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Lemley Yarling Management Co
309 W Johnson Street
Apt 544
Madison, WI 53703
Bud: 312-925-5248       Kathy: 630-323-8422

February 1, 2012

Model Portfolio Value As of 31 January 2012

$ 580,509

Comment on Model Portfolio activity

Mesirow Financial has merged its clearing operations with RBC Clearing Corp. RBC is a wholly owned subsidiary of Royal Bank of Canada, the fifth largest bank in North America. http://www.rbccorrespondentservices.com/index.htm  As a result all of Lemley Yarling Co trades will be cleared through RBC beginning March 2. Clients should have received a package of forms from RBC that need to be completed and signed and returned in the return envelope to Kathy at our Hinsdale Office. If clients have any questions they should call Kathy at 1-800 793-3665 – 8AM to 3PM CST Monday through Friday. The change should be seamless except for the need to set up a new account/password to view accounts online at a new website called Investor Select. There will be a 15 to 25 day lag for the online accounts to be viewable and that should be the only interruption.

Royal Bank of Canada


Through Royal Bank of Canada (RBC) — one of North America’s largest and healthiest financial institutions — RBC Correspondent Services offers the strength and stability you require in a financial partner. Royal Bank of Canada’s credit ratings are among the highest of all financial institutions: S&P: AA-(positive); Moody’s: Aa1; Fitch: AA; DBRS: AA (as of August 26, 2011). RBC is ranked the safest bank in Canada and the safest in North America for the second year in a row (Global Finance, October 2010 and 2011). Based on market cap, RBC is the 11th largest bank in the world and the fifth largest in North America. (Bloomberg as of September 8, 2011). RBC employs more than 74,000 full-and part-time employees who serve more than 15 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 53 other countries. RBC’s financial strength, sound risk management policies, strong balance sheet and diversified business mix have enabled it to withstand many of the market shocks and pressures.

We took our 30% profit in BankAmerica and placed part of the proceeds in the General Motors B warrant which give the right to buy GM stock as $18.33 through July 9, 2019.

Morgan Stanley, owner of the world’s largest brokerage, was upgraded to a “buy” rating by Goldman Sachs Group Inc.  analysts who said the firm may benefit from improvement in the trading environment.

Morgan Stanley was raised from “neutral” and placed on the “conviction list” of top recommendations, the analysts, led by Richard Ramsden, wrote 1/29 in a note to investors.

They also said the shares may rise to $23 in 12 months, 24 percent above the closing price on Jan. 27.

Morgan Stanley posted the only increase in trading revenue excluding accounting gains among the five largest Wall Street banks in 2011, making progress toward Chairman and Chief Executive Officer James Gorman’s goal of boosting market share. The New York-based firm had per-share losses in two of the past three quarters as it took charges to eliminate swap contracts purchased from MBIA Inc. (MBI) and to convert Mitsubishi UFJ Financial Group Inc.’s preferred stake to common shares.

Revenue from Morgan Stanley’s investment banking and trading division will probably rise 13 percent in 2012, excluding one-time items, to $17.4 billion as credit spreads tighten and activity levels increase from a “cyclically depressed” second half of 2011, the analysts estimated. Profitability in that unit may benefit from cost-cutting and lower deferred compensation expenses, they wrote.

The “key concern” for Morgan Stanley is retaining top talent after it reduced compensation and increased deferrals for last year, the Goldman Sachs analysts wrote. The firm cut pay for senior bankers and traders by an average of 20 percent to 30 percent and capped immediate cash bonuses at $125,000, according to people briefed on the plans.

The company will also benefit from lower integration costs at its Morgan Stanley Smith Barney retail brokerage, a joint venture with Citigroup Inc. with more than 17,000 advisers, the analysts said. Morgan Stanley will likely receive approval from regulators to buy an additional 14 percent stake in May, increasing ownership to 65 percent, a purchase that will probably cost $2.7 billion, they wrote.

Morgan Stanley rose 1 cent to $18.57 at 10:10 a.m. in New York trading. The shares have gained 23 percent this year, after dropping 44 percent in 2011.  




January 27, 2012

Model Portfolio Value As of 27 January 2012

$ 583,163

Comment on Model Portfolio activity

Ford reported earnings today and they were good—but not good enough for traders. The shares dropped $1 in early trading and then recovered half. We remain convinced the shares are cheap (eight times earnings in a lousy but recovering economy) and will provide a great reward for the patient. GM also dropped in sympathy and we added GM warrants to accounts.

