J Clinton Hill submits:

At the end of each trading week, Hillbent scans the equity market for potential anomalies which exhibit extremely oversold and overbought conditions. Past observations have revealed that such candidates may experience reversal corrections to the upside or downside once the market reconfirms that their fundamentals remain solidly intact or relatively poor. From a contrarian perspective, these lists may also serve as a precursor to changes in institutional sentiment and underlying fundamentals.

(The purpose of this report is not to provide specific recommendations, but instead serve as a time-saving reference tool and starting point for investment ideas as the upcoming trading week unfolds. Of course, the results generated are not always perfect and users are strongly encouraged to perform their own due diligence on these names. Note that overbought and oversold conditions are based upon proprietary algorithms and quantitative models instead of conventional technical analysis indicators. As a supplement to this report, please refer to our ETF Market Trends™ Report to determine if market direction trends support a bullish or bearish investment bias over short-term, intermediate, and long-term timeframes.)

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• Bernanke gets second term, new challenge. Bernanke won a second term as Fed Chairman in a 70-30 Senate vote, but his fight isn’t over. With another four years as chief, Bernanke must now defend the central bank itself as lawmakers consider opening up the Fed to congressional audits and stripping it of bank-supervision powers.
• Even more Toyota recalls. Toyota (TM) is busy shipping replacement parts to correct the faulty gas pedals in millions of recalled cars, but declined to say whether the parts are being shipped to factories to get production going again or to dealers to fix cars in their showrooms and on the road. Toyota also expanded its recall again, this time to an unspecified number of cars in Europe and around 75,000 cars in China. Meanwhile, lawmakers plan to hold a hearing next month to investigate "how quickly and effectively" Toyota responded to safety complaints.
• BNY Mellon angling for PNC unit. Bank of New York Mellon (BK) is said to be in advanced talks to buy a PNC Financial Services (PNC) unit for around $2.5B. PNC has reportedly been shopping its Global Investment Servicing unit for several months, and a deal would help the bank pay back its $7.6B in bailout funds.
• JPMorgan goes global. JPMorgan Chase (JPM) is going up against Citigroup (C) and HSBC (HBC) with plans to launch a global business that will sell loans and commercial banking services to multinational companies. JPMorgan hasn’t yet announced the unit, but sources say it will be hiring around 300 bankers for the unit and will initially focus on rapidly growing economies like China, India and Brazil.
• RBS unit sued over development project. A U.S. real estate developer is suing the Citizens Bank unit of Royal Bank of Scotland (RBS) for $8B. The developer claims that Citizens Bank failed to follow through on its financial commitments, putting a $700M redevelopment project at risk, and that it used an "artifice" of sham defaults to try to collect $180M of loans to alleviate RBS’ liquidity crisis.
• Obama’s tax credit for jobs. Obama plans to announce a $33B tax credit today that aims to encourage small businesses to hire workers and raise wages. He previewed the idea in his State of the Union address, but is now ready to unveil details which include a $5,000 credit for every new worker hired in 2010 and a $500,000 cap per firm.
• EU stands by Greece. The European Union signaled it would provide last-resort backing should Greece need it, as anxious investors drove Greek bond yields up to a record 7.25%. Sources said eurozone governments and the European Commission would be involved in a back-stop but the IMF would not, while France and Germany played down the suggestion that an emergency rescue plan has already been formulated. Meanwhile, Spain is announcing its deficit-reduction plan today in an effort to avoid Greece’s fate.
• AstraZeneca does a slash and burn on jobs. AstraZeneca (AZN) plans to slash 10,400 jobs over the next four years, in addition to the 12,600 jobs it already cut between 2007 and 2009. The pharmaceutical giant is initiating the cuts ahead of an expected drop in profits this year, and a continued struggle to improve revenue going forward. The cuts will save the firm $1.9B annually, against a restructuring cost of $2B.
• Samsung overtakes H-P. Samsung Electronics reported Q4 earnings this morning, swinging to an operating profit of 2.4T won ($2.1B) after sales climbed 37%, but still falling short of expectations. Sales on a consolidated basis reached a record 136.29T won ($118B), putting Samsung above H-P (HPQ) which reported FY ’09 sales of $114.6B.
• Hynix snubbed by investors. Hynix Semiconductor, the world’s No. 2 memory chipmaker, has failed to draw any bids for a controlling stake in the company by today’s deadline. Creditors-turned-shareholders had put a 28% stake up for sale, and this is the second failed attempt to offload the stake.
• Movie Gallery headed to Ch. 11. Movie Gallery Inc., the company that owns the Hollywood Video chain, could file for bankruptcy as soon as next week, marking the movie-rental chain’s second trip to bankruptcy court in just over two years. Sources say Movie Gallery, which is being hurt by changes in how consumers watch movies and television-shows, could close around two-thirds of its outlets, or 1,800 stores. The move could be a potential boon for rivals Netflix (NFLX) and Coinstar (CSTR), but may bode ill for Blockbuster (BBI).
• Windows 7 lifts MSFT. Microsoft (MSFT) posted better-than-expected quarterly results (details below), reporting a 14% rise in sales almost entirely because of the launch of its Windows 7 in October. The product did especially well in markets like Asia and Latin America, but Microsoft executives warned they’re still not seeing a strong rebound in business spending. Netbooks, once seen as a threat to Microsoft’s bottom line, have stabilized at around 11% of the PC market and the vast majority of them are still sold with Windows on them.
• Jobless claims fall. Initial jobless claims declined 8K to 470K vs. 450K consensus. Continuing claims declined 57K to 4,602,000.
• Chicago Fed Index still weak (.pdf). The Chicago Fed National Activity Index registered -0.61 in December vs. -0.39 in November. The three-month moving average was -0.61 vs. -0.68 last month. Most of the weakness continued to stem from consumption and housing. The level of activity remains in a range historically consistent with the early stages of a recovery following a recession.
• Signs of recovery from KC Fed. The Kansas City Fed Manufacturing Index registered 13 in January, vs. a revised 7 in December. The six-month expectations index came in at 35 vs. a previous 17. Growth slowed, though, at durable goods producers, especially computers and electronics. Production is nearly back to year-ago levels. Price indexes have moved up, but pass-through to finished goods prices is limited.

