BIOF, Nasdaq: BODY, Nasdaq: EPAY, NYSE: BGG, NYSE: EAT, NYSE: BR, Nasdaq: CECE, Nasdaq: CHNR, Nasdaq: CPHI, Nasdaq: CIDM, Nasdaq: CDTI, Nasdaq: COSI, NYSE: DV, Nasdaq: DGLY, Nasdaq: ESTE, Nasdaq: DIET, Nasdaq: RDEN, Nasdaq: ELTK, Nasdaq: EMAN, Nasdaq: GENC, Nasdaq: GCFB, Nasdaq: HOKU, Nasdaq: JSDA, NYSE: KSS, NYSE: MCP, NYSE: JWN, Nasdaq: NVDA, NYSE: PGR, Nasdaq: QPSA, Nasdaq: RRGB, Nasdaq: RENN, Nasdaq: SPNS, NYSE: SLE, NYSE: TK, NYSE: THI, Nasdaq: URRE and NYSE: WEN.

Cisco Systems (Nasdaq: CSCO) – Every Dog has its Day

Cisco’s revenues rose 3%, to $11.2 billion, which was about $300 million higher than the revenue estimates of analysts on average, based on Factset data. Last month, the company said it would let 6,500 people go, and it has begun shedding non-core business efforts like its Flip Video camcorder. Excluding the cost of these measures, Cisco said it would have earned $0.40 a share last quarter, which was 2 cents above the Street view. Cisco even said it might generate 4% revenue growth in the current quarter, also above the Street outlook.

There was but one negative point and warning from John Chambers, the company’s embattled CEO, and that is that government sourced revenue streams are threatened. Indeed, its public sector sales dropped 7%, and unfortunately, this segment represents about a fifth of the company’s business.

Cisco Systems was the dog of the Dow, down 32% before Thursday for the year-to-date. That measured against the Dow’s 7% drop-off. Every dog has his day, though, and today is Cisco’s. It looks like its economic value creating strategy will serve as an offset against the impact of broader economic weakness. Thus, CSCO’s return outlook has some alpha in it to overcome the beta beat-down from the broader economy and market.

This stock epitomizes the appeal of value in a growth troubled environment. It should attract capital as a result, like it clearly has today. The company’s PEG ratio, before the day’s move, was sub-1.0 (about 1.2X now), and growth looks like it has the potential to surprise as the company sheds burdensome business lines, cuts costs and spurs the top line. The PEG ratio we quoted here is based on about a 10% growth forecast over the next five years (Yahoo Finance), but Cisco produced 21% operating EPS growth in this latest quarter, based on the $0.40 figure. As a result, I cannot help but like it as a sector representative for well diversified portfolios.

This article should interest investors in networking and computer device companies, including Cisco Systems (Nasdaq: CSCO), Juniper Networks (Nasdaq: JNPR), Riverbed Technology (Nasdaq: RVBD), Aruba Networks (Nasdaq: ARUN), Finisar (Nasdaq: FNSR), Super Micro Computer (Nasdaq: SMCI), Black Box (Nasdaq: BBOX), Digi International (Nasdaq: DGII), Echelon (Nasdaq: ELON), Extreme Networks (Nasdaq: EXTR), Globecomm (Nasdaq: GCOM), Hughes Telematics (OTC: HUTC.OB), Lantronix (Nasdaq: LTRX), Lattice (OTC: LTTC.OB), Network Equipment Technology (Nasdaq: NWK), Performance Technologies (Nasdaq: PTIX), Sierra Wireless (Nasdaq: SWIR), Silicom (Nasdaq: SILC), Sycamore Networks (Nasdaq: SCMR), Valpey-Fisher (Nasdaq: VPF), WideBand (OTC: ZWBC.PK), WorldGate Communications (OTC: WGAT.PK).

Other big gainers Thursday included Alliance Healthcare (NYSE: AIQ), A123 Systems (Nasdaq: AONE), Industrial Services of America (Nasdaq: IDSA), Insmed (Nasdaq: INSM), K-V Pharmaceutical (NYSE: KV-A), Mackinac Financial (Nasdaq: MFNC), China HGS Real Estate (Nasdaq: HGSH), B+H Ocean Carriers (AMEX: BHO), Talbots (NYSE: TLB), Carbonite (Nasdaq: CARB), Transition Therapeutics (Nasdaq: TTHI), Ampio Pharmaceuticals (Nasdaq: AMPE), CECO Environmental (Nasdaq: CECE), IntraLinks (NYSE: IL), Renesola (NYSE: SOL), Affirmative Insurance (Nasdaq: AFFM), U.S. Concrete (Nasdaq: USCR), TPC Group (Nasdaq: TPCG), Bank of America (NYSE: BAC), Valhi (NYSE: VHI), SearchMedia Holdings (AMEX: IDI), Crimson Exploration (Nasdaq: CXPO), EDAC Technologies (Nasdaq: EDAC), Inphi Corp. (Nasdaq: IPHI).

The rest of the EPS schedule includes: 21st Century Holding (Nasdaq: TCHC), ADA-ES (Nasdaq: ADES), Alibaba.com (OTC: ALBCF.PK), Anheuser-Busch InBev (NYSE: BUD), Bacterin Int’l (Nasdaq: BONE), Bally Technologies (NYSE: BYI), Biofuel Energy (Nasdaq: BIOF), Body Central (Nasdaq: BODY), Bottomline Technologies (Nasdaq: EPAY), Briggs & Stratton (NYSE: BGG), Brinker Int’l (NYSE: EAT), Broadridge Financial (NYSE: BR), Ceco (Nasdaq: CECE), China Natural Resources (Nasdaq: CHNR), China Pharma (Nasdaq: CPHI), Cinedigm Digital (Nasdaq: CIDM), Clean Diesel Technologies (Nasdaq: CDTI), Cosi (Nasdaq: COSI), DeVry (NYSE: DV), Digital Ally (Nasdaq: DGLY), Earthstone Energy (Nasdaq: ESTE), eDiets.com (Nasdaq: DIET), Elizabeth Arden (Nasdaq: RDEN), Eltek (Nasdaq: ELTK), Emagin (Nasdaq: EMAN), Gencor (Nasdaq: GENC), Granite City Food (Nasdaq: GCFB), Hoku (Nasdaq: HOKU), Jones Soda (Nasdaq: JSDA), Kohl’s (NYSE: KSS), Molycorp (NYSE: MCP), Nordstrom (NYSE: JWN), Nvidia (Nasdaq: NVDA), Progressive (NYSE: PGR), Quepasa (Nasdaq: QPSA), Red Robin Gourmet (Nasdaq: RRGB), Renren (Nasdaq: RENN), Sapien’s (Nasdaq: SPNS), Sara Lee (NYSE: SLE), Teekay (NYSE: TK), Tim Horton’s (NYSE: THI), Uranium Resources (Nasdaq: URRE), Wendy’s (NYSE: WEN), and more.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Homebuilder Shares a Prospective Buy Here

But: Liquid Capital Should be Nimble, and Long- Term Investors Might Take a Taste Now, and a Bite Later

