Siemens CEO Sees ‘Many Open Questions’ in Alstom Talks: Spiegel

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Siemens CEO Sees ‘Many Open Questions’ in Alstom Talks: Spiegel 2014-05-11 11:20:22.130 GMT

By Christoph Rauwald May 11 (Bloomberg) -- Siemens to evaluate risks and opportunities for a potential deal before deciding whether it should make a concrete offer for Alstom at month-end, Spiegel cites CEO Joe Kaeser as saying in interview. * NOTE: Merkel Ally Says Germany Shouldn’t Intervene in Alstom Deal

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporter on this story: Christoph Rauwald in Frankfurt at +49-69-9204-1146 or crauwald@bloomberg.net To contact the editors responsible for this story: Chad Thomas at +49-30-70010-6232 or cthomas16@bloomberg.net Ash Kumar, James Amott

>>> Will History Record The Ending Of QE As An Archduke Moment?

Will History Record The Ending Of QE As An Archduke Moment? One can’t help but look at the situations transpiring around the globe and hope: things are different this time. The problem is being different puts it right back in line with that other caveat: history doesn’t repeat itself, but it does rhyme. And so lies the most troubling aspect facing not only the U.S. economy, but quite possibly the world as whole. For if things rhyme anything inline with past events in history: We’re all in a dung heap of QE based minutia, with Geo-political ramifications the “intellectual” crowd never contemplated as possible – let alone probable.

It was just a mere 4 years ago this month in which then Fed. Chair Ben Bernanke announced to the world via his now infamous Jackson Hole speech that QE would basically be adulterating the financial markets indefinitely. i.e., QE1 became QE2 signaling QE4eva. And since that time the Federal Reserve has done just. And as always that decision was heralded by the financial media as “genius.”

And why wouldn’t they since this would now afford them a seemingly never-ending revolving set of happy faced hedge fund managers that could tell the world how they were just making a killing for their investors. Everything once again seemed just ducky. “Don’t fight the Fed.” again became the clarion call. However what most of these “wizards of smart” couldn’t read past their teleprompter is that the world may turn and fight them – literally.

The distortions in financial markets throughout the world have been breathtaking to anyone who’ll look using a thimble full of common sense. As the emerging markets became overheated and searched for ways to deal with hot money inflows wreaking havoc within their own markets. The Fed. and crew kept the pedal down, year, after year seemingly not giving any notion of care that others may retaliate in ways never contemplated by the intellectual crowd. i.e., War.

Just look at recent comments made by now Fed. Chair Janet Yellen in her most recent appearance before Congress as reported by ZeroHedge™:Yellen Warns Of Small Cap Bubble. I read that headline and thought: Are you F’n kidding me?! I then took to the media channels to see if anyone called out that statement as proof the Fed. has no idea of what they are doing and counting on the media as to not point it out. It seemed I was correct for the silence was in fact – deafening.

If one thinks back to nearly every single testimony given as proof that QE was working you’ll recall Mr. Bernanke state, (I’m paraphrasing) “Just look at the Russell 2K.” Now suddenly a mere 5 months after his departure when the media et al gave his steady hand a sycophantic waving of goodbye, no one reports as to elaborate the glaringly obvious admittance by the new Fed. Chair? No one?

Revelations such as this along with the sheer unwillingness (or worse – incomprehension) of others to question such out right contradictory assessments must also be leaving others as slack-jawed as much as myself. But (and it’s a very big but) there are others that see such ineptitude, rudderless, contradiction in monetary, as well as political: as opportunity.

Nothing rallies a nation faster than the threat of an enemy. And nothing serves a political class born of dictators than using any and every tool at their disposal as to rally the glaring eyes of political unrest and affix it to another as to release their ire. And what better straw-man has the world offered the tyrannical powers of the world at large than the interventionist monetary policies of the Federal Reserve via their QE program.

Attach to this the mighty response as a “show of strength” in unison across the globe that sanctions along with freezing accounts is the openly decided upon tool more powerful than armies, or weapons.

To the multitude of uninformed as well of as misinformed people under these regimes. This is propaganda made to order in ways that even Goebbels would blush.