Ford: http://www.nytimes.com/2012/01/28/business/fords-posts-third-straight-annual-profit.html?hp


January 26, 2012

Model Portfolio Value As of 26 January 2012

$ 587,299

Comment on Model Portfolio activity

We sold half our Alcatel Lucent and Chico’s positions to take advantage of the move higher since year end that moved both issues up to close to break even for us. Symantec announced decent earnings but disappointed going forward and we sold the position and placed the funds in AT&T which has a $6 % yield. To some accounts we also added General Motors A warrants that expire on our wedding anniversary in 2016 and are exercisable at $10. They offer a more aggressive approach to owning GM (1.5 times more volatility) and the premium is only $1 for the four plus years. We also will be adding the B warrants which run till 7/10/2019 and are exercisable at $18.33. They offer twice the volatility of the underlying common. The premium is a seemingly rich $4 but actually for the 7 year time frame and the potential reward we think it is justified.

The markets need a rest and a bit of a pullback.

Former President John Tyler’s (1790-1862) grandchildren still alive:


January 20, 2012

Model Portfolio Value As of 20 January 2012

$ 588,678

Comment on Model Portfolio activity

Morgan Stanley Loss Smaller Than Estimated (Bloomberg)

The net loss was $250 million, or 15 cents a share, compared with profit of $836 million, or 41 cents, a year earlier, the New York-based company said today in a statement. The loss from continuing operations was 14 cents, compared with the 57-cent average estimate of 22 analysts surveyed by Bloomberg. Morgan Stanley posted the only increase in trading revenue excluding accounting gains among the five largest Wall Street banks in 2011, making progress toward Chairman and Chief Executive Officer James Gorman’s goal of boosting market share.

BofA Swings to Profit as Lender Rebuilds Capital (Bloomberg)

Net income of $1.99 billion, or 15 cents a diluted share, compared with a loss of $1.24 billion, or 16 cents, a year earlier, according to a statement today from the Charlotte, North Carolina-based firm. While results were boosted by one- time gains on asset sales and reserve releases, the stock advanced 5.6 percent in early trading as investors focused on the stronger balance sheet. Chief Executive Officer Brian T. Moynihan, 52, is cutting holdings, expenses and staff while raising capital to meet demands from regulators for a larger cushion against losses. So far, $50 billion in assets are gone, and Moynihan’s Project New BAC will eliminate at least 30,000 jobs as the firm seeks to save $5 billion annually. He’s also aiming to quell disputes over faulty mortgages that have cost the bank about $40 billion.

Hartford Financial Services http://seekingalpha.com/article/320284-2-insurance-stocks-to-consider-3-to-avoid?source=yahoo

Provides insurance and financial services on a global basis. Its rating has been upgraded from neutral to a buy rating by Goldman Sachs. More than 30% of Hartford Financial Services' commercial business consists of the small commercial space, where better pricing trends are expected. These trends are not adequately reflected in the valuation of the company's stock, according to Goldman Sachs. If the company's valuation remains constantly depressed, it may cause a split between its property and casualty business and its life companies. This move is expected to increase shareholder value, according to Goldman Sachs. Hartford Financial Services has also been quite aggressive in its buyback program.

The American International Group (AIG) is a competitor of Hartford Financial Services. Hartford Financial Services reported a gross margin of 28% as compared to the 13% reported by the American International group. It also reported higher operating margins and had a price-to-earnings ratio of 7.6x versus the 5.7x shown by the American International Group. Shares of the company are currently trading at $17.6 per share and are expected to reach a price target of $23, indicating a potential upside of around 31%.

The Greece brouhaha is all about Hedge funds versus European governments. The solution proposed is to write down Greek bonds on bank portfolios and exchange for new bonds with higher interest rates longer maturities and less principal. That has usually been how these situations have been handled especially when Sovereign (country) debt is involved. But that was before Credit Default Swaps (CDS). CDS only return profits to holders if the underlying bonds default. But Hedge funds will not benefit from the Credit Default Swaps on Greek debt that they own – to the tune of $4 billion profit – if the settlement of the Greek situation is handled in the manner currently proposed. That is because the settlement will not be considered a default.