You would have thought that given Beazer Homes' (NYSE: BZH) bad news today, homebuilder shares might be lower. However, a well-timed Bloomberg article speaking to the seasonal push for housing that follows the Superbowl, published a minute after midnight this morning, got traders started early looking for a homebuilder share recovery. Even BZH's shares are up 3% at the hour of scribbling here. More importantly, I see the industry poised for a significant drive higher, but not without disruption.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: NYSE: BAC, OTC: FMCC.OB, OTC: FNMA.OB, NYSE: GS, NYSE: MS, NYSE: WFC, NYSE: TD, NYSE: SRS, NYSE: URE, NYSE: IGR, NYSE: XIN, Nasdaq: RYHRX, Nasdaq: TRREX, NYSE: TOL, NYSE: HOV, NYSE: DHI, NYSE: BZH, NYSE: LEN, NYSE: KBH, NYSE: PHM, NYSE: NVR, NYSE: GFA, NYSE: MDC, NYSE: RYL, NYSE: MTH, NYSE: BHS, NYSE: SPF, NYSE: MHO, AMEX: OHB, NYSE: VNQ, NYSE: PNC, NYSE: JPM, Nasdaq: HOFT, NYSE: ETH, NYSE: PIR, NYSE: WSM, NYSE: HD, NYSE: LOW, AMEX: VAZ, AMEX: NKR, AMEX: MZA, AMEX: NXE, AMEX: NFZ, Nasdaq: XNFZX, Nasdaq: FSAZX, Nasdaq: AVTR, NYSE: AIV, NYSE: EQR, NYSE: AVB, NYSE: UDR, NYSE: ESS, NYSE: CPT, NYSE: SNH, NYSE: BRE, NYSE: HME, NYSE: MAA, NYSE: ELS, NYSE: ACC, NYSE: CLP, Nasdaq: AGNC, NYSE: SUI, NYSE: AEC, NYSE: PMT and AMEX: TWO, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ

Homebuilder Shares A Prospective Buy Here

It makes logical sense that once the NFL football playoffs conclude, married men have a weekend void to fill. Well, it seems their wives and fiancés don't miss a beat in getting their men busy prepping a nest and looking for a house. The spring home buying season officially begins after the Superbowl, according to the experts, and this year they have their hopes on the first GDP contribution from the sector since 2005, according to Bloomberg's article.

The Commerce Department reports that the yearly peak in New Home Sales has occurred in March or April in 12 of the last 14 years. Since new home construction takes time, prospective buyers look to spring in order to be in their home by the start of the school year. Thus, each spring brings new hope to the industry.

A closer look at the numbers though, shows that while growth is finally expected for 2011, it's nothing special. Decent percentages are forecast on historically horrible numbers. The National Association of Home Builders (NAHB) strong forecast only has the absolute pace of new home sales reaching 385K. But, I expect that because Fannie Mae (OTC: FNMA.OB) (forecasts 18% rise), the Mortgage Bankers Association (forecasts 10%) and the NAHB (+20%) are all looking for growth, and while homebuilder stock speculators are looking for any reason to place the early bet, we will see today's spurt continue. I don't think the appreciation in homebuilder shares will be without disruption though, and so I advise liquid capital to be nimble, and long-term money to take a taste now, and save some appetite for later as well.

My reasoning for this is because I anticipate harsh January weather destroyed the home sales pace for the month in much of the country, and I expect the possibility of bad housing news this month is not yet perfectly factored in by today's enthusiasts driving the shares higher. All of December's deceptive growth in new home sales was born in the Western U.S., and that will have to be the case, and some, in January for sales to continue rising overall.

The Employment Situation Report for January showed construction employment declined by a hefty 32,000 through the snowy month. Given the amount of job shedding in the decimated industry through the recession, the number, however small, is actually an extremely disheartening sign. When the month's housing sales results are reported, I expect they could fluster the market, unless what I am reporting today is understood by then.

Still, the speed and willingness of capital to chase homebuilder shares now, thus their upside sensitivity, is a positive factor to investment in the sector now, in my view. Beazer Homes (NYSE: BZH) reported orders for homes slipped, and BZH shares were down as much as 4% on the news. However, they have now accomplished a 7% swing as speculative money is flooding into the industry. I think you can count on this push driving higher over the near-term.

Even as Beazer reported a poor fiscal first quarter, it noted a 50% sequential month increase in new home orders in January, and said the rate was about equal to the prior year. Thus, perhaps the 72% increase in Western US new home sales reported for December were simply a leading indicator of an even better than expected drive for overall new home sales across the country. The stocks are catching fire, that's for sure, with K.B Homes (NYSE: KBH) up 4%; Toll Brothers (NYSE: TOL) up 3.9%; PulteGroup (NYSE: PHM) up 2.8%; D.R. Horton (NYSE: DHI) up 3.3%; and the SPDR S&P Homebuilders ETF (NYSEArca: XHB) up 1.9%.

The shares of homebuilders have been recovering gradually since early 2009, from the rock bottom the entire market touched. The chart of the XHB shows that the market saw a dip in the summer of 2010, when tax incentives expired and the housing market with it. Since then, capital has been speculatively hopeful for an organic recovery to begin in housing. With most of these cyclical companies only now coming out of years of producing losses, and with real EPS only prospectively seen in 2012 for most of the industry, the sector may be set up to benefit from a surprisingly better pace of sales growth this year. We may not be at inflection point, but it appears we are at a point of important change, which investors tend to benefit greatly from. If earnings estimates are set up for upward adjustment as it appears, these homebuilder stocks should see rich price appreciation as well through the year.

DISCLOSURE: I have no interest in any security mentioned



Editor's Note: Article should interest investors in Bank of America (NYSE: BAC), Freddie Mac (OTC: FMCC.OB), Fannie Mae (OTC: FNMA.OB), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), Toronto Dominion (NYSE: TD), UltraShort Real Estate ProShares (NYSE: SRS), Ultra Real Estate ProShares (NYSE: URE), ING Clarion Global Real Estate Income Fund (NYSE: IGR), Xinyuan Real Estate Co. (NYSE: XIN), Rydex Real Estate Fund H (Nasdaq: RYHRX), T. Rowe Price Real Estate Fund (Nasdaq: TRREX), Toll Brothers (NYSE: TOL), Hovnanian (NYSE: HOV), D.R. Horton (NYSE: DHI), Beazer Homes (NYSE: BZH), Lennar (NYSE: LEN), K.B. Homes (NYSE: KBH), Pulte Homes (NYSE: PHM), NVR Inc. (NYSE: NVR), Gafisa SA (NYSE: GFA), MDC Holdings (NYSE: MDC), Ryland Group (NYSE: RYL), Meritage Homes (NYSE: MTH), Brookfield Homes (NYSE: BHS), Standard Pacific (NYSE: SPF), M/I Homes (NYSE: MHO), Orleans Homebuilders (AMEX: OHB), Vanguard REIT Index ETF (NYSE: VNQ), PNC Bank (NYSE: PNC), J.P. Morgan Chase (NYSE: JPM), Hooker Furniture (Nasdaq: HOFT), Ethan Allen (NYSE: ETH), Pier 1 Imports (NYSE: PIR), Williams Sonoma (NYSE: WSM), Home Depot (NYSE: HD), Lowes (NYSE: LOW), AMEX: VAZ, AMEX: NKR, AMEX: MZA, AMEX: NXE, AMEX: NFZ, Nasdaq: XNFZX, Nasdaq: FSAZX, Avatar Holdings (Nasdaq: AVTR), Apartment Investment & Management (NYSE: AIV), Equity Residential (NYSE: EQR), Avalonbay Communities (NYSE: AVB), UDR Inc. (NYSE: UDR), Essex Property Trust (NYSE: ESS), Camden Property Trust (NYSE: CPT), Senior Housing Properties (NYSE: SNH), BRE Properties (NYSE: BRE), Home Properties (NYSE: HME), Mid-America Apartment (NYSE: MAA), Equity Lifestyle Properties (NYSE: ELS), American Campus Communities (NYSE: ACC), Colonial Properties (NYSE: CLP), American Capital Agency (Nasdaq: AGNC), Sun Communities (NYSE: SUI), Associated Estates (NYSE: AEC), PennyMac Mortgage (NYSE: PMT), Two Harbors (AMEX: TWO).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Netflix (Nasdaq: NFLX) a Buy for Aggressive Investors

