It’s Monday June 12, 2006, and the Dow gave up over 350 points last week as investors continue to be on the fence as it relates to a potential interest rate hike here in the United States. Global Markets have already shifted, from Europe to Asia, interest rate hikes occurred across the board.
A big factor for the U.S. is this Tuesday as the wholesale price report comes out and this Wednesday as the consumer price index is released. So both traders and economist are waiting for these figures as they will give a better indications as to whether Ben Bernanke will announce a rate hike or not during the June 28-29th Fed Meeting. So stay tuned….
Over the weekend the first storm of the 2006 Atlantic Ocean Hurricane Season, Tropical Storm Alberto, dropped over 18 inches of rain in Western Cuba in a 24-hour period, this forced the evacuation of close to 27,000 people. Now this is important because this is the start of hurricane season and Tropical Storm Alberto is heading to Florida, it was tagged as a depression on Sunday and now it’s tagged as a tropical storm as of this morning. The hurricane season will begin to chime in as it relates to crude oil prices, of course the situation in Iran is a big factor as well. We’ll update you on this situation tomorrow.
The first film that has been released by the Disney (NYSE: DIS) Pixar combo did well this weekend as it raked in over $63 million, but this is shy of the estimates. The street was expecting the film to gross between $70-$80 million at the box office this weekend. We even got wind of estimates of $100 million, which was a bit of a stretch. Now bear in mind that this film will do very well globally in the coming weeks and that is what investors need to look at, of course the first outing is important but it will not show you the true value of the Disney-Pixar combo. You may see a slight downturn in Disney today but expect that to be short lived as the street looks down the road and beyond the brick as opposed to looking solely at the weekend box office receipts.
As an investor you need to look at what the companies are currently doing but if you are investing in a company then you are betting that they will do well in the future. So with that in mind you need to look at what companies are doing now and what they could potentially do in the future. A prime example of that is General Motors (NYSE: GM), we’ve been speaking about the “American Icon” for a little bit now and for good reason, the street pounded the stock when the company was on the ropes. As GM began to align the right people and put together the right plan to implement then the street took notice. Now they have been executed their plan piece by piece and they are not even close to being done. Now as an investor had you done your homework or at the very least listened to what we had to say then you would have seen what we saw in the $19 range but it’s far from out of your reach at this point. This is why General Motors is our turnaround spotlight for 2006. We’ve also made one other addition to the “Turnaround Spotlight” and that company is IAC/InterActiveCorp (NASDAQ: IACI).
We spoke about Zale Corp (NYSE: ZLC) on Friday as they received a bump up by Goldman Sachs, and it looks like it was for good reason as Signet Group PLC (NYSE: SIG), the specialty jeweler retail store is said to be in talks with Zale for a potential merger situation. Now Signet operates over 1200 retail jewelry stores here in the United States under the names Kay Jewelers, and Jared The Galleria Of Jewelry and over 1800 globally while Zale operates over 1400 retail jewelry stores here in the U.S. The combination of the two should make them the largest jewelry retailer in the country.
The stock options probe continues as more companies are thrown into the mix, the latest companies to be targeted by informal inquiries by the SEC include Broadcom (NASDAQ: BRCM) and Intuit, Inc (NASDAQ: INTU). They join the likes of UnitedHealth (NASDAQ: UNH) and Power Integrations (NASDAQ: POWI) in a probe that seems to be more of a witch hunt of sorts than random inquiries. Now at least the companies that were initially targeted are not alone in the investigation that in some cases have went to the U.S. Attorneys officer of both New York and California.
Lets talk about cell phones for a minute, both Nokia (NYSE: NOK) Motorola (NYSE: MOT) may begin to feel the pinch of over saturation in the mobile phone market. Texas Instruments (NYSE: TXN) even though they showed good numbers gave a lower outlook for future quarters, they make chips for cell phones. Even though there are more cell phones sold in the United States than computers, that pace is sure to slow down. Motorola however did unveil a new phone to compete with both Research in Motions (NASDAQ: RIMM) Blackberry and Palm’s (NASDAQ: PALM) Treo, this may not be enough to put them over the top but they are in better shape than Nokia who just lost their CEO that helped to bring real value to the company during his tenure.
Movers and Shakers
Some major movers in Friday’s trading session include the healthcare information systems company Quality Systems Inc (NASDAQ: QSII), the stock traded up $5.25 to close at $37.25 and this movement start before the bell as the company announced late Thursday Sonus Complete that their net income jumped 59 percent and their sales increased 39 percent. The street expected 23 cents and Quality Systems shocked them with a 28 cents EPS. Back in January of this year the stock traded in the $37 range before it bumped up to $45.44 exactly one month later. Keep in mind after it hit that $45.44 number the stock nosedived pretty quickly, but it looks to be in better shape now than it was earlier this year.
Royal Group Technologies (NYSE: RYG) shot up over $3.28 on Friday to close at $11.28 after they agreed to be taken over by Georgia Gulf Corp (NYSE: GGC) for $11.64 a share, This is a play that is over so don’t jump in because this is a stock that has pretty much flat lined since its $20 and change high back in 2002. They really have no choice but to inked the deal quickly before Georgia Gulf shareholders give a big “What’s up with that” to the board of Georgia Gulf.
Focus Media Holdings (NASDAQ: FMCN), lets touch on this quickly, the stock bounced back from the dip to $51.56 it made on June 8, 2006 and that just may be it. It closed up $2.49 on Friday to close at $54.05. We told you to keep this on your watch list at $68 because it was hitting a ceiling and it did for the third time, because of a combination of market conditions and additional stock hitting the market from an offering. Now this stock at some point will break through that $69.95 high in2006. I say this because they are the leader in digital signage in China, an ever-expanding market, and they want in on the massive United States Market. So they will either look to do this themselves, which is unlikely or quire a smaller digital signage company in the U.S. to gain footing. We told you that Impart Media Group (OTCBB: IMMGE) is a good candidate for this once they get listed on a higher exchange. So here’s the situation, Focus Media looks to be done on the downside and we see it breaking through the ceiling that it hit three times in a row, even if it gets up there and hits the ceiling again you are looking at a nice run.
The energizer bunny has put some life into Energizer Holdings (NYSE: ENR) as the stock climbed up another $1.53 to close at $56.18. This is due in part by an upgrade by Sun Trust Robinson but look beyond that as we mentioned we are headed into hurricane season and people in those states that are prone to hurricanes will be getting their supply of non-perishables and water in order, as well as their flashlights. This will surely give a nice boost to Energizer this summer but keep in tune to it because if the stock should come close to their 52 week high of $65.44,it could slip down easily once the hurricane season ends.