sony

JAPAN EQUITY FUND $4.79 (New York symbol JEQ; CWA Rating: Aggressive) mostly invests in large-capitalization stocks on the Tokyo Stock Exchange. The fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Honda Motor, Sony Corp., Sumitomo Corp....

Like other stock markets around the world, Japanese markets remain volatile. Moreover, the slow U.S. economy continues to hurt Japan’s major export industries. However, we think that Japan’s interest-rate cuts and its recently enacted $143.7-billion U.S. stimulus package will keep stock prices rising. JAPAN EQUITY FUND $4.79 (New York symbol JEQ; CWA Rating: Aggressive) mostly invests in large-capitalization stocks on the Tokyo Stock Exchange. The fund’s top holdings include: Toyota Motor, Mitsubishi UFJ Financial Group, Honda Motor, Sony Corp., Sumitomo Corp. and Panasonic Corp. Japan Equity Fund sells for 15% less than the value of its assets. It’s a buy....

LIMITED BRANDS INC. $13 (New York symbol LTD; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 321 million; Market cap: $4.2 billion; Price-to-sales ratio: 0.5; WSSF Rating: Average) earned $0.01 a share in its first fiscal quarter, which ended May 2, 2009. That was better than analysts expectations of a loss of $0.04 a share. In the year-earlier quarter, the clothing retailer earned $0.11 a share. That figure excludes a gain on the sale of its stake in a joint venture and a writedown of its investment in another joint venture. Sales fell 10.4%, to $1.7 billion from $1.9 billion. Overall same-store sales fell 7%, consisting of a 10% drop at the Victoria’s Secret and La Senza lingerie chains and a 3% drop at its Bath & Body Works personal-care products stores. The company continues to lower its costs. These measures, which include cutting its head office staff by 10%, freezing salaries and opening fewer stores, should improve its profitability when sales rebound. Limited Brands is a buy....

Cisco Systems Inc., $18.79, symbol CSCO on Nasdaq (Shares outstanding: 5.8 billion; Market cap: $109.6 billion), is a leading maker of products that link and manage computer networks. These include routers, local-area network (LAN) and asynchronous transfer mode (ATM) switches, dial-up access servers and software. Cisco’s IOS (Internet Operating System) software ties these products together, delivers network services (which interconnect and move information between networks) and enables programs to run on networks. Cisco gets about 46% of its revenue from overseas customers. In its third fiscal quarter, which ended April 25, 2009, Cisco’s revenue fell 16.6%, to $8.2 billion from $9.8 billion a year earlier. Excluding one-time items, its earnings fell 24.1%, to $1.8 billion, or $0.30 a share, from $2.3 billion, or $0.38. The company bought back 77 million shares during the quarter, at a cost of $1.2 billion. The recession continues to hurt demand for Cisco’s products. To cope, the company plans to lower its expenses by $1 billion during its current fiscal year, including laying off up to 2,000 workers (or 3% of its workforce)....

SONY CORP. ADRs $22 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1 billion; Market cap: $22 billion; Price-to-sales ratio: 0.3; WSSF Rating: Above Average) has struck a new alliance with Internet search engine Google. Sony hopes the new arrangement will spur sales of its Sony Reader electronic book device. Over the past few years, Google has converted several million books into electronic form. Under this new deal, users of the Sony Reader can download titles from Google for free, but only books whose copyrights have expired. Still, that’s over 500,000 titles. This deal should help Sony’s device compete with the popular Kindle book reader from online bookseller Amazon.com. Sony is a buy. FAIR ISAAC CORP. $14 (New York symbol FIC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 48.8 million; Market cap: $683.2 million; Price-to-sales ratio: 0.9; WSSF Rating: Average) is changing its corporate identity to FICO. (FICO is an acronym for Fair Isaac Corp.) Fair Isaac is still the company’s legal name, but it will now be known as FICO. Its ticker symbol is unchanged....