One can’t help but find the timing hauntingly coincidental that Vladimir Putin decided the window of opportunity to make his move on former parts of the Soviet Union was in near unison with the Fed. revelations that in fact QE was being wound down. i.e., In February when the announcement of the 2nd $10 Billion dollar reduction made manifest that in fact the QE wind down was on schedule. (A schedule many across the financial media said wouldn’t happen.) Now economies such as Russia and others would find themselves once again at the center of any political unrest, while simultaneously being economically hamstrung screamed opportunity to use it to their advantage with Machiavelli inspired actions.

Tag onto this that other land mass with far more people to cast political upheaval than Putin has to contend with: China.

Suddenly the economy touted as “the” economy that will save us all is not only slowing, it’s contracting at a pace far more quickened as a direct result of QE being pulled.

One has to search far and deep to find just how bad and the frightening instability within their financial system that could take down world markets in a free fall under the right circumstances.

The issue here is these circumstances are not a million to one, they could be as high as 1 in 10. The U.S. “intelligentsia” seems absolutely oblivious to these facts or even the notion that such could transpire. Yet, suddenly that trading partner that every one of our so-called “smart crowd” regurgitates “they need us as more than we need them” is publicly taking the side, drawing up trade deals, and standing for photo ops with: Russia. Seems they have something in common suddenly don’t you think?

I marveled the other day when I found myself in a heated argument with others in respects to the events of today and how they’re playing out. Every time a point was brought about on how or why the circumstances along with the possibility for WWIII breaking out in earnest was met with sheer contempt, as if such things were ancient history.

Even when it was pointed out the display this past week by Soviet forces in assorted missile launches coupled with the now seemingly joined at the hip China sending in armed protection provoking retaliation or provocation in both U.S. friendly Japan and Vietnam territories: it was brushed aside.

Used as defense was the ludicrous notion that things like this aren’t as probable any more since economically we’re all dependent on each other as never before. That’s why the monetary policies since WWII has kept that type of balance in check. Personally I was left once again – mouth agape.

Even when the notion was interjected we could see a Bay Of Pigs styled replay at any given time, and that alone could bring on consequences no one has a clue about. Once again it was met as if all the powers that be are in fact “all-powerful” and can handle things with little to no disruption of any significance using , Greece, Spain, and even our own conflicts such as Iraq and more as validation.

I wonder how many besides myself felt quite unnerved when none other Iran was put back into the spotlight openly thumbing their nose in a way that Mussolini could identify with when none other than China publicly endorsed their relationship.

WWI began in earnest just about a month following the Archduke’s demise. Russia invaded Crimea in about the same time-frame. Couple with that the quickness of communist leaders publicly displaying solidarity reminiscent of events that transpired at the beginning of WWII. And the outright visible show of armament and the willingness to display it prominently under the noses of Western alliances suggestive of The Bay Of Pigs, and I guess there’s really no need for concern. After all we’ve got the latest and greatest deterrent the world has ever seen: #hashtags.

Telegraph : Investors tell Astra to engage

Investors tell Astra to engage
Osborne to take 'hard-nosed’ approach on Pfizer, while leading scientist backs US drugs giant’s stance

Shareholders in AstraZeneca have told the company’s management they must engage with Pfizer if and when the US drugs giant returns with a higher offer.
The Telegraph has learnt that a number of major investors who have met chief executive Pascal Soriot in recent days are understood to have told him that a higher offer must not be rejected without full engagement.
Previous approaches from Pfizer — the most recent a £63bn proposal 10 days ago — have been dismissed almost immediately by the board of the British company.
The insistence on communication came at follow-up meetings to Mr Soriot’s defence presentation on Tuesday last week, at which he set out his thoughts on AstraZeneca’s future pipeline.
Feedback at the meetings is said to have been largely positive.