And so the hedge funds now want the European Human rights Court to bail them out. Yes the free marketeers are turning to a human rights authority to get their money. This action reminds of all the free marketeers on the floor of the Chicago futures exchange who lost money in the MF Global debacle who now want the government and the Exchanges to step in and make them whole.

The Greek situation was discussed in the NYT yesterday:

Hedge Funds May Sue Greece if It Tries to Force Loss


LONDON — Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.

The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.

The tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so.

Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation — and in Europe, property rights are human rights.

The bond restructuring is a critical element for Greece to receive its latest bailout from the international community. As part of that 130 billion euro ($165.5 billion) rescue, Greece is looking to cut its debt by 100 billion euros through 2014 by forcing its bankers to accept a 50 percent loss on new bonds that they receive in a debt exchange.

According to one senior government official involved in the negotiations, Greece will present an offer to creditors this week that includes an interest rate or coupon on new bonds received in exchange for the old bonds that is less than the 4 percent private creditors have been pushing for — and they will be forced to accept it whether they like it or not.

“This is crunch time for us. The time for niceties has expired,” said the person, who was not authorized to talk publicly. “These guys will have to accept everything.”

The surprise collapse last week of the talks in Athens raised the prospect that Greece might not receive a crucial 30 billion euro payment and might miss a make-or-break 14.5 billion euro bond payment on March 20 — throwing the country into default and jeopardizing its membership in the euro zone.

Talks between the two sides picked back up on Wednesday evening in Athens when Charles Dallara of the Institute of International Finance, who represents private sector bondholders, met with Prime Minister Lucas Papademos of Greece and his deputies.

While both sides have tried to adopt a conciliatory tone, the threat of a disorderly default and the spread of contagion to other vulnerable countries like Portugal remains pronounced.

“In my opinion, it is unlikely that this is the last restructuring we go through in Europe,” said Hans Humes, a veteran of numerous debt restructurings and the president and chief executive of Greylock Capital, the only hedge fund on the private sector steering committee, which is taking the lead in the Greek negotiations.

“The private sector has come a long way. We hope that the other parties agree that it is more constructive to reach a voluntary agreement than the alternative.”

At the root of the dispute is a growing insistence on the part of Germany and the International Monetary Fund that as Greece’s economy continues to collapse, its debt — now about 140 percent of its gross domestic product — needs to be reduced as rapidly as possible.

Those two powerful actors — which control the purse strings for current and future Greek bailouts — have pressured Greece to adopt a more aggressive tone toward its creditors. As a result, Greece has demanded that bondholders accept not only a 50 percent loss on their new bonds but also a lower interest rate on them. That is a tough pill for investors to swallow, given the already steep losses they face, and one that would be likely to increase the cumulative haircut to between 60 and 70 percent.

The lower interest rate would help Greece by reducing the punitive amounts of interest it pays on its debt, making it easier to cut its budget deficit.

To increase Greece’s leverage, the country’s negotiators have said they could attach collective action clauses to the outstanding bonds, a step that would give them the legal right to saddle all bondholders with a loss. This would particularly be aimed at the so-called free riders — speculators who have said they will not agree to a haircut and are betting that when Greece receives its aid bundle in March, their bonds will be repaid in full.

If the collective action clause is used — and Greek officials say it could become law next week — these investors, who bought their bonds at around 40 cents on the dollar, are likely to suffer a loss.

That, in turn, could prompt suits from investors claiming in the Court of Human Rights that their property rights had been violated.

“Because Greece is changing the bond contract retroactively, this can become an issue in a human rights court,” said Mathias Audit, a professor of international law at the University of Paris Ouest.

Not all funds are pursuing such a strategy. Such a case would take years and would have to run its course in Greece before being heard by human rights judges in Strasbourg, France.

But with their considerable financial resources, some funds may be willing to pursue such a route, and they point to similar cases won by hedge funds in Latin America. While the prospect of Greece paying an investor any time soon is slim, the country wants to avoid a parade of lawsuits across Europe, which would restrict its ability to raise money in international markets.

Argentina, which defaulted on its debts in 2002, still faces legal claims from investors that have made it nearly impossible for the country to tap global debt markets.

“It cannot be Angela Merkel that decides who suffers losses,” said one aggrieved investor who was considering legal action and did not want to be identified for that reason. “What Europe is forgetting is that there needs to be respect for contract rights.”

