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In The Media - Archives 2007
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Author: ANGELA CARTER
Date: November 30, 2007
Publication: New Haven Register
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As stocks traded essentially flat on Thursday, following two days of sharp gains in the Dow Jones industrial average, some area asset managers say the recent market volatility could continue into the first quarter of 2008.
The Dow had its biggest two-day rally in five years Tuesday and Wednesday, after toppling to 12,724 on Monday.
Market gains are unlikely to keep going up without dipping, said Patricia Drax, owner of North Haven-based Drax Asset Management LLC. "There may be some follow through, but we're looking for the market to draw back and test that bottom," she said.
The test is whether or not the Dow remains above Monday's level or falls just slightly below it. "If that test is successful, we're possibly on the verge of a year-end rally," Drax said.
On Thursday, the Dow Jones industrial average rose 22.28 to 13,311.72.
Paul Schatz, president of Heritage Capital LLC in Woodbridge, said that if the Federal Reserve does not grant a rate cut when it meets Dec. 11, then "a sharp and fast" selloff in stocks is likely.
Shareholders in large banks such as HSBC and Citigroup, rocked by the subprime mortgage and credit crises, already have started selling off in the face of write-downs in mortgage-related assets.
Should there be a flurry of divestment activity this month, Drax said the people likely to pick up shares are "contrarian buyers," who do the opposite of the masses, and "value investors" who believe the market price, at a given point in time, is not recognizing a stock's full value.
"I think you need courage to buy something no one else wants," she said.
Schatz said he does not believe the low point will be tested this year, but will be in the first quarter of 2008. Through the end of 2007, he said, more gains and losses are in store. "Weaknesses are a buying opportunity for a rally," he said.
Historically, Schatz said, volatility spikes in September and October.
"November declines are very, very, very rare," but the recent ups and downs of more than 200 points are not the worst ever, he said.
"I think people get scared because they see large point moves in the Dow," he said.
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Author: KAREN TALLEY
Date: November 13, 2007
Publication: Connecticut Post (Bridgeport, CT)
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As Citigroup and International Business Machines put in solid gains, they couldn't stop the Dow Jones Industrial Average from falling below 13000 for the first time in three months, while nonmember E*Trade Financial was sliced by nearly 60%.
The industrial average rose as much as 119.90 early in the session, but "the action was just a bounce, and tech continued to be a huge drag," said Paul Schatz, president of Heritage Capital LLC. "But the extreme downside momentum we've seen has shown itself in the past to be unsustainable, and we're coming into a seasonably strong period, so my feeling is stocks should soon find footing."
The Dow industrials lost 55.19, or 0.4%, to 12987.55.The Nasdaq Composite Index fell 43.81, or 1.7%, to 2584.13.
The Standard & Poor's 500 Index lost 14.52, or 1%, to 1439.18.
Citigroup rose 47 cents, or 1.4%, to $33.57. National City gained 71 cents, or 3.4%, to 21.57; SunTrust Banks rose 1.68, or 2.5%, to 69.15; and Wells Fargo rose 69 cents, or 2.2%, to 32.35.
IBM rose 1.20, or 1.2%, to 101.45. The computer-services and software titan plans to buy Cognos, a provider of business-intelligence services, for nearly $5 billion. Cognos (Nasdaq) rose 4.17, or 7.9%, to 57.15.
E*Trade Financial (Nasdaq) plunged 5.04, or 59%, to 3.55, its lowest level in more than five years. The online brokerage warned of further write-downs for its mortgage-backed securities and said the Securities and Exchange Commission is conducting an informal probe of its portfolios. (See related article.)
EchoStar Communications (Nasdaq) fell 7.68, or 16%, to 40.83, its biggest percentage drop in seven and a half years. With its so-called subscriber-churn rate climbing to 1.9% for the last quarter, the satellite-television service's chief executive said company managers "just haven't done a very good job" of controlling subscriber turnover in recent months. Citigroup, also noting the elevated rate, cut shares to hold from buy. Larger rival DirecTV Group dropped 1.77, or 6.6%, to 25.01.
Whirlpool gained 3.20, or 4.2%, to 78.64. The appliance maker is a global leader able to surmount the U.S. housing contagion, and shares should benefit from the recent acquisition of Maytag, according to Barron's Online.
Blackstone Group lost 2.02, or 8.3%, to 22.26, its biggest percentage drop since going public June 22. The private-equity company said "lack of liquidity in the financing markets" hampered corporate deal-making in the recent quarter. The company swung to a loss on charges related to its IPO.
Goldman Sachs Group rose 3.38, or 1.6%, to 214.71. Punk Ziegel raised Goldman shares to market perform from sell, citing confidence that the investment bank's systems may protect it from "the worst of the excesses now in the marketplace."
First Solar (Nasdaq) lost 29.15, or 14%, to 177.70. Companies involved in producing solar power fell amid concerns that Congress may move forward on an energy bill without including an extension of tax credits for producers and consumers of solar energy.
Cypress Semiconductor dropped 5.07, or 14%, to 31.47; Apple fell 11.61, or 7%, to 153.76; and Citrix Systems lost 2.32, or 5.6%, to 39.47, the latter two on the Nasdaq. Credit Suisse's global-equity strategy team halved its overweight position in technology to 20% from 40%, feeling that 2008 global economic growth could come in below expectations, and tech is a cyclical, or economically sensitive, sector.
Saks rose 54 cents, or 2.8%, to 20. Investment concern Baugur Group HF has hired advisers for a possible pursuit of the luxury retailer, the Sunday Times of the United Kingdom reported.
Tyson Foods lost 42 cents, or 2.8%, to 14.33. The world's largest meat processor swung to a fiscal-fourth-quarter profit but warned fiscal 2008 earnings will be well below analysts' expectations amid difficult chicken and beef markets.
Peabody Energy lost 4.54, or 8.1%, to 51.33. The nation's largest coal producer said its third-quarter profit fell 77% from the year-ago quarter as it booked more expenses from last year's acquisition of Australia's Excel Coal.
St. Jude Medical lost 1.89, or 4.8%, to 37.13. Reports are emerging that some defibrillator wires made by the company are in rare instances puncturing holes in the hearts of cardiac patients.
Abbott Laboratories rose 55 cents, or 1%, to 54.67. The drug maker received Food and Drug Administration approval for a new lower-strength tablet formulation of its HIV protease inhibitor, Kaletra, for pediatric patients.
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Author: PAM DAWKINS
Date: November 7, 2007
Publication: Connecticut Post (Bridgeport, CT)
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A Wilton company has hired a trading monitoring firm to track "short selling" of its shares. The California company, Buyins.net, monitors the nine U.S. stock exchanges and sends out alerts to businesses whose shares it thinks might be involved in short selling. In some cases, investors can use short selling or naked short selling to manipulate share prices, according to the Securities and Exchange Commission, which investigates such allegations.
In an e-mailed response to questions, Buyins founder and chief executive Tom Ronk said he believes Startech Environmental Corp. contacted them after receiving an alert.
Buyins will monitor short and naked short selling and advise Startech on how to address the issues, Ronk said. This includes notifying brokerage firms and others when sellers of the company's shares have failed to deliver on those sales in the regulated period. SEC spokesman John Heine said the agency can neither confirm nor deny any current investigative activity.
Investors who short sell a stock, according to the SEC, borrow that stock, generally from a brokerage firm that charges interest on that loan, to sell to someone else. The short seller expects the share value will drop, so they can then buy that stock at a lower price than what they earlier sold it for; when they turn those shares over to the buyer, they keep the difference.
Naked short selling is a variation where the investor doesn't borrow or arrange to borrow the shares in time to deliver them to the buyer within the three-day settlement period.
Neither short selling nor naked short selling are necessarily illegal, according to the SEC, but abusive practices, such as deliberately trying to manipulate the share price, are prohibited. The SEC can file a civil case against the naked short seller, seeking financial and other penalties.
Ronk said Startech's shares had previously been "naked shorted." Startech makes the Plasma Converter System, which destroys waste products - including municipal solid waste, inorganic products and liquids and gases - and turns many into usable products. According to the company, these include metals and a gas that can be used to produce ethanol and other alternative fuels.
Its shares trade on the Over the Counter Bulletin Board. In the past year, share prices ranged from a high of $3.65 to a low of $1.58, reached Oct. 12, according to MarketWatch.com. The financial Web site reported average volume of 32,800; Tuesday, 50,271 shares changed hands and the stock closed up 1 cent to $2.
Startech executives did not return calls for comment, but in a news release Peter Scanlon, a vice president and chief financial officer, said the company is in production for systems sold for about $25 million. The company, he said, "has never before been as strong as it is today, and getting stronger."
In its latest financial reporting with the SEC, for a three-month period ended July 31, Startech had a loss of $773,509, or 3 cents per diluted share. In the year-ago quarter, the company reported income of $337,902, or 2 cents per share.
Revenues for the 2007 quarter rose to $354,958 from $286,131 in the comparable 2006 quarter, but expenses rose, too. For example, the cost to sell its products rose from about $167,000 to $293,000.
Paul Schatz, president of the Woodbridge investment advisory firm Heritage Capital, said he doesn't agree that short selling or naked short selling drive down a stock's value.
"In the market, you need buyers and sellers and short sellers," he said, because short sellers add another layer of liquidity. "The best markets are the ones where you've got the most amount of people involved in the game."
While the short seller might be betting on a share decline, the buyer is betting on an increase. "It's a two-way street," Schatz said, adding he believes the naked shorting is a minor piece of the market in the long term.
Instead of fighting short sellers, he said, companies should instead focus on rewarding stockholders with good results. "This is a free market. Let it be. It all settles out in the long run."
Pam Dawkins, YourMoney editor, can be reached at 330-6351.
