Fadi El-Eter

I wasn’t right about many stocks, including GOOG and RIMM, but I was right about one stock, AIB. This stock was over $2 just a month ago, and now it dropped to $1.18, its trading is now more or less like SIRI (which is a bugs bunny stock).

AIB is now becoming a disgusting stock, you can never make money on it unless you know its exact movement; the consistent downward trend of this stock is scary, I wouldn’t touch it myself (I was about to buy it at $1.48 a couple of weeks ago, but a glitch in the my Internet connection was the reason why I didn’t buy it).

Investors are now fleeing financials and probably buying technology stocks (hence the rice of MSFT, GOOG, RIMM, AAPL, and the likes). I feel that financials are now undervalued (although I really really hate BAC, I feel that it’s way undervalued at $11.98, make that $11.96. It does seem that BAC is heading for doom. I wish not, I own a lot of this thing. I have also increased my position last week). BAC’s 52 week low is $11.74, 20 cents less its current trading. Will the stock go down further, only tomorrow’s earnings will tell…

Let’s wait and see…

Every day there are some bad news coming about banks: foreclosures, new regulations, etc… Of course, bank stocks are hugely affected by these bad news, there is one bank stock that is resiliently moving up: C.

I love C, I always feel depressed if I don’t own this stock. I regret not selling the stock a few days ago when it was at $4.26, but then again, this stock is always bound to move up (in my opinion).

BAC on the other hand, is one stock I really loathe, yet I keep buying, with the hope that it will go up one day. I bought again at $12.50. IMO, BAC is a good buy below $13, and right now at the current price of $11.98, it can really go up tremendously. The main difference between BAC and C is that most investors seem to like the latter but hate the former.

CVBF is finally coming up, it went up to $8.20 last week, which means, in my book, that the jinx for this stock is finally over. I still own it and I would not like to sell it at a loss. Let’s wait and see.

PS: Financials are going up in the pre-market, maybe because of this report? (I like the word “ended” in the title)

Sanofi is after Genzyme for a few months now, with no avail. Genzyme just won’t sell. Sanofi today began a hostile takeover to buy Genzyme. The hostile takeover values the company at $18.5 billion, or $69 per share, the same price that Sanofi offered to Genzyme back in August, but the latter, of course, spurned, claiming the company is worth more. But how much more is it worth?

Genzyme is losing money, it has an EPS of -30 cents, and the movement of the stock, at least for the last few months (since the Sanofi bid), does not reflect the performance of the company at all (it is only going up because of the Sanofi bid).

For Sanofi to stalk Genzyme for a few months and finally go for a hostile bid, this means it really wants it, and can pay the maximum amount that it can afford to acquire this company. So, in order to know the upper limit of GENZ, we need to know how much money Sanofi is willing to pay.

Let’s study some facts:

– Sanofi’s market capitalization is $86.4 billion, which makes the $18.5 billion they are willing to pay for Genzyme far from being peanut money (it is more than 20% than Sanofi’s market capitalization).
– SNY is way undervalued at a P/E of 10.5.
– Sanofi is making a lot of money, and is buying a company that is losing a lot of money.
– Sanofi has not raised the price in its aggressive bid, which means that its margin is not that high, and will probably can afford a few bucks extra to buy the stock.
– Sanofi’s bid of $69 is $2 lower than the $70.88 of the current GENZ price.

I think the price of the stock will go up substantially in today’s trading, at least 10%, which will probably be $10 higher than the Sanofi bid. The question remains, what will Sanofi do?

Again, clearly they want the company, and it seems that they are willing to fight for it until the end of the year, after that, investors from both sides will feel that this game is bigger than both companies…

We shall see. SNY is currently trading at $33.12 and GENZ is currently trading at $70.88.

I usually check the top losers for the day and see if there are any interesting stocks. I found one: DVOX. The stock went down 32% on very high volume (over 13 times the average volume), and it may very well drop more (maybe another 10%). The stock dropped after the software company withdrew its previous guidance for its 2011 guidance, claiming that the market is softening. The company is specialized in software that will overcome mainly speech disabilities.

Now what made me pick this company? Look at the current EPS, it’s 3.04, the company has a P/E of 1.79 (stock is currently trading at $5.44). Personally, I would wait until the stock drops to somewhere in the high 4s and buy a small position, just for fun.

I think DynaVox, with its very small size (market capitalization is $51 million), has a huge potential to be acquired by a large company that will benefit from its technology.