It is not just the legal cudgel that investors are threatening to use. Some hedge funds have discussed among themselves the possibility of demanding a side payment, as they describe it, as a price Europe and Greece must pay if the two want the funds to participate in the agreement.

With the stakes so high, a compromise may well be reached. Germany and the I.M.F. may realize that if the private sector is pushed too hard, the deal will collapse and they will have to pay even more money to keep Greece afloat in the coming years.

Eager to put the issue behind them, private sector creditors may accept a larger loss and exchange their nearly worthless Greek bonds for more valuable securities that would also offer enhanced protection if Greece had to restructure in the future.

As for the holdouts, they could run up millions of dollars in legal bills chasing after Greece in European courts.

But beyond all the byzantine wrangling, a crucial question is how this would benefit Greece. Even with the deal, Greece’s debt would be no less than 120 percent of G.D.P. in 2020 — which seems to be slight progress given the austerity and pain its citizens must endure during this period.

“The real issue is not who participates in the deal,” said Jeromin Zettelmeyer, the deputy chief economist at the European Bank for Reconstruction and Development and an authority on sovereign debt. “The question is whether there is enough debt relief for Greece, and there may not be, because the fiscal and growth situation in Greece is quite dire.”



January 18, 2012

Model Portfolio Value As of 18 January 2012

$ 577,118

Comment on Model Portfolio activity

We added Deutsch Telekom to some larger accounts. DT gets $4 billion from AT&T for the failure of the merger with T Moble. Moreover they may get a leg up in Cloud computing as referenced in this Bloomberg article.

European governments, determined not to lose another technology battle to the U.S., are giving domestic companies a leg-up in the cloud.


France set up a venture in November with companies including France Telecom SA (FTE) and Thales SA (HO) to offer on-demand rental of hardware, software and applications that are “made in France.” The German government is working on stricter data- protection rules that would include as a criterion the location of servers that host often confidential and sensitive user data.

State intervention has picked up since Microsoft Corp. (MSFT) said last June that, as an American company, it must hand data to U.S. authorities under the Patriot Act if asked, even if its files are stored in Europe. At stake is a market valued at $47 billion in western Europe alone by 2015, according to Gartner Inc. (IT) France Telecom, Deutsche Telekom AG (DTE) and Atos Origin are bidding against U.S. suppliers Hewlett-Packard Co. (HPQ) and International Business Machines Corp. (IBM)

“It’s the beginning of a fight between two giants,” Jean- Francois Audenard, Paris-based France Telecom’s cloud-security adviser, said in an interview. “It’s extremely important to have the governments of Europe take care of this issue because if all the data of enterprises were going to be under the control of the U.S., it’s not really good for the future of the European people.”

Europe’s technology companies have fallen behind Google Inc. (GOOG), Facebook Inc. and Apple Inc. (AAPL) in Internet search, social- media and consumer electronics. Henning Kagermann, a former chief executive officer of Walldorf, Germany-based SAP AG (SAP), the largest maker of management-business software, said Europe needs to avoid the same fate in cloud computing.

Salesforce.com, IBM

“I can’t imagine that Europe can afford to leave this field to the U.S.,” Kagermann, now president of Germany’s National Academy of Science and Engineering, said in an interview in Berlin yesterday. “This year will show whether we’re serious about this.”

SAP, its archrival Oracle Corp. (ORCL), and companies such as IBM, Hewlett-Packard, Salesforce.com Inc. (CRM), Amazon.com Inc. (AMZN) and Microsoft are promoting cloud computing as a secure way to outsource services and reduce the need for pricey servers.

In Europe, Deutsche Telekom’s T-Systems unit and France Telecom are wooing clients with the vow to protect their data from the U.S. government. They cite legal provisions, including the Patriot Act, that allow authorities to request data without a court order and to force providers to keep quiet about it toward their customers.

‘Level Playing Field’

The European Commission will this month present tighter data-protection rules to shield individuals from data loss on the Web while at the same time create a “level playing field for companies” by smoothing out differences across European countries. EU Justice Commissioner Viviane Reding said last month that the reforms should inspire the U.S. to also strengthen its privacy regime.

Some governments have proposed measures that may be seen as protectionist. In September, Dutch Security and Justice MinisterIvo Opstelten told the parliament that U.S. companies will be excluded from bidding for IT services by his government because of fears that the U.S. Patriot Act may allow data to be compromised.