(c) 2007 The Connecticut Post. All rights reserved. Reproduced with the permission of Media NewsGroup, Inc. by NewsBank, Inc.
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Author: ROB VARNON
Date: September 25, 2007
Publication: Connecticut Post (Bridgeport, CT)
Connecticut Post Article
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Shareholders in People's United Financial Inc. will finally vote on the multi-million dollar executive compensation package that raised so many eyebrows when the Bridgeport bank went public.
In April, People's shed the last vestiges of its mutual holding company and converted to PUF Corp., with all its stock traded on the Nasdaq Stock Exchange. Some investors questioned the retention package the bank put together for employees and executives as it made the move. During the April shareholders meeting, attendees estimated the stock package was worth $240 million. These awards would come on top of the regular incentives and salaries management is in line to receive.
At the April meeting, People's Chairman, President and Chief Executive Officer John Klein called the $240 million figure speculative, and he was right.
That figure was based on the $20 initial sale price for PUF stock. Since converting, the stock has dropped to under $18, making the package shareholders will vote on worth less than $200 million.
The Bridgeport-based bank mailed out proxies to its shareholders this month announcing an Oct. 18 meeting. Investors can vote - either through the proxy or in person - to approve or deny the package. They will also vote on two directors and an independent auditor.
Brent DiGiorgio, a People's spokesman, said the board of directors believes the compensation package aligns the interests of executives with those of shareholders.
The pay will come in stock options and be distributed by the board during the next five years, he said. Which executives will get the awards has not been determined, he said.
Two area experts in stocks and securities law said People's plan didn't sound out of line for publicly traded companies.
At the heart of the matter is whether compensation should be for stock performance or company performance, according to Paul Schatz, president of investment firm Heritage Capital of Woodbridge.
People's sold its stock for $20 per share in April during its conversion. Its highest closing price since was $20.85, on April 18, and it dipped as low as $14.99 on Aug. 3. But the stock has stabilized during the last month and closed at $17.25 Monday.
Schatz said some executives improve earnings and the company's bottom line, but for some reason the market doesn't react and the stock goes nowhere. But other companies can have virtually flat earnings and yet the stock jumps.
Attorney Richard Slavin, principal and chairman of Bridgeport-based law firm Cohen and Wolf's Securities Group, said shareholders have to ask if the package is outrageous and then make a decision.
"What's really outrageous is if the company loses a lot of money and management gets rewarded like they were making money," Slavin said. That's not the case here, he said.
Slavin said he would be surprised if shareholders kill the pay package, not only because People's management has a good reputation but because most investors are like him.
"If I don't like management, I'll sell the shares."
Schatz said shareholders do have the upper hand in this vote, because it's unlikely the top management would move to another bank if they don't get this deal.
There's a contraction going on in the banking and financial sectors, he said. "They could go nowhere."
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Author: KAREN TALLEY
Date: September 19, 2007
Publication: Wall Street Journal
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As the Dow Jones Industrial Average marked its biggest gain in nearly five years, Lehman Brothers Holdings benefited from its pleasing
earnings report as well as the Federal Reserve's expansive interest-rate cut, Kroger rose on an upwardly revised outlook and E*Trade
Financial faded on greatly reduced guidance.
The Dow industrials rose 335.97 points, or 2.5%, to 13739.39, its biggest point gain since Oct. 15, 2002.
Twenty-nine of 30 components advanced, with Boeing the exception, although the stock did recoup a lot of ground. Boeing shares fell
17 cents, or 0.2%, to $98.47 after being down as much as 2.20, 2.2%. The drop came after Banc of America Securities cut its price
target to $114 from $131, citing "still significant risk" for the aerospace contractor's 787 program.
The Nasdaq Composite Index gained 70, or 2.7%, to 2651.66 and the Standard & Poor's 500-stock index advanced 43.13, or 2.9%, to
1519.78. The gains for both indexes were the biggest in more than five years.
The Fed's half-percentage-point interest-rate cut "was a trader's dream," said Paul Schatz, president of Heritage Capital LLC.
"We had tremendous volatility and liquidity and that created major opportunities. I think it will last based on historical trends
when the Fed begins a rate-cutting cycle."
Lehman rose 5.87, or 10%, to 64.49, its biggest percentage gain in close to 6½ years. Fiscal third-quarter net income fell 3.2%
on big write-downs of mortgage securities and leveraged-buyout loans. Investors appeared relieved that the damage wasn't greater
and encouraged by near-record quarterly results in investment banking and equity trading.
Shares of Lehman and many of its investment-bank peers shot higher after the Fed announced the rate cut in the afternoon.
Goldman Sachs Group moved past the 200 mark with a gain of 12.89, or 6.9%, to 200.50. Morgan Stanley gained 3.60, or 5.6%,
to 68.51 and Merrill Lynch advanced 2.98, or 4.1%, to 75.83.
Kroger rose 2.07, or 7.7%, to 29.09. The supermarket chain raised its 2008 outlook after fiscal-second-quarter net income
jumped 28%, helped by stronger sales and fewer shares outstanding from a year ago. Fellow grocer Safeway gained 1.47, or
4.6%, to 33.76 and organic chain Whole Foods Market (Nasdaq) gained 2.31, or 5.4%, to 44.96.
E*Trade Financial (Nasdaq) was another beneficiary of the Fed's largesse, dropping 21 cents, or 1.5%, to 14, after being off
as much as 6.8%. The online brokerage, known for providing low-cost trades to individual investors, said it expects profit
for the year to fall 31% short of the most recent forecast given to analysts -- partly because of the company's exposure
to the mortgage business.
Best Buy rose 2.92, or 6.6%, to 47.46. The consumer-electronics retailer posted a better-than-expected 8.7% increase in fiscal
second-quarter earnings and said market-share gains should help it hit the high end of its previous full-year earnings forecast.
The news lifted rivals, with Circuit City Stores gaining 36 cents, or 3.6%, to 10.42; and RadioShack advancing 85 cents, or 3.9%, to 22.95.
Sonoco Products fell 2.42, or 7.3%, to 30.78. The producer of consumer and industrial products cut its estimate of adjusted
third-quarter and full-year earnings as volume declined in its markets and raw-material and other costs rose more than expected.
Cummins rose 12.76, or 11%, to 134.51, having more than doubled in price this year. The engine and fuel-systems maker reaffirmed
its 2007 earnings outlook, citing a strong first half and its projections for the rest of the year. Two other S&P 500 components
have more than doubled in size this year: Amazon.com (Nasdaq) and National Oilwell Varco.
Millennium Pharmaceuticals (Nasdaq) rose 88 cents, or 9%, to 10.65. The biopharmaceutical concern said it ended a Phase III trial
of Velcade, a treatment for newly diagnosed multiple myeloma, early because a therapy with the drug "demonstrated a highly statistically
significant improvement in all efficacy measures."
Dow industrial General Electric rose 1.50, or 3.7%, to 41.68. The industrial-and-financial conglomerate reiterated its forecast for
full-year earnings from continuing operations and said it sees the broad industrial economy as solid, even as it acknowledged that
the company is continuing to monitor developments in the troubled housing sector.
Harte-Hanks dropped 1.20, or 5.2%, to 21.80. J.P. Morgan Securities cut shares to underweight from neutral, feeling the marketing
company will face more challenging business conditions in 2008 than anticipated, with its Shopper publications, once a star performer,
continuing to be hurt by the same factors plaguing newspaper classifieds.
Lockheed Martin rose 2.69, or 2.7%, to 102.10. Merrill Lynch raised shares to buy from neutral saying while slowing F-16 fighter jet
sales are expected to take $1 billion out of the defense contractor's 2008 revenue, the pullback will be short-lived and shouldn't
be overdramatized.
Adobe Systems (Nasdaq) rose 65 cents, or 1.5%, to 43.71. The software maker's third-quarter profit more than doubled compared with the
same period a year earlier, bolstered by sales of its flagship Creative Suite 3 product.
China Telecom's American depositary receipts gained 5.52, or 9.6%, to 62.90. The fixed-line operator plans to buy all the Beijing
assets of its parent China Telecommunications Corp., giving it access to the 10 northern provinces where rival China Netcom Group is
based, Caijing magazine reported. China Telecom denied the report.
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Author: Aldo Svaldi and Margaret Jackson
Date: July 27, 2007
Publication: Denver Post
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The index has suffered triple-digit declines in three of the past five trading days as mortgage troubles spill into the corporate debt markets.
U.S. stock markets Thursday suffered their worst declines since February after disappointing news on new-home sales and manufacturing orders heightened fears of an economic slowdown.
The Dow Jones industrial average, after losing nearly 450 points, closed the day down 311.5 points, or 2.26 percent, to 13,473.57.
The index of blue-chip companies has suffered triple-digit declines in three of the past five trading days since it set a record closing high above 14,000 last week.
The S&P 500 fell 2.3 percent to 1,482.66, and the Nasdaq declined 1.8 percent to 2,599.34.
"When it begins to unwind, all the elephants start heading through the door," said Paul Schatz, president of Heritage Capital in Hartford, Conn. "Today was one of the worst days we have seen in a long, long time."
Only one stock moved higher for every 10 that declined. Every sector was down significantly, with the exception of biotech and HMOs, he said.
"The stuff has hit the fan," said Jeffrey Hirsch, editor of the Stock Trader's Almanac. "We have been worried about this market for some time."
Hirsch said economists anticipate gross domestic product growth, when it comes out in a report today, will be 3.2 percent in the second quarter, a significant improvement over the 0.7 percent growth rate seen in the first quarter.
A significant miss on GDP could rock markets, just as two economic reports on new-home sales and durable-goods orders did Thursday.
"If the primary measure of production and consumption for the U.S. falls short, look out below," Hirsch said.
