Jim Cramer Blog

Here are 7 trading ideas for today. These lists come directly from the TradingMarkets Stock Indicators page and are based upon our latest quantitative research.
Bullish
Gaps Down 5% or More: These are stocks that gap down by 5% or more and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that gap down by more than 5% have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.

Compucredit Corporation (NasdaqGS:CCRT - News). CCRT's PowerRating is 5.
Laps Down 5% or More: These are stocks that lap down by 5% or more and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that lap down by more than 5% have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Petroquest Energy (NYSE:PQ - News). PQ's PowerRating 6.
5+ Consecutive Down Days: These are stocks that have closed down for five or more consecutive days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that close down for five or more days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
C.R. Bard (NYSE:BCR - News). BCR's PowerRating is 6.
5+ Consecutive Lower Lows: These are stocks that have made a lower low for five or more consecutive days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that make lower lows for five or more days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Human Genome Sciences (NasdaqGM:HGSI - News). HGSI's PowerRating is 6.
2-Period RSI Below 2: These are stocks that have a 2-period RSI reading below 2 and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving with a 2-period RSI reading below 2 have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Jackson Hewitt (NYSE:JTX - News). JTX's PowerRating is 7.
Stocks Down 10% or More: These are stocks that have lost 10% or more over the past five days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that have lost 10% or more over the past five days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Gymboree (NasdaqGS:GYMB - News). GYMB's PowerRating is 5.
Bearish
2-Period RSI Above 98: These are stocks that have a 2-period RSI reading above 98 and are trading below their 200-day moving average. Our research shows that stocks trading below their 200-day moving with a 2-period RSI reading above 98 have shown negative returns, on average, 1-day and 1-week later. Historically, these stocks have provided traders with a significant edge.
Southwest Airlines (NYSE:LUV - News). LUV's PowerRating is 4.
PowerRatings are courtesy of PowerRatings.net