Earnings: Friday Before Open

• Arch Coal (ACI): Q4 EPS of $0.11 misses by $0.06. Revenue of $725M (-0.6%) vs. $728M. Shares -6% premarket. (PR)
• Autoliv (ALV): Q4 EPS of $1.39 beats by $0.59. Revenue of $1.67B (+40%) vs. $1.58B. Shares +5% premarket. (PR)
• Dover (DOV): Q4 EPS of $0.55 beats by $0.06. Revenue of $1.5B (-13%) vs. $1.45B. (PR)
• Fortune Brands (FO): Q4 EPS of $0.66 beats by $0.14. Revenue of $1.79B (+0.6%) vs. $1.67B. Shares -0.4% premarket. (PR)
• Honeywell (HON): Q4 EPS of $0.91 beats by $0.01. Revenue of $8.07B (-7%) vs. $8.14B. (PR)
• Mattel (MAT): Q4 EPS of $0.81 beats by $0.13. Revenue of $1.95B (+0.8%) vs. $1.97B. (PR)
• Newell Rubbermaid (NWL): Q4 EPS of $0.27 misses by $0.01. Revenue of $1.4B (-2%) in-line. (PR)
• PACCAR (PCAR): Q4 EPS of $0.10 beats by $0.03. Revenue of $1.9B (-24%) vs. $2B. Shares +0.3% premarket. (PR)

