Raw Greed requests, Axcelis Technologies, Inc.

Shashi G. writes,

ACLS? It broke 200 DMA today.

ACLS, Axcelis Technologies, Inc. produces ion implantation systems, including high and medium current implanters, and high energy implanters, as well as offers dry strip equipment, thermal processing systems, and cleaning and curing systems used in the fabrication of semiconductor chips. I think ACLS is an interesting pick and I’ve added it to my watchlist. I am bullish on the Semiconductor industry for 2006 and expect gains across the board for equipment manufacturers and material suppliers to semiconductor fabricators. ACLS looks like it jumped up on February 9th, 2006, when the company reported a smaller 4th Quarter, 2005 loss than expected. The company reported a net loss of .01 a share, analysts were expecting a net loss of 0.3 a share. It looks to me like shares of ACLS swing quite rapidly. When news of the smaller than expected loss was posted in February, ACLS jumped up from low $6’s to $8. I am guessing what we are looking at is profit taking from investors who are worried about a sustained recovery in the semiconductor industry. If you compare ACLS to AMAT, Applied Materials, Inc. that supplies some of the same equipment to the semiconductor industry, you will see that shares have similarly dropped in February and March trading. Looking at the overall improvement in utilization rates from Semiconductor fabricators, I believe ACLS faces a robust market for the company’s products in 2006. I believe in the short run you may see ACLS drop before rebounding. I will keep ACLS on my watchlist and may purchase shares in the company if the stock trades under $5 again without any news released by the company.

1-800-FLOWERS.COM, Inc. update

FLWS, 1-800-FLOWERS.COM, Inc. has met my target price of $7. I believe the stock has a chance of meeting my second price target of $7.50 in the next 1-3 months. The stock closed today at $7.10. I am going to set a stop loss order at $7.

Here is a recap of my current predictions performance. You can view the complete list of all my predictions by clicking the predictions link at the top of the page.





Total number of picks since September 22nd, 2005: 20, Completed picks: 13, Winners: 11, Losers: 2 

Total Winners: 84.6%

GroovyStocks.com Lucent and Alcatel article

Moosa from GroovyStocks.com e-mailed me a link to a humorous Lucent and Alcatel article on the blog. It’s good to read a little humor while waiting for the results of the merger talks. I’ve added GroovyStocks.com to my blogroll. GroovyStocks.com is what you get when you combine a well written blog with a dash of humor and a variety of investment ideas.

The Raw Greed request line is open

E-mail me your stock picks and if I know anything about them I will report back with a post or analysis. If I don’t post a response within 48 hours then I don’t know anything about the stocks you sent in.

1-800-Flowers.com Inc. update

FLWS, 1-800-Flowers.com Inc., is nearing my target price of $7. FLWS closed yesterday at $6.86. I saw the stock trade as high as $7.45 in after-hours trading. If the stock breaks $7 by next week I may hold onto the stock until it meets my second target sell price of $7.50. FLWS’s current 1 year target estimate is $8.58. The company is set to announce 1st Quarter earnings on April 27th, 2006. I saw FLWS trade as high as $6.96 this morning.

Gold update

The market has seen a huge surge in gold prices in the last week. Gold is now approaching $600 and is currently trading at $585. I believe we may see another round or two of profit taking before we eventually break $600. I am keeping an eye on AUY, Yamana Gold, Inc. and BGO, Bema Gold Corporation. I was in BGO earlier this year at $2.80 and I sold out at $4.03. BGO is now trading at $4.56. After watching both stocks, I believe AUY has risen more aggressively than BGO and is more prone to price swings when the price of gold drops. AUY is definitely heavily influenced by speculation on future earnings and a continued rise in the price of gold. If I were to choose a gold mining stock, I would choose to invest in AUY over BGO during the rush to $600 and above. AUY went public in early 2004 and there is more opportunity for a young stock like this to appreciate with an impending mania and overly eager investors who attempt to look for the next bargain gold stock. Since I am bullish on gold and do see the metal breaking $600 in 2006, I will likely take a position in AUY if gold drops under $550. I would expect AUY to trade at low $8’s or just under $8 if gold drops under $550. Among the gold stocks on my watchlist, I also believe GG, Goldcorp, Inc. may be a good short term investment, I expect GG to drop to the $25-$26 range if gold drops under $550.

A merger of equals

I’ve read a number of articles this week that have alluded to the same point that I drew in my post about the LU, Lucent Technologies, Inc. and ALA, Alcatel merger. With so much talk about a ‘merger of equals’ it’s no wonder that people are pointing out that the valuations of the companies show a different story.

I continue to believe that Lucent investors will not be happy using last Thursday’s, March 23rd, closing price of $2.82 as the base share price for a deal with Alcatel. I believe if Alcatel announces a deal without a premium attached to Lucent shares, LU investors will likely attempt to block the transaction.