As more European clients may request to have data stored locally, U.S. cloud providers may increasingly have to divvy up contracts with local providers.

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company and one of Microsoft’s biggest clients in the region, last year decided to store its data in Germany with T-Systems while leaving Microsoft to run software applications. Jonathan French, a Shell spokesman, won’t discuss why the company chose German servers.

Google Deal

This month, Google won its biggest enterprise contract to date, helping 110,000 employees at Spain’s Banco Bilbao Vizcaya Argentaria SA (BBVA) access its Apps suite, which includes e-mail, calendar, data and Website creation tools.

That deal doesn’t include storing “more confidential” data about clients and the bank’s business as the lender prefers keeping such files under its own control, said Carmen Lopez, director for BBVA’s Innovation Observatory.

Sebastien Marotte, a vice president at Google Enterprise, said that the company would need “strong justification” from U.S. authorities, like alleged crimes, before handing over data.

In the longer term, European companies won’t be able to win global clients with business models based on local regulations, said Gartner analyst Frank Ridder.

“You always have to keep in mind that you’re participating in a model that’s geared toward global application,” he said. “Governments need to understand that if they want to promote cloud computing they have to open up rather than dig in.”

As Big as the Web?

Europe is still a relatively small slice of the global cloud market, which may expand to $241 billion in 2020 from $40.7 billion last year, according to Forrester Research Inc. North

American and Asian telecommunications companies last year outspent European peers on cloud assets, with the latter accounting for only 7 percent of the $13.5 billion investments globally, according to researcher Informa Plc. (INF)

The cloud will become as important as the Internet in maintaining U.S. competitiveness, according to a report that 71 of the nation’s largest technology companies submitted in July to the Obama administration.

Patrik Edlund, a Hewlett-Packard spokesman, said the company’s cloud products are certified to meet various levels of data protection. “We welcome any initiatives to standardize rules and make them more transparent because that actually helps all parties do business.”

T-Systems Wins

IBM spokesman Joseph Hanley said the company makes sure it “works with customers to architect solutions appropriate for their privacy and security needs.”

For now, the U.S. laws are helping Deutsche Telekom, in which the German government owns 32 percent, win cloud business, said Reinhard Clemens, CEO of the T-Systems unit. T-Systems last month added contracts from customers including Promotora de Informaciones SA, Spain’s largest media company, Brazilian insurer Intermedica Sistema de Saude SA, and South African glass manufacturer Consol Ltd.

“The Americans say that no matter what happens, I’ll release the data to the government if I’m forced to do so, from anywhere in the world,” Clemens told reporters on Sept. 12. “That’s why we’re well-positioned if we can say we’re a European provider in a European legal sphere and no American can get to them.”


January 13, 2012

Model Portfolio Value As of 13 January 2012

$ 563,353

Comment on Model Portfolio activity

The major market measures had a nice rally this week until JP Morgan missed its revenue number this morning and that caused profit taking in the markets. The economic numbers remain positive and we expect higher markets.

Since last we wrote we sold a portion of our Ford warrants (our position was overweighed) and spent the proceeds on Huntington Bank. We reduced BankAmerica in some larger accounts where we too aggressive buying in the last week. We also purchased a small amount of Urban Outfitters when it dropped 18% on news it fired its CEO. Founder Richard Haynes took over and obviously fourth quarter revenues and earnings are going to be bad so we will await further info before adding much more. We had a nice trade in the shares last year and hope for the same this year although hope in not an investment metric.


January 10, 2012

Comment on Model Portfolio activity

Juniper pre-announced negative news last night but this morning and analyst recommended the shares and the stock jumped but then backed off. We made a nice trading profit in Juniper in the 4th quarter 2011 and we sold today for another nice but not as much profit. The major market measures are at 4 month highs and there may be a consolidating pullback the next few days. With that in mind we took the gain and switched the funds to Cisco. Cisco is down on an up day because of the Juniper news but Cisco may be taking market share from Juniper and also Cisco’s sales are more broad-based that Juniper’s telecoms focus.

We also swapped the American Eagle we purchased yesterday for GM. We decided that the Sears money should be in GM and we are taking a 25 pennies loss per share to make the switch.


January 9, 2012

Comment on Model Portfolio activity

Our buy of Sears Holding at year end for a quick pop in the New Year failed and we are taking our lumps today and placing the funds in American Eagle which also dropped in the New Year although not as much. We also sold Alcoa for a loss ahead of earnings after the company announced it was closing smelter capacity. We bought more BankAmerica and reinitiated a position in Huntington Banks with the funds.