Earnings: Thursday After Close

• Amazon.com (AMZN): Q4 EPS of $0.85 beats by $0.13. Revenue of $9.5B (+42%) vs. $9B. "Millions of people now own Kindles … And Kindle owners read, a lot. When we have both editions, we sell six Kindle books for every 10 physical books. This is year-to-date and includes only paid books." Sees Q1 revenue of $6.45B-7B vs. $6.36B. Announces $2B stock repurchase program. Shares +2.5% AH. (PR, earnings call transcript)
• Applied Micro Circuits (AMCC): FQ3 EPS of $0.04 in-line. Revenue of $54M (+13%) vs. $53M. Shares +3.7% AH. (PR)
• AsiaInfo (ASIA): Q4 EPS of $0.38 beats by $0.07. Revenue of $76M (+42%) vs. $72M. Sees Q1 EPS of $0.19-0.20 vs. $0.22, on sales of $61M-63M vs. $63.8M. Shares -7.4% AH. (PR)
• C.R. Bard (BCR): FQ3 EPS of $1.39 beats by $0.05. Revenue of $677M (+7%) vs. $675M. (PR, earnings call transcript)
• CA Inc. (CA): FQ3 EPS of $0.43 beats by $0.01. Revenue of $1.1B (+8%) in-line. Names William McCracken new CEO. Shares -0.5% AH. (PR, earnings call transcript)
• Chubb (CB): Q4 EPS of $1.66 beats by $0.20. Net premiums written of $2.8B (-4%). Shares +0.14% AH. (PR)
• Compuware (CPWR): FQ3 EPS of $0.12 beats by $0.02. Revenue of $230M (-14%) vs. $214M. Shares +1.4% AH. (PR, earnings call transcript)
• Genworth Financial (GNW): Q4 EPS of $0.19 beats by $0.09. Revenue of $2.46B (-6%) vs. $2.53B. Shares -1.7% AH. (PR)
• Informatica (INFA): Q4 EPS of $0.25 misses by $0.03. Revenue of $151M (+21%) vs. $139M. Shares +0.97% AH. (PR, earnings call transcript)
• International Coal Group (ICO): Q4 EPS of $0.00 (breakeven) in-line. Revenue of $246M (-5%) vs. $281M. Shares +1.5% AH. (PR)
• Juniper Networks (JNPR): Q4 EPS of $0.32 beats by $0.06. Revenue of $942M (+2%) vs. $885M. Shares +3.7% AH. (PR, earnings call transcript)
• KLA-Tencor (KLAC): FQ2 EPS of $0.28 beats by $0.01. Revenue of $440M (+11%) vs. $438M. Shares +2.6% AH. (PR, earnings call transcript)
• Leggett & Platt (LEG): Q4 EPS of $0.30 beats by $0.06. Revenue of $770M (-13%) vs. $723M. Shares +1.8% AH. (PR)
• Maxim Integrated Products (MXIM): FQ2 EPS of $0.19 beats by $0.01. Revenue of $474M (+15%) vs. $459M. Shares +4.6% AH. (PR)
• Microsoft (MSFT): FQ2 EPS of $0.60 beats by $0.01. Revenue of $19B (+14%) vs. $17.8B. Windows 7 sales – more than 60M licenses through end of Q2 – led to record Windows sales, and the 14% gain to record revenues overall. Sees full-year operating expense of $26.2B-26.5B. "Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth.". Shares -0.7% AH. (PR, earnings call transcript)
• PMC – Sierra (PMCS): Q4 EPS of $0.17 beats by $0.02. Revenue of $140M (+16%) vs. $137M. Shares +6.7% AH. (PR, earnings call transcript)
• Quantum (QTM): FQ3 non-GAAP EPS of $0.07 misses by $0.02. Revenue of $182M (-11%) vs. $180M. Shares -13% AH. (PR, earnings call transcript)
• Rambus (RMBS): Q4 EPS of -$0.22 beats by $0.04. Revenue of $31M (-18%) vs. $28M. Shares -0.9% AH. (PR, earnings call transcript)
• Robert Half International (RHI): Q4 EPS of $0.09 beats by $0.04. Revenue of $737M (-26%) vs. $704M. Shares -0.6% AH. (PR, earnings call transcript)
• SanDisk (SNDK): Q4 EPS of $1.18 beats by $0.49. Revenue of $1.24B (+44%) vs. $1.16B. Shares -6% AH. (PR, earnings call transcript)
• Synovus Financial (SNV): Q4 EPS of -$0.54 beats by $0.05. Net interest income of $1B (-6%). Shares +4.4% AH. (PR)
• Tessera Technologies (TSRA): Q4 EPS of $0.31 beats by $0.18. Revenue of $56.5M (-18%) vs. $56M. Shares -2.7% AH. (PR, earnings call transcript)
• Thoratec (THOR): Q4 EPS of $0.27 beats by $0.05. Revenue of $105M (+22%) vs. $94M. Shares -0.9% AH. (PR)

Today’s Markets

Asia markets drifted lower Friday, but Europe stocks are up and U.S. futures have reversed earlier losses and now suggest a firm open.

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Trader Mark submits:

I will be selling the last of our AsiaInfo Holdings (ASIA) on the open as the stock will be gapping down after tepid guidance. The price is irrelevant as we only kept about $1000 worth (0.05%) of exposure, simply to keep it on our sheets so we keep a closer eye on it. Quick history – we began the current position about half a year ago, and it briefly became our largest position just as one of its competitors was about to IPO in American markets in early December. In a surprise move, the companies merged the day before the IPO, and ASIA jumped 25% overnight where we sold half the position in the low $30s.