The vast majority are said to have been comfortable with the rejections of the indicative proposals to date, and pleased that the executive has now set out details to allow the company to be properly valued.
Pfizer is expected to return with a higher offer towards the tail-end of this week, raising the cash element of its original approach from 30pc to approximately 40pc, in part as a result of the falling value of its share price following disappointing results last week.
News of investors’ intentions — no discussions on a potential take-out price are thought to have been had at the meetings — came as George Osborne, the Chancellor, upped the rhetoric ahead of a series of select committee appearances for both companies on Tuesday and Wednesday this week.
Ian Read, Pfizer’s chairman and chief executive, and Mr Soriot are due to appear before the Commons business select committee on Tuesday, followed by the science select committee a day later.
Mr Osborne said that he would take a “hard-nosed” approach in order to establish what a deal between Pfizer and AstraZeneca might mean for British jobs.
Speaking on BBC Radio 4’s Today programme, the Chancellor said: “My job is to create both a really competitive place for businesses to come to Britain and create jobs in Britain. And we’re seeing those jobs being created.
“But I’m also, on the specifics, prepared to get in the room and have a hard negotiation with very large companies and be very, very, hard-nosed about what we want to deliver in terms of good British science and good British jobs.”
Mr Osborne went on to say that the UK is an “open economy” and defended the tax system which is one of the key drivers of Pfizer’s approach.
His comments are expected to be echoed by David Cameron, the Prime Minister, who is expected to appear on The Andrew Marr Show on BBC One on Sunday morning.
Mr Osborne was being interviewed at roughly the same time as Pfizer released a series of short videos featuring Mr Read, answering questions with regard to its intentions.
Mr Read said in the videos that a takeover of AstraZeneca would be a “win-win” for shareholders, stakeholders and society, and that a combination of the two pharmaceutical giants would strengthen their abilities to meet patients’ needs and bring drugs to market sooner.
He explained that the deal was motivated by three drivers; AstraZeneca’s strong drugs pipeline; cost cutting; and the strength given to the combined balance sheet through the lower tax base the UK provides.
Meanwhile a leading Cambridge professor has broken ranks with the scientific community, saying efforts to characterise the US pharmaceuticals giant as a “praying mantis” were unfair and that Britain owed a debt of gratitude to the company.
Steven Ley, professor of organic chemistry at Cambridge and former president of the Royal Society of Chemistry, defended Pfizer’s record against a volley of criticism of the company and the proposed takeover.
Politicians and leading scientists have savaged the potential deal, amid fears that Pfizer could cut jobs and spending on research and development in Britain.
However, Prof Ley, who has worked as a consultant for Pfizer, spoke up for the American business, saying that the sustained attacks were out of kilter with reality.
“Talking about broken promises and calling Pfizer a praying mantis — these sound-bites do not resonate well with me,” he told The Telegraph.
“This is a company I have been involved with for many years and known it to be highly ethical and supportive of the science base across the world.
“The whole UK economy and health of our nation have benefited from Pfizer’s substantial contribution,” Prof Ley added.

Barron's What to Do When the Market Plays Hard to Get

What to Do When the Market Plays Hard to Get

The market is sending mixed signals -- so much so that analysts and fund managers have made some pretty bad calls. But the outlook isn't as gloomy as many think. Plus: A good time to buy HollyFrontier.

Like an eligible bachelor who refuses to settle down, the market's sending mixed messages and driving investors crazy.

The Standard & Poor's 500 index has come to a virtual standstill, giving investors the opportunity to play "she loves me, she loves me not" with each data point and price swing. Last Thursday, for instance, the benchmark fell 0.1%, despite a large drop in first-time jobless claims, while the 10-year Treasury yield hovers near its lowest level in 10 months. For those inclined toward melancholy, it's easy to imagine that a slower economy, deflation, and a bear market lurk just around the corner.

But what if the market is just playing hard to get? Sure, overpriced market favorites like Twitter (ticker: TWTR) and Groupon (GRPN) and once-surging small companies have plunged, while ultrasafe utilities have topped the list of best-performing sectors so far this year, suggesting investors are running scared. But not all investors: Energy stocks like ConocoPhillips (COP) and Halliburton (HAL), which benefit from a stronger economy, are flying high. And heavily shorted stocks, which should be dropping if the market is really heading for a fall, haven't suffered in the past two months, suggesting that pockets of optimism remain.

These mixed signals have been especially painful for the pros. Some 90% of large-company value and growth funds have lagged their benchmarks this year, far worse than last year's 56%. The stocks with the highest ratings from analysts have lost 2.4% this year, while their least-favorite companies have gained 3.5%, according to Bespoke Investment Group's Paul Hickey. And even retail investors have bought into the doom and gloom, as they've poured nearly $1 billion back into bonds in the week ended on April 30, while pulling $4 billion out of U.S. stocks.