Stock Pick Long Idea

While not for the faint of heart, Netflix (Nasdaq: NFLX) shares look to me like a buy for aggressive capital. The company blew away fourth quarter EPS forecasts. Consensus estimates look too conservative, which have the effect of over-inflating the P/E and PEG ratios. Beware though that high growth and valuation bring with it sensitivity to news, and so any failing can be disastrous for capital.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: Nasdaq: NFLX, Nasdaq: TIVO, Nasdaq: CMSCA, Nasdaq: DTV, Nasdaq: AMZN, Nasdaq: AAPL, Nasdaq: MSFT, Nasdaq: YHOO, Nasdaq: GOOG, NYSE: DIS, NYSE: DWA, NYSE: CNK, NYSE: RGC, NYSE: RLD, NYSE: LGF, OTC: BLOAQ.PK, Nasdaq: RENT, Nasdaq: CKEC, Nasdaq: LSTZA, NYSE: MHP, NYSE: PSO, NYSE: JW-A, NYSE: JW-B, Nasdaq: SCHL, Nasdaq: CRRC, NYSE: NED, Nasdaq: PEDH, NYSE: BKS, Nasdaq: BAMM, NYSE: BGP, OTC: LYFE.OB, Nasdaq: NOOF, OTC: PUBM.OB, OTC: IFLM.OB, Nasdaq: PTSX, Nasdaq: SAPX, OTC: AFFW.OB, NYSE: TWX, Nasdaq: NWSA and Paris: VIV.PA, Nasdaq: QCOM, NYSE: ABT, NYSE: BA, Nasdaq: SYMC, NYSE: TER, Nasdaq: CTXS, NYSE: AF, Nasdaq: BOKF, NYSE: CP, Nasdaq: COHU, NYSE: COP, NYSE: CBE, NYSE: CVD, Nasdaq: ETFC, NYSE: EK, NYSE: GD, NYSE: ISH, NYSE: KYO, NYSE: LM, Nasdaq: LOGI, NYSE: LSI, NYSE: MKC, NYSE: MWV, NYSE: OXY, NYSE: ROK, NYSE: SAP, Nasdaq: SEIC, NYSE: SO, Nasdaq: SBUX, Nasdaq: TSCO, NYSE: UTX, NYSE: VLO, NYSE: WLP, NYSE: XRX, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

Netflix (Nasdaq: NFLX) a Buy for Aggressive Investors

Netflix (Nasdaq: NFLX) shares jumped 10% after-hours Tuesday and were up 14% through the premarket morning, after the pioneer in the movie rental business beat the street with its quarterly earnings. Netflix grew EPS by 55% in its fourth quarter, with its $0.87 in EPS exceeding the analysts' consensus of $0.71 by 22.5%. The growth came on 34% revenue growth, which was short of but close enough to the analysts' consensus for the top line.

The blockbuster growth was driven by better than forecast subscriber growth. The company added 3.08 million new subscribers in the quarter, some 500K more than analysts had forecast. Netflix grew subscribers at a fierce rate of 18% from the third quarter, and at a count of 20.01 million, it can now boast the third largest US video subscription service, behind Comcast (Nasdaq: CMSCA) and DirecTV (Nasdaq: DTV).

Subscriber growth was certainly lifted by its late year launch of its unlimited streaming-only subscription plan. The company's expansion into Canada, while generating an international operations operating loss momentarily, will be followed shortly with a launch into a second international market. I'll go ahead and speculate that to be the United Kingdom, because it just makes sense due to language, custom and technological consistencies. Netflix estimates that it will take about 8 quarters to turn that second market profitable; we say it will happen quicker, as is occurring with the Canadian market. We expect Netflix is underestimating its brand power and the nearness of the global community.

The leverage of revenue over operating expenses allowed for operating margin expansion and operating profit growth of 47%. Since the company had been buying back shares, the lower count allowed for even faster EPS growth. It appears the company also produced the most free cash flow in its history this past quarter.

We find Netflix's partnership with Amazon.com (Nasdaq: AMZN) quite interesting. What already appears to be a complementary fit, is now working together, and we have to wonder if either Netflix or Amazon knew exactly what they were doing by engaging the other when this deal formed. In case you were not aware, Netflix has shifted from its own servers to AWS servers, and things got a whole lot easier for them since.

I must say that I've read a lot of earnings releases over the years, and have rarely come across the tone found in Netflix's news. Perhaps this is the direction we're heading, casual conversation on corporate releases, but sometimes people and corporate executives speak perfectly and the words are all made up (God knows I've seen too much of that on Wall Street). One thing I like about the Netflix team though is the candid conversation, and perhaps this is why the company does not take live questions on its conference calls; they might accidentally say too much to the rightly posed query.

The management team of this firm might not be up to par with the task at hand, or perhaps it is precisely because the CEO and Founder cares about his company so much that it will continue to astound. Usually though, these guys are pushed out, and it's unfortunate, because these companies are their babies. I feel I should say congratulations to Netflix's founder, for thinking outside the box, and then doing it again when the box changed. All small businessmen should be inspired by this success. Still, I will say that the trouble with the forecasting we saw this quarter, which resulted in a wildly positive surprise and stock surge, might someday lead to a bad miss or reflect a poor decision.

That said…

Given the big miscalculation by analysts this past quarter, let's assume the high estimate for 2011 is correct, and NFLX will earn $4.55. Let's say the stock opens where after hours trading took it, at $202. That gives NFLX a P/E ratio of roughly 44 on the forward estimate. The growth that estimate projects for the company in 2011 is 54%, and it would seem, if this or somewhere near is more correct than the conservative consensus estimates out there, then the high flying stock might not be overvalued.

Whenever you get an unsustainable growth rate, though, and a P/E value that nearly matches it, you're going to find volatility and sensitivity to news. Thus, even though the PEG ratio might be 0.8 when applying that one-year growth, or close to 1.0 for a lesser three-year growth rate, owning the shares is not for the faint of heart. That said, the run up after hours appears justified to me, and the stock still seems a proper fit for aggressive investors.



Disclosure: I have no interest in any mentioned stock.

This article should interest investors in Disney (NYSE: DIS), DreamWorks Animation (NYSE: DWA), Cinemark Holdings (NYSE: CNK), Regal Entertainment (NYSE: RGC), RealD (NYSE: RLD), Lions Gate Entertainment (NYSE: LGF), Rentrak (Nasdaq: RENT), Carmike Cinemas (Nasdaq: CKEC), LYFE Communications (OTC: LYFE.OB), New Frontier Media (Nasdaq: NOOF), Public Media Works (OTC: PUBM.OB), Independent Film Development (OTC: IFLM.OB), Point 360 (Nasdaq: PTSX), Seven Arts Pictures (Nasdaq: SAPX), Affinity Medianetworks (OTC: AFFW.OB), Time Warner (NYSE: TWX), News Corp. (Nasdaq: NWSA), Vivendi (Paris: VIV.PA), Liberty Starz Group (Nasdaq: LSTZA), McGraw-Hill (NYSE: MHP), Pearson Plc (NYSE: PSO), John Wiley & Sons (NYSE: JW-A, NYSE: JW-B), Scholastic (Nasdaq: SCHL), Courier (Nasdaq: CRRC), Noah Education (NYSE: NED), Peoples Educational Holdings (Nasdaq: PEDH), Barnes & Noble (NYSE: BKS), Amazon.com (Nasdaq: AMZN), Books-A-Million (Nasdaq: BAMM) and Borders (NYSE: BGP).

Other of the day's corporate EPS Wednesday came from from Qualcomm (Nasdaq: QCOM), Abbott Labs (NYSE: ABT), Boeing (NYSE: BA), Symantec (Nasdaq: SYMC), Teradyne (NYSE: TER), Citrix Systems (Nasdaq: CTXS), Astoria Financial (NYSE: AF), BOK Financial (Nasdaq: BOKF), Canadian Pacific Railway (NYSE: CP), Cohu (Nasdaq: COHU), ConocoPhillips (NYSE: COP), Cooper Industries (NYSE: CBE), Covance (NYSE: CVD), E*Trade (Nasdaq: ETFC), Eastman Kodak (NYSE: EK), General Dynamics (NYSE: GD), International Shipholding (NYSE: ISH), Kyocera (NYSE: KYO), Legg Mason (NYSE: LM), Logitech International (Nasdaq: LOGI), LSI Corp. (NYSE: LSI), McCormick & Co. (NYSE: MKC), MeadWestVaco (NYSE: MWV), Netflix (Nasdaq: NFLX), Occidental Petroleum (NYSE: OXY), Rockwell Automation (NYSE: ROK), SAP (NYSE: SAP), SEI (Nasdaq: SEIC), Southern Co. (NYSE: SO), Starbucks (Nasdaq: SBUX), Tractor Supply (Nasdaq: TSCO), United Technologies (NYSE: UTX), Valero Energy (NYSE: VLO), WellPoint (NYSE: WLP), and Xerox (NYSE: XRX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Roaring Rare Earth Stocks!

