Tag - Dis

I've found and interesting small cap company operating in the mobile technology industry - one that stood out from the pack because it has morphed two trends into one business model for those on the go.

But there's a catch: This microcap company is looking to make money by giving away their products.

Stocks are selling off around the world. And China is in the lead. The Shanghai Composite is down 23% since August 4. Former Morgan Stanley Asia economist Andy Xie says Chinese stocks have been in bubble mode and there are more declines to come.  

The main issue for China is the same as it is here in the U.S.: prices are getting ahead of fundamentals. At least, that's the fear. It's funny, though, that nobody looks at AIG's moonshot and concludes the U.S. stock market is a bubble.  

I sure hope this isn't the end of the rally, because I'm really growing fond of my new term, the Cash for Clunker Stock rally.  

*****In his morning missive to his TradeMaster Daily Stock Alerts readers, Jason Cimpl offered the following advice: "Pay close attention to any weakness in our early warning sign groups such as small caps, technology, oil and bonds, as ways to gauge a top in the US indices."

For clarification, if the Cash for Clunker Stock rally is over, we will see bonds rally as investors move into safe-haven investments. So far today at least bonds are down right along with stocks. And since U.S. stocks are down only slightly, I think it would be prudent to consider the current action profit-taking for now.  

******We should probably add shipping stocks to Jason's list of stocks to watch. The Baltic Dry Index, a leading indicator that measures shipping rates, is down 28% this month.  

Shipping rates are down mainly because China is buying less iron-ore. And new ships being delivered is expanding supply and helping drive prices lower.  

The Baltic Dry Index was absolutely decimated at the outset of the global recession. SmallCapInvestor PRO readers made 65% on shipping stock Genco (NYSE:GNK) as shipping rates recovered. We took profits on July 22, as the Baltic Dry Index was showing signs that it would roll over. 

If shipping rates fall another 50%, as some are expecting, it will mean two things. One, the bloom will be off the global economic recovery and the Cash for Clunker Stock rally will have ended. And two, it will be time to buy shipping stocks again. 

*****Before we get too bearish, though, please note that two M&A deals were announced today. Disney (NYSE:DIS) is buying Marvel (NYSE:MVL) for $4 billion and oil services company Baker Hughes (NYSE:BHI) is buying BJ Services (NYSE:BJS) for $5.5 billion.  

Mergers and acquisitions are generally considered bullish because they indicate that the acquiring company feels prices are attractive and there is growth ahead.  

That's especially significant in the case of Baker Hughes. There's not an analyst out there who hasn't been saying that oil prices have risen too high in the current environment of growing supply and falling demand.  

Oil is an important indicator of investor expectations for the economy. And now, it seems, even the "insiders" are getting more bullish on oil prices.  

Oil is trading below $71 today. That's a far cry from the $50-$60 range that some say is fair value. And a move to these levels is looking less and less likely. 

Best regards,

Ian Wyatt
Editor
Small Cap Investor Daily

P.S. My book The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks is coming out on September 14 - visit www.smallcapbook.com to learn more. You can also follow me on http://twitter.com/ianwyatt 

Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor.com and author of The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks. You can learn more about his book and receive small-cap stock picks at www.smallcapbook.com.

Small-cap stocks hovered near steady levels in early trading, with pressure from weak corporate profit news countered by bargain hunting, overseas gains and a private employment report that wasn’t as bad as feared. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was down 0.26, or 0.06% at 452.64.

The ADP Employment Survey reflected a loss of 522,000 jobs from non-farm payrolls and projected the Labor Department report Friday would show a decline in jobs of 525,000, which was slightly above the median forecast of 500,000. That said, the market took the ADP figures in stride, with a “it could have been much worse” mentality in play. It’s worth noting that the ADP report was veering way offline for many months before they shifted methodology last month and got back on a tighter track with the Labor Department survey.

In overseas trading, European shares pushed higher despite disappointing December retail sales. The gains were a little dynamic in Asia, where Chinese shares climbed 2.7% as the government started to release funds for stimulus programs and Indonesia cut interest rates. Tech stocks, electronics makers and auto stocks were among the better performers in Asian trading overnight.