Labels: BCR, CCRT, GYMB, HGSI, Hot Stocks, JTX, LUV, PQ

Return to the Limelight
Jay Weinstein, of Oak Forest Investment Management, in Bethesda, Md., my guru for undervalued, ultra-small companies, in 2005 picked Atrion (ATRI), a medical-products company, and it jumped 57%. For 2006, he chose Astronics (ATRO), only one letter away, and it rose 60%. Now, for 2007, he's back to Atrion. "Chief executive Emile Battat and his chief financial officer, Jeff Strickland, have done a phenomenal job building shareholder value," Weinstein tells me. He sees Atrion ending 2007 with no debt and $6 a share in earnings. So at current prices you are paying a multiple of 13 times earnings -- puny for a company growing at better than 15% annually. Weinstein reveals that his clients own a big chunk of the stock. But with a market capitalization (shares outstanding times the stock price) of just $145 million, the share price is apt to be volatile.
Last year, I said Tom Brown "is probably the best financial-stock analyst in the business." After the performance of First Marblehead (FMD), which returned 152% (best on my list for 2006) and which, by the way, Brown still likes, I am going to drop the "probably." For the year ahead, one of the holdings of Brown's hedge fund jumps out: CompuCredit (CCRT). The company focuses on the subprime lending market, issuing credit cards, auto loans, and small "payday" advances to people without the best creditworthiness. CompuCredit is a smart operator in a tough business. "Earnings growth and profitability have been strong -- and figure to stay that way," writes Brown, but "CompuCredit's stock trades at an extremely low valuation" -- just eight times the $4.60 in earnings per share that Brown expects in 2007.
I have rhapsodized over Hennessy Cornerstone Growth, a mutual fund that follows a stock-picking formula that screens for rising earnings, a low price-to-sales ratio and above-average stock-price increases. The fund has returned an annualized 17% over the past five years. Its low price-to-sales criterion means that an abundance of retailers and energy companies qualify for the portfolio, so I prefer to look for stocks in other sectors. One of the best is Emcor Group (EME), which designs, operates and maintains sophisticated electrical and mechanical systems for factories, utilities and office buildings. The stock is pricey, but growth is impressive, with profits expected to rise by one-third in 2007.
A Health-care Pick
As I write this column, Fidelity Equity-Income fund is on track to beat the S&P 500 for the seventh year in a row, at risk levels well below the benchmark. Managed by Stephen Petersen for the past 13 years, the fund owns large-company stocks that pay nice dividends. Petersen is adding to the fund's holdings of Johnson & Johnson (JNJ), maker of drugs, medical devices and consumer health products. Although the business could be under the gun of a Democratic Congress, shares trade at a modest valuation of 16 times expected 2007 earnings, with a dividend that's rising at a consistent, double-digit rate.
Value Line Investment Survey has a great record for picking stocks. As of December 1, only two of the roughly 2,000 stocks that Value Line covers received top ratings for both timeliness and safety: Lockheed Martin and Du Pont. It's a tough choice, but I slightly prefer Lockheed Martin (LMT), the aerospace company. Its stock has doubled since early 2004 but still trades at a price-earnings ratio of 16, based on estimated 2007 earnings. Plus, its volatility is well below the market as a whole.
Magazines and More
I'm a fan of money manager Joel Greenblatt, author of The Little Book That Beats the Market, which sensibly advocates a stock-picking strategy that combines both growth and value elements. Greenblatt operates a free stock screener at www.magicformulainvesting.com. When I tried it last year, the screener produced 25 attractive selections, of which I picked American Eagle Outfitters. It returned a juicy 121%. Facing another 25 choices, I am drawn to Meredith (MDP), publisher of Better Homes & Gardens and other magazines and owner of 14 television stations. At a time when traditional media are out of favor, Meredith has been increasing its profits at a rapid pace. Nevertheless, it carries a modest valuation.
Ric Prentiss, the top telecom analyst at Raymond James & Associates, a brokerage with an exceptional track record for stock picking, tells me his best idea right now is a small company with an unwieldy name -- Ntelos (NTLS). It sells wireless phone and Internet service to customers in Virginia and West Virginia. Also, Ntelos sells wholesale wireless service to Sprint and, says Prentiss, it should benefit as Sprint moves its newly acquired Nextel customers to the CDMA technology that Ntelos provides. A big attraction of the stock, says Prentiss, is that it's cheap compared with similar businesses. Why? The company, founded in 1897, is "still not very well known." That's what we like in a stock: market inefficiency.
Friess Associates, which manages $12 billion in assets through vehicles such as the wonderful Brandywine fund, has kind words for SkyWest (SKYW), a regional airline that, in the words of the Friess newsletter, Looking Forward, "receives payment [from Delta and United] for each completed departure rather than on a percentage-of-revenue basis, minimizing the effects of load factors and fuel price hikes." Considering its rate of profit growth, the stock trades at a low valuation of nine times expected 2007 profits.
After two big losers in a row, the Prudent Speculator newsletter has been placed in my penalty box, and I'm returning to an old favorite among newsletters, Dow Theory Forecasts, for a selection. We need an energy company for 2007, and highly rated on the Dow Theory buy list is ConocoPhillips (COP), which has been rearranging its portfolio in a way that appears perspicacious. For example, Conoco's purchase of Burlington Resources in March 2006 made it the largest natural-gas producer in North America -- a smart move in a tight market. Based on expected 2007 earnings, shares trade at a P/E of just 8 and yield 2.1%.
Unloved and Little Known
Now, here's a contrarian stock. Universal Forest Products (UFPI) makes wood and plastic building products, such as roof trusses, for the construction and do-it-yourself sectors. With the decline in the housing market, the stock skidded 40% between May and December. It is, however, a selection of one of my favorite analysts, Cleveland-based Elliott Schlang, of Great Lakes Review, who focuses on midwestern stocks in boring industries. He likes companies with heavy insider ownership, strong cash flow and solid balance sheets. Universal meets the criteria and, trading at a P/E of 12 based on estimated 2007 earnings, it looks awfully cheap. That's the list. Just remember warning number three.
By James K. GlassmanKiplinger's Personal Finance