Uncovering Opportunity

Rare earth dealing stocks took off this week, reviving a year-long climb. By Tuesday the popular press was well focused on the gains, as a report that China would be limiting exports of rare earth elements found the wire. At this point, investors are most interested in learning if it is too late to benefit, and we think we have uncovered a couple ways you still might.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers include: NYSE: MCP, NYSE: REE, Nasdaq: REMX, AMEX: GMO, Nasdaq: XING, AMEX: SHZ, AMEX: AVL, ASX: LYC.AX, OTC: LYSCF.PK, OTC: LYSDY.PK, NYSE: RIO, NYSE: BHP, OTC: GWMGF.PK, CDNX: GWG.V, Nasdaq: CHGS, AMEX: URZ, Nasdaq: CDII, NYSE: QXM, AMEX: ABL, AMEX: CDY, OTC: ARAFF.PK, ASX: ARU.AX, ASX: ALK.AX, Nasdaq: WEBM, Nasdaq: BASI, Nasdaq: GCFB, Nasdaq: PULS, Nasdaq: NANX, Nasdaq: PRPH, Nasdaq: RNOW, Nasdaq: ALTI, Nasdaq: OSN, Nasdaq: TWER, Nasdaq: KONE, Nasdaq: CACB, Nasdaq: WSB, NYSE: RC, Nasdaq: FFBH, Nasdaq: AMRS, Nasdaq: KGJI, AMEX: ADK-WT, Nasdaq: CPWM, Nasdaq: HAUP, Nasdaq: SCKT, Nasdaq: ULBI, Nasdaq: SCMF, Nasdaq: CAVO, Nasdaq: TGIS, Nasdaq: PBIO, Nasdaq: ESMC, Nasdaq: DARA, Nasdaq: INOC, Nasdaq: FCFL, Nasdaq: CTEK, Nasdaq: BNSO, AMEX: BTX, AMEX: INS, Nasdaq: CPBK, AMEX: QBC, Nasdaq: ORCH, NYSE: KFS, Nasdaq: CLWT, Nasdaq: HMNF, Nasdaq: GRNB, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ.

Roaring Rare Earth Stocks

In case you were unaware, rare earth elements are of strategic importance to our defense industry, and China has quietly amassed a 96%+ majority of the world's supply of the scarce stuff. We are talking about dysprosium (vital to clean energy), terbium, europium, neodymium, and yttrium. These are not household names, but the iPhone and other mobile phones, flat screen televisions, compact fluorescent light bulbs, and rocket guidance systems they are used in are, and clean energy initiatives involving wind turbines and electric cars will need them too if we are to seriously move toward energy independence.

Showing us how China will deal with the world in a future in which it becomes more important, the country has imposed criminal export taxes on these and less expensive rare earths like lanthanum and cerium, which are used in oil refining and glass manufacturing. The World Trade Organization has banned export taxes, but China has imposed them on these elements for the last four years - simply because it can. In some cases, materials that cost a few dollars a pound in China, cost $40+ elsewhere, due to the tariffs. That's called giving it to ya good where I come from. Imagine how China will deal with us when it is a more important military and economic power.

Dysprosium helps magnets retain their magnetic properties under extreme temperatures (for permanent magnets), which makes it important to clean energy industries. Its near complete current production in China, and the strong push for clean energy including within China, has some experts worried the limited supply of the resource could stymie development for five years or so. Because of this, along with China's unfair currency policy and low cost labor, alternative energy companies are basing operations in China, which nearly ensures the US manufacturing base will find no benefit from the shift toward energy independence. That's a bummer for President Obama and his big hopes to revive the Midwest.

The Chinese seem to have legitimate reasons for controlling supply, starting with their own burgeoning domestic demand derived from multiplying middle class development. It seems the strategic importance of the elements will ease legislative and regulatory restrictions that had helped to shut down US production previously, in favor of cheaper Chinese sources. However, for now, the demand/supply equation has been wildly swayed, and prices have rocketed. For instance, in 2003, you could get a pound of dysprosium for $6.50, though I don't know where. Today it runs upward of $132 a pound. Thus, capital is running to rare earth miners and companies whispering of moving some of their mining resources to rare earth production.

Thus, over the past month or so, a creeping of the rare earth stocks has shifted back into high gear once again. Molycorp (NYSE: MCP) has reinvigorated its year-long trend higher, rising 70% thus far in December alone. Rare Element Resources (NYSE: REE), another name getting plenty of attention, was up 14% Wednesday alone and is up 49% since the start of the month. This stock was less than $2 back in the summer, and now trades near $15! REE is a North American like Molycorp, based in Canada, and has operations in Wyoming. It mines gold and rare earth elements, so it is doing okay despite gold's lag... Trading volume was almost seven times normal Wednesday for this debt free company, and REE has been active this month raising money for E&P, since it can at will now.

If you are seeking exposure at less risk, you might try the Market Vectors Rare Earth Metals ETF (Nasdaq: REMX), though it is not a pure play on the squeezed resources out of China. The ETF was only up 7% Wednesday and is up 20% this month. General Moly (AMEX: GMO) was up 10% Wednesday, and is a development stage company focusing on molybdenum through a property in Nevada. It's a money loser and cash burner, but with prices on the rise and supply constrained, the economics of operation are changing for all of these companies.

"This move has all the components that a stock frenzy needs, as it includes China and a mysterious good that nobody understands."

This move has all the components that a stock frenzy needs, as it includes China and a mysterious good that nobody understands. The quick profits are sending capital into more speculative names as well, including stocks of companies that have little or no currently proven resources in the commodities of interest, but are prospecting hopefuls or at least people are saying they might be. The latter is implied by the movement in the shares of Qiao Xing Universal Resources (Nasdaq: XING), up 46% Wednesday to $2.71. The company is a zinc and copper miner with resources in Mongolia, but is somehow finding frenzied capital interested from rare earth seekers. Whether something pans out or not probably will not matter to the traders pushing this stock up, when they pull the rug out from under you later. And it is probable also that unsophisticated investors in China are helping fuel the rise too, which makes for an unreliable support base.

Shares of China Shen Zhou Mining & Resources (AMEX: SHZ) has most of the hot keywords in its name, and so led all gainers Wednesday, rising 69%. This company also focuses on copper and zinc, but has mysterious properties in inner Mongolia that smell good to frenzied capital. Buyer beware, and take a close look at the company's 10K or Chinese facsimile to see if it has rare earth possibilities. We are guessing by the movement Wednesday that a few investors might have discovered this to be true, or were saying so anyway. We went through the last 10K issued for March-end and saw only copper, zinc and fluorite within its portfolio, and one location indicated further exploration might find more minerals, but did not expand as to whether those would be more of the same or something magical. So, is it speculation driving the shares, or inside knowledge or unfounded rumors? Whatever the case, it's not enough to trade on from my perspective. And be careful if you find information in the latest 10Q that did not exist in the 10K issued for March, because this is China we're talking about, the land of legend.

Then there are companies like Avalon Rare Metals (AMEX: AVL), which have it all together. The company was formed in 1991, but changed its name in February 2009 from Avalon Ventures to Avalon Rare Metals (so you would better notice it). What I like best about it is that it makes everything even more mysterious by looking for the alien goods beneath a dark Canadian lake. This stock stopped taking part in the fun after a Monday morning spike higher, and though it may eventually dig up something, I'm not excited about it right now.

