JP Morgan Offer for Wachovia Makes Sense

Todd Sullivan submits:

This rumor makes a whole lot more sense than the previous one.

The latest rumor has Jamie Dimon and JP Morgan (JPM) making an offer for Wachovia (WB). The deal makes sense for a couple reasons. Unlike Bear Stearns (BSC), Wachovia is a bank with investor deposits. Dimon has made very public his desire to expand his banking franchise into the SE and a Wachovia deal would do just that.

Flirting with Flir Systems - Cramer's Lightning Round (6/23/08)

Stocks discussed in the lightning round session of Jim Cramer’s Mad Money TV program, Monday June 23.

Bullish calls:

Peabody Energy (BTU): "I’d rather go with Peabody Energy.”
Eaton (ETN), Emerson Electric (EMR),Honeywell (HON)
Precision Castparts (PCP): "PCP is just a buy here. People are negative on aerospace, but they're missing the fuel savings part of the business and PCP is part of it. "
Frontline (FRO): “ …the one to own here is Frontline FRO. 15% yield, 52 week high, that's the one we want."
Nordic American Tanker Shipping (NAT): “NAT is real good, but it's still not as good as Frontline.”
Sociedad Quimica (SQM): “Here's a stock that I recommended that's coming on strong. This one must be bought."
Flir Systems (FLIR): “It's a win with both Obama and McCain. Pull the trigger."
Titan Machinery (TITN)

Virtual Private Equity Is a Step Closer to Reality

Christopher Holt submits:

A lot has been written over the past few years about hedge fund/private equity “hybrids” where a so-called “side-pocket” is created to hold a particularly illiquid investment.  But while these funds may indeed contain both asset classes, they are long and short in public equities and long-only in private equities.  In other words, it is difficult to actually hedge private equity.

Of course, you could always short comparable public equities (or even an index) against a long position in private equity.  In fact, given the high correlation between private equity and public equity, that might not be a bad idea.  There has been some research showing that a leveraged public equity position could actually trump private equity on a risk adjusted basis (see related posting). 

Don’t Worry About a Return to ‘70s Stagflation

John Derrick submits:

Recent months have resurrected a potent economic villain of the past—stagflation.

The U.S. economy is seeing little to no growth, while at the same time inflation has risen to levels not seen in the better part of two decades due in large part to soaring food and energy prices.

UPS: Oil's Latest Victim

Steve Farrington submits:

Trading of United Parcel Service, Inc. (UPS) shares was halted Monday after hours until about 4:55 PM EST (T3) as they warned on Q2 earnings, citing, you guessed it, rising oil prices and package volume:

• Old guidance range: $0.97 to $1.04 per share
• New guidance range: $0.83 to $0.87 per share

UPS has plenty of concerns with the obvious. But, along with FedEx (FDX), international demand seems to be holding serve. In fact, UPS is an official sponsor of the 2008 Beijing Olympic Games and has been serving China since 1988 with non-stop flights. Just spit-balling here, but perhaps the international goodwill and global media presence this August can help enhance their full year earnings.

Hail Brittania Bulk: A Broken IPO That May Come Back

Britannia Bulk Holdings, Inc. (NYSE: DWT) owns and operates a fleet of 5 ice-class bulk vessels, 8 bulk carriers, 4 ice-class tug boats, and 5 ice-class ocean-going barges.

Ice-class vessels are those that have been certified for transportation in icy conditions, which exist in the Baltic region half of each year. DWT has contracted to purchase an additional six Panamax ice-class drybulk vessels, which are scheduled to be delivered between Jun 2009 and Sep 2010. Upon delivery of these additional vessels, DWT will increase its dry weight capacity by 72% to 1.1 million and its owned fleet will consist of 28 vessels, including 19 dry bulk vessels, 11 of which will be ice-class. This expansion will allow DWT to significantly grow its revenue, and extend its leading position in ice-class service.