Here in the United States, much of the individual corporate profit news was gloomy this morning, including disappointments from The Walt Disney Co. (NYSE:DIS), Costco Wholesale Corp. (Nasdaq:COST) and Time Warner Inc. (NYSE:TWX). Shortly . . .

U.S. stocks are expected to open flat to slightly lower, pressured by sloppy corporate profit reports, which should offset modest gains in Europe and Asia in overnight trading, with the latter region boosted by Chinese stimulus spending and rate cuts in Indonesia.
However, gains in Europe were sliced after Russia’s debt ratings were cut. The ADP Employment Report came out in line with expectations and appeared to have only minor impact on pre-market trading. The Dow was called 25 points lower while the Russell 2000 (NYSE:IWM) was seen flat to slightly lower at 452.50.

The ADP report reflected a loss of 522,000 on non-farm payrolls and the survey projected the U.S. report Friday to show a loss of 525,000. Friday’s Labor Department report is expected to show a loss of 500,000 non-farm jobs and a jobless rate of 7.5%.

On the earnings front today, The Walt Disney Co. (NYSE:DIS), Costco Wholesale Corp. (Nasdaq:COST) and Time Warner Inc. (NYSE:TWX) all were seeing sizable losses in pre-market trading after releasing weak profit reports. Small-cap chip designer Rambus Inc. (Nasdaq:RMBS) fell some 20% in extended trading Tuesday on news that a judge postponed a patent trial dispute.

The chart picture for small caps shows that the Russell has nestled into another trading range, punctuated by moderate to light volume. The push back above 450 on Tuesday was a supportive signal, and the overall trading range pattern has a mild . . .

It’s been a rollercoaster ride thus far for small caps, most recently trending deeper into the red along with the S&P 500 and the Dow after a gloomy weekly unemployment claims report and a weaker-than-expected read on GDP dragged equities lower. 

At 12:46 p.m. ET, the Russell 2000 (NYSE:IWM) was down 3.44, or 0.48%, at 715.42, while the Dow down 0.98%, or 113.01, at 11,470.68.

The weekly claims number, reported this morning, spiked more-than-expected to 448,000 from last week’s 404,000 level. The claims number, which was substantially above the median forecast of a decline to 395,000, was pushed higher by an emergency unemployment program. The number was the single largest weekly claims figure in more than five years. Although this survey was taken after the numbers were collected for Friday’s monthly employment release, it has heightened jitters ahead of the Labor Department’s release tomorrow. 

The second-quarter number for GDP, also out this morning, wasn’t comforting either. The nation’s domestic growth clocked in at 1.9% for the second quarter, below the forecast of 2.3%. Additionally, GDP for the past 3 years was revised downward. Fourth quarter GDP was reduced to minus 0.2%, the first decline in quarterly GDP since 2001.

"The revisions were ugly and will fuel the recession debate," Andy Busch, global foreign exchange strategist for BMO Capital Markets, said in an email. "Today's numbers were a big disappointment and will rev up the doom-gloom crowd to call for the end of the world. July was brutal. Let's hope we can focus on the Olympics -- I'm still expecting/hoping to see a stabilization occur in August without the massive swings July presented."

Although the weak GDP number and claims took the limelight today, there was some hopeful economic news in the abyss. The Chicago Purchasing Managers report came in stronger than expected. PMI was 50.8, above the forecast of 49 and above 50 for the first time since January.

For the first time in awhile, gyrations in crude oil prices were not the focal point. Crude sold off this morning, after spiking over $4 Wednesday, and continues to tread in the red. A barrel of light sweet crude slipped $2.40 to roughly $124 mid-session.

The economic reports managed to smother uplifting merger and acquisitions news. Bristol-Myers Squibb Co. (NYSE:BMY) made a bid to acquire ImClone Systems Inc. (Nasdaq:IMCL) ...

With a push from its largest shareholder, little-followed microcap play Crown Crafts Inc. (Nasdaq:CRWS) could be poised to finally unlock shareholder value in the coming quarters.

On July 3, Gonzalez, La.-based Crown Crafts announced a settlement agreement with Wynnefield Capital, its largest shareholder. The agreement averts a proxy contest showdown between the long-time shareholder and the designer of infant and toddler bedding, blankets and accessories. As part of the settlement, Crown agreed to add a Wynnefield nominee to the company’s board of directors. Crown also agreed to form a strategic review committee to explore strategic alternatives. Wynnefield is permitted under the agreement to increase its ownership stake in Crown up to 20%. The investment firm currently holds around a 15% stake.