New-home sales declined 6.6 percent in June from May and are down 22.3 percent from June 2006. Orders for durable goods, excluding transportation equipment, also declined.
Like a sucker punch in the stomach, weak home sales have knocked the wind out of homebuilders, including Denver- based MDC.
MDC, parent of Richmond homes, reported a net loss of $106.1 million in the second quarter, a sharp reversal from the $76.5 million it made in the second quarter of 2006.
The number of homes MDC sold in the quarter was down 40 percent overall, including a 50 percent decline in Colorado sales.
"It's painful, and it will continue that way until we eat through the standing inventory, whether it's new or resales," Larry Mizel, MDC's chief executive and chairman, told analysts on a conference call Thursday.
Losses across the board
Profits have turned to losses across the board for homebuilders, not just MDC. D.R. Horton lost $823.8 million during the quarter, Beazer Homes reported a $123 million loss, Pulte Homes is in the red $507.6 million and Ryland Group shed $52.4 million.
Sluggish home sales have put downward pressure on home prices, making it harder for borrowers to refinance or sell their properties. That has resulted in more mortgage defaults, especially among borrowers with impaired credit who hold subprime loans.
Wells Fargo & Co. said Thursday that it will shut down its subprime wholesale lending arm because the risks are not worth the returns available.
Fewer lenders and tighter credit standards have made it harder for marginal buyers to qualify for mortgages, one reason home sales are falling.
Mortgage troubles have spilled over to the corporate debt markets, where investment banks are struggling to fund $134 billion worth of bonds for buyouts like that of Kohlberg Kravis Robert's $29 billion purchase of Greenwood Village-based First Data Corp.
Such buyouts, fueled by cheap credit, were a key driver lifting stock prices higher in recent months despite rising oil prices, slower earnings growth, a weakening dollar and political strife.
Investors reassured
U.S. Treasury Secretary Henry Paulson reassured investors Thursday that the collapse in the subprime mortgage market isn't a threat to the overall economy.
"Risk is being repriced," he said. "As we get a broad reassessment of risk, we are getting volatility."
Corporate earnings are still coming in better than expected for most companies, said Ashwani Kaul, an analyst with Reuters Estimates in New York.
"From our standpoint, the markets will bounce back," he said. "We have a lot of good news coming up in terms of earnings that will offset some of the credit concerns."
Schatz also expects a short- term rebound in the market given the severity of the decline in recent days. But if markets continue to fall today, a "mini- crash" may unfold, he warned.
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Author: Steve Higgins
Date: July 20, 2007
Publication: New Haven Register
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The Dow Jones industrial average poked through the 14,000 barrier for the first time Thursday on a surge of confidence fueled by positive profit reports.
The Standard & Poor's 500 index also had a record close.
Upbeat earnings news from companies including IBM, Juniper Networks Inc. and SAP AG fueled an 82.19-point surge in the Dow, a 0.59 percent increase to 14,000.41.
The S&P 500 index advanced 6.90, or 0.45 percent, to 1,553.07, while the Nasdaq composite index rose 20.55, or 0.76 percent, to 2,720.04.
Area investment advisors differed over the meaning behind reaching the milestone.
"The economy is in good shape, and companies that have a global presence are doing especially well," said Veronica Murphy, owner of Vision Asset Management in Milford. "There are a lot of technology and shipping stocks moving forward."
Murphy said momentum is picking up, noting that this time of year the market is usually sluggish, and she expects that momentum to continue.
Paul Schatz, president of Heritage Capital LLC in Woodbridge, agreed that momentum is driving the market but predicted a rapid plunge in stock prices now that the 14,000 milestone has been breached.
"This is a tremendous selling opportunity," Schatz said. "For the first time in almost a year, risk far outweighs reward, and I think the next significant move will be downward."
Schatz predicted the Dow would drop 4 to 6 percent over the next few weeks. He said long-term interest rates have risen, making money harder to come by; the market rally has become more narrow, meaning there are fewer stocks and fewer industry sectors participating in the run-up, a sign of a tired market; and the dollar is "completely collapsing," which fuels inflation.
Worries over financial instruments that are vulnerable to the woes in the subprime loan market kept financial stocks down Thursday. Fed Chairman Ben Bernanke said on Capitol Hill that problems such as foreclosures among holders of subprime mortgages are "likely to get worse before they get better." And a research group predicted the housing slump will cause the economy to contract in coming months.
IBM, one of the 30 stocks that make up the Dow industrials, jumped $4.78, or 4.3 percent, to $115.86 after the technology company said strength in its software division and an improvement in its services business helped second-quarter profits. Juniper Networks Inc. reported it swung to a profit in the second quarter from a loss a year earlier. The stock rose $3.33, or 12.5 percent, to $30.06. Germany's SAP rose $3.59, or 6.9 percent, to $55.54 after reporting market-share gains boosted profits.
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Author: RON VARNON
Date: July 10, 2007
Publication: Connecticut Post (Bridgeport, CT)
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BRIDGEPORT - Royal Bank of Scotland Group, the world's 10th-largest bank by stock value, is taking it Citizens Bank subsidiary national
while the parent company jumps into the commodities market with a $1.35 billion stake in a Stamford energy trader.
"It's switching to a federal charter," James Heckman, a Connecticut Department of Banking spokesman, said Monday.
Citizens is a state-chartered institution, which means it is regulated by the banking commissions in the states in which
it operates. It has branches throughout the Northeast, including Connecticut - where it also owns Bridgeport-based RBS
National. RBS National was formed when RBS acquired People's Bank's credit card division.
If approved, the state banking department will not have any oversight over Citizens, just as it does not have oversight
over People's United Bank, which made a similar move in 2006.
Heckman said any complaints about service will have to be lodged with the Office of Thrift Services, instead of the state's
Department of Banking. All other standards should be the same.
The state banking commission will take a hit from the change; it will lose the $193,800 fee Citizens pays each year.
The state charges the banks it regulates a fee based on a percentage of the banks' assets.
Chris Riley, a Citizens Bank spokesman, said RBS National will keep its name and identity. It will operate under Citizens'
federal charter, but remain independent of Citizens Bank. A federal charter will allow Citizens to grow more efficiently, Riley said.
Changing Citizens' charter isn't all the parent company is up to. RBS Group announced Monday it is buying a majority stake in the
oil-, electricity- and natural gas-focused Sempra Commodities of Stamford.
Sempra Commodities, a subsidiary of California-based Sempra Energy, has sold electricity to The United Illuminating Co. and
Connecticut Light & Power Co. Sempra Commodities does not make any electricity - it buys contracts from power plants and then
sells those contracts to the customers of the two utilities.
Sempra Commodities' contract with UI recently ended so its only existing contract is with CL&P.
Mitch Gross, a CL&P spokesman, said the RBS deal should not impact its Sempra contract, which ends in December 2007.
"It makes sense, but they're late to the party," said Paul Schatz, chief executive officer of the Woodbridge-based securities
trading firm Heritage Capital, of RBS' plunge into commodities.
"The entire commodities futures market is hot right now," Schatz said, specifically oil, natural gas and grain contracts. Metals,
which Sempra Commodities also trades, have been stable, he added. Even with this hot market, Schatz said, financial
institutions - particularly European ones - have been slow to get into trading commodities.
RBS already trades in more traditional investments, including bonds and currencies. Being late, however, isn't as bad as not
joining the party at all, Schatz said.
Oil prices, according to Schatz, are poised to go higher, especially in light of an International Energy Agency report issued
Monday that said supplies will get tighter during the next five years because of the inability of oil-producing nations to keep
up with rising world demand.
Sempra Energy spokesman Art Larson said the parent company will use the money from the deal to buy back shares. He said this
is a good move for both companies, because RBS is getting a profitable company and Sempra Commodities is joining an expanding
financial company.
Larson said Sempra bought the company in 1997 for $200 million; in 2006, Sempra Commodities had net income of more than $500
million. It employed 200 people in 1997 and today has 850, including 400 in Stamford, he said.
The deal between Sempra and RBS will close within a year and the joint business will be called RBS Sempra Commodities. U.S.
energy and securities regulators and their United Kingdom counterparts will have to approve the deal.
Shares of RBS closed up 3 pence to 642.50 pence, or about $12.95, on the London Stock Exchange. Shares of Sempra Energy closed
up $1.44 to $60.74 on the New York Stock Exchange.
Rob Varnon, who covers business, can be reached at 330-6216.
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Author: David Hoffman
Date: June 11, 2007
Publication: InvestmentNews.com
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PHILADELPHIA - Rydex Investments has been in discussions with some suitors about being acquired, according to industry sources.
Two executives, who asked not to be identified, confirmed that they worked on behalf of their respective firms and were involved in talks to acquire Rydex.
Both executives said the companies had pulled out of those talks within the last few months. One of the executives said the company he represents pulled out because the asking price for Rydex - 10 times earnings before interest, taxes, depreciation and amortization - was too high.
Rockville, Md.-based Rydex is trying to get the best price it can by leveraging its position as a top provider of exchange traded funds, he said.
Meanwhile, other companies are still interested, sources said.
Held in 'trust'
Rydex was the sixth-largest ETF provider by assets at the end of April, with $4.86 billion in assets spread across 25 ETFs, according to State Street Global Advisors of Boston.
Rydex is owned by a trust controlled by the family of founder Albert "Skip" Viragh Jr. Ownership passed to them after Mr. Viragh died in 2003.
Rydex officials would neither confirm nor deny that talks of a sale are taking place.
"We're a privately held firm," said Dawn Kahler, a spokeswoman. "We can't talk about that."
Some financial advisers who do business with Rydex, however, said the company has been hinting at a possible sale for some time.