Labels: ATRI, ATRO, CCRT, COP, EME, FMD, JNJ, LMT, MDP, NTLS, SKYW, UFPI

BioCryst Pharmaceuticals (NASDAQ:BCRX - News) named Jon Stonehouse its chief executive. BioCryst, a Birmingham, Ala., drug development company, said Stonehouse succeeds Charles Bugg, the company's founder and CEO. Bugg will become nonexecutive chairman. Stonehouse had been senior vice president of corporate development at Merck KGaA.
Caremark Rx (NYSE:CMX - News) rejected an unsolicited merger proposal from Express Scripts (NASDAQ:ESRX - News) and affirmed its support for a deal with CVS (NYSE:CVS - News).
Compucredit Corp. (NASDAQ:CCRT - News) said in a filing with the Securities and Exchange Commission that it now expects earnings for the fourth quarter to come about 20% below its previous projections.
Delta Apparel Inc. (AMEX:DLA - News) said it expects second-quarter sales of $72 million to $73 million, down from a previous estimate of $74 million to $78 million, and earnings of 5 cents to 7 cents a share, down from a prior projection of 14 cents to 18 cents a share. Delta Apparel also cut its forecast for the year's sales and earnings.
Dynavax Technologies Corp. (NASDAQ:DVAX - News) shares fell after the Berkeley, Calif.-based biotech company said interim one-year data from its two-year ragweed allergy trial indicated that "no meaningful ragweed-specific allergic disease was observed in the study population," making it impossible for the company to measure the impact of its Tolamba treatment. "This result was unexpected, though these challenges are well known to occur in allergy drug development," said Dino Dina, president and chief executive, in a statement. "Due to the fact that no clinically significant disease was seen in the study population, it was impossible to measure the effect of our intervention."
Fastenal (NASDAQ:FAST - News) was downgraded to hold from buy at BB&T Capital Markets.
Garmin (NASDAQ:GRMN - News) was downgraded to neutral from buy at D.A. Davidson due to valuation concerns.
GOL Linhas Aéreas Inteligentes (NYSE:GOL - News) said its passenger traffic rose 48% in December while its capacity rose 65% for the month, compared to the same period last year. That caused its load factor, or percentage of seats filled with paying passengers, to fall to 67.4% from 75.2%. The Brazilian low-cost airline also forecast a drop in fiscal year earnings to 3.15 to 3.30 reals a share, down from 3.40 to 3.65 reals a share.
Heartland Payment (NYSE:HPY - News) was downgraded to underweight from market weight at Thomas Weisel Partners.
Hertz (NYSE:HTZ - News) plans to cut roughly 200 jobs in the first of "a series of initiatives" to improve its competitiveness. The layoffs will come at headquarters in Park Ridge, N.J., a service center in Oklahoma City, and in U.S. field operations. The car-rental company expects to save as much as $15.8 million annually from the job cuts and expects restructuring charges of $3.3 million to $3.8 million in the first quarter.
MarineMax Inc. (NYSE:HZO - News) sees a first-quarter loss of 20 cents to 25 cents a share; the First Call-derived average forecast stands at a loss of 6 cents. The company also lowered its profit outlook for fiscal 2007.
Medecision (NASDAQ:MEDE - News) shares plunged after the Wayne, Pa.-based a provider of software and services to healthcare payers said late Friday it expects fourth-quarter revenue of $10.3 million to $10.6 million. MEDecision said it signed five contracts during the quarter, resulting in lower-than expected term license revenue of between $1.1 million and $1.3 million.
Methanex Corp. (NASDAQ:MEOH - News) was downgraded to sector underperformer from sector performer at CIBC World Markets.
Microsemi (NASDAQ:MSCC - News) was downgraded to equal weight from overweight at Lehman Bros. The firm cited a lack of catalysts for the stock.
Molex Inc. (NASDAQ:MOLX - News) lowered its second-quarter earnings and sales outlook citing lower-than-anticipated gross margins, which is due primarily to lower sales and higher price erosion in its mobile phone business. The Lisle, Ill. electronics components maker now expects to earnings of 34 to 37 cents a share vs. its previous forecast of 39 to 43 cents a share. Revenue is expected to be $830 million to $840 million, revised from a previous projection of $830 million to $850 million. The company also sees new orders slowing to $770 million to $780 million.