Australia based Lynas Corp. (OTC: LYSCF.PK) is a tiny company active in rare earth and other mining in Australia and Asia. Lynas' Australian shares (ASX: LYC.AX) gained about 8% Wednesday, while its ADRs in the US (OTC: LYSDY.PK) gained about 14% and are up 30% through December. A look at the company's website seems to indicate it has all the right stuff, and after reviewing comparable info from the US State Department's December Report, it appears to have relative importance. The company claims to have the richest deposit of rare earths outside of China, and the US State Department Report I checked seems to agree. Lynas expects to be first to market outside of China in Q3 2011, and I'm officially interested.

You can be sure that given the new economies of the sector, the big boys, those being Rio Tinto (NYSE: RIO) and BHP Billiton (NYSE: BHP), are paying attention to the ones worth noting. If you catch a whiff of who they're sniffing up, you might have a lead on which stocks make best long-term sense; and I'm talking about if they're not bought out. There are also going to be a bunch of worthless miners that might stumble upon an opportunity and create some millionaires in the process. This is an interesting place to prospect, but it's the most dangerous treading, so be careful. As for the group generally, the stocks have run up so much, and there is so great uncertainty (outside of this blog anyway) about which ones will really produce the key rare earths over the next five years, that I would look for a January pullback for the group broadly before considering long-term stakes using perhaps LEAPS. You might use the REMX ETF for that. Of the stocks, Australia's Lynas has my interest right now (I'm calling it a "Buy"), and Australia's other projects look promising as well.



The rest of Wednesday's most active stocks included gainers: WebMediaBrands (Nasdaq: WEBM), Bioanalytical Systems (Nasdaq: BASI), Granite City (Nasdaq: GCFB), Pulse Electronics (Nasdaq: PULS), Nanophase Technologies (Nasdaq: NANX), ProPhase Labs (Nasdaq: PRPH), RightNow Technologies (Nasdaq: RNOW), Altair Nanotechnologies (Nasdaq: ALTI), Ossen Innovation (Nasdaq: OSN), Towerstream (Nasdaq: TWER), Kingtone Wireless Info (Nasdaq: KONE), Cascade Bancorp (Nasdaq: CACB), WSB Holdings (Nasdaq: WSB), Grupo Radio Centro (NYSE: RC), First Federal Bancshares of Ark (Nasdaq: FFBH), Amyris (Nasdaq: AMRS); Losers: Kingold Jewelry (Nasdaq: KGJI), Adcare Health Systems Warrants (AMEX: ADK-WT), Cost Plus (Nasdaq: CPWM), Hauppauge Digital (Nasdaq: HAUP), Socket Mobile (Nasdaq: SCKT), Ultralife (Nasdaq: ULBI), Southern Community Financial (Nasdaq: SCMF), Cavico (Nasdaq: CAVO), Thomas Group (Nasdaq: TGIS), Pressure Biosciences (Nasdaq: PBIO), Escalon Medical (Nasdaq: ESMC), DARA Biosciences (Nasdaq: DARA), Innotrac (Nasdaq: INOC), First Community Bank (Nasdaq: FCFL), CleanTech Innovations (Nasdaq: CTEK), Bonso Electronics (Nasdaq: BNSO), BioTime (AMEX: BTX), Intelligent Systems (AMEX: INS), Community Capital (Nasdaq: CPBK), Cubic Energy (AMEX: QBC), Orchid Cellmark (Nasdaq: ORCH), Kingsway Financial Services (NYSE: KFS), Euro Tech Holdings (Nasdaq: CLWT), HMN Financial (Nasdaq: HMNF) and Green Bankshares (Nasdaq: GRNB).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Mr. Kaminis held no beneficial interest in any mentioned security at the hour of publishing this article, though he may take interest at later date.

Seattle Genetics (Nasdaq: SGEN) Trepidation

Biotech Stock Has Appeal on Weakness

Seattle Genetics (Nasdaq: SGEN) was a company I followed off-wire as an analyst, and kept on my radar for potential initiation into coverage. That was when the stock traded at $5, and before I left my Senior Equity Analyst position at Standard & Poor's. It was on a short list, and unfortunately my followers never learned of it. The company is now on the cusp of gaining FDA approval for a novel and effective cancer drug, but it was downgraded by two analysts this week, and slipped to $14. So we thought we would take a look for you.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Seattle Genetics (Nasdaq: SGEN) Trepidation

Seattle Genetics (Nasdaq: SGEN) is a company I had on my prospects list when I was an analyst, and a firm my old employer might have benefited from had I stayed put. When I followed the stock, it traded in the $5 range. Admittedly, it was one of those companies I heard about from an unsophisticated though still savvy investor, my Uncle Tom, who I use to love to chat stocks with over the holidays. This was a company though that checked out after Uncle T's mention. SGEN now has collaborations with medicine mainstays like Bayer (OTC: BAYRY.PK), Genentech (NYSE: DNA), Millennium, GlaxoSmithKline (NYSE: GSK) and is held by major investment managers like Fidelity, T. Rowe Price (Nasdaq: TROW), Oppenheimer, Federated Investors (NYSE: FII), Wellington, etc. I kept it on the radar for other reasons...

In particular, I liked the idea behind its drug development. Seattle Genetics genetically engineers monoclonal antibodies to fight disease. I found it novel, and the approach to treating disease made sense to me as well. Inspiring and employing the body's immune system to win the battle just makes sense. Why do some people get cancer and others do not, and some overcome it and others do not? The factors that come to play within individual immune systems seem to obviously play important role in answering those questions. Seattle Genetics goes a step further by loading its antibodies with potent cell killing chemicals that release after the bomb has embedded itself inside the disease. Meanwhile, the company is also adding some extra punch to its drug development line, creating some antibodies that kill foreign bodies on their own, and in some cases juicing up that talent through more genetic engineering.

Back in the earlier part of this decade the company also seemed a sure beneficiary of terrorism tied tensions, given its pill delivered drug that targets and is effective against Small Pox. However, Seattle Genetics has since moved into larger less speculative markets. It currently has several cancer drugs in clinical stage development that have the investment community excited. Well, at least it was mostly that way until Monday.

SGEN has been downgraded to sell by two analysts (Canaccord Genuity and Brean Murray) over the last few days. One held a buy rating and the other a hold before the cuts. The stock dropped 4.8% Monday, which was also the day it reported its earnings results. It fell another 9% Tuesday, but was still quite higher than when it was on my radar screen as an analyst (at $14+ today). So, we thought we would take a look at it for you here, since an opportunity might exist now or when the stock eventually settles.

The company has made significant gains in the progress of its lead drug, Brentuximab Vedotin (SGN-35) or B-Vedotin, as the company's CEO calls it. Management's goal remains to gain FDA approval in 2011 for use treating cases of relapsed refractory Hodgkin Lymphoma and also relapsed and refractory systemic anaplastic large cell lymphoma, or sALCL. About 8K to 9K individuals in the US are diagnosed with Hodgkin lymphoma yearly, and would be treatable nearly immediately. SGEN sees potential for frontline use as well, in conjunction with chemotherapies and also other novel drugs, as tests prove out. Finally, the company hopes the drug can be effective against other cancers that exhibit similar characteristics (CD-30 positive hematologic malignancies), and it is testing drugs for pancreatic and prostate cancer among a few.

Seattle Genetics is in solid financial position, as it prepares for submission of B-Vedotin to the FDA in the first part of 2011. Revenues of $16 million were up 38% from the prior year, and were driven by amounts earned under ADC collaborations, especially via the expansion of its collaboration with Genentech. It also reflects amounts earned under the company's collaboration with Millennium, who will market the B-Vedotin product in Europe and will seek EU approval in 2011. The company's operating expenses increased as planned, and were driven by its investments in B-Vidoten to drive clinical programs forward, to prepare for drug manufacturing and prepare for Biologics License Application (BLA) submission.

The company ended the quarter in strong financial position with $315 million in cash and investments, up $28 million year-to-date. This, and its revenue, reflect payments received from Millennium on milestones reached and its expanded Genentech collaboration. The company's managers say revenues will exceed the top end of guidance and expect to end the year with more cash than previously forecast. 2011 expenses will increase as they initiate additional clinical trials and build the commercial infrastructure with anticipation of product launch in the second half of 2011.

