Investing Ideas November 2014

Yum Brands,parent of Kentucky Fried Chicken and Pizza Hut,has been upgraded from hold to buy at Janney Capital Markets,mainly on undervaluation.The firm got a new price target of 88.00 a share.*
Don't expect Apple Computer to go higher,according to Pacific Crest Securities.There is a potential lack of growth beyond the iPhone 6,and the iWatch and other products won't be able to make up for it.*
Lumber Liquidators was raised from equal weight to overweight at Morgan Stanley,with an 85.00 a share price target.The company has about 10% square footage growth and powerful store remodel/relocate benefits in its favour.Rising home prices and lower fuel costs should also help Lumber Liquidators.*
The low gas prices should also help big box retailers such as Target and Best Buy,says Stifel Nicolaus.Another plus is the strength of their online businesses alongside their brick and mortar stores.Wal-Mart has already seen share price appreciation from these factors.*
Yum Brands(YUM),Best Buy(BBY),Wal-Mart(WMT),Target(TGT),Apple Computer(AAPL)

Wal-Mart Stores:Focus and Future

Wal-Mart Stores has named Doug McMillon the next CEO of the world's largest retailer,replacing the retiring Mike Duke in January.Arkansas native McMillon,47,had worked his way up from unloading trucks at a warehouse to being head of Wal-Mart's international division as President and CEO of Wal-Mart International.
Mr.McMillon's position is a CEO training program,said analyst David Schisk of Stifel Nicolaus.He's had a taste of different opportunities and challenges.This appointment is very much expected.The CEO of Wal-Mart is essentially a major political job,on top of everything else.*
Wal-Mart needs to have a focus on being the best to their core customer.They don't have to take over the planet for growth's sake.It's a massive company.What we're seeing Wal-Mart and the entire industry focusing on is omnichannel,which is using your mobile phone to help you shop more efficiently.*
I think Wal-Mart is doing a better job of cooperating internationally,rather than competing,adds David Kelly of JP Morgan Asset Management.The working age population is declining in most of the developed world.You've got to be in the emerging markets,and in emerging markets beyond China-in Vietnam and Indonesia.*
Wal-Mart has done just that by acquiring a controlling stake in South African retailer Massmart.Massmart is listed on the Johannesburg Stock Exchange.It has about 290 stores in 14 countries,most of them in South Africa.It also manages 8 wholesale and retail chains,including Game;Dion;Makro;Shield;and CCW.
Founded in 1990,Massmart is Africa's third-largest distributor of consumer goods;the leading retailer of general merchandise,liquor and home improvement equipment and supplies;and the leading wholesaler of basic foods.
South Africa is a fast-growing market,but troubled by a high crime rate and unemployment.*
Wal-Mart Stores Inc(WMT),Massmart Holdings Ltd(MSM:SJ)

Should You Invest in Yahoo

Yahoo beat Wall Street expectations for both profit and overall sales in Q4,with a roughly 4% gain in sales.Display ads alone brought in 520 million dollars in revenue,which was down 10% on the year;but search revenue was 427 million,up from 376 million a year ago.
Eric Jackson of Ironfire Capital said Yahoo is gonna be the AOL of 2013.I think Yahoo has really been trucking along nicely.This year,there is a possible sale of Yahoo's stake in China's Alibaba.com,plus the monetisation of Yahoo Japan.
Marissa Mayer,Yahoo's fifth CEO in four years,is clearly focused on mobile,but it will take years.They're gonna focus on small acquisitions-companies with 50 employees or less whom they can partner with.Yahoo can actually partner with anyone-even Apple or Google.
Ms.Mayer,37,who had been one of Google's founding employees, is a genuine star of the business world.She's injected some dynamism into a company Wall Street had all but given up on.
Yahoo shares are at a three year high.Stifel Nicolaus raised the stock from a hold to a buy Monday.Yahoo closed flat at 19.34 in Monday after hours trading.
Yahoo Inc(YHOO)