Myriad Genetics (NASDAQ:MYGN - News) said a clinical trial of MPC-7869, designed to evaluate its safety and potential efficacy in slowing the rate of progression of prostate cancer, didn't show statistical significance in either endpoint. The primary clinical endpoints of the trial were the time to systemic disease progression and the change in velocity of prostate specific antigen levels. The company said it does not intend to pursue further development of the compound in cancer. Myriad said it will continue to concentrate its efforts on the compound's activity in Alzheimer's disease.
Newmont Mining (NYSE:NEM - News) was downgraded to underweight from neutral weight at Prudential, which cited weak earnings power even at optimistic assumptions for metals prices. Analyst John Tumazos also lowered his stock price target to $40 from $50. "While heretofore we have 'disbelieved' how badly the company's costs deteriorated, and expected a future cost turnabout, we have given up hope in large part," Tumazos said in a research note to clients. "We expect a higher gold price outlook owing in part to higher gold mining costs and output erosion, but the profit margin at those higher prices is much lower than envisioned several years ago."
Northwest Airlines Corp. (Other OTC:NWACQ.PK - News) said traffic in December rose 1.1% to 6.38 billion revenue passenger miles. Load factor, or the percentage of the plane filled with passengers, increased by 0.7 percentage points to 80.7%. Capacity rose 0.1% to 7.9 billion available seat miles, the Eagan, Minn.-based carrier said.
Novastar Financial (NYSE:NFI - News) was downgraded to market perform from market outperform at JMP Securities.
Nu Horizons Electronics (NASDAQ:NUHC - News) said net income rose 59% to $2.4 million, or 13 cents a share, for its fiscal third quarter ended Nov. 30 with sales up 26% to $186 million. From the last quarter, however, sales fell at the electronic components distributor, due to a decline in the company's systems business related to a substantial customer-specific decrease, as well as to market weakness related to some end customer and manufacturing channel inventory builds.
Panacos Pharmaceuticals (NASDAQ:PANC - News) named Alan Dunton M.D. its new chief executive. Dunton has also been added to the company's board of directors. Dunton replaces Peyton Marshall, Panacos' chief financial officer, who had served as interim CEO since the sudden death of former Chief Executive Samuel "Skip" Ackerman last June.
P.F. Chang's China Bistro (NASDAQ:PFCB - News) was downgraded to underperform from peer perform at Bear Stearns.
Schnitzer Steel Industries (NASDAQ:SCHN - News) reported first-quarter earnings of $21 million, or 69 cents a share, down from a year-ago profit of $42 million, or $1.34 a share. The year-ago results included a gain of $34 million related to an asset disposition as well as a charge of $11 million from an investigation reserve. Excluding items, Portland, Ore.-based Schnitzer earned $19 million, or 61 cents a share, in the year-ago period. Revenue rose in the latest three months to $510 million from $341 million in the same period a year earlier. The average estimate of analysts polled by Thomson First Call was for a profit of 99 cents a share in the November period on revenue of $511.9 million. The company said it saw lower volumes and higher costs per ton in the latest quarter due to the installation of mega-shredders at its metals recycling facilities in the Oakland and Boston areas. In addition, margins were hurt by higher raw material costs in the quarter, and its auto parts business saw lower vehicle purchases due to higher prices.
Targeted Genetics Corp. (NASDAQ:TGEN - News) agreed to sell 2.18 million shares to institutional investors at a price of $4 each. The transaction includes warrants to purchase up to 763,000 shares, exercisable at price of $5.41 per share. The Seattle-based biotechnology company expects net proceeds of $8.1 million from the transaction, which is expected to close Jan. 11. Targeted Genetics plans to use the funds for working capital and general corporate purposes.
Published By MarketWatch