To that point, comments made by Rydex CEO Carl G. Verboncoeur at a conference in Orlando, Fla., last month left attendee Paul Schatz, president of Heritage Capital LLC of Woodbridge, Conn., with the distinct impression that a sale is in the works. The conference was hosted by the Littleton, Colo.-based National Association of Active Investment Managers Inc.
Discussing the rumors that Rydex is for sale, Mr. Verboncoeur said that because Rydex is the sole asset in the trust controlled by Mr. Viragh's family, the family wants to diversify their investment holdings, according to several people who attended the meeting.
Mr. Schatz interpreted Mr. Verboncoeur's remarks to mean that a deal is definitely going to be done this year as long as the successor agrees to take care of the current Rydex employees.
Rydex officials wouldn't confirm the comments made by Mr. Verboncoeur at the conference.
Meanwhile, the identity of potential acquirers is unclear.
At one point, Invesco PLC of London, formerly Amvescap PLC, expressed interest in buying Rydex, according to one source familiar with the negotiations, who asked not to be identified.
The London firm last year purchased ETF producer PowerShares Capital Management LLC of Wheaton, Ill., for what many industry observers believe was an inflated price.
It is company policy not to comment on rumor, Ivy McLemore, a spokesman for AIM Investments, a Houston-based subsidiary of Invesco, said about potential interest in Rydex. AIM also is the distributor of the PowerShares ETFs.
Because Invesco already owns PowerShares, however, and there would be some overlap between their products and Rydex, it may not make a great deal of sense for Invesco to buy Rydex, said Geoff Bobroff, a fund industry consultant based in East Greenwich, R.I.
That is not to say that the London firm - which had $471.2 billion in assets under management as of March 31 - isn't the right kind of company to make a play for Rydex, he said.
"I think it's got to be an organization of some size to handle the potential price," Mr. Bobroff said.
Some industry experts are surprised that it has taken this long for Rydex to wind up on the block.
"Anytime a business is run by a trust, it's a challenge keeping professionals," said Liz Nesvold, managing director of New York-based Cambridge International Partners Inc.
Trust owners aren't usually very engaged in their company, she said. It can be a problem, because in such a situation, employees aren't necessarily endowed with a sense of ownership, which can leave companies feeling directionless, Ms. Nesvold said.
Several financial advisers, however, said they feel that Rydex is doing just fine.
Cause for angst
In fact, the idea that it could be sold to another company is a source of concern for some.
"I am a huge fan [of Rydex], but a sale or a deal would make me worry," Mr. Schatz said. "Their customer service is unparalleled. I fear a new owner wouldn't devote what they do to customer service."
Such concerns are legitimate, said Eric Leake, a vice president and portfolio manager with Anchor Capital Management Group Inc. in Irvine, Calif.
"I think there is always concern anytime there is an ownership change," said Mr. Leake, who also attended the NAAIM conference at which Rydex's chief executive spoke.
But Mr. Leake, who is also a member of the Rydex advisory board, said he's confident that Rydex won't tarnish the memory of its late founder by "dumping it off onto an organization that doesn't share" its commitment to it clients.
"I'm looking forward to [Rydex's] selecting the right partner," he said.
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Author: RON VARNON
Date: May 31, 2007
Publication: Connecticut Post (Bridgeport, CT)
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BRIDGEPORT - Connecticut Treasurer Denise Nappier said backing the ouster of an ExxonMobil board member during the annual shareholder meeting both protected a state pension fund and furthered an environmental cause.
"It was an eye-opener," Nappier said Thursday of her trip earlier this week to Dallas where she attended Exxon's annual meeting.
Connecticut was among 25 pension funds, representing 115 million shares, that backed a proposal to withhold support for the re-election of Exxon board member Michael Boskin.
Boskin, a Stanford University economics professor and former chairman of the President's Council of Economic Advisers, is Exxon's public issues committee chairman, but he refused to meet with Nappier and others face-to-face to discuss global warming policies. He did reply to questions in four letters and arranged a meeting with executives.
A person answering the phone in his Stanford office said he never comments on his board positions unless the company asks him to.
Nappier counts herself among the growing number of shareholder activists, but with the reservation that she's pursuing it for the general good of the pension fund she's in charge of. One of her jobs as treasurer is to be the principal fiduciary of the $25 billion Connecticut Retirement Plans and Trust Funds.
"I'm not going to chase after a laudable goal if there is no benefit to the pension fund," she said. "It's still about the bottom line."
As corporations continue to list more and more shareholder resolutions, which can include policies on pet testing and executive, the success of these campaigns has remained elusive. Experts agree it's easier to take on a company that's financially troubled.
So why take on Exxon, which Nappier has called one of the world's most successful companies. It reported net income of more than $39 billion in 2006.
Nappier said she learned a lot from Enron and WorldCom when they collapsed in 2001 and 2002 respectively. Both those companies looked strong financially all the way up until their sudden falls, she said. Now, she scrutinizes all companies in which she invests. So having Exxon address a major hurdle - climate change - in its continued profitability is important, she said, because if the company does not it could impact the state's pension fund.
The specific issue with Boskin is in the way he and Exxon responds to investors, Nappier said. She was shuttled between the board and management during the last 18 months trying to talk about the policy. That's also why Nappier supported a resolution to require the board chairman to be an independent director, who could deal with shareholders directly. Exxon's chief executive officer is also its chairman.
Nappier said she didn't expect to unseat Boskin, but she wanted to send a message that Exxon needs to change.
Gantt Walton, an Exxon spokesman, said Exxon recognizes global warming is occurring, but disagrees on what is the best way to deal with it. He said the board will discuss many of the issues raised at the three-hour long meeting. The company also supported Boskin's response to Nappier and others and said it was appropriate for Boskin to set up a meeting with executives.
While Nappier's resolution to separate the chairman and CEO jobs won 40 percent of the vote, the attempt to remove Boskin was virtually ignored as 93 percent of those voting supported his return.
That's as it should be, according to Paul Schatz, president of Woodbridge-based Heritage Capital. Shareholders invest in companies because they make money, Schatz said, and that's what ExxonMobil is doing.
"It's become in vogue to pick on ExxonMobil because of how much money it's making," Schatz said. No one was asking questions about Exxon's profits or its policies when oil was at $15 a barrel, he said.
Schatz and John B. Nano, president and chief executive officer of Fairfield-based Competitive Technologies Inc., agreed it's easier for shareholders to change companies that are not strong financially.
Nano led a group of investors who successfully ousted the entire board of Competitive Technologies last year, he said, because it was not performing well.
However, Nano said it's possible to oust a director or change a company's policies even when it's making money; you just have to get the mutual funds on board. And that's the difficult job, he said.
"The fund managers, unless you have a real compelling argument, their charge is to vote with management," Nano said.
To unseat him, Nappier would have to show Boskin was unresponsive or was blocking popular, or even profitable proposals, he said, but that didn't appear to be the case.
Besides Nappier's independent chairman resolution, several other shareholder proposals won support including one to establish greenhouse gas reduction goals backed by 31.1 percent.
Schatz and Nano disagree over whether shareholder activism is heralding a new democratic era in corporate America.
Nano has said several times, he believes it is.
But Schatz said he thinks this is more of a last hurrah, that ultimately, the large mutual funds will increasingly be the final word on corporate policies because they control so much of the stock. That will mean the single shareholder's vote will "mean less and less."
Rob Varnon, who covers business, can be reached at 330-6216.
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Author: KAREN TALLEY
Date: May 10, 2007
Publication: Wall Street Journal
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Stocks spun higher, taking the Dow Jones Industrial Average to a record, while Texas Instruments and
Rio Tinto marked their own milestones and investors reacted to Cisco Systems' softer outlook.
The industrials gained 53.80, or 0.4%, to 13362.87, the average's sixth record close this month.
The Dow swung broadly after of the Federal Reserve's afternoon interest-rate decision, dropping roughly
50 points at one juncture. But investors ultimately sent the average on an upward swing that took it to
an intraday high of 13369.29. The Dow is now up 25 of the past 29 sessions, a run not seen since 1944.
The Standard & Poor's 500-stock index rose 4.86, or 0.32%, to 1512.58, now less than 15 points from
its March 24, 2000, all-time high of 1527.46.
The Nasdaq Composite Index, after spending much of the day in negative ground as techs struggled on
Cisco's outlook, rose 4.59, or 0.18%, to 2576.34.
Investors decided the central bank's "comments were exactly what they wanted to hear," said
Paul Schatz, president of Heritage Capital. "The Fed observed
a weakening economy and that's dovish because it can be countered with lowered rates. And their comments on
inflation remained consistent with previous statements."
Texas Instruments rose $1.66, or 4.7%, to $36.83, the stock's highest close since August 2001. The
communications-chip maker raised its gross margin and operating margin targets, citing better product mix.
Rio Tinto's American depositary receipts rose 31.62, or 12%, to 296.27, a record closing after surging
past the 300 mark during the session to reach 314.49. Speculation stirred that rival BHP Billiton will
make an acquisition overture for the mining and metals giant. Mining titan BHP Billiton's ADRs gained
2.43, or 5.1%, to 50.33.
Cisco (Nasdaq) lost 1.85, or 6.5%, to 26.51. The networking giant late Tuesday posted a 34% increase in
fiscal third-quarter net income and a 21% jump in revenue, but is expecting a modest slowdown after
posting stronger than expected sales growth in recent quarters.
Priceline.com (Nasdaq) fell 5.77, or 9%, to 58.28. The online travel booking service's first-quarter
loss widened to $14.7 million, or 44 cents a share, from a year-earlier loss of $99,000, or two cents a share.