Here is a quote from a Financial Times article that discusses the merger of equals,

The phrase ‘merger of equals’ is a misnomer because you always have a buyer and a seller,” says Jeffery Perry, of Ernst & Young’s transaction services unit in Chicago. “It can send the wrong message.”

Here is a quote from a WSJ article* about the merger

*note you must be a subscriber

When they acknowledged they were in deal talks last week, Lucent Technologies Inc. and France’s Alcatel SA described their potential combination as “a merger of equals.”

Yet that’s not the case in at least two important ways. The first, obvious way: The stock-market value of Lucent is less than $14 billion, versus over $21 billion for Alcatel.

While I have written that I think a combination of Lucent and Alcatel is a good idea, it will take some time for the operations to consolidate and realize the cost savings from the merged company. There is also a management risk that overlaps and confusion will create some deficiencies for the combined company. Without a premium attached to Lucent shares, I believe some LU investors may not want to take the risk of betting on the combined company. Those who are long on Lucent are likely anticipating a rebound for the company led by many of Lucent’s emerging technologies in 2006-2007. Alcatel may be getting a bargain considering the valuable IP of Lucent that does not immediately contribute to the bottom line of company. LU closed today at $3.04, unchanged from the prior days trading. Unless LU rises quickly without any news being released about the merger, I will likely hold my shares of the company until details of the merger are announced.

Lucent and Alcatel

While I think the proposed LU, Lucent Technologies, Inc. and ALA, Alcatel merger is a good idea, I have some concerns as a Lucent investor with the pricing of LU shares. The latest news has Alcatel acquiring Lucent at market price. The estimated value of the combined company will be $34 billion. I doubt Lucent investors are very happy with this. At the close of today’s trading, Alcatel’s market cap is $20.52 billion and Lucent’s market cap is $13.68 billion. The combined market caps already exceed the $34 billion dollar estimated value of the combined companies. News outlets are already speculating about the current value of the companies.

Here is a quote from this Reuters press release:

Lucent’s market capitalization is about $12.6 billion, compared to Alcatel’s value of about $22 billion.

According to the press release, if LU shares were purchased using a $12.6 billion market cap, each LU share would be priced at $2.82. Normally the way I have seen acquisitions work is that the shares of the purchaser will go down because investors view the purchaser as taking an assumed risk, and shares of the company being acquired will rise. Today what we saw is ALA and LU rise. The market appears to be assuming that the consolidation is a good idea for both companies and will lower risk overall. I don’t see how Lucent investors would be happy with a share price of $2.82, which is far lower than the company’s 52 week high of $3.49.

Taken from the same press release:

Shareholders might not be happy about the proposed price, said Pranav Rawal, an equity analyst at Metropolitan West Capital Management LLC, a large Lucent shareholder.

As a Lucent investor I am definitely not going to be happy with a share price of $2.82. What I would consider fair is taking LU’s 52 week high of $3.49 and using that as a starting point. The yearly historical high of $3.49 reflects how the market priced LU using earnings, positive news and market conditions surrounding the company’s future prospects. A merger with Alcatel should obviously produce greater opportunity for Lucent than anything that has happened in the last year. At $3.49, LU would have a market cap of $15.6 billion. If the combined deal value remained at $34 billion that would place ALA’s market cap at $18.4 billion or $14.05 per share. This is not a far stretch considering shares of ALA have traded exactly at $14.05 as the low in the last 2 weeks. I believe for a merger of equals, as some news outlets are calling this merger, LU’s share price has to go up and ALA’s share price has to go down for the markets caps to be closer in value. The current $10 billion disparity, as the above press release prices the two companies, has ALA valued almost twice that of LU. That’s certainly not a merger of equals in practical price terms.

Lucent Technologies, Inc. update

LU, Lucent Technologies, Inc. is jumping up today on talks that the company might merge with French telecom equipment maker ALA, Alcatel. A merger would throw a wrench into my long term price targets for LU, depending on which company retained majority control and the financial terms of the deal. Early indications have Alcatel acquiring Lucent for less than Lucent’s current market cap.

Here is a quote from today’s press release about the merger.

The Times, citing people close to the talks, reported that Alcatel was negotiating to acquire Lucent for about $12.6 billion. The Journal valued the “merger of equals” at $33 billion, quoting unnamed people familiar with the matter.

I will likely sell LU if the stock breaks $3.20 today.

Tempur-Pedic International, Inc. update

It looks like shares of TPX, Tempur-Pedic International, Inc. are starting to jump up. TPX closed today at $14.35. TPX may reach my target price of $15 faster than I expected.

Groovy Stocks article on Intel Corporation

I caught an excellent article written on February 27th, 2006 by Groovy Stocks.com, that mirrors many of my own thoughts about INTC, Intel Corporation.

Here is a quote from the article:

A lot of people are worried about the AMD threat. We think these worriers have gotten used to having it too good. Might AMD win market share from Intel? It sure might! But who doesn’t have competition? UPS has FedEx, General Mills has Kellogg, the Yankees have the Red Sox, and Intel has AMD. Once you accept that every business has competition, what’s so bad about being over 7 times as large as your competitor? For crying out loud, Intel’s cash net of debt equals about 60% of AMD’s market cap!