The economic news has been mostly positive and we continue to believe the markets are heading higher.


January 6, 2012

Model Portfolio Value As of 6 January 2012

$ 546,316


January 5, 2012

Comment on Model Portfolio activity

We switched Oracle at a plus scratch to the Money Center Bank ETF (KBE). American Eagle reported same store sales up 10% but cut earnings 10 pennies and the shares tanked 15%. We had reduced our position last month but since we are fully invested we are not adding shares but still like the stock. BankAmerica popped and we don’t know why. It is cheap.


January 3, 2012

Model Portfolio Value As of 3 January 2012

$ 542,695

Comment on Model Portfolio activity

We ended the year down about 15% with the S&P 500 down 1%. To say we are disappointed doesn’t tell the story. But last year is spilled milk.

We think our performance this year will be positive and if the markets cooperate we hope to outperform. Luckily past performance is not an indication of future performance as the SEC wants us to continually remind folks.

We agree with most of Krugman’s views in that the stimulus package was too small and that talk of balancing the budget is election year rhetoric. Media hype aside there is no comparison between now and the 1930s.  Times are now tough for 15% of Americans (50% in the Depression) but we are sure that our parents would consider present conditions a cakewalk compared to what they and their parents faced in the Great Depression. Social security, Medicare, Pensions, and unemployment insurance provide stimulus to our economy. No such payments existed in the 1930s. Nor was the Defense budget 50% of government spending. Even reduced state and local government spending is a much greater percentage of the economy than back then. The dust bowl wiped out farmers while the vibrant farm economy of the last three years is a greatly ignored story.

We have posited that the European crisis is overblown. And while we don’t like High Frequency Trading- when markets become more bullish HFT will exacerbate the move to the upside just as it did to the downside. HFT exaggerates trends- it doesn’t create trends.

As we begin the year fully invested we wish to review what we own and why we own.

Alcatel Lucent is a multinational company that makes telephone equipment. To understand the stock’s valuation we suggest multiplying by ten. Last year ALU ranged between a high of $7 and a Low of $1.50. (Multiply by ten and the range is $70 to $15) and gives some concept of how oversold is a company that will earn $.20 ($2) and have sales of $20 Billion ($200 Billion). It is priced at book for the first time in history and with a valuation of $4 billion it sells at 25% of total revenues.

One investor’s take: http://seekingalpha.com/article/316014-6-stocks-under-10-to-double-in-2012?source=yahoo

Alcatel-Lucent is a technology company with a significant presence in Europe, and it has fallen by 47% during the last year. The company's global presence is substantial, and many fear that its presence may be a hindrance rather than a luxury, to consistent growth. Therefore, the loss is more speculative than fundamentally driven, because fundamentally the company's had a breakout year in 2011. ALU is trading with its best margins in several years, and the company's first year of net income in more than four years. Yet despite this fact, the stock continues to trade lower and investors fear that because the company lowered guidance, as a precaution, in Europe for the upcoming quarter, that it could be a sign of things to come. I'm expecting very large gains from ALU during 2012: The company's invested a large sum of time and money into its mobile networks and bandwidth services in some of the most underdeveloped, yet most populated, areas of the world.

Alcatel-Lucent has partnerships with two very large telecom companies in both the European and Asian-Pacific regions of the world; and in these regions, the company is developing its 4G LTE technology, and is currently in its "test run" phase in Madrid and Barcelona before offering the service throughout Spain and other countries. The 4G LTE technology may not sound exciting to us in the U.S., but in other highly populated countries with less communication technology, this service is exciting. I believe that Alcatel's strategic plan is both working and will prove to be affective, because while other companies struggle for market share in the U.S, ALU is playing on a much larger field throughout the globe. I expect that as the company's services expand, and it lowers its dependency on the U.S, its revenue, earnings and margins will all improve

Alcoa engages in the production and management of aluminum, fabricated aluminum, and alumina and is a DJIA component. Priced at ten times estimated earnings revenues grew 24% last quarter. Pricing pressure is affecting the short term outlook.

American Eagle Outfitters expects to earn $1.20 this year. Same store sales have been positive in a tough teen market.