Marvel Entertainment fell 1.51, or 5.1%, to 27.89. J.P. Morgan downgraded shares to neutral from
overweight, feeling expectations for strong licensing and toy revenues tied to "Spider-Man 3" are
priced into the stock, limiting near-term upside because there is now a paucity of catalysts.
Foster Wheeler (Nasdaq) gained 14.60, or 20%, to 87.75. The engineering group's first-quarter profit
rose to $114.8 million, or $1.60 a share, from $14.6 million, or eight cents a share, as revenue jumped 78%.
Walt Disney lost 43 cents, or 1.2%, to 36.12. The entertainment giant's second-quarter earnings
swelled 27%, trumping expectations, but that was countered by a sales shortfall.
Dow Jones, which News Corp. is trying to buy, lost 2.80, or 5.1%, to 52.20. On his company's earnings
call, News Corp. Chief Executive Rupert Murdoch implied he is unwilling to raise his $60-a-share offer
for Dow Jones, publisher of this newspaper, and Lehman Brothers said there was only the slimmest
possibility a sale will occur.
News Corp. dropped 39 cents, or 1.7%, to 23.26. The media titan reported a 6.2% rise in fiscal third-quarter
earnings, driven by film-studio profits.
Arrow International (Nasdaq) advanced 5.98, or 18%, to 38.82. The medical-products maker said it is exploring
options to enhance shareholder value, spurring talk of a sale.
Electronic Arts (Nasdaq) dropped 2.29, or 4.3%, to 50.65. The videogame maker said Tuesday its quarterly loss
widened as heavy spending on developing next-generation games outpaced revenue gains from new releases.
CDW (Nasdaq) rose 6.24, or 8.5%, to 79.61. The technology products distributor said its average daily sales
rose 22.8% in April to $29.6 million. Barr Pharmaceuticals gained 2.36, or 4.7%, to 52.25. First-quarter
profit fell, but the drug company backed its earnings forecast for the year of $3 to $3.30 a share.
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Author: KAREN TALLEY
Date: May 3, 2007
Publication: Wall Street Journal
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Indexes Continue To Climb on Deals; Harris, Nalco Fall
As the Dow Jones Industrial Average continued its record run, acquisition activity lifted Cablevision Systems,
while MasterCard and Yum Brands closed at record highs as their profits pleased.
The Dow Jones Industrial Average rose 75.74, or 0.58%, to 13211.88, its second record close in as many days.
The Dow also notched an intraday high of 13256.33.
The Nasdaq Composite Index gained 26.31, or 1.04%, to 2557.84, a six-year high and the first time in nearly
2½ weeks it has risen more than 1% in a session.
The Standard & Poor's 500 Index rose 9.62, or 0.65%, to 1495.92, after coming within less than one point of
1500. The S&P last closed above 1500 in September 2000. The index is now 31.54 points from its closing high
of 1527.46, hit in March 2000.
The session saw a big slide in the price in oil and investors received word that factory orders rose more
than expected in March, a sign of economic strength. But it was really investors' continued zeal that
drove stocks, said Paul Schatz, chief trader at Heritage Capital. "People saw the dip from Monday and
[Tuesday] morning and were afraid to miss the next move higher, given the overall melt-up the market has been demonstrating."
Cablevision Systems rose 3.23, or 9.9%, to 35.90. A $36.26-a-share deal to take the cable operator
private secured approval from the firm's board and special committee, and now needs backing from a
majority of its public shareholders.
MasterCard gained 11.50, or 10%, to 126.35. First-quarter profit jumped 70% as consumers made more
purchases with a growing number of credit and debit cards branded by the payment-card giant.
Yum Brands rose 3.61, or 5.7%, to 66.73. The fast-food-chain operator reported better-than-expected
earnings with overseas results, particularly in China, powering the performance and mitigating what
the company said was a nationwide impact from tainted lettuce and fallout from widely broadcast footage
of rats in a New York City KFC/Taco Bell.
Ahold NV's American depositary receipts rose 92 cents, or 7.2%, to 13.65. The Dutch retailer said it
entered a definitive accord to sell its food-service distributor, U.S. Foodservice, to a group of
private-equity investors in a deal valued at $7.1 billion.
Harris fell 4.54, or 8.7%, to 47.85. Weaker-than-expected growth in the communication-services
company's commercial units overshadowed a near tripling in quarterly profit.
Nalco dropped 2.19, or 8.1%, to 24.87. The water-treatment provider's earnings came in at 16 cents
a share, four cents, or 20%, below expectations, while sales, at $909.3 million, were in line with analyst projections.
Clorox rose 74 cents, or 1.1%, to 68.50. Volume growth in home-care products and cat litter in North
America, along with higher sales of laundry and cleaning goods in Latin America helped the company push
its fiscal third-quarter profit higher.
Nortel Networks gained 2.05, or 8.9%, to 25.12. The telecom-equipment vendor pre-announced revenue and
gross margins results for the first quarter that were ahead of expectations and maintained its guidance for the year.
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Author: RON VARNON
Date: April 13, 2007
Publication: Connecticut Post (Bridgeport, CT)
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BRIDGEPORT - Despite less-than-optimum economic conditions, People's Bank is poised to have one of
the largest-ever initial public offerings for a financial institution, after its depositors and
investment bankers agreed to buy more than $3.44 billion of the Bridgeport institution's shares.
Investment firm Friedman, Billings, Ramsey & Co. Inc. said in a report Wednesday that People's
projected gross sales of new stock - after its conversion from a mutual holding company into a
fully public one - will be the fifth-biggest IPO for a U.S. financial company. FBR also said it
expects People's to hit a share price target of $23 after the conversion.
Under the old mutual holding structure, less than 50 percent of People's stock was traded on the
Nasdaq Stock Market. Should the Office of Thrift Supervision approve the conversion, People's
said stock in its new parent company, People's United Financial Inc., could start trading Monday.
The bank said in a Wednesday press release depositors placed orders - at $20 per - for more than
63 million shares, while investment bankers, serving as underwriters, placed orders for more
than 108 million shares. Underwriters agree to purchase stock and sell it to their customers.
The bank said it will exchange 2.1 shares of new stock for each share of old stock owned, which
recently traded at more than $43 a share. Depositors and shareholders approved the conversion
last week in special meetings.
But once the new stock starts trading, there's no guarantee what it will be worth.
"It would be a gift," said Paul Schatz, chief executive officer of Woodbridge-based Heritage
Capital, on the chances of the stock hitting $21 or more Monday.
Because of a downturn in the housing market and problems in the mortgage-lending sector, Schatz said
he expects regional banks' stocks will struggle, including People's.
Many subprime lenders - those loaning money to people with less-than-pristine credit - have gone out
of business this year while foreclosures on homes have increased dramatically, creating a tough climate
for banks, according to University of Bridgeport School of Business Dean M. Jay Forgotson.
But Forgotson, a former bank executive, took issue with Schatz' lumping of People's with other banks.
"I don't agree with that," Forgotson said. People's has a solid management team and will be armed with
a lot of cash to acquire the banks that are going to be affected by a downturn in the market, he said,
making this a good time for it to become fully public.
"You can always find good stuff in uncertain markets," Forgotson said.
Forgotson would not project an opening day price. Schatz, despite recommending against buying regional
banks right now, said he expects the stock to range between $20 and $20.75.
To stave off confusion, shares of People's new stock will trade under the symbol PBCTD for 20 days
before assuming the banks' old symbol of PBCT.
Rob Varnon, who covers business, can be reached at 330-6216.
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Author: KAREN TALLEY
Date: April 5, 2007
Publication: Wall Street Journal
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As stocks tacked on a bit to Tuesday's rally, Microsoft rose on positive product comments, corn
demand seeded a rise for Monsanto and a jump in net income produced an almost double-digit
percentage gain for Acuity Brands.
A revenue revision toppled Monster Worldwide, sentiment that shares fully reflect the "Shrek 3"
movie's earnings power downed DreamWorks Animation SKG and Ameristar Casinos pulled back after
taking acquisition action.
The Dow Jones Industrial Average rose 19.75 points, or 0.16%, to 12530.05, its fifth straight
up session, tying its longest streak of the year. The Nasdaq Composite Index gained 8.36, or 0.34%,
to 2458.69. The Standard & Poor's 500-stock index rose 1.60, or 0.11%, to 1439.37.
The market's relatively muted action was a positive thing, said Paul Schatz, chief trader at
Heritage Capital. "The bears could not make any headway after [Tuesday's] major move. That's
a sign of underlying strength, meaning there's a bid to this market."
Microsoft (Nasdaq) gained 63 cents, or 2.3%, to 28.50. Citigroup raised its third-quarter
sales and earnings forecast for the software giant, citing building momentum for its Vista
operating system.
Monsanto advanced $1.79, or 3.2%, to $57.79. Fiscal second-quarter profit rose 23% as demand
for higher-yielding corn seeds and higher-margin, triple-trait corn technology offset a
decline in soybean-seed and -trait revenue in the U.S.
Acuity Brands rose 5.46, or 9.9%, to 60.51, a top Big Board percentage performer. The
lighting manufacturer reported net income in the second quarter of $24.4 million, or 55
cents a share, compared with $14.5 million, or 32 cents a share, in the year-earlier period.
Monster Worldwide (Nasdaq) lost 6.41, or 13%, to 42.10, in the top five among Nasdaq
percentage decliners. The parent of job-search Web site Monster.com cut its first-quarter
revenue outlook to below Wall Street projections.
DreamWorks fell 1.22, or 3.9%, to 30.18. Sanders Morris Harris cut shares of the animation
studio to "neutral" from "buy," saying the "dramatic" run-up in shares over the last six
months fully reflects the earnings power of "Shrek 3" and upside potential beyond $33 near
term looks limited.