I have recommended MLNX a couple of times before, and I have predicted a rebound. MLNX is still a very interesting stock, but is currently way overpriced. The stock is currently trading at 35 times EPS, which makes it very risky at this point. On the other hand, this is the mergers and acquisitions gold rush, and Mellanox technologies is a very small company (market capitalization is about $670 million), and could be easily swallowed by a giant such as IBM, HP, DELL, etc… Now the question is in order to assess the upper limit for this stock, how much are these companies willing to pay for Mellanox?

MLNX is currently trading at $19.86, up 25% from last month, it is a profitable and dynamic company, and unlike most companies being bought (remember PAR), the company is actually making money (EPS is $0.57). MLNX’s 52 week high is $27.48, making the company’s market capitalization at peak $927 million ($27.48 x 33.74M shares). A ballpark figure of $1 billion to buy the company (or $29.50 share) will most likely be rejected by Mellanox, especially when the stock is going up fast. Probably the least amount offered (that will be considered by the board) to buy Mellanox will be $1.5 billion, or $44/share, which 230% higher than the current stock price. This may seem like unrealistic but in this day and age, it is not far fetched.

The company fundamentals are great, and mega companies are fighting to acquire these small companies to lower their long term cost. Let’s see where the stock will end in a month for now. I am currently focusing on financials at the moment, but if I had some spare money, I would buy some MLNX (just a few hundred shares), and how knows, maybe my money will double in a month or two. Worst case scenario the stock will retreat to $15.

I have written earlier about playing with FAS and FAZ, which, IMO, are probably the most interesting stocks out there. Generally, and in the last couple of weeks, the DOW was moving up, and FAZ was going down. But, I have noticed that FAZ’s support $12.70 (that is tested 9 times so far) is pretty solid, and FAZ rebounds at least a buck or two when it tests this level. Remember that at one point nearly a month ago, FAZ broke higher than FAS (they meet at around $17).

There are lots of bad news that are still coming: Greece and Europe in general, Bernanke speaking, unemployment, etc… It’s a rule of thumb that stocks cannot go up (or down) forever. Next trading day is Monday, I predict that stocks will go up until around 12:00, and then they will drop, and the DOW will close lower (for some reason stocks always go up on Monday morning).

IMO, the current rally is unexplained.

On another note I sold my IMAX shares at $15.85, for a small profit. I didn’t want to get greedy and wait a bit, although if I waited for 24 hours, I would have made much more money, as the stock went up to $16.85 the next day, and I had a lot of these things.

I want to get rid of BAC and MFC (I think MFC has excellent prospects btw, but I just want to get rid of it for now).

I will try to buy FAZ somewhere below $13 this coming Monday, not too much, but enough to make a decent amount when the stock rebounds. There is no reason whatsoever for the DOW to continue going up.

Google has 2 good news for that may potentially prop up GOOG to the above $500 level, and maybe the above $600 level by the end of the year.

The first good news is Google TV, essentially a service competing Apple TV (which was a flop) and Netflix. Google TV consists of a partnership with Sony, DISH Network, Logitech, and Intel to provide internet TV stream, on your TV. In other words, you can watch regular TV channels through the Internet, and not through your cable provider. You can also watch Internet videos from Internet video websites (such as Youtube). You can also record your favorite videos as well (I can see copyrights issues here). I am not advertising for this service, but I think it’s something that everyone has been waiting for for so long. I think this service, if it works, has a huge potential, and can generate a lot of money for Google, and its investors.

The second good news is Google Instant, which is an enhancement of the current search engine. This enhancement, according to Google, will reduce search time, and enhance the user experience while searching. Honestly I don’t like it (I can turn it off), but people generally have positive opinions about it. Now this news might not sound important, but I think that any thing done on the search engine means that Google is still trying to perfect things, which is good, from an investor’s perspective. My personal opinion is that the Google search is as good as it is when it comes to searching using your keyboard (Hey Google, how about voice search?).

Now let’s look at GOOG, it is currently trading at $470, and going up almost $7 in the pre-market (investors like good news). GOOG has a problem, for months now, to maintain the $500 level, let’s see if they can hold when it’ll probably go up to that level next week.

Other stocks affected especially by the first news are:

SNE: Sony, a scary stock trading at 113 P/E. I would really stay away from it.

