by: SA Editors posted on: April 09, 2006 | about stocks: BBBY / DIS / ED / GCI / GS / HET / JBX / KCE / KRI / LVS / MGM / MNI / VSPC / WYNN    

Here's a one page summary of this weekend's (April 8) Barron's (paid sub. req.), noting stocks to watch for Monday morning when the market opens and brief comments on the Barron's articles. Note: clicking on a stock ticker pulls up opinion, analysis and a quote for that stock.

Lead Article: Minting Money, The Goldman Sachs Way
by Michael Santoli

• Highlighted companies: Goldman Sachs Group, Inc. (GS)

Thesis: Goldman Sachs makes lots of money from trading for its own accounts. One of GS's key services is serving as a counterparty to derivatives contracts and thereby collecting the "liquidity premium" that market makers earn. Recent performance has lead to a sharp spike in the stock price. The stock at 161 is trading at historical highs, both on its own and relative to the rest of the capital markets sector. Michael Santoli feels the shares would be a good buy in the 140s.

Quick comment:The streetTRACKS KBW Capital Markets ETF (KCE) is a good way to get diverse exposure to this sector.

Barron's Feature: A Tempting Wager
by Neil A. Martin

• Highlighted companies: Harrah's Entertainment (HET), MGM Mirage (NYSE: MGM), Las Vegas Sands Corp (LVS), Wynn Resorts Ltd. (WYNN)

Thesis: Harrah's has earnings momentum, a development pipeline and is working well on integrating of its acquisition of Caesars Entertainment. The purchase of Caesars has given Harrah's a full stable a brands work with. Harrah's has wide geographic diversity in the US and isstarting to expand overseas. The stock is currently trading at a discount to other companies in the gambling sector

Quick comments: Harrah's player's club program is considered the best in the industry, and provides a key competitive advantage. Interesting that Jim Cramer has also been recommending these stocks on Mad Money.

Barron's Feature: Jack's Juicy Situation
by Jennifer Ablan

• Highlighted companies: Jack in the Box (JBX)

Thesis: Jack in the Box, a western US hamburger chain is becoming increasingly popular, with an enhanced menu and higher food quality attracting customers. The company is planning to shift more of its company owned stores (78% of locations) into franchises, thus allowing JBX to collect property leases, royalties, and profits from required supplies. JBX may decide to spin out a portion of its Qdoba Mexican Grill chain, similar to Wendy's International, Inc.'s (WEN) offering of Tim Hortons Inc.'S (THI) and McDonald's Corp. (NYSE: MCD) offering of shares in Chipotle Mexican Grill Inc. (CMG)

Quick comment: Various analysts quoted in the article suggest a target price of $60 for JBX shares currently trading at 42.

Economic Beat: More Jobs, Higher Pay
by Gene Epstein

• Thesis: Recent growth in the job market has caused unemployment to drop below the critical NAIRU [non-accelerating inflation rate of unemployment], causing upward pressure on wages. The Bureau of Labor Statistics calculates that in 2005 compensation per hour for non-farm non-supervising workers was up 5.5% over 2004

Quick comment: Unemployment figures are notoriously squishy -- such an increase in wages ought to be equally reflected in a 5.5% increase in consumer spending YoY.

Intelligence Failure
by Bill Alpert

• Highlighted companies: ViaSpace (OTCBB: VSPC)


• Thesis: Retired four-star general and former presidential candidate Wesley K. Clark joins the board at ViaSpace, an OTCBB stock with very questionable management and operations. Wes Clark resigns his directorship two weeks after signing on. ViaSpace appears to be involved -- to the tune of over $500,000 -- in fees with various penny stock promoters.

Quick comment: As is typical for OTCBB scams, many of the key players are operating from Canada to avoid the SEC's jurisdiction

Barron's Feature: Restarting the Presses
by Andrew Bary

• Highlighted companies: McClatchy (MNI), Knight-Ridder (KRI), Gannett (NYSE: GCI),


• Thesis: McClatchy's planned purchase of Knight-Ridder will create a newspaper powerhouse. But Wall Street is not impressed with M&A activity among large newspapers because the industry is in decline and it is unclear if M&A costs can be recovered without hurting shareholder value.

Quick comment: The resulting combination will be highly leveraged, which is to the benefit of shareholders if the merger can in fact work.

Con Ed Pressured by Interest Rates
by Prudential Equity Group

• Highlighted companies:Consolidated Edison (ED)


• Thesis: Prudential Equity Group has downgraded ConEd to Underweight from Neutral Weight due to valuation concerns, and sets a target price of $40. Prudential believes ConEd's bond-like 5.3% dividend yield causes the stock price to be sensitive to rising interest rates. Because ConEd pays out 78% of its income as dividends, it has limited ability to finance growth internally or issue debt that could jeopardize dividends. Therefore ConEd finances growth via public equity offerings, Prudential believes that ConEd will try to raise $450 million in 2006, which will lower EPS because of dilution.


• Quick comment: Consolidated Edison has paid dividends since 1886, with one omission in first quarter of 1974.The omission of the dividend resulted in several angry shareholders being ejected from the 1974 shareholders' meeting after attempting to attack the company's chairman. Since 1974 the company has raised dividends each year, making the company a "Dividend Aristocrat" with a 32 year record of increased dividends.

Plugged In: Have We Got A Job For Jobs
by Mark Veverka

• Highlighted companies: Disney (DIS)


• Thesis: Mark Veverka proposes that Steve Jobs become Chairman of Disney. He feel's that Jobs's understanding of media and technology is what Disney needs at the top. Steve Jobs will also be Disney's largest shareholder with 7% of the company as a result of his ownership in Pixar (PIXR). However Veverka wonders if Jobs is too hands-on to be an effective board member


• Quick comment: Historically, Steve Jobs is known for not playing particularly well with the boardroom, as Jobs' greatest quality is his "vision thing" which is not a item that board members typically apply in their role as overseers for shareholders

Buoyant Bed Bath and Beyond
by Prudential Equity Group

• Highlighted companies:Bed Bath and Beyond (BBBY)


• Thesis: Prudential Equity Group has upgraded Bed Bath & Beyond Inc. (BBBY) to Overweight from Neutral Weight and set a price target of $46 based on strong fundamentals and an attractive relative valuation. BBBY is achieving both top line and bottom line growth, driven by increased same store sales. Prudential feels that BBBY is trading at a discount relative to other players in specialty retail.


• Quick comment: Based on the "thread count war" that broke out between Wal-Mart Stores, Inc. (WMT) and Target Corp. (TGT) over which store had the highest qualilty (thread count) sheets and pillowcases, demand for higher end soft goods seems strong. Starwood Hotels & Resorts Worldwide, Inc. (HOT) has been quite successful with their Westin at Home website which sells soft goods used at Westin five star hotels.

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By SA Editors