Stock Picks: Apple, Intel, Aetna, H&R Block

Apple Inc.: Broadpoint AmTech analyst Brian Marshall reiterated his buy rating on shares of Apple Inc. (AAPL) on Mar. 9.

 

In a note, Marshall said the next major catalyst for Apple shares will be the launch of the iPad on Apr. 3. "We believe the general consensus (i.e. select media outlets) view of this device and its potential is overly pessimistic," Marshall wrote. "We note the vast majority of the naysayers have not yet had the opportunity to use the iPad on a firsthand basis."

 

Marshall said the "true genius" of the device is its media and content -- such as eBooks, newspapers, magazines, applications, games, movies and TV episodes -- which he believe will be help provide recurring revenues for Apple.

 

The analyst raised his estimate for calendar 2010 iPad shipments to 4.0 million units from 2.2 million units. He also hiked his calendar 2010 revenue estimate to $57.913 billion from $55.738 billion, and his earnings per share (EPS) estimate to $12.75 from $12.00.

"In our view, Apple remains the best technology company on the planet," Marshall wrote. He raised his price target on Apple shares to $280 from $264.

 

Intel Corp.: Robert W. Baird analyst Tristan Gerra upgraded a rating on shares of Intel Corp. (INTC) to outperform from neutral on Mar. 9.

 

In a note, Gerra said that checks with industry sources point to large PC manufacturers recently raising their procurement forecasts for the first half of 2010, in part due to a rebound in corporate PC spending for 2010. "Intel could outperform semiconductor peers this year, notably those with stretched lead times," Gerra wrote. "Should a gradual recovery in true end-demand prolong the current upcycle, INTC shares should benefit as well."

 

Gerra expects Intel's revenues to rise 15% in 2010, following two consecutive years of revenue declines.

 

"Intel's valuation is compelling, in our view," Gerra wrote. The analyst raised a price target on the shares to $26 from $24.

Aetna Inc.: Collins Stewart analyst Brian Wright lowered his rating on shares of Aetna Inc. (AET) to sell from hold on Mar. 9.

Wright said in a note that he believes near-term pressure on the shares is likely as he see the consensus estimate of Wall Street analysts of $3.12 EPS for 2010 as "too high". The analyst has a $2.60 EPS estimate for Aetna in 2010.

 

"We believe consensus estimates assume a greater degree of gross margin improvement in the commercial business than our modest 30 basis points improvement outlook," Wright wrote. His outlook is for "modest" improvement, based on continued pricing pressures and a cost trend that has accelerated in 2009.

 

The analyst established a near-term target price target of $24 on the shares.

H&R Block Inc.: Oppenheimer analyst Scott Schneeberger reiterated a perform rating on shares of H&R Block Inc. (INTC) on Mar. 9.

On Mar. 8, H&R Block, the biggest U.S. tax preparer, posted a fiscal third-quarter profit that exceeded most Wall Street estimates that were pared after the company said it would miss its 2010 earnings forecast.

 

Net income rose to $50.6 million, or 15 cents a share, for the period ended Jan. 31, from $47.4 million, or 14 cents, in the same period a year earlier. Profit from continuing operations was 16 cents a share, a penny more than the average estimate of nine analysts surveyed by Bloomberg.

 

In a Mar. 9 note, Schneeberger said that H&R Block's third quarter EPS from continuing operations of 16 cents exceeded his estimate of 10 cents. "However, the good news ended there," Schneeberger wrote, as "year-to-date tax metrics through Feb. 28 deteriorated from already disappointing YTD performance through Feb. 15". Schneeberger said H&R Block appears on track to lose over a million storefront customers in fiscal 2010 after losing more than 914,000 in fiscal 2009.

 

Schneeberger also noted that H&R Block management "did not reinstate guidance after pulling it 12 days ago on poor ... YTD results [through Feb. 14]".

 

The analyst maintains a fiscal 2010 EPS estimate of $1.38 and a fiscal 2011 forecast of $1.52.

Hedge Funds Returned 0.5% in February on Stock Market Recovery

March 10 (Bloomberg) -- Hedge funds returned 0.5 percent in February, led by North American managers, as global stock markets rose on signs of recovery in corporate earnings and U.S. interest rates are likely to remain low, Eurekahedge Pte said.

 

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, is down 0.3 percent this year through February, after posting its first monthly loss in four in January, the Singapore-based research firm said in a preliminary report on its Web site. Almost 90 new funds started globally in the first quarter of this year, the report said.

Improved global manufacturing data last month and Federal Reserve Chairman Ben S. Bernanke's indication that he will keep U.S.

