Saturday December 20, 2008
Navivest

Allstate - (ALL) $31.86 +$1.92

Shares of the insurer were up as were other insurers, which were mostly up in the day, probably on the auto industry bailout that was announced by President Bush.

Apache – (APA) $74.57 +$4.76

Shares of oil and gas producer Apache were up after crude oil managed to eek out very modest gains on Friday.

Baker Hughes - (BHI) $29.99 +$1.74

Baker Hughes is a service provider to the oil and gas exploration industry and the shares were up in tandem with crude oil prices.

Darden Restaurants – (DRI) $28.55 +$4.57

Darden Restaurants, which among its holdings operates Olive Garden and Red Lobster, on Thursday, reported that its second quarter 2009 diluted net earnings per share from continuing operations were $0.42 cents, an increase of 40%, versus 30 cents in the prior year.

With analysts looking for just $0.31 per share, Wall Street must have been impressed that the company’s earnings beat estimates so handily, in an economic environment where the consumer is hurting.

Fuel Systems Solutions – (FSYS) $34.52 +$3.28

FSYS shares were up after the company announced on Friday, that it’s Italian division, will be buying Distribuidora Shopping SA of Argentina for $22 million after which coverage of its stock was initiated with a buy rating, by Janney Montgomery Scott. Fuel Systems is a manufacturer of alternative fuel systems for vehicles and the company is looking to expand its product line and market, with the purchase of Distribuidora Shopping, which makes components and systems for the Compressed Natural Gas (CNG) vehicles market.

Oracle – (ORCL) $17.78 +$1.17

Shares of Oracle posted their biggest one day gain in over three months, by rallying 7.04% today, after the company reported that Q2 2009 earnings per share came in at $0.25, which was in line with what analysts were looking for.

Revenues for the period was up 6% to $5.6 billion, while quarterly GAAP net income saw a 1% decline to $1.3 billion.

Broken down, software revenues were up 8% to $4.5 billion with new software license revenues down 3% to $1.6 billion. Software license updates and product support revenues were up 14% to $2.9 billion and services revenues were down 2% to $1.1 billion.

Operating income was up 11% to $2.0 billion and operating margin on a GAAP basis, was up 1.66%, to 35%. Cash flow for the period was $8.1 billion.

In the second quarter, there was a $0.04 per share negative impact on the bottom line, as the dollar rallied against other major currencies. As such, without the foreign currency effect, EPS would have come in at $0.29.

Provident Bankshares Corporation- $9.33 +$3.53

Shares of Baltimore, Maryland’s largest independent bank rallied 60.86% after M&T Bank agreed to buy Provident for $401 million in an all-stock deal. Provident Bankshares Corporation shareholders will receive $10.50 for each share they own when the deal closes in the second quarter of 2009. The

Research In Motion – (RIMM) $42.83 +$4.39

Shares of the Research In Motion, the mobile communications device company, which makes the Blackberry, were on a tear on Friday, after the company on Thursday December 18, reported third quarter 2009 earnings that came in in-line with analysts forecasts.

Q3 revenue came in at $2.78 billion, which was up 7.9% consequentially from the $2.58 billion that the company realized in the previous quarter and up 66.3% from the $1.67 billion in the same period a year ago. Breakdown for the company’s revenue in the quarter, was roughly 81% for devices, 13% for service, 2% for software and 4% for other revenue. The company shipped approximately 6.7 million devices during the quarter and added 2.6 million new subscribers, bringing the subscriber account base to about 21 million, a sequential 14% increase from the second quarter.
Earnings per share came in at $0.83, after special items are ex-ed out. For the Q4 2009 period, the company is providing EPS guidance in the range of $0.83-$0.91. Wall Street analysts are looking for a EPS to come in at $0.83.

Tags: Allstate  Apache  Baker Hughes  Darden Restaurant  Oracle  Provident Bankshares  Research In Motion Fuel Systems

First they were for it, then they weren’t. Word started emerging Thursday 09/25/08 afternoon, that the rescue plan which looked like it was just about a done deal, was hitting major snags, as republicans started balking.

As a result, stocks, which had surged on Thursday, started indicating a lower open on Friday evening in after hours trading, as it was basically confirmed that there were major obstacles to the plan. With the failure of Washington Mutual (WM) and the disappointing earnings from Research In Motion (RIMM) late Thursday, we could definitely see a major drop in the stock market on Friday.

However, we do feel that a rescue plan of some sort for the financial industry, will emerge soon and the largest bank failure in U.S. history should only help spur that along. As much as our politicians might want to play politics, the economic situation on main street continues to worsen and to do so fast. They have no choice, but to act.