Following a successful restructuring in 2001, Crown has maintained profitability since 2002 through a combination of organic and acquisition-driven revenue growth and sensible moves to clean up its capital structure. The $32 million market capitalization company is the largest producer of infant bedding, bibs and bath items in the United States. Crown’s products are marketed under a variety of company-owned trademarks, such as NoJo and Hamco, as well as licensed trademarks. The sale of products under licenses from Walt Disney Co. (NYSE:DIS) accounted for 30% of total revenue in fiscal 2008. Crown’s top customer is Wal-Mart Stores Inc. (NYSE:WMT), followed by privately held Toys “R” Us, Inc., and Target Corp. (NYSE:TGT).

For fiscal 2008 ended March 30, Crown reported revenue of $74.9 million and net income of $4.4 million, or $0.43 a diluted share, compared with year-ago revenue of $69.2 million and net income of $3.9 million, or $0.39 a diluted share. This reported net income total for fiscal 2007 excluded a gain on refinancing, net of taxes, . . .

After rising during morning trading, the Russell 2000 (NYSE:IWM) hit resistance at 733.59 at 10:45 a.m. ET, and has continued to slide in Wednesday’s trading action. At 1:59 p.m. ET, the Russell was down 6.12, or 0.84%, at 723.67.

Federal Reserve Bank of Kansas City President Thomas Hoenig gave the bears support after he said late Tuesday that inflationary pressures “now stand at unacceptably high levels.” Hoenig is not a current voting member of the policy-making Federal Open Market Committee. U.S. consumers are feeling the pinch on their wallet, especially with oil prices surging to record highs. In recent trading, June crude oil contracts were up $1.51 to $123.35 a barrel.

A rising U.S. dollar combined with a positive productivity report kept investors bullish during early trading. In afternoon trading, the greenback is up to $1.5387 versus the euro. The U.S. dollar closed at $1.5524 against the Euro on Tuesday.

Also encouraging the bulls was the Labor Department’s Wednesday morning announcement that non-farm business productivity increased at an annual rate of 2.2% during the first quarter. Economists anticipated a 1.5% increase. Unit labor costs rose slower than expected at an annual rate of 2.2%, compared with . . .

Small-cap stocks pushed higher in early trading action, lifted by a surge in the U.S. dollar, and by yet another economic report that surprised on the upside. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was up 1.52, or 0.21%, at 731.31.

The greenback was on a roll this morning, gaining about 0.9% versus the euro, which would put the buck on a pace to close at the highest level since late March. Dollar strength also was noted against the yen, with dollar/yen rates up nearly 0.7% into the U.S. stock market opening.

Equities markets were lower in after-hours trading, but started to move toward the green after the monthly productivity report beat expectations. The headline figure for productivity came in at a gain of 2.2%, which was above the forecast for a rise of 1.6%. Typically, the productivity report has only a modest impact on stocks, but it did appear to move the S&P 500 about four handles. Perhaps of greater significance is that the productivity report was yet another economic release that topped the forecast, feeding good news to a market that might need it with small caps closing at 13-week highs Tuesday. There’s an old saying in the market that “you have to feed a bull, not necessarily a bear.”

Despite the jump in the U.S. dollar, crude oil prices were still hovering in rare air after setting record intraday and closing price values Tuesday. Amid supply concerns out of Africa, geopolitical strife in the Middle East and analyst forecasts calling for sharp gains in crude oil in coming months, “black gold” remains strong and . . .

Small-caps stocks were expected to open slightly lower in line with a mild overnight dip in most stock index products. The Russell 2000 (NYSE:IWM) was off about 0.1% in after-hours trading, which would translate to a cash opening near 729.

The productivity report, which came out at 8:30 a.m. ET, was better than forecast, with the headline number up 2.2%, compared with the median prediction for a gain of 1.6%.

The U.S. dollar was on a roll this morning, up 0.6%, or nearly 100 bps versus the euro, and up 0.4% against the yen, which should provide some support to the market if the dollar can hold those gains during the U.S. trading session.