We must admit that we are surprised to find ourselves writing about one of the most visible stocks in the market. Are we missing something? Can it be that such a value is hiding in plain sight? Is it just that traders and growth investors have given up on the company? We can’t fully explain why Intel is so beat up.

After today’s upgrade from JMP Securities, shares of INTC have climbed about 1% at this writing. Somebody please downgrade the stock! We’re not done buying.

I originally wrote about Intel on January 31st, 2006, in this post. I own 1000 shares of INTC purchased at $21.35. Microsoft has announced additional delays for its Windows Vista operating system. The consumer version of Vista is now slated for release in early 2007 pushed back from late 2006. I believe the delay in Vista will soften demand for both AMD and Intel processors. The delay in Vista may also contribute to keeping the price of INTC depressed longer than I originally anticipated. I haven’t changed my price targets for the stock, but I may hold off on purchasing additional shares until the company announces 1st Quarter 2006 results. I believe INTC may drop below $19 before rebounding. You can view my price targets for INTC by clicking the predictions link at the top of the page.

Raw Greed mentioned in the WSJ Online

David Jackson, from Seeking Alpha, sent me an e-mail with news that Raw Greed was mentioned on March 7th, 2006, in the Wall Street Journal Online. The Journal picked up a post I wrote about where the market is headed. Media coverage like this is very encouraging. Many thanks to David for letting me know. I fully support David’s work and appreciate the effort he has put forth for stock bloggers. If you haven’t visited Seeking Alpha, please take a look.

Raw Greed morning report

Good Morning, let’s get started. Today I am watching YHOO, Yahoo! Inc. The stock is currently trading in the low $30’s, down from a recent high of $43.66 set on January 9th, 2006. I believe YHOO’s recent drop has much to do with the drop in GOOG, Google Inc. Google has dropped over a variety of problems that have created investor fear and that fear is likely trickling over to Yahoo. Google is facing some difficulties from click fraud lawsuits, public backlash over its decision to censor content in China, accelerating revenue to exceed the high expectations of analysts, and in creating new services to maintain the company’s amazing growth rate.

I believe Yahoo is an older and more mature company in the search market. I like the company’s conservative approach to using capital and rolling out new services. Yahoo recently scrapped plans to create its own customized content and the company is slowly rolling out its Yahoo Publisher service for advertisers. Yahoo appears to have learned several lessons from the .com crash that collapsed high flying companies that were spending money without realizing any revenue from the services they created. I wrote a previous post about Yahoo and the company is one of my former picks. I originally purchased YHOO at $33.97 and I sold the stock at $38. You can click the predictions link at the top of the page to view my original price targets for the company. While I once purchased YHOO close to $34, I would not recommend purchasing the stock at today’s prices. I believe negative sentiment may build around Google and YHOO shares will likely further drop as an after effect. I like YHOO at under $28. The stock is currently trading at low $30’s.

Where the market is headed

The theme for the markets these days seems to be uncertainty. I see opportunity in semiconductor stocks and precious metals. Some readers have e-mailed me, asking why I am bullish on Semi’s. The answer is simple. Business for outsourced semiconductor fabricators is improving on a global scale. The positive outlook trickles up and down the food chain to all companies involved. Business for parts and material suppliers, such as WFR, MEMC Electronic Materials, Inc., to outsourced semiconductor companies is improving. The increase in utilization at outsourced semiconductor company’s, signals anticipated bullish retail demand from consumer electronics and computer equipment manufacturers.

I like precious metals, mainly silver and gold, as a hedge against a bearish stock market. I believe gold is in more of the public spotlight and offers more headroom to grow than silver. I believe we could easily see gold pass $600 in 2006 if worries over terrorism and avian flu persist. Before gold passes $600, I believe we will see several dips above and below $550. I will look at investing in gold mining stocks if the metal drops below $530 again.

There’s not much else I am looking at for the short-mid term at the moment. I believe much longer term, in the next decade, what will be hot is emerging alternative energy, alternative fuel, water and copper mining companies.

In alternative energy I see focus on solar energy and electric fuel cell technology. In alternative fuel I see continued development of hybrid electrical/gasoline based solutions and a focus on corn ethanol fuel. I believe water companies will take the spotlight in global emerging markets development, with conservation, distribution and filtering companies in focus. For metals, I believe copper will take focus. Copper is used in electrical wiring and many types of industrial applications. In the next decade prices will rise due to lack of new copper deposits, diminishing supply and increased consumption by emerging markets such as China and India.

Update Ford Motor Company

It looks like I may have missed my chance to purchase F, Ford Motor Company at under $7.40. F, traded as low as $7.39 on March 3rd, 2006. If the price of crude oil rises and we see more negative news from auto parts manufacturers, I believe F has a chance of dipping to low $7’s.