 

interest rates low "for an extended period," helped boost hedge-fund returns and pushed the the MSCI World Index 1.2 percent higher in February. A measure tracking North American managers, which make up 65 percent of the hedge-fund universe, led the month's gain, rising 1.4 percent, Eurekahedge said.

 

Bernanke said last month the U.S. economy is in a "nascent" recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus expires. Slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate low, he said. The rate has been in a range of zero to 0.25 percent for more than a year.

Greece Concerns Latin America, Asian and Japanese managers also posted gains of 0.5 percent, 0.2 percent and 0.1 percent respectively, the report showed.

 

The euro's weakness amid speculation of Greece's sovereign debt default sent the Eurekahedge Eastern Europe and Russia Hedge Fund Index down 4.5 percent, while the measure tracking European managers declined 0.7 percent, the firm said.

 

Eight out of nine different strategic indexes rose, with the measure tracking commodity trading advisers known as CTAs gaining 1.3 percent, the best performer. Managers of CTAs benefited from strength in commodity prices as well as the U.S. dollar, the report said. The measure tracking funds that invest in distressed debt was little changed, falling 0.02 percent.

 

Eurekahedge's figures are estimates based on the 39 percent of funds that have so far disclosed performance to the researcher. The firm plans to release full data later this month.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

common stock

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation. In the event of liquidation, common stockholders have rights to a company's assets only after bondholders, other debt holders, and preferred stockholders have been satisfied. Typically, common stockholders receive one vote per share to elect the company's board of directors (although the number of votes is not always directly proportional to the number of shares owned). The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company. Common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives. In addition to voting rights, common shareholders sometimes enjoy what are called "preemptive rights". Preemptive rights allow common shareholders to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that common shareholders with preemptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company. also called junior equity.

 

stock History

During Roman times, the empire contracted out many of its services to private groups called publicani. Shares in publicani were called "socii" (for large cooperatives) and "particulae" which were analogous to today's Over-The-Counter shares of small companies. Though the records available for this time are incomplete, Edward Chancellor states in his book Devil Take the Hindmost that there is some evidence that a speculation in these shares became increasingly widespread and that perhaps the first ever speculative bubble in "stocks" occurred.[citation needed]

The first company to issue shares of stock after the Middle Ages was the Dutch East India Company in 1606. The innovation of joint ownership made a great deal of Europe's economic growth possible following the Middle Ages. The technique of pooling capital to finance the building of ships, for example, made the Netherlands a maritime superpower. Before adoption of the joint-stock corporation, an expensive venture such as the building of a merchant ship could be undertaken only by governments or by very wealthy individuals or families.

Economic historians find the Dutch stock market of the 1600s particularly interesting: there is clear documentation of the use of stock futures, stock options, short selling, the use of credit to purchase shares, a speculative bubble that crashed in 1695, and a change in fashion that unfolded and reverted in time with the market (in this case it was headdresses instead of hemlines). Dr. Edward Stringham also noted that the uses of practices such as short selling continued to occur during this time despite the government passing laws against it. This is unusual because it shows individual parties fulfilling contracts that were not legally enforceable and where the parties involved could incur a loss. Stringham argues that this shows that contracts can be created and enforced without state sanction or, in this case, in spite of laws to the contrary.[6][7]

 

 

Stock derivatives

For more details on this topic, see equity derivative.
A stock derivative is any financial instrument which has a value that is dependent on the price of the underlying stock. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm's stock, e.g. single-stock futures.

 

Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally not delivered in the usual manner, but by cash settlement.

 

 

A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black Scholes model.[5] Apart from call options granted to employees, most stock options are transferable.

 

Types of stock

Stock typically takes the form of shares of either common stock or preferred stock. As a unit of ownership, common stock typically carries voting rights that can be exercised in corporate decisions. Preferred stock differs from common stock in that it typically does not carry voting rights but is legally entitled to receive a certain level of dividend payments before any dividends can be issued to other shareholders.[3][4] Convertible preferred stock is preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Shares of such stock are called "convertible preferred shares" (or "convertible preference shares" in the UK)

New equity issues may have specific legal clauses attached that differentiate them from previous issues of the issuer. Some shares of common stock may be issued without the typical voting rights, for instance, or some shares may have special rights unique to them and issued only to certain parties. Often, new issues that have not been registered with a securities governing body may be restricted from resale for certain periods of time.

Preferred stock may be hybrid by having the qualities of bonds of fixed returns and common stock voting rights. They also have preference in the payment of dividends over common stock and also have been given preference at the time of liquidation over common stock. They have other features of accumulation in dividend.