Ameristar Casinos (Nasdaq) dropped 1.87, or 5.8%, to 30.60. The casino operator said it
agreed to acquire Resorts East Chicago, a Chicago-area hotel and casino, from Resorts
International Holdings for about $675 million.
Best Buy lost 1.24, or 2.5%, to 47.89, and Circuit City Stores fell seven cents to 18.21.
Falling prices of flat-screen TVs continue to generate sales, but the price wars they are
causing are pinching profits at the top U.S. consumer-electronics retailers.
NYSE Euronext lost 3.45, or 3.4%, to 97.55 in the first day of U.S. trading for the world's
largest stock exchange (See related article).
ImClone Systems (Nasdaq) gained 2.02, or 5%, to 42.49. The drug company said a first-line
Phase III study of its Erbitux combined with platinum-based chemotherapy met the primary
endpoint of increasing overall survival in patients with recurrent and/or metastatic
squamous cell carcinoma of the head and neck.
Panera Bread (Nasdaq) fell 2.47, or 4.1%, to 57.75. First-quarter revenue rose 24% to
$240 million, but the bakery-cafe chain expects a first-quarter profit at or "modestly below"
its previous target of 47 cents to 50 cents a share.
Varian Semiconductor Equipment Associates rose 1.45, or 2.6%, to 56.45; KLA-Tencor gained 1.02,
or 1.9%, to 55.24; and Lam Research advanced 1.13, or 2.4%, to 49.06, all on Nasdaq. Stifel
Nicolaus raised the chip-equipment companies' shares to "buy" from "hold," feeling the
industry is near a fundamental bottom.
Valhi rose 1.46, or 8.1%, to 19.39 and also seemingly snubbed the exchange it trades on.
The stock spiked on higher-than-usual volume, and the NYSE asked the company to publicly
comment on whether there were any corporate developments to explain the activity. But Valhi,
whose businesses include titanium, waste management and security products, declined to comply,
saying it has a policy about not commenting on unusual market action.
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Author: Steve Higgins
Date: March 22, 2007
Publication: New Haven Register
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Today marks the deadline for People's Bank depositors to buy stock at the offering price of $20 a share as the bank
converts to a fully public company.
People's Bank expects to raise up to $4.3 billion by offering the 57 percent of its shares currently owned by People's
Mutual Holdings to the public. The bank sold 43 percent of the stock to the public in 1988, pioneering the dual
mutual/stock form of organization.
Last year, the bank announced it would convert to full public ownership, to make it easier to expand in order to
compete with larger banks.
Depositors get first shot at the shares. They may buy the stock for $20 a share if they had at least $50 in a
People's Bank account as of June 30, 2005. Applications must be in by 11 a.m. today, for at least 25 shares
and at most 100,000 shares.
People's Bank's stock, which trades on Nasdaq as PBCT, closed Wednesday at $44.03 a share, up 29 cents.
After the conversion - no date has been set - current shareholders will receive between 1.67 and 2.26 new
shares in exchange for each of their current shares. As a result, the stock price is expected to fall from
its current level closer to the $20 level, although of course no one knows exactly what the shares will
trade for after the conversion.
In nearly all cases of mutual holding companies converting to stock ownership, the stock price rises above
the initial offering price by 30 percent and often more. However, most such conversions are offered at $10
a share, and most are conversions from full mutual holding companies to stock, rather than half-conversions.
Paul Schatz, president of Heritage Capital LLC in Woodbridge, said depositors probably would do well to buy in.
"Everyone's situation is different. However, historically, initial public offerings in the banking
sector have been a very positive thing for shareholders," he said.
Shareholders will vote on the conversion proposal at an April 5 shareholders' meeting.
Founded in 1842, People's has more than 150 branches statewide and $11 billion in assets.
Banking analysts said the bank's challenge will be how to use the capital raised in the conversion.
"That's a huge amount of capital, $4.3 billion," said Susan Monti. "Whether it's a good or bad deal
will depend on whether they will be able to effectively utilize this capital."
Monti said it makes sense for the bank to grow by buying other banks, since the banking industry is
becoming more and more competitive and it's hard for smaller banks to compete with the mega-banks.
John Carusone, president of the Bank Analysis Center Inc. in Hartford, agreed.
"But even if they succeed in raising all the capital they expect, they have set themselves up for the
issue of an encore," he said. "That is a lot of capital to deploy, and the market will have limited
patience for them to put that equity to work. They will be enormously overcapitalized."
As part of the reorganization, the bank's top executives and members of its board of directors stand
to earn stock grants and options worth more than $240 million.
Attorney General Richard Blumenthal has said that payout is too high and the bank should lower the
amount of rewards handed out to top officials.
People's Bank officials have declined to discuss the offering, citing securities regulations that
curtail their discussion of the stock issue.
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Author: GREGORY ZUCKERMAN AND JACLYNE BADAL
Date: March 4, 2007
Publication: Wall Street Journal
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What should you do now -- and what if things get worse?
On the heels of a difficult week for stocks, highlighted by Tuesday's dramatic 416-point decline in the
Dow Jones Industrial Average, investors are revisiting their portfolios, and top financial advisers and
analysts are mapping out strategies for clients.
Among the best nuggets of advice: Search for ways to improve the quality of the stocks and bonds in your
investment portfolio. Prepare a wish list of stocks to buy if a deep downturn materializes. Use stop-loss
orders to brace for more volatility and protect against potential sizable losses.
For the week, the Dow industrials tumbled 533 points or 4.2% and the Nasdaq Composite Index fell 5.8%.
It was the worst weekly percentage drop for the Dow since March 2003. For the year to date, the Dow is
down 2.8% and the Nasdaq is down 2%.
The rough week is a wake-up call for investors who have piled into riskier areas of the market, such as expensive small-cap
shares and emerging-market funds. It's also a reminder that in tough periods, many riskier investments move down together,
surprising those who figured they were diversified. Last week everything from shares of U.S. lenders serving riskier borrowers
to shares of Latin American telecommunications providers fell sharply.
Think 'Quality'
Now it's time to focus on high-quality investments that tend to not drop as far in bad times for the market. Those include
large-cap companies in developed markets, especially health-care shares, as well as top-rated corporate bonds, says Richard
Bernstein, chief investment strategist at Merrill Lynch. Stocks with generous dividends also should do better than others
if the market weakens, he says.
It may also be time to trim holdings of stocks from developing nations. "We recommend that U.S. investors take some profit
from the emerging markets and deploy the cash into large-cap U.S. stocks," says Joseph Quinlan, a market strategist at Bank of America.
His favorite sectors now: defense, energy, industrials and materials. He also recommends that investors reduce their
exposure to riskier asset classes like "junk," or below-investment-grade, bonds.
But don't make any rash moves. Peter Andersen, a portfolio manager at Dreman Value Management in Jersey City, N.J.,
says "a 5%-10% slide is like a cut that takes at least a couple of days to heal....Don't contemplate any major decisions until then."
Still, he says the recent downturn serves as a warning about the risks of both stocks and bonds of emerging markets,
which are prone to severe selloffs and are appropriate only for investors with a hearty appetite for risk. Tuesday's
big drop in U.S. stocks was partly a reaction to an 8.8% drop in Shanghai stocks.
More Volatility?
Mr. Andersen of Dreman says if the U.S. market goes down further, it could signal a new period of volatility, as
hedge funds and others who sometimes make sharp short-term changes in their holdings scramble to adjust their portfolios.
"I tell clients to expect more swings like this, because there are more aggressive 'hedgies' in the market now,
and they operate differently," Mr. Andersen says. "So brace yourself."
If the market takes another leg down, and the drop turns into a 10% correction, Mr. Bernstein of Merrill Lynch
says investors should try to avoid reacting to the move.
"We always suggest that investors adjust their portfolios by time and not by reacting to events," he says.
"Adjusting at regular time intervals is one of the simplest methods of being a more disciplined investor."
He cites academic studies showing that reacting to market moves is less successful.
Here's more proof of the folly of trying to time the market: Even experts get it wrong. Mark Hulbert, of
Hulbert Financial Digest, tracks the recommendations of investment newsletters. His data show that in recent
weeks these newsletters were urging their readers to boost their exposure to the market, rather than reduce
it. On the heels of the market's Tuesday tumble, they have begun to urge caution, but for their readers it
might be a little too late.
"As far as I can tell, no one gave a [sell] signal Monday," says Mr. Hulbert. "Had they really felt that
this was coming, they wouldn't have been building back their exposure." (Hulbert Financial Digest is owned
by MarketWatch, which, like The Wall Street Journal, is a unit of Dow Jones.)
Paul Desmond, president of Lowry's Reports, a market researcher in North Palm Beach, Fla., says the fact
that Tuesday's losses were so harsh, and that at least 90% of the day's trading volume took place on falling
stocks, might actually be a good sign.
"Historically, when that's happened, the resulting decline is usually very short-lived and is generally
followed by higher prices. It's a fast, nasty, short-term correction, but it generally does not lead to
an extended market decline."
If Mr. Desmond is wrong and stocks do keep falling further, the best strategy is to assess whether
something has changed in the outlook for profits and interest rates, the keys to the long-term performance
of stocks. For stocks to enter a bear market -- typically defined as a 20% drop -- it likely would take
signs of a serious downturn for earnings, or higher interest rates.
Last week, reports on new-home sales and durable-goods orders were very weak, raising the possibility
of a recession. Problems in the Chinese stock market also raise questions about whether the white-hot
growth there will cool. But for now, most analysts say the likelihood of a bear market remains low.
"The Chinese economy will likely not slow anytime before the 2008 Beijing Olympics," says Bill Stone,
a senior vice president at PNC Wealth Management. "Investors who have cash sitting on the sidelines can
use this pullback as an opportunity to buy some high-quality large-cap stocks."