The company reports unprecedented success rates in its trials, and fully expects to receive FDA approvals, at least for use treating Hodgkins lymphoma (75% objective response rate in trial) in some manner. It has, thus, gotten to work in setting up production capacity in order to have a significant launch next year. SGEN's CEO says, and I believe in his tone, that it is first and foremost, in order to provide these drugs to people who need them.

What I have gathered from my review of the conference call was that there was some trepidation with the progress of SGN-35 for use in sALCL treatment (86% objective response in trial). These concerns may prove unwarranted given the reported success by management, but I sensed some risk as well. Given the high expectations of FDA approvals, any delay in that process comes to play in cash flow forecasts. Perhaps there are also some concerns about the potential to even attain early approval for the ALCL usage, as testing is thus far inadequate (though precedent exists for passage). These things impact forecasts which impact valuation, and uncertainty is never good for stocks.

Given that I have given all but a day to my latest review of this company (relearning it even), I cannot say what cash flow forecasts look like, and I cannot even say I have seen another analyst's outlook. I required 3 to 5 days to put together thorough analysis as an analyst, while negligent and poor managers sought a one day turnaround. I would not budge then, nor will I now, especially on this complicated business that requires industry insight or otherwise special smarts. Therefore, for now, I will refrain from making a formal call.

However, I can say that an unscientific view of the company's progress and this setback would lead me to lean toward seeking opportunity to buy versus to sell the stock in the short-term, if I were an analyst or investor here. Without making a guarantee, I hope to take an even deeper look into the analyses produced by the analyst community here and speak with management, and to sift the data carefully to give a buysider's view on the stock in the near-term. Remember, I was a sell-side analyst, doing all the ground work myself in the past and producing formal reports; entertaining calls of portfolio managers; and generally getting on the horn behind my picks. So, for now, let's just say SGEN looks interesting. Drugs like Seattle Genetics' SGN-35 already have established a market near $2 billion in size, and the drug looks disruptive.



The article should be relative to investors in Biotechnology stocks: Amgen (Nasdaq: AMGN), Gilead Sciences (Nasdaq: GILD), Celgene (Nasdaq: CELG), Genzyme (Nasdaq: GENZ), Biogen Idec (Nasdaq: BIIB), Life Technologies (Nasdaq: LIFE), Illumina (Nasdaq: ILMN), Dendreon (Nasdaq: DNDN), Human Genome Sciences (Nasdaq: HGSI), Qiagen (Nasdaq: QGEN), Abraxis BioScience (Nasdaq: ABII), Amylin Pharmaceuticals (Nasdaq: AMLN), Talecris Biotherapeutics (Nasdaq: TLCR), BioMarin Pharmaceutical (Nasdaq: BMRN), Techne (Nasdaq: TECH), Regeneron (Nasdaq: REGN), Charles River Labs (NYSE: CRL), Incyte (Nasdaq: INCY), Medicis (NYSE: MRX), Onyx (Nasdaq: ONXX), Savient (Nasdaq: SVNT), Theravance (Nasdaq: THRX), Acorda (Nasdaq: ACOR), ViroPharma (Nasdaq: VPHM), XOMA (Nasdaq: XOMA), ZymoGenetics (Nasdaq: ZGEN), Martek (Nasdaq: MATK), Halozyme (Nasdaq: HALO), InterMune (Nasdaq: ITMN), MannKind (Nasdaq: MNKD), Enzon (Nasdaq: ENZN), Momenta (Nasdaq: MNTA), Targacept (Nasdaq: TRGT), Questcor (Nasdaq: QCOR), PDL BioPharma (Nasdaq: PDLI), Emergent BioSolutions (NYSE: EBS), Alnylam (Nasdaq: ALNY), VIVUS (Nasdaq: VVUS), Micromet (Nasdaq: MITI), Sequenom (Nasdaq: SQNM), Clinical Data (Nasdaq: CLDA), Lexicon (Nasdaq: LXRX), Eurand NV (Nasdaq: EURX), Exelixis (Nasdaq: EXEL), Medivation (Nasdaq: MDVN), Cadence (Nasdaq: CADX), Jazz (Nasdaq: JAZZ), NPS (Nasdaq: NPSP), Ariad (Nasdaq: ARIA), Immunogen (Nasdaq: IMGN), Optimer (Nasdaq: OPTR), Neurocrine (Nasdaq: NBIX), PROLOR (Nasdaq: PBTH), QLT (Nasdaq: QLTI), Codexis (Nasdaq: CDXS), 3SBio (Nasdaq: SSRX), AVEO Pharmaceuticals (Nasdaq: AVEO), Cell Therapeutics (Nasdaq: CTIC), Bacterin (OTC: BIHI.OB), Exact Sciences (Nasdaq: EXAS), Osiris (Nasdaq: OSIR), Corcept Therapeutics (Nasdaq: CORT), Dyax (Nasdaq: DYAX), China Biologic (Nasdaq: CBPO), Novavax (Nasdaq: NVAX), Obagi Medical (Nasdaq: OMPI), Cytori Therapeutics (Nasdaq: CYTX), Chelsea Therapeutics (Nasdaq: CHTP), Idenix (Nasdaq: IDIX), Xenoport (Nasdaq: XNPT), BioCryst (Nasdaq: BCRX), Nabi (Nasdaq: NABI).