CYXI: A Growth Stock Trading Below Book Value

Cabeza Howe submits:

Since the China Expert Tech (CXTI.PK) scam last summer, I have promised myself not to touch OTC stocks again. But then there are occasional exceptions. China Yingxia (CYXI) has now made my exception since I found it to be a credible growth stock that is trading well below its book value.

At $0.67 a share (June 23 close), this stock is trading at about 0.76x its book value and 3.58 to 3.70x the company’s projected earnings for FY 08 (using total diluted shares of Q1). This seems outrageously cheap for a company that, from 2005 to 2007, grew revenue by 157% ($6.18M to 15.91M), operating income by 121% ($2.76M to 6.08M), and net income by 233% ($1.84M to $6.12M).

Blockbuster Goes Bust - Cramer's Mad Money (6/23/08)

Stocks discussed in the in-depth session of Jim Cramer’s Mad Money TV program, Monday June 23.

Offshore Fears Unfounded

Cramer was critical of the fear of allowing offshore drilling because of “one oil spill” in 1969 (the Union off-shore oil spill off of Santa Barbara California); “We may not have the technology for clean coal, but we sure do have the technology for clean drilling, clean pumping and clean extraction of oil,” Cramer said. Offshore drilling is cleaner and safer than transporting oil on a tanker, Cramer added, and lifting restrictions will make around 18 billion barrels of oil and 76 trillion cubic feet of natural gas available. He said he is devoting the rest of the week to discussing clean offshore drilling companies.

Compagnie Generale de Geophysique-Veritas (CGV)

CGV is the only pure play on Seismic mapping for offshore drilling, and if Congress lifts restrictions, the company will see a significant upside. CGV’s 4-D technology controls 60% of the market, and the company is expecting more business from Brazil and in the Gulf of Mexico. CGV has a huge backlog and is “the cheapest stock left in the group.”

CEO Wall of Shame: James Keyes Blockbuster (BBI), Circuit City (CC)

Can one mistake turn a stellar CEO into an inductee onto Mad Money’s Wall of Shame? An unwise acquisition can make the difference between a transformational CEO to one who is wrecking the value of his company. As late as March, Cramer was bullish on Blockbuster, since CEO James Keyes was tackling debt, raising prices and transforming the company from a renter to a seller of movies. However, the stock is down 24% after the announcement that it plans to acquire Circuit City and pay a premium for a dying company; "These are two different companies in two different businesses," Cramer said. "There aren't any cost savings here." If Keyes were to scrap this meaningless acquisition, the stock would see a significant upside. However, he wouldn’t count on this, but would stay away.

Mad Mail: CSX (CSX), Tidewater (TDW)

Cramer told one viewer that if CSX’s CEO Michael Ward is forced out, the stock would see a short-term gain but would lose a third of its value in the long term, because the hedge funds which are trying to push Ward out “know nothing.” Of Tidewater, Cramer said although the company missed its quarter, “a rising tide lifts all boats.”

Market Stuck Between a Rock and a Hard Place

Andy Sutton submits:

Over the past few months, the US Federal Reserve, amid much fanfare, has lowered the benchmark interest rate from 5.25% to 2%. This loose policy was lauded by those in the financial media as being the right thing to do to prop up the economy, and banks in particular. Bernanke went from being the goat to the hero almost overnight. Rest easy folks, our Fed Chairman is on board; finally having gotten with the program.

At the time, we discussed the obvious and perhaps unintended consequences of Bernanke’s actions. On one hand, the Fed had to increase the money supply by leaps and bounds to drive their target rates lower; especially given the fact that banks were particularly loathe to lend, even to each other. This boost in the money supply has provided the fuel for the recent run up in food and fuel prices at the commodity level, and will begin to work its way through to producers and finally, consumers in the coming months. In the time since the official M3 numbers were discontinued in 2006, we have seen the total money supply grow by nearly 40%:

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