DISH: Dish networks, a decent stock, with a decent entry point below $18. DISH is trading at $18.37 at the moment. DISH has a huge potential to be bought by Google in case this whole Google TV thing worked (or maybe even before).

INTC and LOGI, would also be positively affected, but I don’t know to what extent. Both are good stocks by the way.

NFLX: Netflix has to watch out for the TV move by Google. I mentioned before that this a horrible stock, and now, at $146, it is even more horrible. NFLX is trading at an all time high ($147.83) in the pre-market.

Here’s a list of some of the stocks that I would love to have, and the price I’d like to buy them at:

RIG: The most beautiful stock in the world, someone should name a whole city after RIG (let’s call it the “Rigged City”, get it?). I always made money on RIG, sometimes traded it multiple times a day. I wish I can get a hundred or so at $48. I thought RIG was going to go down after BP’s little fingerpointing today, but apparently it did not. RIG is one solid stock.

BP: I have traded BP only once, and I made money with it. I’ve studied for months now, and I think it’s a great buy below $35.

BIOS: A great pharmaceutical stock, company has excellent fundamentals, EPS is $1.01, and P/E is 4.87 (yes, it is that low). I would love to buy this stock at $4.40 (if we’re every going to see this level again). I bought it and sold it before for a little gain, I was terribly impatient with this stock, and I made a wrong decision by selling it at a bad time (that’s why I only made very little money out of it). The stock is solid. Even at $5 it’s a bargain if you’re in for the long run. BIOS can be very easily bought for 20 times EPS, which will make the stock price essentially $20 (4 folds gain).

MAS: A stock that frustrated me until I figured out its pattern, I made money with it though. MAS is highly dependent on home sales (because it mainly sells building products). I have noticed that MAS has an excellent support at $10: 2 weeks ago, the stock rebounded the moment it touched $10. I would love to buy MAS at $10.

I wrote last month on how credit card companies have a wrong vision by punishing the merchants with higher fees (to compensate for lower fees that they will be getting from credit card users), it didn’t take that long to prove my point. A recent article proved that people, in 2009, relied less on credit cards, and more on debit cards. Bad news for Visa and Mastercard (that’s the price you pay for getting greedy):

V has lost over 4% today, and has closed at $68.55, $2 shy from its 52 week low of $66.50.
MA has lost over 3% today, and has closed at $194.40, $1.40 shy from its 52 week low of $193.

You see, Visa and Mastercard tried their best to maintain and increase their stock price by throwing the burden on the merchant, and this hasn’t really worked, as now many merchants are refraining from accepting credit cards, resulting in less people using credit cards and more people using debit cards.

Expect Visa and Mastercard to have a substantial drop this year as well. That’s the price of greediness.

I have written earlier about the hostile bid that BHP made to acquire Potash of Saskatchewan. BHP back then offered $130/share to buy the company, the bid was rejected, and POT soared to $143 (from $112). POT then was growing moderately nearly every week (closing at around $149 yesterday), until yesterday evening, when Bill Doyle announced that there may (or may not be) other parties interested in buying the company (of course, Bill Doyle may or may not be lying, the guy seems opportunistic anyway, and maybe trying to artificially inflate the stock price for his own benefit). POT went up $4.43 in the after hours. I expect POT to close at around $158 today (34 X EPS, which is now high).

POT’s market cap is now $44 billion (with a potential to of going up to $50 billion), big enough to attract the attention of the Canadian government (or any government, for that matter), that may or may not approve the sale, especially as multi-national companies (notably Chinese) are apparently seeking to buy Potash.

This is a very dangerous play for Doyle. He is relying on the immediate clearance of the sale by the Canadian government (wrong), thinking that he has all the time in the world to sell his company, and probably hoping for more catastrophes hitting crops all over the world as well as an exponential increase in food demand, leading to an exponential demand for fertilizers.

POT is becoming a really dangerous stock now, especially since it’s in a highly regulated country such as Canada, and since the sale may cause a huge debate at the public level.

I still think though that the stock can easily go up to $165, in a week or two. Still, nobody knows if Doyle is bluffing with BHP at the moment, who may or may not increase their bid, at the expense of their own stock. POT is becoming bigger to swallow by the day, even for company such as BHP. BHP’s market cap is just over 4 times that of POT’s. BHP’s stock closed yesterday at $69.72 (down a buck from the previous trading day), and is currently down another 70 cents in the pre-market.

Personally I would stay away from both stocks, unless it’s for a short (very short, I’m talking hours) trade.