Such caution is understandable -- no one likes to be played for a fool, after all -- but are these signs as contradictory as they seem? Consider the recent plunge in small stocks. The Russell 2000 has dropped 8.4% since it peaked on March 4, while the S&P 500 has ticked up 0.2%. To some, the Russell's collapse portends trouble, because it means that the bigger stocks are driving the rally, and it's only a matter of time before they fall, too. But if that were the case, the smallest stocks in the S&P 500 should be lagging as well, says Doug Ramsey, chief investment officer at the Leuthold Group. They're not. The equal-weighted S&P 500, which includes as much of the $3 billion International Game Technology (IGT) as it does the $500 billion Apple (AAPL), has dropped just 0.3%, a fraction of a percent lower than the S&P 500's rise. "When you get glaring weakness in small caps, people jump to the conclusion that this is the end," Ramsey says. "It doesn't mean the game is over."

The drop in U.S. Treasury yields might be more worrisome, if only because the bond market has a reputation for being smarter than stocks. Yet, the falling yield doesn't have to mean that something's wrong with the U.S. economy. In fact, Deutsche Bank strategist Alan Ruskin has a list of reasons for the low yields, including the Federal Reserve's large holdings and ongoing buying, pension-fund rebalancing, and short-covering. Even the never-ending standoff in Ukraine could be driving some investors to the safety of U.S. bonds. And those low yields, rather than being a sign of turmoil ahead, could actually give the economy -- and stocks -- a boost if they stay low. Says Ruskin: "It should be very positive for U.S. equities."

ENERGY STOCKS HAVE BEEN hot this year, but the love hasn't been spread equally. So-called exploration and production companies and oil-field services firms have notched double-digit gains, while offshore drillers like Noble (NE) and Transocean (RIG) have been hammered. Refiners, however, occupy a middle ground.

HollyFrontier (HFC) looks particularly interesting. The performance of the Dallas-based refiner has been a disappointment recently, and for good reason. Last Tuesday, HollyFrontier said that its first-quarter profit had been cut in half from a year ago, and it missed analyst earnings forecasts by a penny. As a result, its shares dropped 5% last week.

The future looks brighter, however, says Credit Suisse analyst Edward Westlake, who upgraded the stock last week. For starters, Holly refines oil drilled in the Permian Basin -- an area that encompasses parts of western Texas and the southeastern corner of New Mexico. Production in the region has been booming, so its oil is cheaper than elsewhere, which should juice Holly's margins. The refiner also has about $1.8 billion in cash on its balance sheet to keep paying its 2.4% dividend yield, as well as periodic special dividends, Westlake says. Yet, it trades at just 11.3 times 2014 earnings, well below the S&P 500's 15.9. If Westlake is right, Holly could trade as high as $62, up 26% from Friday's close.

No mixed message there.

>>> Italian Government could sell STM stake to Fsi (Fondo Strategico Italiano,)

Italian Government could sell STM stake to Fsi (Fondo Strategico Italiano,)

The Italian government could sell its 13.75% stake in listed European electronic chip producer STMicroelectronics to Fondo Strategico Italiano, Italian daily Il Sole 24 Ore reported, citing unspecified sources. This was part of a long report which mainly quoted Fsi head Maurizio Tamagnini, which has been appointed in the supervisory board of STM, as talking about some M&A deals in Italy. The report said that Tamagnini is in pole position to become STM chairman

A previous report said that the Italian government could make EUR 700m from the deal.

A previous item noted that the Italian government holds the stake indirectly via ST Holding, a vehicle in which it holds a 50% stake. The report said that the other 50% stake in ST Holding is held by the French government


Source Il Sole 24 Ore

>>> Mediaset mulling last-minute rival bid for Prisa’s DTS

Mediaset mulling last-minute rival bid for Prisa’s DTS

Spanish media group Prisa may receive a last-minute bid for DTS from Mediaset, despite having reached an agreement to sell its 56% stake to Telefonica, ABC reported.

Prisa announced that it had accepted a EUR 725m offer from the listed Spanish telco on 8 May for its stake in DTS, a pay-TV provider known commercially as Canal+.

According to the ABC report, which cited people with knowledge of the situation, Mediaset is considering tabling a counter offer over the next two weeks, the amount of time Spanish law gives it to submit a rival bid.