Stocks to Consider
Some analysts recommend UnitedHealth Group (UNH), the big managed-care insurer, and discount retailer Kohl's (KSS).
Jason Trennert, chief investment strategist and managing partner at Strategas Research Partners,
agrees that the U.S. economy will be resilient and he believes the market could be up as much as
15% from current levels by year end. Among his reasons for optimism: continued strong earnings,
low interest rates and strong corporate balance sheets.
After the Tuesday tumble, he says, "We asked ourselves a simple question: What's changed? Our simple
answer was really 'nothing.'" He likes Cisco Systems (CSCO) and mutual fund Legg Mason Value Trust (LMVTX).
Paul Schatz, president of Heritage Capital in Woodbridge, Conn., believes the market could rally
for the next few months, but he is worried about the market's outlook for the fall. A fan of
active trading, he says investors who are bearish might buy Rydex Inverse S&P 500 Fund (RYARX) or
ProFunds Bear Fund (BRPIX), two mutual funds that are structured to go up if the market falls.
Doug Fabian, of Doug Fabian's Successful Investing newsletter, likes to use stop-loss orders,
which provide for a security to be sold when it falls to a preset price or tumbles by a set
percentage. On Tuesday, an exchange-traded fund invested in gold stocks that he owned hit its
stop-loss price and was sold. He adjusted the stop-loss points on three other ETFs so that it
would take a smaller drop than previously to trigger a sale.
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Author: Steve Higgins
Date: February 28, 2007
Publication: New Haven Register
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The stock market took investors on a wild ride Tuesday as the Dow Jones industrials fell nearly 550
points before closing down 416.02, or 3.29 percent, at 12,216.24.
The plunge followed a 9 percent wipeout in Chinese stocks and also reflected concern over an unexpected drop
in durable goods orders and an apparent attempt on the life of Vice President Dick Cheney in Afghanistan.
It was the Dow's worst day since the Sept. 11, 2001, terrorist attacks, when the Dow plummeted 684.81, or
7.13 percent, the day the market re-opened Sept. 17.
"This definitely caught me by surprise," said Paul Schatz, president of Heritage Capital LLC in Woodbridge.
"What really happened was that computerized trading and momentum trading fed on itself as the market began to unravel."
Institutional investors use computerized trading to quickly take advantage of price fluctuations in the
market, but the practice adds volatility since price swings trigger huge numbers of trades.
Schatz said he expects the market to hit a bottom quickly and recover early next week.
"This is 100 percent bull market behavior," he said. "Bull markets go up at a stair-step pace, and they
drop at a waterfall pace. Bull market corrections are very short and very steep, and hair-raising."
Worldwide, markets in Asia and Europe also fell after the Chinese selloff, which resulted from
concerns that the Chinese government may step in to cool off the nation's red-hot financial markets,
which have soared 14 percent so far this year after a 130 percent eruption last year. Critics say
speculation has driven prices sky-high and share prices have become overinflated.
On Tuesday, the Dow plunged 546.02, or 4.3 percent, to 12,086.06 before recovering some ground in
the last hour of trading to close down 416.02.
The broader Standard & Poor's 500 index fell 50.33, or 3.47 percent, to close at 1,399.04, and the
tech-dominated Nasdaq composite index was off 96.65, or 3.86 percent, at 2,407.87.
A suicide bomber attack on the main U.S. military base in Afghanistan where Cheney was visiting also
rattled the markets. Cheney was not injured, but the explosion killed 23 people, including two Americans.
The New York Stock Exchange imposed trading curbs at 1 p.m. as the Dow slipped 200 points. The
selloff resumed at 2:30 p.m., when full trading resumed.
Area economists Donald L. Klepper-Smith, chief economist for DataCore Partners in New Haven, and
Todd Martin, economic adviser to People's Bank, both said a market correction had been overdue.
"In the Chinese market, a 9 percent drop is the equivalent of a 1,000-point drop in the Dow," said
Klepper-Smith. "In a global marketplace, it's not surprising that a meltdown over there would raise concerns here."
But Klepper-Smith said the current economic recovery is in its 64th month, and the average postwar
recovery has lasted 60 months.
"The market had a broad extended run dating back to last summer, and a correction is not unexpected;
maybe it's overdue," he said. "I don't think we're looking at a recession as being imminent."
Klepper-Smith said U.S. stocks today boast an average price/earnings ratio of 17 or 18, and the
average is 15. "Stocks are overvalued," he said.
Martin said many investors are concerned that U.S. companies cannot continue to turn in the high
profit announcements of recent months.
"The market was ripe for a correction," he said. "There are real concerns about profits going
forward, and we are seeing all-time high valuations."
On Tuesday, a Commerce Department report that orders for durable goods in January dropped by
the largest amount in three months exacerbated jitters about the direction of the U.S. economy,
just a day after former Federal Reserve Chairman Alan Greenspan said the United States may be headed for a recession.
Overseas, the Shanghai Composite Index tumbled 8.8 percent to close at 2,771.79, its biggest
decline since it fell 8.9 percent on Feb. 18, 1997.
"Seeing that the Shanghai market has tripled in the last couple of years, that correction,
caused by concern over what the Chinese government may do to temper its financial markets,
wasn't a complete surprise," said Thomas Coe, associate professor of finance in the School
of Business at Quinnipiac University.
Hong Kong's benchmark Hang Seng Index dropped 1.8 percent, and Malaysia's Kuala Lumpur
Composite Index fell 2.8 percent. Japan's Nikkei stock average fell a more moderate 0.52
percent, but European markets were rattled - Britain's FTSE 100 lost 2.31 percent, Germany's
DAX index dropped 2.96 percent, and France's CAC-40 fell 3.02 percent.
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Author: RON VARNON
Date: February 2, 2007
Publication: Connecticut Post (Bridgeport, CT)
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John B. Nano and his "dissident" group swept back into power at Fairfield-based Competitive Technologies Inc.
on Friday after winning a majority of shareholder votes at the annual meeting. The entire board of directors
and senior management were replaced after stockholders votes were officially recognized at the meeting,
held at the American Stock Exchange in New York.
The company's board of directors fired Nano in June 2005. But he said a group of stockholders,
distressed the company had lost millions since Nano's departure, recruited him in November 2006
to return to his position by winning the election at the annual stockholders meeting.
"It's a real case of shareholders standing up," Nano said Friday.
Shareholders were tired of their interests not being taken seriously, he said, especially as the
company hemorrhaged money in a strong market.
Nano replaces D.J. Freed as president and chief executive officer. The new directors coming into
power with Nano are Ben Marcovich, William Reali, Joel Evans, Richard Hornidge Jr. and Ralph Torello.
Competitive Technologies employs about 20 people. It is known as a technology transfer company,
meaning it markets and licenses patented technologies and procedures developed by universities
or other companies.
Typically, stockholders vote by proxy on one ballot, which lists a slate of candidates for the
board of directors that the board has approved, but Competitive Technologies investors had to
choose between proxies this year. Management offered the first ballot and the Nano group the
second. The exact vote count was not available Friday, but the Nano group won by a 2-to-1 margin, Nano said.
"Wow. That's unreal," Paul Schatz, founder and president of Woodbridge-based trading firm
Heritage Capital, said about Nano's victory.
Schatz said the victory was the "epitome of capitalism." While there are indications more
companies are facing challenges to the board of directors' slate of candidates and how the
company is managed, Schatz said not to expect that to happen at larger corporations because
"it's too expensive." He said people can expect challenges to continue at smaller companies,
where people such as Nano can create grass-roots campaign.
Nano disagrees. He said his victory is more proof that public companies are becoming truly
democratic enterprises, where shareholders will demand more accountability from management
and directors or show them the door.
"They will keep managers on their toes and remind them who they are working for," he said.
Nano said his slate won because the company had gone in the wrong direction since he left.
The company reported a net loss of $2.37 million for the fiscal year ended July 31, 2006,
compared with a positive net income of $5.7 million for the fiscal year ended July 31, 2005.
Nano said the company lost millions more since July 31. Nano and the new directors plan to meet
through the weekend to hammer out the details of the company's new strategies, he said, then
report to work at Competitive Technologies' corporate headquarters Monday. They will receive
a very different reception than during a recent visit.
Two weeks ago, Nano and his backers were turned away from the office at 777 Commerce Drive.
A company news release dated Jan. 18 was titled "Nano Group Tries to Storm Competitive Technologies' Headquarters."
It said management was "appalled by Mr. Nano's erratic and irrational behavior" and that police had to remove
him from the scene.
"I was the youngest guy in the group, and I'm 62," Nano said, laughing off the incident as a desperate
attempt by the company's former management to stay in power. Nano had gone to the office to discuss a
previous shareholders meeting, which was adjourned before a final vote tally was made.
There were a number of allegations of Securities and Exchange Commission rule violations exchanged
between the parties during the run-up to the vote, and Nano was suing the company over pay he claimed
he was owed for running it. Nano said he would settle his suits with the company for less than what
he could have won in court.
With the election, company spokesman Johnnie Johnson said, the allegations have "been taken care of."
"There's only one thing wrong with this company," Johnson said,. "That for five quarters it lost money."
Shares of Competitive Technologies closed up 4 cents, to $2.50, in Friday trading on the American Stock Exchange.
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Author: KAREN TALLEY
Date: January 25, 2007
Publication: Wall Street Journal
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Gains by Yahoo and Sun Microsystems pushed the Nasdaq Composite Index to its highest close this year.
The Dow Jones Industrial Average climbed to its highest closing on record, as component AT&T rose
on continued strength from its Cingular Wireless unit.
There were some downbeat developments as semiconductor giant Advanced Micro Devices issued a
withering report and Norfolk Southern stopped a railroad rally.