The stock then went sideways for a month, peaking in the $32s, and was consolidating the huge move it made so there were no issues technically other than a massive ‘gap’ in the chart created by the overnight surge from the merger. If you are new to technical analysis and want to see what a "double top" looks like, see the chart below – ASIA made a perfect double top with mid-December and Jan 1 intraday highs, and it has been all downhill from there. [double tops are bearish]

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Southhill Partners submits:

Telestone Technologies (TSTC), a small wireless equipment manufacturer in China, has attracted quite some attention since late last year when its stock price ran from below $5 to over $20 in several months. Riding the opportunity of the 3G buildup in China, Telestone Technologies supplies wireless coverage products to the three wireless operator giants: China Mobile (CHL), China Unicom (CHU) and China Telecom (CHA), and is expected to double its revenue and earnings in 2009.

However, TSTC’s stock is notoriously volatile, often moving up or down 10% in a single day. After hitting an all-time high of $24 in January, it plunged to a low of $12 intraday on February 1st and is currently trading at around $20.

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Trader Mark submits:

One of our old Chinese holdings, AsiaInfo Holdings (ASIA), that, for reasons unclear to me, has suffered a bloodbath, is up 10% in early trading on a Goldman Sachs (GS) upgrade.

• Goldman Sachs upgrades AsiaInfo Holdings from Neutral to Buy and added the stock to their Conviction Buy list. The firm set a $31 price target.
• The firm said the company should see 20% year-over-year growth, continued market share gains, increasing cross selling opportunities, an improving competitive environment, and could benefit from potential USD/RMB depreciation in 2010-2011.

If memory serves, Goldman downgraded the stock, which put it into a tailspin in the first place. Must be nice to be able to move a stock whichever direction you need… (Click to enlarge)

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Market Folly submits:

(This post is part of our series on tracking hedge fund portfolios. If you’re unfamiliar with tracking investments they disclose via SEC filings, check out our series preface on hedge fund 13F filings.)

This is the first time we’ve covered Philip Hempleman’s Ardsley Partners so let’s get a brief background. Hempleman founded the firm in 1987 and it is a long/short equity focused hedge fund that uses bottom-up stockpicking (the ideal type of fund for tracking purposes). Ardsley runs various funds including their Offshore Fund, Partners Fund, Partners Institutional Fund, etc and last we heard, they manage over $1 billion.

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Hao Jin submits:

The Dow is back in the bull zone above the critical 10,725 level. According to Charles Dow, co-founder of Dow Jones & Company, when the public mind has a well defined tendency, either bullish or bearish, it is not easily changed. Scores or hundreds of people may change, but the mass press on in the same direction.

Now that the recovery is on the way, corporate IT spending is ramping up. NThe network security sector stands to be beneficiaries of the growth in this market as governments and organizations begin to see the desperate need to meet regulatory and compliance rules.

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Trader Mark submits:

I really like AsiaInfo Holdings (ASIA) (fundamentally) but Goldman Sachs really crushed the stock with a downgrade at the most inopportune time a few months back. Then they upgraded the stock on March 1st, creating a huge surge and gap up. It is almost as if Goldman is playing the stock like a fiddle … must be nice to move a stock (or market) wherever you need it to go.

Since the Goldman upgrade I’ve been torn – should I chase this story? It’s a breakout, after all, but that nasty gap. I see a similar pattern in countless charts now and the next serious cleansing in this market has a lot of "gap filling" to do. But stocks can move ever upward on momentum so the gaps mean nothing… until they do. I obviously decided to not chase it, which has cost me opportunities in other stocks, but saved me some pain in this one. Most likely I would have jumped in just as the stock was about to stall. (Click to enlarge)

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Japan

Mobile/Wireless

• The Japanese government’s plans to lift sim card locking restrictions for mobile phones will lower operator switching costs for end-users in the country. Shares of leading mobile service provider Softbank (SFTBF.PK) slid as analysts expect this new law to favor operators like DoCoMo (DCM), whose network coverage is broader than Softbank’s. DoCoMo had lost many users to Softbank after the latter became the sole reseller of Apple’s (AAPL) iPhone in the country. The new law will allow users who bought the iPhone from Softbank to switch to DoCoMo without any penalties.

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Asiainfo Holdings, Inc. (ASIA)

Q1 2010 Earnings Call Transcript

May 3, 2010 8:00 pm ET

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