Both Mediaset and Telefonica both currently own a 22% stake each in DTS, the item noted.


Source ABC

(BN) Apple’s Cook Pursuing Beats Seen Presaging More Big Takeovers

Apple’s Cook Pursuing Beats Seen Presaging More Big Takeovers
2014-05-10 04:01:00.6 GMT


By Peter Burrows
     May 10 (Bloomberg) -- Tim Cook is making a habit of
breaking with Apple Inc.’s past.
     The chief executive officer is overseeing talks to purchase
Beats Electronics LLC, the headphones and music service company
founded by music-industry executive Jimmy Iovine and hip-hop
artist Dr. Dre, for $3.2 billion, people with knowledge of the
matter have said.
     That goes against the playbook of Apple co-founder Steve
Jobs, who never paid more than a few hundred million dollars for
an acquisition, choosing to buy small companies designed to
bring in technology and talent. Buying Beats will also signify
Cook’s willingness to use Apple’s $150.6 billion in cash more
aggressively, according to Gene Munster, an analyst at Piper
Jaffray Cos. in Minneapolis.
     “This opens the door to do more mergers and acquisitions,
and I think you’ll see more deals around content and products,”
Munster said.
     Apple’s possible targets include Yelp Inc., payments
company Square Inc. and Twitter Inc., Munster said.
     Until now, Cook has closely followed Jobs’s mergers
strategy. The Cupertino, California-based company has bought 24
companies over the past 18 months, mostly small.
     The biggest-ever acquisition was the $400 million Apple
paid in 1997 to buy Next Computer Inc. as part of a deal to
bring Jobs back to the company. Since then, the largest known
purchase was Anobit Technologies Ltd., a flash-memory drive
maker, for about $390 million two years ago.

                         Modus Operandi

     A deal to buy Beats would be unlike anything Jobs ever did,
and shows that Cook is taking his predecessor’s advice to heart.
“Just do what’s right,” Cook recalled Jobs telling him before
his death in 2011. Cook said the Apple co-founder told him not
to worry about what he would do.
     Cook has already been putting his stamp on Apple since
taking over, introducing dividends and share buybacks and
rolling out a corporate philanthropy program. Apple is also
sharing more information about its environmental efforts and
labor conditions in its supply chain.
     “This appears to be the first time they are acquiring
another brand, which hasn’t been their modus operandi,” said
Todd Lowenstein, a money manager at Highmark Capital Management
Inc. in Montecito, California. “At this deal value, this would
mark the largest acquisition in its history and a material
divergence from past strategy.”
     Tom Neumayr, a spokesman for Apple, and Sarah Joyce, a
spokeswoman for Beats, declined to comment. Faryl Ury, a
spokeswoman for Square, and Rachel Walker, a spokeswoman for
Yelp, declined to comment. A Twitter representative didn’t
immediately respond to requests for comment.

                           Big Targets

     Lowenstein and some other investors are questioning why
Cook would choose Beats as the company to break the mold. With
annual sales of around $1 billion, the Santa Monica, California-
based company won’t deliver meaningful top-line growth relative
to Apple’s revenue of $170.9 billion in its latest fiscal year,
even if Beats were to grow 50 percent a year, according to
Charles Wolf, an analyst at Needham & Co.
     “I don’t think investors care at all about the $3.2
billion,” Wolf said. “They might care if Apple did a $50
billion acquisition.”
     Apple shares barely budged on news of the Beats deal. The
stock fell less than 1 percent to $585.54 at the close in New
York.