Labels: BCRX, CCRT, CMX, CVS, DLA, DVAX, ESRX, FAST, GOL, GRMN, HPY, HTZ, HZO, MEDE, MEOH, MYGN, NEM, NFI, SCHN, TGEN

Cover Story: The New IBM by Leslie P. Norton
Highlighted companies: International Business Machines Corp. (NYSE: IBM - News), EMC Corp. (NYSE: EMC - News), Microsoft Corp. (NASDAQ: MSFT - News), Dell Inc. (NASDAQ: DELL - News), Hewlett-Packard Co. (NYSE: HPQ - News), Citigroup Inc. (NYSE: C - News), Sun Microsystems Inc. (NASDAQ: SUNW - News), Siemens AG (NYSE: SI - News), Accenture Ltd. (NYSE: ACN - News), Infosys Technologies Ltd. (NASDAQ: INFY - News), Wipro Ltd. (NYSE: WIT - News), SAP AG (NYSE: SAP - News),Summary: Barron's cover story takes a bullish stance on International Business Machines Corp. (NYSE: IBM - News). CEO Samuel Palmisano, who few thought would radically part ways with his predecessor Louis Gerstner when he took over in 2002, is doing his best to reinvent the giant and transition it from a hardware/mainframe focus to a middleware producer which can make big dough with its exceptional software margins (85%), followed-up with client services. Some key points:
2006 earnings are expected to grow 12%, and 2007 by another 9% ($5.98 and $6.54).
Shares trade at 15x earnings vs. 25x for EMC Corp. (NYSE: EMC - News), 23 for Dell Inc. (NASDAQ: DELL - News), and 20 for Microsoft Corp. (NASDAQ: MSFT - News).
Its $10b cash on hand can be and has been used to boost earnings through swallowing up smaller software companies and speculative investments such as last month's Citigroup Inc. (NYSE: C - News) partnership in China's Guangdong Development Bank.
A decade ago most IBM software ran on its mainframes. Today it's the world's largest middleware vendor through brands WebSphere, Lotus, Tivoli, Rational and DB2 brands. Its legacy software, such as the operating systems for IBM mainframes and servers, "don't blow anyone's doors off," but are still big money makers.
Its middleware helps companies implement "Service Oriented Architecture" [SOA], a buzzword for the growing trend to make computer systems more flexible and adaptable to changing business needs. IBM sells over 3x more SOA products and services than anyone else.
Its traditional services department has been hit by competition, particularly Indian rivals which low-cost services. IBM has restructured its service unit, and plans to invest $6b in India, possibly acquiring another firm to go along with its purchase of outsourcing company Daksh. This quarter IBM won a $300 million contract with Scotland's public health service, an $863 million deal with the State of Texas, and is expected to sign a 10-year $8.45 billion contract with Siemens AG (NYSE: SI - News) to modernize technology for the German military.
Its "cash-cow hardware division keeps ticking," with Q3 growth up 8.8% (versus 5% in 2005) from higher mainframe revenues and gains in IBM's Technology Collaboration operation.
IBM processors are at the core of all major videogame consoles, including Sony's (NYSE: SNE - News) new PlayStation 3. Bob Djurdjevic of Annex Research predicts that Technology Collaboration, its R&D and semiconductor-design unit, "will become so large that it deserves comparison to IBM's shift to services several years ago." Palmisano: "We have a top share in servers and Linux, No. 1 in blade servers, which is a huge growth area... No. 1 in supercomputing, No. 1 in SOA... We're No. 1 in middleware... IBM is a stronger company today than it was four years ago, with stronger margins, solid cash and earnings." Barron's: You don't need a computer to know what that trend could do for IBM's shares.

