The show opened with Chuck talking with Charles Rotblut, senior market analyst for zacks.com. Zacks joins us every Thursday to give us the Bull and the Bear of the week. Today their picks were:
Bull: International Business Machines (IBM)
- Last featured as a Bull on Apr 2
- Stock was trading at $114 then
- Stock closed on Wednesday at $123, a 5% gain
- Our six-month price target was $128
- Global technology conglomerate
- Over half of the company’s revenues come from outside of the U.S.
- Major operating segments:
- Global Services – IT infrastructure services, business process services, consulting and application management services (54.9% of FY07 revenues)
- Systems and Technology – Servers, mainframes, advanced computing solutions (21.6% of revenues)
- Software – Middleware (allows integration of different applications) and operating systems software (20.2% of revenues)
- Global Financing – related financial services (2.5% of revenues)
- IBM is a defensive technology play in the current economic environment
- Brazil, Russia, India and China (the “BRIC countries”) continue to be a source of strong growth for the company
- Last quarter, revenues from the Americas increased 6%
- The company raised its full-year earnings guidance to $8.75, representing growth of 21.9%
- Continues to look for strategic acquisitions
- Recently announced construction of 13 global centers that will allow businesses to continue to operate under virtually any condition and speed up recovery
- The company is focused on high growth, high value segments of IT industry
- Identity and access management software
- Unified communications (voice, video and data)
- Business intelligence
- Virtualization and high performance computing
- Big Blue has been actively working to improve margins
- Exited low margin businesses such as PCs (sold to Lenovo) and hard disks (sold to Hitachi)
- Restructured internal operations
- Gross margins improved by 210 basis points last quarter
- Six month price target: $140
- 15x raised 2009 EPS
- About 14% above the current price
Bear: SanDisk (SNDK)
- Largest supplier of flash memory cards
- Cards are used in digital cameras, mobile phones, PDAs, mp3 players, etc.
- Featured as a Bull on September 5, 2007
- The stock was trading at $55.85 and our price target was $69; the stock closed yesterday at $14.83
- At the time, our analyst thought the pricing environment would improve sooner than later
- The opposite has happened, and our analyst lowered his rating to hold in Feb and to sell in July
- NAND memory has been come a commodity
- Supply grew 164% last year
- At the same time, average selling prices fell 60% last year
- Several manufacturers have been producing NAND memory, creating intense competition
- Visibility for the industry is questionable
- Market research firm iSuppli expects sales to total $15.2 billion this year, a small increase from last year ($13.9 billion)
- Apple has cut back on its orders for flash memory
- Weakening global economy is resulting in lower demand for electronics
- Industry players are curtailing production plans
- Sandisk has canceled plans to open two addition fabrication plants
- Hynix Semiconductor has reduced its flash memory output
- The production cuts are probably not enough to salvage the short-term pricing pressures
- Six-month price target: $10
- About 30% below Wednesday’s close
- 10x lowered 2009 earnings estimates
We also spoke with Bob Powell
who joined us for Senior Focus.
Bob Powell, editor of "Retirement Weekly" says that beyond living
comfortably in retirement, individuals should take some time to tell their
life story to loved ones, so that they can pass on their values and what
shaped their perspective. While not creating a financial legacy, Powell said
that whether it comes in the form of an "ethical will" or from hiring
someone to ghost-write a life story or simply telling tales at family
gatherings or on an audiotape, the idea is to add context that is worth more
than money for survivors struggling to deal with grief.
Go to go to MarketWatch.com to find Bob Powell's columns. Bob joins us every Tuesday for "Senior Focus" on Your Money, where we discuss issues related to retirement and beyond.
We played Hold It or Fold It with:
Paul Justice, exchange-traded fund specialist for Morningstar, who says that
investors need to be careful in using ETFs to find the right match between
assets and portfolio needs. Today on Your Money, Justice noted that he
tends to look to ETFs that can give him "access to names he can't get on his
own," or that provide broader portfolio diversification than their name
implies. Justice noted that some ETFs sound better diversified or exposed to
more countries or industries than they really are, which requires digging deeper to pick the right funds to own.
The following tickers were mentioned today on our program:
EWZ, SKF, IYE, IEO, PTH, IXJ, DBU, DBA, DJP, EEB, VWO, BKF, ETF, EPP, and EWA.
Finally, Chuck Opened the phone lines and took calls from listeners who had questions, or just wanted to say goodbye.