Monday's other EPS reports included news from Allergan (NYSE: AGN), Baker Hughes (NYSE: BHI), Consolidated Edison (NYSE: ED), Corning (NYSE: GLW), Evergreen Solar (Nasdaq: ESLR), Humana (NYSE: HUM), Loews (NYSE: L), MEMC Electronic Materials (NYSE: WFR), Nam Tai Electronics (NYSE: NTE), and Pactiv (NYSE: PTV). The rest of the day’s EPS includes reports from Acorda Therapeutics (Nasdaq: ACOR), Administaff (NYSE: ASF), Akorn (Nasdaq: AKRX), Alberto Culver (NYSE: ACV), Alere (NYSE: ALR), Alexander’s (NYSE: ALX), Altra Holdings (Nasdaq: AIMC), American Financial Group (NYSE: AFG), Anadarko Petroleum (NYSE: APC), Anadigics (Nasdaq: ANAD), Arthrocare (Nasdaq: ARTC), Atlas Air (Nasdaq: AAWW), Axis Capital (NYSE: AXS), BankFinancial (Nasdaq: BFIN), Brigham Exploration (Nasdaq: BEXP), Brookdale Senior Living (NYSE: BKD), Calgon Carbon (NYSE: CCC), Carmike Cinemas (Nasdaq: CKEC), Carolina Trust Bank (Nasdaq: CART), CFS Bancorp (Nasdaq: CZFS), Chelsea Therapeutics (Nasdaq: CHTP), Cleco (NYSE: CNL), CNA Financial (NYSE: CNA), Cognex (Nasdaq: CGNX), Cognizant Technology (Nasdaq: CTSH), Comstock Resources (NYSE: CRK), Concurrent Computer (Nasdaq: CCUR), Cooper Tire & Rubber (NYSE: CTB), Corporate Executive Board (Nasdaq: EXBD), Credit Acceptance (Nasdaq: CACC), Cross Country Healthcare (Nasdaq: CCRN), Cumulus Media (Nasdaq: CMLS), Cutera (Nasdaq: CUTR), CVR Energy (NYSE: CVI), Dale Jarrett Racing (Nasdaq: DJRT), Deltek (Nasdaq: PROJ), Depomed (Nasdaq: DEPO), Drew Industries (NYSE: DW), Ducommun (NYSE: DCO), DXP Enterprises (Nasdaq: DXPE), Endo Pharmaceuticals (Nasdaq: ENDP), Everest Re (NYSE: RE), Extreme Networks (Nasdaq: EXTR), First Franklin (Nasdaq: FFHS), Flagstone Reinsurance (NYSE: FSR), Forest Oil (NYSE: FST), Franklin Electric (Nasdaq: FELE), Frozen Food Express (Nasdaq: FFEX), Gladstone Commercial (Nasdaq: GOOD), Global Crossing (Nasdaq: GLBC), Guidance Software (Nasdaq: GUID), Haemonetics (NYSE: HAE), Harleysville Group (Nasdaq: HGIC), Herbalife (NYSE: HLF), Heritage Financial (Nasdaq: HFWA), HFF (NYSE: HF), Hopfed Bancorp (Nasdaq: HFBC), Hutchinson Technology (Nasdaq: HTCH), Imperial Oil Limited (AMEX: IMO), Interactive Intelligence (Nasdaq: ININ), IntercontinentalExchange (NYSE: ICE), Interline Brands (NYSE: IBI), International Bancshares (Nasdaq: IBOC), Intevac (Nasdaq: IVAC), IPG Photonics (Nasdaq: IPGP), JinkoSolar (NYSE: JKS), Kaman Corp. (Nasdaq: KAMN), Kforce (Nasdaq: KFRC), Kindred Healthcare (NYSE: KND), K-Sea Transportation (NYSE: KSP), Kubota (NYSE: KUB), LeapFrog (NYSE: LF), LHC Group (Nasdaq: LHCG), LookSmart (Nasdaq: LOOK), Louisiana Bancorp (Nasdaq: LABC), LSB Financial (Nasdaq: LSBI), MAM Software (Nasdaq: MAMS), Maui Land & Pineapple (NYSE: MLP), McGrath Rentcorp (Nasdaq: MGRC), Meadowbrook Insurance (NYSE: MIG), MEMC Electronic Materials (NYSE: WFR), Mercer International (Nasdaq: MERC), Mercury General (NYSE: MCY), MicroStrategy (Nasdaq: MSTR), Microvision (Nasdaq: MVIS), Mindspeed Technologies (Nasdaq: MSPD), Momenta Pharmaceuticals (Nasdaq: MNTA), Monarch Community Bancorp (Nasdaq: MCBF), Morton’s Restaurant (NYSE: MRT), MPG Office Trust (NYSE: MPG), MSB Financial (Nasdaq: MSBF), Navarre (NYSE: NAVR), NL Industries (NYSE: NL), NutriSystem (Nasdaq: NTRI), Old Line Bancshares (Nasdaq: OLBK), Old National Bancorp (NYSE: ONB), Optibase (Nasdaq: OBAS), Orbotech (Nasdaq: ORBK), Orient Express Hotels (NYSE: OEH), Parexel (Nasdaq: PRXL), Parkway Properties (NYSE: PKY), Peapack Gladstone (Nasdaq: PGC), Penson Worldwide (Nasdaq: PNSN), Post Properties (NYSE: PPS), Provident Community Bancshares (Nasdaq: PCBS), PS Business Parks (NYSE: PSB), Regal Beloit (NYSE: RBC), REX Energy (Nasdaq: REXX), Rogers (NYSE: ROG), Rudolph Technologies (Nasdaq: RTEC), Sanmina-SCI (Nasdaq: SANM), Seattle Genetics (Nasdaq: SGEN), Senior Housing Properties (NYSE: SNH), Sify Limited (Nasdaq: SIFY), Simon Property Group (NYSE: SPG), Skilled Healthcare (NYSE: SKH), Smurfit-Stone Container (Nasdaq: SSCC), Southern Community Financial (Nasdaq: SCMF), Span-America Medical (Nasdaq: SPAN), SPAR Group (Nasdaq: SGRP), Stereotaxis (Nasdaq: STXS), Sterling Bancorp (NYSE: STL), Stewardship Financial (Nasdaq: SSFN), Summer Infant (Nasdaq: SUMR), Sykes Enterprises (Nasdaq: SYKE), Tasty Baking (Nasdaq: TSTY), Tengion (Nasdaq: TNGN), Terremark Worldwide (Nasdaq: TMRK), Texas Roadhouse (Nasdaq: TXRH), TGC Industries (Nasdaq: TGE), The Principal Group (NYSE: PFG), TNS Inc. (NYSE: TNS), Town & Country Financial (Nasdaq: TWCF), Unitrin (NYSE: UTR), Universal American (NYSE: UAM), Virtus Investment Partners (Nasdaq: VRTS), Voltaire (Nasdaq: VOLT), Vulcan Materials (NYSE: VMC), Weingarten Realty Investors (NYSE: WRI), Weyco (Nasdaq: WEYS), Wilmington Trust (NYSE: WL), Winn-Dixie (Nasdaq: WINN) and WMS Industries (NYSE: WMS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Procter & Gamble (NYSE: PG) Looks a Safe Bet

Greek Pick: PG

Despite drags on sales and pressure on margins, this stockpile of American staple brands is making market share inroads across the globe and driving steady growth with a decent dividend to boot. In our estimation, growth is underestimated and Procter & Gamble's P/E ratio overstated as well. Thus, in my estimation, NYSE: PG shares look to provide a 15% return on capital over the next year. But keep your eye on petrochemical prices and commodity pressures as the key risk to a PG investment.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative tickers: NYSE: CL, NYSE: KMB, NYSE: AVP, NYSE: EL, NYSE: ENR, NYSE: ACV, NYSE: NUS, NYSE: REV, Nasdaq: IPAR, Nasdaq: RDEN, NYSE: BTH, Nasdaq: FHCO, Nasdaq: UG, Nasdaq: PARL, Nasdaq: FACE, AMEX: CAW, Nasdaq: SYMC, NYSE: S, NYSE: TER, NYSE: IP, Nasdaq: ESRX, Nasdaq: ATX, NYSE: ABD, NYSE: ACE, Nasdaq: ACXM, NYSE: AEA, Nasdaq: AFFX, NYSE: AEM, Nasdaq: AKAM, NYSE: AYE, Nasdaq: ALGT, NYSE: AIQ, Nasdaq: AHGP, Nasdaq: ARLP, NYSE: AB, NYSE: AMX, Nasdaq: ARII, NYSE: ASI, Nasdaq: ARGN, NYSE: AMP, Nasdaq: ARRS, NYSE: ARW, NYSE: AHL, NYSE: AIZ, NYSE: AUO, NYSE: ADP, NYSE: AVB, NYSE: AVY, NYSE: BEZ, NYSE: BYI, Nasdaq: BBVA, NYSE: BBD, NYSE: BEC, Nasdaq: BOKF, Nasdaq: BOLT, NYSE: BWA, Nasdaq: BPFH, NYSE: BDN, NYSE: EAT, Nasdaq: BVSN, NYSE: BKI, Nasdaq: CACI, Nasdaq: CDNS, NYSE: CWT, NYSE: CP, NYSE: CAJ, NYSE: CMO, Nasdaq: CAVM, NYSE: CDR, NYSE: CLS, Nasdaq: CETV, Nasdaq: CITZ, NYSE: ZNH, NYSE: CHH, NYSE: CHT, Nasdaq: CINF, Nasdaq: CMCSA, NYSE: CTV, NYSE: CYH, NYSE: COP, NYSE: OFC, NYSE: CCI, NYSE: DEL, NYSE: DB, NYSE: DHT, NYSE: DPS, NYSE: DRE, Nasdaq: DYAX, Nasdaq: DRCO, NYSE: ELN, NYSE: EOC, NYSE: EEQ, Nasdaq: WIRE, Nasdaq: ELGX, NYSE: EGN, NYSE: ENI, AMEX: EGT, Nasdaq: ENTR, NYSE: EFX, NYSE: ETH, Nasdaq: EEFT, Nasdaq: EXAS, Nasdaq: DAVE, Nasdaq: FFCH, Nasdaq: FLEX, NYSE: FLS, NYSE: FMC, Nasdaq: FXCB, NYSE: GD, NYSE: GMR, Nasdaq: GLCH, NYSE: GG, Nasdaq: GOLF, Nasdaq: GSIC, Nasdaq: GTCB, NYSE: HGR, NYSE: HTS, NYSE: HMA, NYSE: HLX, Nasdaq: HERO, Nasdaq: IACI, Nasdaq: ISIG, Nasdaq: ISSI, Nasdaq: IDCC, Nasdaq: IFSIA, NYSE: ISH, Nasdaq: IRBT, Nasdaq: ITRI, NYSE: JMP, Nasdaq: JBSS, NYSE: KYO, NYSE: LVS, NYSE: LAZ, NYSE: LM, NYSE: LAD, Nasdaq: LTFD, Nasdaq: LOGI, Nasdaq: LOGM, Nasdaq: LOJN, Nasdaq: LOOP, NYSE: LSI, NYSE: MPX, Nasdaq: MKTX, NYSE: MSO, NYSE: MHH, NYSE: MWV, Nasdaq: MDAS, NYSE: MTH, Nasdaq: MERU, Nasdaq: MORN, Nasdaq: NWK, Nasdaq: NICE, NYSE: NSC, NYSE: NVO, Nasdaq: ODFL, Nasdaq: OMCL, Nasdaq: ORLY, Nasdaq: OFIX, NYSE: OC, Nasdaq: PFCB, NYSE: PTI, Nasdaq: PRAA, Nasdaq: POWI, NYSE: PX, Nasdaq: PROV, Nasdaq: PEG, Nasdaq: RDWR, NYSE: RA, Nasdaq: RWCB, NYSE: RNR, NYSE: RYL, Nasdaq: SGMO, NYSE: SAP, Nasdaq: SVVS, NYSE: SEE, NYSE: SSW, Nasdaq: SIGI, NYSE: SXT, NYSE: SCI, Nasdaq: SMED, NYSE: SHG, Nasdaq: SFLY, Nasdaq: SIFI, Nasdaq: SLAB, Nasdaq: SPIL, NYSE: SHI, NYSE: SKM, NYSE: SKX, Nasdaq: SCKT, NYSE: SOA, Nasdaq: FIRE, NYSE: SO, Nasdaq: SRCL, NYSE: RGR, NYSE: SXL, Nasdaq: SUSQ, NYSE: SYA, Nasdaq: TASR, NYSE: TER, NYSE: ALL, NYSE: EML, NYSE: JNY, NYSE: TMO, Nasdaq: TOMO, NYSE: TMK, Nasdaq: CLUB, NYSE: TRH, NYSE: TRN, Nasdaq: TQNT, NYSE: TYL, NYSE: UMC, Nasdaq: UVSP, NYSE: UPI, Nasdaq: USMO, Nasdaq: VALE, Nasdaq: VMED, Nasdaq: VRTU, NYSE: V, Nasdaq: VISN, NYSE: WAB, Nasdaq: WFD, NYSE: WHR, NYSE: WLL, NYSE: WSH.