Even though Washington Mutual was already on life support, with a stock that was down 87.5% for the year as of the close of the stock market on Thursday, and Standard and Poor’s cutting it’s rating earlier this week, the failure will be seen as a major shock on Friday and that should light a fire under our politicians.

We’ve recommended that subscribers to our Options Capitalist trading advisory service buy calls on the Proshares Ultra Financials (UYG) in anticipation of a rescue plan. We recommended the October 22 calls on UYG. Until the rescue plan is official, there will be ups and downs in the Proshares Ultra Financials (UYG) so be prepared for a bumpy ride. However, we should see a plan announced very soon.

A trading plan would be to wait to see what stocks do early Friday 09/25/08, since we are expecting a lower open, then at some point in the afternoon, enter into the trade.

Wall Street could use some good news and once a rescue plan is approved by congress, if Wall Street likes the details of the plan, we should see a very nice financials led rally that traders will not want to miss. Of course with the underlying economy in dire straits, we won’t expect the rally to last so if we do get the rally. Take early profits.

Tags: Bailout Plan  Washington Mutual  Research In Motion

Shares of Research In Motions (RIMM) are tumbling $18.93 or 19.41% in after hours trading, after the company reported 2009 second quarter results for the three months ended August 30, 2008 Thursday 09/25/08 evening.

Revenue for Q2 2009 was $2.58 billion, up 15% from $2.24 billion in Q1 and up 88% from the $1.37 billion that the company reported in the same period last year.

According to the company, the revenue breakdown for Q2, was approximately 82% for devices, 13% for service, 3% for software and 2% for other revenue. The company shipped approximately 6.1 million devices in the period.

Net income for the quarter was $495.5 million, or $0.86 per diluted share. This compares to $482.5 million, or $0.84 per diluted share in Q1 and net income of $287.7 million, or $0.50 for each diluted share in the period last year.

For Q3 2009, Research In Motion (RIMM) is guiding as follows: “Revenue for the third quarter of fiscal 2009 ending November 29, 2008 is expected to be in the range of $2.95-$3.10 billion. Net subscriber account additions in the third quarter are expected to be approximately 2.9 million.

Earnings per share for the third quarter are expected to be in the range of $0.89-$0.97 per share diluted based on a gross margin of approximately 47% and operating expenses that are 1-2% lower as a percentage of revenue than in the second quarter.”

Tags: Research In Motion RIMM Earnings

RIMM obviously disappointed with their earnings and the stock took a beating yesterday. We had bought some Jul 145 calls into the earnings and hedged that trade with some puts buying as well. Our hedge ratio was 3 calls to one put, recommending a minimum trade of 6 Jul 145 calls and 3 135 puts.

With the downturn in the shares, the calls lost quite a bit of money. You could have sold yesterday at $70 per contract, if you are still holding, sell those now, current prices are about $35 per contract.

The puts are doing quite nicely, having gone from our entry price of $6.50, to $18. Put an order in to sell the calls at $20. We will watch RIMM shares all day and try to get out today.

RIMM has done the unthinkable and missed by a penny. As a result the stock is getting punished after hours. We will listen in to the conference call to see where the company failed to meet Wall Streets aforementioned insatiable appetite, as a 107% change in revenues from the same period last year was not good enough. Hedging our trades with put options was a very good idea and if the street beats up the stock enough tomorrow, the trade will actually be net profitable.

Reasearch In Motion (RIMM) will be releasing its earnings after the close of the stock market today. The company has in the past, done a good job of beating Wall Street estimates and the stock subsequently rewards its holders well the next day.

We expect more of the same and are recommending traders buy Research In Motion (RIMM) call options. We are hedging the trade with some puts to offer some protection against a downside. Wall Street is sometimes insatiable and (RIMM) could come out with phenomal earnings and the street might still deem them to be inadequate, although with the launch of new products recently as well as continued wider adoption of the company’s products, we would be very suprised if the company puts out negative earnings related news.  

The Trade: Buy the Research In Motion July $145 calls. For every three contracts bought, buy 1 Research In Motion 135 puts. We are recommending a trade of at least 6 call contracts and 2 put contracts. This will be slighty over $5,500. For those that can’t swing this, but would like to enter the trade, if you have risk capital of $700-$1400, you can buy 1 or two call contracts. These will not be hedged for downside protection, but again, there is a bigger chance of the company beating than not.

Notes: Watch this space and or subscribe to this blog is you have not already done so, we will be tracking (RIMM) all day and if can adjust the position to take some profits even before the earnings, we post accordingly.

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With the release of Research in Motion’s earnings next Wednesday, there is an opportunity to possibly make big money in the (RIMM) options. Navivest will be providing its subscribers with strategic option plays on Monday. Those that have never subscribed to our services before can take advantage of our free two week no obligation trial subscription by signing up at the Navivest site - http://www.navivest.com