The Dow industrials rose 87.97 points, or 0.7%, to 12621.77, with 26 of 30 components advancing.
The Dow has marked record closes 26 times since Oct. 3. The Nasdaq Composite rose 34.87, or
1.43%, to 2466.28, its best point-and-percentage increase since Dec. 4. The Standard & Poor's
500-stock index added 12.14, or 0.85%, to 1440.13, its best gain of the year and about 87 points
away from its record of 1527.46, from March 24, 2000.
"Yahoo and Sun overshadowed Advanced Micro, and the market breathed a sigh of relief that President
Bush in Tuesday night's State of the Union speech didn't say anything dramatic," said
Paul Schatz,
head trader at Heritage Capital LLC. "Once the market began to get rolling the momentum just fed
on itself. But I think we're going to peak in the short-term."
Yahoo (Nasdaq) rose $1.98, or 7.3%, to $28.94, its biggest percentage gain since early April 2004.
The Web giant's fourth-quarter results included a 61% drop in profit blamed in part on higher
stock-options expenses, which wasn't as bad as analysts expected. More enticing was news that
the new Panama advertising system -- Yahoo's best hope for cutting the profitability gap with
Google -- was on track to deliver financial benefits starting next quarter.
Yahoo's news appeared to galvanize the Internet group, as Google gained 20.02, or 4.2%, to 499.07,
again trying to get past 500. Amazon.com advanced 83 cents, or 2.3%, to 37.26, and eBay, which
reported after the closing bell, rose 1.38, or 4.8%, to 30. All three stocks trade on the Nasdaq.
Sun Microsystems (Nasdaq) gained 49 cents, or 8.7%, to 6.15, its biggest percentage advance since
the beginning of April 2004. The computer maker swung to a profit from a year-earlier loss,
continuing to see an improvement in its services-and-server businesses.
Sun Microsystems also said private-equity firm Kohlberg Kravis Roberts will make a $700 million
investment in the company in the form of convertible senior notes. (See related Breakingviews column.)
Advanced Micro Devices dropped 1.48, or 8.5%, to 16.03, the Big Board's third-largest percentage
decliner. The semiconductor maker posted a fourth-quarter loss, hurt by acquisition-related charges
and a price war with rival Intel that weighed on gross margins. Dow industrial component Intel
(Nasdaq) received a vote of confidence, rising 29 cents, or 1.4%, to 20.84.
AT&T advanced 1.27, or 3.6%, to 36.63, its highest closing level in nearly five years. Cingular
Wireless, which is the No. 1 wireless carrier by subscriber base, more than tripled its
fourth-quarter net income and added a record number of net subscribers. AT&T in December
completed its purchase of BellSouth and gained full control of Cingular, which the two companies had run together.
Norfolk Southern lost 3.12, or 5.8%, to 50.61. Net profit rose 6% to $385 million in the
fourth quarter, though a decline in volume during the period indicated the railroad operator
is suffering the effects of weakness in certain segments of the economy. The report came a day after
Burlington Northern Santa Fe rallied the railroad group after saying fourth-quarter earnings rose 21%.
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Author: RON VARNON
Date: January 20, 2007
Publication: Connecticut Post (Bridgeport, CT)
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General Electric Co. reported record net income in 2006, despite having to erase $343 million in profits from 2001 through the first three quarters of
last year because the company didn't properly account for fluctuating interest rates.
On Friday, Fairfield, Conn.-based GE reported income of more than $20 billion for 2006 and confirmed during a conference call with analysts that it is
trying to sell its plastics business, which has operations in Massachusetts.
GE's earnings increased 11 percent, from $18.7 billion in 2005 to $20.7 billion in 2006. Earnings per share for the year increased 13 percent,
from $1.76 in 2005 to $1.99. Fourth-quarter earnings increased 12 percent, from $5.9 billion in 2005 to $6.6 billion in 2006.
After consulting with the Securities and Exchange Commission about its accounting formulas for variable interest rates related to its financial
lending business, GE said Friday it would restate earnings dating to 2001.
According to its statement, GE did not properly account for its use of derivatives when calculating the financial impact from variable interest
rates affecting its financial services business.
Derivatives are mathematical formulas companies use to assign a fixed value to prices or interest rates that can swing up and down during a period.
The formulas can get complicated, but without them some argue that earnings for many big corporations would be hard to track because the volatile
prices or rates would skew profits.
Collins, senior capital industrial analyst with Edward Jones, said he was surprised by the restatement, "that, by itself, was immaterial."
The issue was over accounting and shows the company is dedicated to open and honest reporting, he said, adding that many corporations use derivatives
accounting.
Other than the accounting change, Collins said, there weren't any real surprises. The company turned in a solid quarter and, except for concerns
about the tax rates GE pays, the company's stock is poised to outperform the market, he said.
GE pretty much confirmed it is getting out of the plastics industry, Collins said, adding that plastics has been weighing down its earnings.
GE has also positioned itself well in the world market, Collins said. "The company earned $30 billion [in revenue] in emerging markets that are growing
faster than the United States and Europe," he said. "They were there early."
For the quarter ended Dec. 31, five of GE's six divisions posted increased profits, compared with the same period in 2005. GE's Industrial division,
the only segment to post a decline, reported a profit of $673 million, compared with $769 million in the 2005 quarter.
Profits at GE's Infrastructure division rose 19 percent, from $2.43 billion in the fourth quarter of 2005 to $2.89 billion in 2006. Stamford-based
GE Commercial Finance's profits posted the second-highest increase at 18 percent, rising from $1.28 billion to $1.50 billion.
NBC Universal, which airs television shows such as "Scrubs," saw profits increase 5 percent during the quarter.
"I haven't said this in a long time," said Paul Schatz, president of Woodbridge-based Heritage Capital, "but GE makes a good core holding."
Schatz, who has called GE a "widows-and-orphans stock," because it doesn't go up or down but pays decent dividends, said he also expects the
company's stock to be stronger this year.
GE's share price has lagged the market for years.
Schatz said the company's stock won't go "gangbusters," as it did in the 1990s, but will be more volatile this year while trending higher.
Shares of GE closed down $1.05, to $36.95, in Friday trading on the New York Stock Exchange.
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Author: PAM DAWKINS
Date: January 11, 2007
Publication: Connecticut Post (Bridgeport, CT)
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Oil-heat customers who locked in prices over the summer only to watch the cost of oil drop dramatically have caught a break this winter. So far. But many of the companies homeowners buy from are hurting, according to an industry association.
"We've got some heating oil companies who are in some trouble," said Gene Guilford, executive director of the Independent Connecticut Petroleum Association.
Over the summer, oil prices rose to record highs. But consumers who worried prices would skyrocket even further once cold weather hit signed contracts to buy oil at those summer prices. "Then we had an equally historic collapse" in prices, Guilford said. This meant customers who locked in prices would pay more than those who bought at that day's price.
Over the fall, the ICPA distributed 40,000 bill-stuffers, reminding customers they signed contracts and, besides, it wasn't yet winter - the main heating oil season is between November and March - and prices could still go back up as demand rose.
But when it was supposed to get cold, it didn't, and more than two months are gone from the five-month season.
So customers aren't using as much oil, and aren't feeling the full effect of those higher, locked-in prices, Guilford said.
But individuals weren't the only ones to lock in prices over the summer; oil dealers signed contracts with wholesalers for oil they cannot now take delivery of, because they don't have the demand. Those wholesalers, Guilford said,
penalize dealers if they don't take all the oil they contracted for. That penalty, the difference between the existing market price and the contract price, is about 50 cents per gallon today, according to Guilford.
"This is just something no one's ever seen before," he said. "It's just been a bizarre 12 months."
The money many customers are saving on heating oil, though, is being funneled into their vehicles, because gasoline prices don't fall quickly in response to declining oil prices.
"They're giving us one-, two- and three-cent reductions, that's it," even though the price in New York harbor has dropped more than 20 cents since Christmas, said Michael J. Fox, executive director of the Gasoline and Automotive Service Dealers of America. Fox, however, said he hopes the General Assembly this year will be able to make some real changes. Gov. M. Jodi Rell's energy plan includes requiring a different pricing structure.
According to Fox, only the state's independent gasoline dealers - those not affiliated with an oil company - can buy gas from any company at the cheaper "rack" price that is based on the New York harbor price plus transportation costs to Connecticut. More than 75 percent of gasoline stations, he said, instead must buy from specific oil companies, who he said charge them more.
"When the market goes down, the rack goes down," Fox said. In September, Rell proposed a two-year pilot ban on pricing based on location, said Chris Cooper, the governor's spokesman. That proposal will be part of the energy proposal she submits to the Legislature, he said.
"It'll be earlier rather than later in the session," Cooper said Thursday when asked about the timing.
Two people who watch the industry credit the disappearance of speculation with the recent crude oil price drops, which continued Thursday. On the New York Mercantile Exchange, a barrel of crude oil dropped $2.14 to close at $51.88, far off the $70-per-barrel plus highs of the summer.
"This is really a momentum-driven market" that is wringing out the excess, said Paul Schatz of Heritage Capital.
Stafford Bucknall of the commodities brokerage firm Man Refco branch, said the prices reflect the disappearance - for now, at least - of the "war-premium," caused by uncertainty in the global supply.
Bucknall and Schatz also credited the warmer-than-usual weather in parts of the United States and slowing economies in China and the United States, which has reduced demand.
The drop is only temporary, Schatz said.
"Higher energy is here to stay," because growth in Russia, South Korea, India and China is creating more of a demand. "I think we're nearing the end of this decline."
But Bucknall thinks there's still room for gas prices to move lower.
It takes time for declines on the wholesale market to make their way to the pump prices, he said. But, "market forces will force them to bring it down."
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