spin off
BROADRIDGE FINANCIAL SOLUTIONS INC. $20 (New York symbol BR; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 140.0 million; Market cap: $2.8 billion; WSSF Rating: Extra risk) provides communication, processing and other back-office services to the investment industry. These services help reduce the need for its clients to make significant capital investments in operations infrastructure, thereby allowing them to focus on core business activities. Broadridge’s clients include 250 banks, 500 mutual fund families and over 5,000 publicly listed companies. Broadridge began trading on April 2, 2007 after former parent Automatic Data Processing Inc. distributed its shares to its own stockholders as a special dividend....
MICROSOFT CORP. $28.42, Nasdaq symbol MSFT, has dropped $4 since it made a hostile takeover bid for Internet search provider Yahoo! Inc. (Nasdaq symbol YHOO) at the start of February. Yahoo has rejected the offer, leading to speculation that Microsoft may have to raise its bid. Concerns over Microsoft’s ability to meet cost reduction targets after the takeover have also weighed on the stock. As well, a hostile takeover could also prompt Yahoo’s programmers and other key employees to quit. Yahoo is now exploring alliances with other media and technology companies to fend off Microsoft. Regardless of the outcome, we still see Microsoft as a buy....
It was an unsettling week, but the market ended up in the middle of the range it has stayed in since its January 21 plunge. No one can predict these things consistently, but I still think we are much closer to a bottom than a top. To put it another way, if I had to choose between “buy” and ”sell”, I would definitely say “buy”. DIEBOLD INC. $25.49, New York symbol DBD, plans to cut its workforce by 5%, mainly due to slow demand for its electronic voting machines and delays in installing a lottery system in Brazil. This latest move is in addition to Diebold’s earlier plan to cut costs by $100 million over three years. Diebold has not issued financial statements since April 2007, due to an SEC investigation into the way it recognizes revenue from sales of ATMs and surveillance systems. The company expects to catch up with its reporting in the next few months....
MICROSOFT CORP. $30.45, Nasdaq symbol MSFT, has launched an unsolicited offer to buy Internet search provider Yahoo! Inc. for $44.6 billion in cash and stock. Microsoft will limit the cash portion to 50% of the total payout. To put the price in perspective, Microsoft earned $4.7 billion or $0.50 a share in its second fiscal quarter ended December 31, 2007. The company holds cash of $21.1 billion or $2.26 a share. The offer represents a 62% premium for Yahoo’s stockholders, so a competing bid seems unlikely. Yahoo may try to find other bidders. However, recent writedowns of subprime mortgages have limited the willingness of banks to provide financing for big takeovers like this. Microsoft feels it can save $1 billion in costs a year by combining Yahoo with its MSN online search business. The Internet advertising market is growing fast, and the combination will help Microsoft compete more effectively with market leader Google. The deal would also give Microsoft access to Yahoo’s fast-growing search businesses in Asia....
APPLE INC. $130.01, Nasdaq symbol AAPL, fell 15% this week after its revenue and profit predictions for the first three months of 2008 fell short of consensus forecasts. Fears that a slowing economy would hurt sales of its iPod music players and Mac computers also weighed on the stock. In its first fiscal quarter ended December 29, 2007, earnings rose 54.4%, to $1.76 a share from $1.14 a year earlier. Sales grew 35.2%, to $9.6 billion from $7.1 billion. Most of the gains came from a 44% jump in shipments of its new Mac computers. Demand for its iPhone remained strong, but sales of iPods have slowed compared to previous years. We’ve long held a high opinion of Apple and its products. But the stock’s rapid rise in the past two years limited its appeal. After the recent drop, however, we once again see Apple as a buy for aggressive investors....
BANK OF AMERICA CORP. $38.50, New York symbol BAC, has agreed to buy troubled mortgage lender Countrywide Financial Corp. (New York symbol CFC) for $4 billion in stock. In August 2007, Bank of America bought $2 billion of convertible preferred shares from Countrywide. The preferred shares are convertible under certain circumstances into Countrywide common shares at $18 a share, or about 14% below Countrywide’s then market price of $21.00. These preferred shares have since lost approximately 65% of their value. The merger will make Bank of America the largest mortgage lender in the United States, with 25% of mortgage originations and 17% of the mortgage servicing market. Bank of America can also market other services such as deposit accounts and credit cards to Countrywide’s large client base....
AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 370.0 million; Market cap: $13.3 billion; WSSF Rating: Average) makes electronic test and measurement equipment. Manufacturers use these products to improve the reliability of a wide variety of electronic products, such as cell phones and communication network components. This business accounts for 60% of Agilent’s revenue. The remaining 40% comes from measurement equipment for medical research labs and drug developers. Agilent’s products also help government agencies test for biological and chemical contaminants in air, water, soil and food. Agilent’s revenue rose from $6.1 billion in 2003 (fiscal years end October 31) to $7.2 billion in 2004, but slipped to $6.9 billion in 2005. In 2006, revenue fell to $5.0 billion after Agilent sold its struggling chipmaking business. On October 31, 2006, Agilent handed out its remaining shares in its chip-testing subsidiary Verigy Ltd. (Nasdaq symbol VRGY) to its own stockholders as a special dividend. Despite the spin-off, Agilent’s revenue in 2007 rose to $5.4 billion....
Agilent is a leader in two niche markets: testing equipment for the electronic and medical science industries. Both fields are expanding, and Agilent continues to maintain its dominance with high research spending and selected acquisitions. It’s also using its strong cash flow to buy back shares. AGILENT TECHNOLOGIES INC. $36 (New York symbol A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 370.0 million; Market cap: $13.3 billion; WSSF Rating: Average) makes electronic test and measurement equipment. Manufacturers use these products to improve the reliability of a wide variety of electronic products, such as cell phones and communication network components. This business accounts for 60% of Agilent’s revenue. The remaining 40% comes from measurement equipment for medical research labs and drug developers. Agilent’s products also help government agencies test for biological and chemical contaminants in air, water, soil and food....
FEDEX CORP. $94.29, New York symbol FDX, earned $1.54 a share in its second fiscal quarter ended November 30, 2007, down 6.1% from $1.64 a year earlier. Higher fuel costs and weaker profits at its domestic less-than-truckload operations offset strong overseas growth. Revenue rose 6.2%, to $9.45 billion from $8.9 billion. The company has started passing along its rising fuel costs to its customers, but it will take several weeks before these surcharges take effect. The stock now trades at 14.4 times its likely fiscal 2008 earnings of $6.55. That’s reasonable in light of its expanding international operations, particularly in Asia. FedEx is a buy....
CONAGRA FOODS INC. $24 (New York symbol CAG; Income Portfolio, Consumer sector; Shares outstanding: 487.3 million; Market cap: $11.7 billion; WSSF Rating: Above average) has recalled all of its Banquet and store-brand frozen beef and poultry pot pies due to possible salmonella contamination. Earlier this year, the company had to suspend production of its Peter Pan peanut butter following a salmonella outbreak. It’s unclear whether this latest case is due to contamination or improper cooking. In any event, the recall should have little impact on ConAgra’s profits. ConAgra is a buy. CINTAS CORP. $35 (Nasdaq symbol CTAS; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 158.9 million; Market cap: $5.6 billion; WSSF Rating: Average) reported revenue of $969.1 million in its first fiscal quarter ended August 31, 2007, up 6.0% from $914.2 million, thanks to a recent expansion of its salesforce. However, the costs of adding the extra employees cut per-share profits 3.8%, to $0.51 to $0.53....