American Eagle Outfitters upgraded at Piper Jaffray from Neutral to Overweight. $19 price target. Business trends have remained strong in Q4. American Eagle Outfitters upgraded at Jefferies to Buy from Hold. $21 price target. Normalizing cotton costs now a tailwind.

BankAmerica has problems. Everyone knows that. BAC is not going away and is cheap at $5.50. Warren the Buffet invested $5 billion in BAC at $7 a share in August.

Chico’s (Chico’s FAS, Inc., together with its subsidiaries, operates as a specialty retailer of casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items. The company offers its products under the Chico’s, White House|Black Market (WH|BM), and Soma Intimates brand names. The Chico’s brand sells primarily private branded clothing focusing on women 35 and over) is priced at 90% of revenues and in the past wherever the shares trade below one times revenues that shares have been a buy.

Cisco is the primo networking company and seems to be back in favor among conservative tech investors. Analysts suggest earnings of $1.77 in 2010 and $1.97 in 2013. CEO Chalmers is under pressure to improve performance and he seems to be meeting the challenge.

Dell is the computer maker that we can’t stand owning (computers are dead- iPads are in) and can’t stand not owing (we only buy Dell computers). We are back in it for now. Earnings are expected to exceed $2 this year and with $5 billion net cash and priced at 40% of revenues these shares are compelling- until they aren’t. Michael Dell has been turning the company around after he returned to the helm and our guess is that this year big boy and girls will finally begin to return to the shares.

Ford (common and warrants) is priced at $9 times earnings. Market share is 15% and Ford is earning money is slow economy. Negative opinion mentions Europe as a drag. When-If- the economy recovers Ford can earn $2.50 per share and sell at $20 plus. We own the common and warrants. Warrants expire January 2013 so we will have to take action this year. The warrants give us leverage-both ways.

General Electric is involved in all the future growth right areas of the economy -Solar, wind and nuclear power, water desalinization, a financial arm that weathered the crisis and media communications. With a 3.8% yield form and increasing dividend we expect GE to hit $30 in the next two years.

General Motors is cheap cheaper cheap.

Hartford Financial Services Group, Inc., through its subsidiaries, provides insurance and financial services in the United States and internationally. The company’s Property and Casualty Commercial segment provides workers’ compensation, property, automobile, marine, livestock, liability, and umbrella coverages, as well as customized insurance products and risk management services, including professional liability, fidelity, surety, specialty casualty coverages, and third-party administrator services. Its Group Benefits segment offers employers, associations, affinity groups, and financial institutions with group life, accident and disability coverage, voluntary benefits, and group retiree health products and services. The company’s Consumer Markets segment provides standard automobile, homeowners, and home-based business coverages to individuals, as well as a special program designed exclusively for members of AARP. This segment also operates a member contact center for health insurance products offered through the AARP Health program. Its Global Annuity segment offers individual variable, fixed market value adjusted, and single premium immediate annuities; stable value contracts; and retirement savings, as well as administers investments. The company’s Life Insurance segment sells life insurance products, including variable universal life, universal life, and term life, as well as variable PPLI owned by corporations and high net worth individuals. Its Retirement Plans segment provides government plans to corporations, municipalities, and not-for-profit organizations. The company’s Mutual Funds segment offers retail mutual funds, investment-only mutual funds, and college savings plans; and proprietary mutual fund supporting insurance products. The Hartford Financial Services Group, Inc. was founded in 1810 and is headquartered in Hartford, Connecticut. ITT Hartford Group, Inc. operates independently of ITT Corporation as of December 19, 1995. http://finance.yahoo.com/q/pr?s=HIG+Profile

One opinion:
Arne Alsin-- http://seekingalpha.com/article/315908-my-top-picks-for-the-coming-decade-of-stocks-part-v?source=yahoo  

This is a stock (and a book value) that almost nobody believes in. With a book value of $46.72 and a stock quote around $16, this is a story that begins and ends with one word: Confidence.

Most investors are already familiar with Hartford, the company. Hartford sells individual annuities, mutual funds, and multiple insurance lines, including life, disability, property and casualty. Confidence in the insurance industry – and in Hartford, in particular - cratered during the credit crisis. In 2009, the company borrowed $3.4 billion in TARP monies, paying it back in full in 2010. Just because TARP was quickly repaid, though, doesn’t mean investors have faith in Hartford financials.