What's in His Wallet? by John Kimelman
Highlighted companies: CompuCredit Corp. (NASDAQ: CCRT - News), Capital One Financial Corp. (NYSE: COF - News), RenaissanceRe Holdings Ltd. (NYSE: RNR - News), Citigroup Inc. (NYSE: C - News), Bank of America Corp. (NYSE: BAC - News), JPMorgan & Chase Co. (NYSE: JPM - News), Wachovia Corp. (NYSE: WB - News), Tennessee Commerce Bancorp (NASDAQ: TNCC - News)Summary: Tom Brown's Second Curve Capital hedge-fund invests exclusively in financial services stocks, and has generated 20% yearly returns since its start in May 2000. Stocks mentioned:
CompuCredit Corp. (NASDAQ: CCRT - News): A sub-prime lender that instead of focusing on credit cards, offers payday and automobile loans. Brown concedes that sub-prime lenders may be vulnerable to economic slowdowns, but sees risk assessment as a far more critical determinant. Calls CCRT's $700m of excess liquidity a "wild card" that could be used for earnings growth. Shares trade at 6x '08 earnings, and he expects earnings growth of 20%+.
Capital One Financial Corp. (NYSE: COF - News): Within a year credit cards will be less than half of its earnings. It trades at 8x '07 earnings. "Next year it will be perceived as a rapidly growing diversified financial institution."
RenaissanceRe Holdings Ltd. (NYSE: RNR - News): 2004-5 hurricane devastation led to a dramatic repricing in the reinsurance industry that will drive 20%+ growth for another couple years. It trades at 6x 2007 estimates, which Browns says are too low.
Citigroup Inc. (NYSE: C - News) Bank of America Corp. (NYSE: BAC - News) JPMorgan & Chase Co. (NYSE: JPM - News) Wachovia Corp. (NYSE: WB - News): Due to their size, they stand little chance of having a serious earnings shortfall, but huge earnings beats are equally unlikely. If Citigroup management starts taking action like selling off some businesses, it could go up 10-15%.
Regional banks: He's short the sector, particularly banks that bet on falling interest rates and steep yield-curves. He doesn't see the yield-curve steepening in the coming year. He likes Tennessee Commerce Bancorp (NASDAQ: TNCC - News) because of its focus on the small business customer that "more than compensates for its exposure to the yield curve -- they can grow their earnings rapidly despite the difficult interest-rate environment."

At Duke, A Powerful Idea by Jack Willoughby
Highlighted companies: Duke Energy Corp. (NYSE: DUK - News)Summary: Duke Energy's planned January spinoff of its natural-gas operations into Spectra Energy is 'turnaround wiz' Chairman Paul Anderson's brainchild. He hopes the split will bring "full value" for its underappreciated gas assets, including 17,500 miles of pipeline. The two businesses trade differently: (1) Gas companies trade for multiples of cash flow and electrics for multiples of earnings. (2) Gas concerns command richer valuations, in part because they make use of master limited partnerships which allow them to pass tax-free cash through to investors. (3) Spectra faces fewer regulatory hurdles than electric utilities, and expansion opportunities abound due to underinvestment in pipelines and storage, and rising demand. Duke shareholders are to receive one Spectra share for every two shares of Duke common, meaning they would get Spectra stock for $8 per share. Analysts believe it could trade for double. According to analyst Nathan Judge, Duke's assets are worth about $37 a share, 17% above the recent stock price of $31. Utilities analyst John Bartlett calls Duke, "an excellent way to capitalize on both the need for new energy infrastructure and the potential for a higher valuation as the market recognizes the strength of the underlying utility business."Barron's bottom line: After the spinoff, Duke could trade for $23 and change; Spectra, for $16.45.

TECHNOLOGY TRADER: Microsoft's Bold Voyage Begins by Bill Alpert
Highlighted companies: Microsoft Corp. (NASDAQ: MSFT - News), Cisco Systems Inc. (NASDAQ: CSCO - News)Summary: Shares of Microsoft Corp. (NASDAQ: MSFT - News) are up 35% since June to $29 as investors anticipate big upgrade revenues from Vista and Office 2007. Shares presently trade at 20x 2006 expected cash flow of over $15b. While some investors are skeptical that Vista can deliver the growth bulls think it will, Barron's likes last week's launch, the fact that profit margins on Vista and Office exceed 60%, and that forecasts are conservative in estimating only 50% of its installed base will upgrade. New server-based voice communication and collaborative software look to be stiff competition for Cisco Systems Inc. (NASDAQ: CSCO - News), and it seems MSFT will finally start turning a profit on Xbox 360. The company plans to use up to $40b of its massive cash stash in stock buybacks, which combined with a rise in revenues from its new products could get per-share cash-flow up to 15%, and push shares into the mid 30s.