Procter & Gamble (NYSE: PG)

12 Month Total Return Target: +15%
Today's Closing Price: $63

This American icon sells products including Gillette Razors, Tide Detergent, Pantene Shampoo, Crest Toothpaste and other products that fill your cabinets. The company is boosting growth via expansion and market share gains into India, China and other emerging and developed markets. Its staple businesses and brands, and clever operational strategy, make it a must own for many institutional portfolio managers most of the time.

Procter & Gamble (NYSE: PG) reported quarterly results today that exceeded Wall Street's views. PG shares settled after spiking on the open, but moved higher into the close. The company reported EPS from continuing operations grew 5.2% in its quarter ended September. It's EPS from continuing operations, which exclude a sold pharmaceutical business, reached $1.02, versus $0.97 in the year ago period. The result exceeded P&G's guidance range of $0.97 to $1.01 and beat Wall Street's view for $1.00, based on Thomson Reuters data.

Procter & Gamble's sales were up 2% in the quarter, to $20.1 billion, falling short of the analysts' consensus for $20.2 billion. P&G made up for the top-line miss though with organic sales growth of 4%; this excludes factors such as acquisitions, divestitures and currency changes. Organic growth was driven by "broad-based volume and market share gains," according to P&G. Volume was up 8%. The company recorded growth in all major geographic regions and in five of its six business segments. P&G also noted market share gains in 13 of 17 countries and in 17 of its 23 billion dollar brands. This is what keeps analysts on board, as the company is making inroads for growth, and also positioning for extra lift out of economic trough.

Several factors are coming into play with regard to P&G's operating environment. Economic recession typically spares consumer staple sector shares, as investors flock to them for their more sure sales of consumer necessities like razors and soap. However, as anyone in a bind will tell you, the use of razors, deodorant, and other so-called necessities will decrease when money needs to be saved badly enough. Thus, even consumer staples can be affected by declines in economic activity, but certainly to a lesser degree than businesses that earn revenues from activities like eating out, travel and the purchase of luxuries.

P&G's sales came under pressure this quarter due to: geographies of operations and product mix (-2%); pricing (-1%); and unfavorable foreign exchange (-3%). Furthermore, Procter & Gamble shed 70 basis points on its gross margin line, due to rising commodity costs. The resin for the plastic bottles it packages its goods within and the paper pulp it uses to produce its paper goods like Charmin and Bounty products have seen steep increase. The company's peers are reporting the same issues, with Kimberly-Clark (NYSE: KMB) posting a 19% earnings decline last week on rising commodity costs. However, the company is not expected to push through costs to consumers, except via new and "improved" product line options for less price sensitive clientele. Instead, the company's CEO, Bob McDonald, says P&G will make up for it in cost savings. In its most recent quarter, P&G cut 60 basis points off its SG&A expense line on improved productivity, lower forex costs, and reduced overhead spending.

P&G continues to be a cash cow, money making machine, producing $2.5 billion in cash flow last quarter and $1.9 billion in free cash flow. The company forecast Q4 EPS from continuing operations will increase 4-10%, to $1.05 to $1.11 per share. That compares to analysts' expectations for $1.11, but P&G looks to have a record of conservative corporate estimation and solid execution. According to Yahoo Finance, PG has beaten the Street four out of the last five quarters. The company set its FY 11 (June) guidance at $3.91 to $4.01, or up 11-14%.

The stock currently trades at a P/E ratio of 15.7X the high end of its FY 11 guidance range, which, it seems to us, it is likely to attain (given its history). Before adjustment for today's result, analysts were looking for $3.97 for the full fiscal year; that will increase at least a couple points to make up for the most recent quarterly result. The P/E ratio sits above the 10% growth forecast for the company's EPS this fiscal year, but PG also offers shareholders a dividend of 3%. Considering the fact that management has likely understated growth, and the fact that this is a half year forecast, not full year, the stock looks worth owning for a seemingly reliable 15%+ return over the next 6-12 months in my view.

My greatest concern though, and what I would suggest prospective investors keep an eye on, is increasing pressure on petrochemical prices and commodities generally. I expect rising resource demand from emerging markets and economic stability-to-growth to again pressure commodity prices, and potentially pricing generally (yes inflation, while the Fed focuses on deflation). Thus, war with Iran is also a bad thing for PG (and everybody else), since it would hike petrochemicals in a hurry. So, with that risk/return analysis I leave you with the rest of the day's EPS reporters.



This article should also interest NYSE: PG peers: Colgate-Palmolive (NYSE: CL), Kimberly-Clark (NYSE: KMB), Avon (NYSE: AVP), Estee Lauder (NYSE: EL), Energizer (NYSE: ENR), Alberto-Culver (NYSE: ACV), Nu-Skin Enterprises (NYSE: NUS), Revlon (NYSE: REV), Inter Parfums (Nasdaq: IPAR), Elizabeth Arden (Nasdaq: RDEN), Blyth (NYSE: BTH), Female Health (Nasdaq: FHCO), United Guardian (Nasdaq: UG), Parlux Fragrances (Nasdaq: PARL), Physicians Formula (Nasdaq: FACE), CCA Industries (AMEX: CAW).

The remainder of the day’s EPS results emanated from: Symantec (Nasdaq: SYMC), Sprint Nextel (NYSE: S), Teradyne (NYSE: TER), International Paper (NYSE: IP), Express Scripts (Nasdaq: ESRX), A.T. 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