It’ll happen in due course. The stock will trade at around one times book someday soon, after investors get comfortable with the quality of book equity and with management’s new taste for risk aversion. The company needs a few quarters of consistent operating performance to turn skeptics into believers.

Funny thing is, much of the worry and angst over the books of financial companies like Hartford is unnecessary. As I’ve said in columns on Citigroup (C) and Bank of America (BAC), financial companies have been thoroughly vetted by regulators, and subjected to all sorts of stress tests (e.g., what happens if unemployment goes to 13%). This is a time when investors should be confident in the accuracy of financials – the time to be nervous was pre-credit crisis, when risk-taking was the norm, when oversight by regulators was sloppy.

If anything, this is the sort of company nervous investors should seek out in the current market environment. Like Citigroup, many of Hartford’s low-return, high-volatility businesses (comprising 30% of operations) have been separated from the core company and are in run-off mode. What is left are high-quality businesses that are healthy and growing.

For 2012, earnings from Hartford’s core businesses (ex-run-off businesses) should be about $3.40 per share, for a PE multiple of less than five. Capital is already being returned to shareholders, a sign that the company is on solid financial ground. Add the dividend yield of 2.7% to the current stock buyback (the company is retiring over 7% of outstanding shares), and the implied yield to shareholders is nearly 10%. It’s just the beginning of good things to come for buyers of Hartford stock

Hewlett Packard is the tech soap opera of 2010 to 2012. Hopefully this year investor confidence will return. Too much value to abandon.

Juniper competes with Cisco. Juniper Networks, Inc. designs, develops, and sells products and services that provide network infrastructure to create environments for the deployment of services and applications over a single network.

For a complete positive analysis see:

Morgan Stanley is a financial holding company, and provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. It operates in three segments: Institutional Securities, Global Wealth Management Group, and Asset Management.

Priced at $16 with a book value of $30 and projected earnings of $2 the shares are priced for catastrophe. There isn’t going to be catastrophe.

Nvidia has been a good trade for us over the past year and we hope that luck continues. NVIDIA Corporation provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. It operates in three segments: Graphic Processing Unit (GPU), Professional Solutions Business (PSB), and Consumer Products Business (CPB). The GPU segment offers GeForce discrete and chipset products, which support desktop and notebook personal computers plus memory products. The PSB segment provides its Quadro professional workstation products and other professional graphics products, including its NVIDIA Tesla high-performance computing products used in the manufacturing, entertainment, medical, science, and aerospace industries. The CPB segment offers Tegra mobile products, which support tablets, smartphones, personal media players, Internet television, automotive navigation, and other similar devices. This segment also licenses video game consoles and other digital consumer electronics devices. The company sells its products to original equipment manufacturers, original design manufacturers, add-in-card manufacturers, consumer electronics companies, and system builders worldwide that utilize its processors as a core component of their entertainment, business, and professional solutions. NVIDIA Corporation was founded in 1993 and is headquartered in Santa Clara, California.


It is a Raymond James pick for 2011:

Company Profile: Nvidia is a visual computing technologies company and the inventor of the graphics processing unit.

Share Price: $13.71 (Dec. 14)

Potential Upside: 104 percent based on a price target of $28

Investment Thesis: Analyst Hans Mosesmann says that the bear case for Nvidia has been overstated and that headwinds won't materialize in the company's fiscal 2013.

"Investors have been increasingly concerned about Nvidia's applications processor, Tegra, and its ability to compete given new dynamics in the tablet and smartphone market," Mosesmann notes.

"In essence, we believe Qualcomm  will be successful in targeting the lower end of the market, but Nvidia's early lead at quad core will allow the company to have meaningful traction for Tegra in FY13."

Oracle is the primo software company. ORCL missed earnings in the last quarter and took a 20% hit to its share price. We bought for a recovery trade.

Sears Holding is Sears and Kmart. Business stinks for them and the shares dropped $15 (30%) in the last two weeks of trading. The share price is volatile because of the small float and lower than it was in the 2009 Crash. We bought small amount of hold//trade.

Symantec is Norton internet security for personal computers also big in company security business. Share price at $16 is down from $26 when tech was hot in early 2011. Trade/hold.

Walgreen is a stock that is cheap with a 2.56% yield. Share price was down 25% last year because it dropped filling prescriptions for Express Scripts. Share price will recover.

Talbot’s warrants are in accounts to remind us that we are human.








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