                          Brand Appeal

     With Beats, Apple would also bolster its online music
services as the market for downloads, which Apple dominated,
slows. Music has long been one of the cornerstones of Apple’s
business, with its iTunes store and the iPod player that
reignited the company’s growth more than a decade ago. Apple has
also rolled out iTunes Radio, an advertising-supported streaming
service that competes with Pandora Media Inc. and Spotify Ltd.
     While Beats would be too small to jump-start growth, the
deal would indicate that Apple is more serious about selling
more content and services to its customers to make up for slower
sales of mobile devices, according to Colin Gillis, an analyst
at BGC Partners LP in New York.
     “This would be a step toward building a services layer,”
Gillis said. “Why not just buy Spotify? Go for the big boy in
the market.”
     Maintaining a separate brand might also help Apple appeal
to a younger audience that no longer thinks Apple is cool,
Gillis said. Still, 67 percent of U.S. teens said their next
smartphone would be an iPhone, according to Piper Jaffray.
     Another benefit of a deal would be bringing Beats co-
founder Iovine closer into Apple’s fold. The 61-year-old music
producer was instrumental in helping Jobs hone the strategy that
enabled iTunes to dominate the music business.
     “Apple seems to want to burnish its brand with a younger
demographic and Dr. Dre and Jimmy Iovine have done a great job
of branding those headphones,” Mike McGuire, an analyst at
Gartner Inc., said. “Tim Cook has been alluding to new products
coming soon, maybe they are feeling they need to round their
lineup a bit.”

For Related News and Information:
Apple Said Near Buying Beats Electronics for $3.2 Billion
FIFW NSN N5BP326KLVRF <GO>
Apple Said to Prepare Song-ID Feature for IPhone Software Update
FIFW NSN N45GO56KLVRF <GO>
Carlyle Group Buys Minority Stake in Dr. Dre’s Beats Electronics
FIFW NSN MTS7806K50XS <GO>
Apple income charts: AAPL US <EQUITY> FA Q IS CHART <GO>
Apple relative value: AAPL US <EQUITY> RV <GO>
Top Technology Stories: TTOP <GO>

--With assistance from Scott Moritz in New York and Sarah Frier
and Adam Satariano in San Francisco. 

To contact the reporter on this story:
Peter Burrows in San Francisco at +1-415-617-7191 or
pburrows@bloomberg.net
To contact the editors responsible for this story:
Pui-Wing Tam at +1-415-617-7327 or
ptam13@bloomberg.net
Reed Stevenson, Stephen West

NY Post Apple-Beats deal all about red-hot music exec Iovine

Apple-Beats deal all about red-hot music exec Iovine

Apple’s expected deal to buy Beats Electronics for $3.2 billion is really about one man — Jimmy Iovine.
The tech titan was so anxious to snag the 61-year-old music industry veteran that it made one of its largest acquisitions ever in order to do it, sources tell The Post.
In the business, it’s called acqui-hiring — the acquiring of a company just to hire its key human assets.
Tim Cook, Apple’s CEO, hopes Iovine, the head of Universal Music Group’s Interscope, Geffen and A&M labels, wants to blast the Cupertino, Calif., company into a new era in the music subscription streaming business.
Iovine helped the late Apple co-founder Steve Jobs create the multibillion dollar iTunes download business — now 11 years old.
That model has served Apple well — earning it boatloads of profits — but downloads are now in decline and a new idea is needed.
Iovine is being drafted to drive Apple into the $1 billion streaming music business, which globally grew 51 percent in 2013, according to the IFPI.
Global download revenue fell 2.1 percent.
“The electronics are a drag-along,” said one music source. “They want Jimmy and they wanted streaming.”
Ironically, Iovine pitched Jobs on a subscription music service years ago in partnership with MTV, sources said.
Jobs said they had it all wrong and wanted to stick with iTunes, sources said.
“Jimmy is much more of a ‘Steve-type’ person and Cook is the operator,” said one source, explaining the rationale behind the hire. “They have no larger-than-life characters, and people in the music business respect Jimmy.”
Iovine had been trying to sell the business for years to both HTC and Sony, sources said.
Sony/ATV CEO Marty Bandier cheered the move, saying, “We look at this as a real opportunity to grow an interactive streaming business. Apple has finally arrived.”
Apple is expected to announce its eye-popping $3.2 billion Beats Electronics acquisition in the next week, with some expecting Beats co-founders Iovine and Dr. Dre to show up at Apple’s Worldwide Developers Conference on June 2.
Investors were not initially too excited about the proposed pick-up as Apple shares barely budged on Friday, closing down 0.4 percent, to $585.54.
Iovine is still negotiating his way out of a UMG contract — but Apple is keen to get him on board as soon as possible to repair its relationships with the labels after failing to make iTunes Radio a success.
Iovine’s hire may threaten Robert Kondrk, vice president of Apple iTunes Content, music industry sources said.
At the same time, Apple’s acquisition of Beats music-streaming service may put pressure on Google to buy a music-streaming service of its own — with many believing Spotify, which is prepping for a fall public offering, being the most likely, sources said.
Google already has a big slice of the music-streaming business in YouTube and is readying a second subscription business through its leading video streaming site.
It also operates Google Play Music All Access, a streaming site.