What HP Needs From Meg Whitman

Despite beating estimates for both sales and profit,Hewlett-Packard posted an outlook for 2012 below what they were looking for.The pc business was down 2% in Q3,and printing was off about 10%.It looks like the company is resetting the bar,says analyst Aaron Rakers,CFA,Managing Director at Stifel Nicolaus.A lot of downward revisions have already been baked into the stock,and people are hopeful for upward revisions now.
Under new CEO Meg Whitman,the company is keeping the pc business and its economies of scale,leveraging the volume of what the pc business brings.Job One for Meg Whitman is resetting expectations.She must also bring cohesiveness to HP's management team.
Mr.Rakers is neutral on the stock.In order to upgrade it,he needs to feel comfort with the various competitive dynamics across HP's business segments.
Meg Whitman replaced Leo Apotheker in the top job at the firm.She had been CEO of eBay and a candidate in the 2010 California governor's race.
Hewlett-Packard(HPQ)

Conference Board Charts Downdraft

The Conference Board's Consumer Confidence Survey registered 87.3 last week-a drop from 105.3 a year ago,and down 8.3 from last month.A combination of high gas and food prices,coupled with a decline in home values and a nervous stock market,are giving consumers their most cautious frame of mind in two years.Billionaire Wilbur Ross of W L Ross and Company says the consumer is quite a bit overstretched.Spending has exceeded income growth for the past six years.Donald Ratajczak of Morgan Keegan feels that the pressures should create a recession,but the economy's internal dynamics have allowed for absorption to this point.Still,there is a 50-50 chance of a consumer-led recession.Goldman Sachs(GS) issued an analysis upping the chance of a recession to 40-45%.Gross Domestic Product growth will be below trend for an extended period-through 2008.Unemployment will rise to 5.5% from 4.7%.The housing downturn will worsen,and credit availability will decline.To Joe Battipaglia of Stifel Nicolaus,the U.S. is going through financial difficulty that will affect the general economy.We may be in a recession right now.That bonds are outperforming stocks is an indication of this.The equity risk premium is only 2.25%,yet the slowing economy suggests there is actually more risk than that.The correction of stock prices could have as much as 15% more to go.You'll see more rate cuts.Financial institutions will write more losses off.The economy won't pick up till the end of next year and into '09.A growth portfolio should contain 50% U.S. equities,25% international equities and 25% short term,risk averse instruments and gold.David Rosenberg of Merrill Lynch(MER) puts the odds of recession at 60%.Financial and brokerage stocks are already pricing it in.The Federal Reserve is pushing on a string,as we are in a rare environment of national real estate deflation and a credit crunch.Robert Albertson of Sandler O'Neill thinks the market will fall another 15%.The Federal Reserve can't do much about the mortgage problem.You should stockpile cash,as there is no pressing need to buy stocks right now.If you must buy them,then defensive areas such as tech and health care would be best.The iShares Lehman Brothers SHY and TIP bond funds have been good refuges for cash this year.

Wary Sentiment Wells Up

For the past several days,a wary mood has been expressed by Wall Street analysts.David Greenlaw of Morgan Stanley(MS) notes a powerful flight to the safety of government bonds.Banks are still tightening credit,which will slow the economy over the next several quarters.Peak foreclosure on homes will not occur until mid-2008.Jack Ablin of Harris Private Bank thinks the world has changed now.There is the high price of oil coupled with the weak dollar.The trend has changed.As the Federal Reserve lowers interest rates,the price of commodities spikes.Fifteen of twenty commodities have gained over the past six months.Billionaire Wilbur Ross of W L Ross and Company says we are in the fourth or fifth inning of the crisis.It will be at least a few more years until foreclosures and write-downs end.More credit card and loan delinquencies are being recorded,which suggests that consumers are tapped out.Oppenheimer's Michael Metz feels we are in for a period of very slow growth.This will last for about two years,as we've been in a leveraged economy.The big growth wasn't real.Now we will see a period of 1-1.5% growth.To Joe Battipaglia of Stifel Nicolaus,we are in a contraction from housing,and consumption will be weak for some time.It will take years to work this out.Housing prices are just beginning to fall.The biggest consumer asset is losing its value.Credit is harder to get,so the market is properly going down.We've only dropped 5% in home prices so far.The clock is ticking on 600 billion of mortgages,so he is staying in a lot of cash and some multinational stocks.Cash has been pouring into money market funds,sending them to record levels.Oppenheimer offers its customers the Advantage series of funds.Other stable funds are TIAA-Cref Instit MMF/Retail and Vanguard Tax-Exempt MMF.Procter and Gamble(PG) and Johnson and Johnson(JNJ) are favored multinational stocks.