In overseas trading, European shares had a nice recovery move, climbing from a loss of 0.8% to a gain of 0.3%. Equities in Asia were mixed, but tilted to the negative side, with Japan’s Nikkei up 0.38%, Hong Kong’s Hang Seng down 2.48% . . .

Spectrum Brands, Inc. (NYSE: SPC) CEO Ken Hussey announced during a midday conference call that the consumer products maker signed an exclusive three-year deal with The Walt Disney Co. (NYSE: DIS). The agreement gives Spectrum the rights to feature Disney and Pixar characters on packaging and promotions. Under the deal, Spectrum will also be the exclusive supplier of batteries to Disney parks and will be identified as the official battery of Disney resorts.

The Atlanta-based company will take advantage of the deal this holiday season by releasing Disney-branded battery packages in Wal-Mart Stores, Inc.’s (NYSE: WMT) toy and infant care sections.

Hussey said the company is feeling “a little cautious” about consumer spending. In terms of exposure to an economic slowdown, he said Spectrum will be affected “just like every other consumer product company.”

“However, we think our value alternative positioning in many categories insulates us to some extent relative to our peers,” he said.
 
The chief executive said the firm’s fiscal 2008 plan calls for modest organic revenue growth in all categories.

“I think we’ll know better what to expect when we see what the holiday season holds for retailers a few weeks from now,” Hussey said. “We believe we are positioned to deliver operating and profit growth next year.”

For 2008, Spectrum plans to reduce its number of product offerings in order to reduce production and inventory costs, capital needs and operations complexity. Hussey said the firm is working to identify and evaluate products and customers that do not meet its goals of contributing to profitability. The company will terminate some of its business relationships—he cited Spectrum’s European private-label battery business as an example—in the process. The firm’s first goal is making the company “a more profitable entity,” he said.

Toronto-based Kaboose, Inc. (TSX: KAB) is North America's largest independent online media company in the kids-and-family market — a sector dominated by giants such as Walt Disney Co. (NYSE: DIS), Time Warner Inc.'s (NYSE: TWX) AOL unit and Viacom Inc.’s (NYSE: VIA) Nickelodeon. Solid planning, creative financing, strategic marketing, and sound partnerships have this small-cap standing strong in the face of stiff competition from larger competitors with well-oiled marketing machines.

Founded in 1999, right before the dot-com bust, Kaboose plowed full steam ahead, aggressively snapping up kid-oriented websites. After a round of acquisitions, the small media company conceded it would never win the battle for children's attention on the Internet, so it shifted gears and targeted their moms. Today, the company runs a string of content-related sites that focus on mothers and young families. Visitors to Kaboose's sites can do everything from staying informed of the latest trends and reading product and service reviews to planning birthday parties and family vacations to creating online photo scrapbooks.

With a Web portfolio including popular sites like BabyZone, ParentZone, Birthday in a Box, Two Peas in a Bucket and the recently acquired image-sharing service Bubbleshare, Kaboose's 120,000 pages of content attract 12 million unique visitors a month and its family of sites have more than 2 million registered users (return visitors who can be tracked and cross-promoted)—a fact that has brought advertisers knocking.

"Kaboose is one of only a handful of Canadian companies that is benefiting from the significant shift in advertising spending from traditional media to online media," Ron Shuttleworth of Jennings Capital Inc., said in a recent report.

"As the company scales and solidifies its position as a pre-eminent destination for families, we expect that Kaboose should capture more share of advertising budgets and higher rates," he wrote.

Last year, the advertising dollars poured in: Kaboose revenues swelled 200% to $11.7 million and in the third quarter of last year, the company recorded its first ever profit, $500,000 (a $1-million turnaround from the same period in 2005). All in all, sales have grown more than 1,000% since 2003. And the company has built an impressive list of business partners, including the likes of McDonald's Corp. (NYSE: MCD), Target Corporation (NYSE: TGT), Hewlett-Packard Company (NYSE: HPQ), DaimlerChrysler AG's (NYSE: DCX) Mercedes-Benz subsidiary, Mattel, Inc. (NYSE: MAT) and M.J. Heinz Company (NYSE: HNZ).