TECHNOLOGY TRADER: Dell by Bill Alpert
Highlighted companies: Dell Inc. (NASDAQ: DELL - News), Hewlett-Packard Co. (NYSE: HPQ - News), EMC Corp. (NYSE: EMC - News)Summary: Friedman Billings Ramsey hardware analyst Clay Sumner asserts in a report published Friday that Dell (NASDAQ: DELL - News) has been manipulating its earnings by under-compensating for warranty costs; he claims Dell EPS figures have overstated earnings by $0.02-$0.08/share in five of the past 12 quarters. He accuses Dell of using warranty accruals to custom-fit earnings -- citing that while warranty claim rates have been relatively stable, accrual rates have varied wildly. Dell, he says, tends to under-accrue during poor seasons and over-accrue in better times, but the overall trend since Q3 2003 has been toward under-accrual. Warranty costs are currently 46% of its warranty reserve, well above Hewlett-Packard Co.'s (NYSE: HPQ - News) 26% and EMC Corp.'s (NYSE: EMC - News) 13%, and that Dell with its large corporate sales base (85%) should be more in-line with EMC that with HP. With actual claims rising steadily, he warns earnings restatements may be on the way.

Tracking the Smartest Money by Andrew Bary
Summary: Barron's identifies five top-notch hedge funds whose investment moves are closely watched by the industry, revealing their top holdings and some recent transactions:
David Tepper's Appaloosa Fund: (1) Oracle Corp. (NASDAQ: ORCL - News) (2) Micron Technology Inc. (NYSE: MU - News) (3) Applied Materials Inc. (NASDAQ: AMAT - News). Other big holdings: Cisco Systems Inc. (NASDAQ: CSCO - News), Microsoft Corp. (NASDAQ: MSFT - News), Texas Instruments Inc. (NYSE: TXN - News), NASDAQ 100 Trust Shares ETF (NASDAQ: QQQQ - News), AMR Corp. (NYSE: AMR - News), UAL Corp. (NASDAQ: UAUA - News), and Continental Airlines Corp. (NYSE: CAL - News). Notes tech stocks aren't the bargains they were earlier in the year.
David Einhorn's Greenlight Fund: (1) Ameriprise Financial Inc. (NYSE: AMP - News) (2) Microsoft (3) Hospira Inc. (NYSE: HSP - News). In May Einhorn talked about his affinity for Microsoft, saying that buying Microsoft at $23 was like getting Alex Rodriguez for a merely average price in a fantasy-baseball draft.
Steve Mandel's Lone Pine Capital Fund: (1) Brookfield Asset Management Inc. (NYSE: BAM - News) (2) Google Inc. (NASDAQ: GOOG - News) (3) Comcast Corp. (NASDAQ: CMCSA - News). Mandel cut his Google position by 25% in Q3, suggesting it may be getting too rich for him. He added to Comcast and Qualcomm Inc. (NASDAQ: QCOM - News), sold Research In Motion Ltd. (NASDAQ: RIMM - News) and America Movil SA de CV (NYSE: AMX - News), and established a position in Schlumberger Ltd. (NYSE: SLB - News).
Ed Lampert's ESL Investment: (1) Sears Holdings Corp. (NASDAQ: SHLD - News) (2) AutoZone Inc. (NYSE: AZO - News) (3) AutoNation Inc. (NYSE: AN - News). The three comprise Sears Holdings' CEO's entire portfolio. Barron's says many hedge-fund managers own Sears out of admiration for his retailing skills.
Activist investor Carl Icahn: (1) Time Warner Inc. (NYSE: TWX - News) (2) ImClone Systems Inc. (NASDAQ: IMCL - News) (3) American Railcar Industries (NASDAQ: ARII - News).