AEROPOSTALE INC., $25.23, symbol ARO on New York, reported higher sales and profits this week. Notwithstanding the weak economy, the teen-clothing retailer took market share from its rivals, mainly on the strength of its lower prices. During the quarter, Aeropostale posted positive same-store sales, while rivals The Gap and American Eagle saw their same-store sales drop. In the three months ended January 31, 2009, Aeropostale’s revenue rose 16.7%, to $690 million from $591.3 million a year earlier. Same-store sales rose 6%, and online sales jumped 88%, to $41.4 million from $22 million, as more Christmas shoppers chose to make their purchases through the Internet. Aeropostale also added 86 new stores, which brings it to a total of 914. It operates 28 stores in Canada. Aeropostale’s wide variety of clothing, low prices and aggressive promotions continue to drive up the company’s sales. Its earnings rose 5.4%, to $68.2 million, or $1.02 a share, from $64.7 million, or $0.96 a share. Higher holiday sales were offset by markdowns, which lowered profits....

3M COMPANY $56.04, New York symbol MMM, fell roughly 7% this week after it warned that the slowing economy will hurt its earnings. As well, the company gets two-thirds of its earnings from overseas markets, and the higher U.S. dollar will dampen its overall growth. 3M now expects to report earnings of $5.10 to $5.15 a share for 2008, down from its earlier forecast of $5.40 to $5.48 a share. For 2009, 3M expects to earn between $4.50 and $4.95 a share. The stock trades at 11.9 times the midpoint of its 2009 range. The company also announced a new restructuring plan that should save it $170 million in 2009. That’s equal to about 5% of its annual earnings. The savings should let 3M continue to fund research (5% of revenue), and pursue acquisitions....

SONY CORP. ADRs $20 (New York symbol SNE; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 1.0 billion; Market cap: $20.0 billion; WSSF Rating: Above average) is one of the world’s leading makers of consumer electronics. Top brands include Bravia (TV sets) and Vaio (computers). This business accounts for 67% of its revenue. The company’s other businesses include PlayStation video games (14% of revenue), motion picture and TV programming through Columbia Pictures (10%), financial services (6%) and other (3%). Sony has restructured its operations in past few years, mainly to take advantage of growing consumer demand for high-definition, flat-screen TV sets. Sales fell from $72.1 billion in 2003 to $63.9 billion in 2005 (fiscal years end March 31), as the company phased out its older products. However, new products helped push sales up to $89.3 billion in 2008.

Cost cuts spur big earnings jump

Besides launching new products, the company also aggressively cut its operating costs. Earnings rose from $0.89 per ADR (total $871 million) in 2003 to $1.52 per ADR ($1.6 billion) in 2004, but fell to $1.00 per ADR ($1.1 billion) in 2005. (Each American Depository Receipt represents one Sony common share.) Thanks to the success of the restructuring, earnings improved to $3.53 per ADR ($3.7 billion) in 2008....

As I’ve said several times in the past few weeks, you can only spot a market bottom (a reversal in a falling trend in stock prices) in hindsight. Then too, a market can hit bottom, put on a healthy bounce, then go back down to the bottom once again before going on to a lasting rise. But I do feel that a lot of the risk of further decline is now out of the market. My view is that stocks are likely to move substantially higher in the next 6 months to a year, if not sooner. VERIZON COMMUNICATIONS INC. $30.05, New York symbol VZ, owns 55% of Verizon Wireless, a joint venture with UK-based Vodafone. Verizon Wireless has now received most of the regulatory approvals it needs for its acquisition of privately held Alltel Corp., which provides wireless services to 13 million customers in mainly rural areas of 34 U.S. states. Regulators imposed several conditions on the takeover, including exiting certain markets. However, these conditions should not significantly diminish the future profitability of the combined operations, which will be the largest wireless provider in the United States with over 80 million customers. Verizon Wireless aims to complete the takeover in the next few weeks....

SONY CORP. ADRs $37.83, New York symbol SNE, fell roughly 10% this week after it reported earnings that fell short of consensus forecasts. In its first fiscal quarter ended June 30, 2008, earnings fell 39.2%, to $0.31 per ADR from $0.51 a year earlier. The drop was mainly due to lower profits at its TV division, where intense price competition and rising raw material costs have squeezed profit margins. Lower results from its cellphone and movie operations also contributed to the weaker earnings. However, overall sales improved 16.2%, to $18.7 billion from $16.1 billion. If you disregard foreign currency changes, sales were unchanged. The slowing U.S. economy and weak dollar could hurt Sony’s growth in fiscal 2009. But recent cost cuts should improve its long-term profitability. As well, rising sales of its PlayStation 3 video game player should lead to more licensing revenue from game designers. Sony is a buy for long-term gains....