THE TRADER: Retail Stocks by Vito J. Racanelli
Highlighted companies: Tiffany & Co. (NYSE: TIF - News), The Home Depot Inc. (NYSE: HD - News), Best Buy Co. Inc. (NYSE: BBY - News), Circuit City Stores Inc. (NYSE: CC - News), Wal-Mart Stores Inc. (NYSE: WMT - News), Federated Department Stores Inc. (NYSE: FD - News)Summary: Despite TV coverage of shoppers stampeding through malls, retail stocks were down last week; the internet group was down 7% while department stores fell 4%. According to Lehman Brothers' chief technical analyst, Jeffrey deGraaf, retail stocks tend to peak in the days that straddle Thanksgiving, then drifting down through most of December before Christmas. Generally it's better to wait until just before Christmas to play the sector; its long-term outlook is neutral. Stocks noted: Tiffany & Co. (NYSE: TIF - News) -- showing a good technical pattern. The Home Depot Inc. (NYSE: HD - News) -- neutral. Best Buy Co. Inc. (NYSE: BBY - News) and Circuit City Stores Inc. (NYSE: CC - News) -- among the weakest patterns in the group. Department stores -- look good. Wal-Mart Stores Inc. (NYSE: WMT - News) -- mediocre. Federated Department Stores Inc. (NYSE: FD - News) -- it reported sizzling sales last week, and if it goes down with the sector, it will be a buying opportunity in a couple weeks.

Weak Dollar by Vito J. Racanelli
Summary: Few Americans like the recent beating the U.S. dollar has taken; half of this year's 8-10% slide has come in the past month. A sustained drop could lead to the Fed raising interest rates. Will it continue? Hard to say, but with interest rates and growth rising in most other parts of the world, unlike the U.S., its drop may be sustainable. For one domestic group, American multinational corporations, who derive a good part of their revenues from overseas, this is good news. Bank of America's Joseph Quinlan says a "sustained, broadly based decline" in the dollar could provide a big earnings boost for many U.S. multinationals, namely: Intel Corp. (NASDAQ: INTC - News) leads the Dow components in overseas exposure with 85% non-domestic revenue. Coca-Cola Co. (NYSE: KO - News) (71%), ExxonMobil Corp. (NYSE: XOM - News) (69%), McDonald's Corp. (NYSE: MCD - News) (66%), Hewlett-Packard Co. (NYSE: HPQ - News) (65%), International Business Machines Corp. (NYSE: IBM - News) (62%) and 3M (NYSE: MMM - News) (61%).

Sunny Skies for Insurers by Jim McTague
Highlighted companies: Aspen Insurance Holdings (NYSE: AHL - News), Endurance Specialty Holdings Ltd. (NYSE: ENH - News), Axis Capital Holdings Ltd. (NYSE: AXS - News), Montpelier Re Holdings Ltd. (NYSE: MRH - News), RenaissanceRe Holdings Ltd. (NYSE: RNR - News), ACE Ltd. (NYSE: ACE - News)Summary: Many property and casualty insurers will likely see triple-digit earnings growth this year, after recovering from weather catastrophes that dropped profits in 2005. Shares have rebounded nicely, although more gains lie ahead, particularly for the industry's biggest players. Because the insurers lost so much in 2005, regulators let them hike rates sharply and increase deductibles. With a mild 2006 storm season behind them, some analysts feel shares are now fairly priced. But others say that even assuming an average rate of catastrophes, return on equity could increase 18-20% in 2007 due to the higher premiums, driving share prices up 25-30%. Assuming no major earthquakes, Rohan Pai and Alain Karaoglan of Deutsche Bank say earnings for the next three quarters should be excellent. They like Aspen Insurance Holdings (NYSE: AHL - News), Endurance Specialty Holdings Ltd. (NYSE: ENH - News), Axis Capital Holdings Ltd. (NYSE: AXS - News), Montpelier Re Holdings Ltd. (NYSE: MRH - News), and RenaissanceRe Holdings Ltd. (NYSE: RNR - News). Even the less enthusiastic agree that bigger companies like ACE Ltd. (NYSE: ACE - News) still have some upside.
-SeekingAlpha

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