Barron's : Gundlach, Einhorn, Ackman: What the Smart Money Is Buying Now

Gundlach, Einhorn, Ackman: What the Smart Money Is Buying Now
Stocks earning a thumbs-up at last week's annual Sohn conference included Humana and Moody's.

The 19th annual Sohn Investment Conference last Monday in Manhattan featured a slew of stock picks and a handful of pans from some famous investment managers, including headliner David Einhorn of Greenlight Capital, who took a shot at athenahealth (ticker: ATHN), a highflying electronic medical-records company that he thinks could fall as much as 80% from its recent high. Given his strong record of Sohn short recommendations, including Lehman Brothers in 2008, Einhorn's critique sent shares of athena down 15% on Wednesday, to $108; they finished the week at around $113.

Bill Ackman of Pershing Square recommended Fannie Mae (FNMA), while Larry Robbins of top-performing Glenview Capital was bullish on managed-care operators Humana (HUM) and WellPoint (WLP). Philippe Laffont of Coatue Management talked up Liberty Global (LBTYA), the European cable-TV giant controlled by John Malone, while Zach Schreiber of PointState Capital was bearish on domestic oil but bullish on a pair of refiners, Valero Energy (VLO) and Marathon Petroleum (MPC), that would benefit from cheaper feedstock.

Bond maven Jeffrey Gundlach of DoubleLine Capital argued that demographic and income trends don't support U.S. housing bulls. He recommended that investors short a basket of housing stocks. Longtime hedge fund manager Paul Tudor Jones lamented the plight of "macro" investors like himself, who depend on volatile stock, bond, and currency markets at a time of unusual global calm. There was even a plug for Gazprom (OGZPY), Russia's natural-gas giant, from Jim Grant of Grant's Interest Rate Observer.

THE SOHN CONFERENCE, which raises money for pediatric cancer research, attracts strong support from New York's hedge fund community. Einhorn, a regular presenter at Sohn, said that athenahealth is representative of "bubble stocks" in technology that have become untethered from fundamentals. The company is unprofitable based on GAAP accounting (generally accepted accounting principles), and yet had a market value of $8 billion at its peak in February, when the stock topped $200.

Bulls, Einhorn said, justify athena's valuation by using outlandish growth projections stretching out a decade or more, and by comparing it with other stocks that trade at rich multiples, based on revenue. Operating in a highly competitive market, athena has weak margins and "falling earnings estimates," Einhorn said. He added that the company amounts to a "service business, not a software business," as bulls maintain, and thus lacks any meaningful operating leverage.

Robbins, in prefacing his bullish comments on Humana, joked that "there's an alarming outbreak of old people in the U.S." One of Humana's major businesses is providing managed care to the elderly through the increasingly popular Medicare Advantage program. He said that Humana, then trading around $110, was valued around 11 times his 2015 earnings projection of $10 per share, adding that his estimate could turn out to be $1 too low. Robbins said that Humana, WellPoint, and other managed-care companies "have weathered the storms" and should benefit from new members coming from Obamacare, as well as programs to enroll more dual-eligible Medicare/Medicaid recipients. WellPoint, he added, should get a boost from regaining control of its pharmacy-benefit management business in 2019, which could add $2 a share to earnings. The business was sold to Express Scripts under a 10-year deal in 2009. Robbins also recommended Monsanto (MON), arguing the company's genetically modified seeds will continue to take market share.

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David Einhorn of Greenlight Photo: Eduardo Munoz/Landov
Ackman, one of Fannie Mae's largest holders, said the mortgage giant, which was put into conservatorship by the U.S. government in 2008, along with Freddie Mac (FMCC), could rise to $23 or more from a recent price of $4. The fate of Fannie Mae and Freddie Mac is mired in politics amid congressional proposals to wind them down and develop alternative ways to backstop the American mortgage market.

Ackman argues that Fannie Mae has a great low-risk business in guaranteeing home mortgages and that the best alternative for Uncle Sam is to allow Fannie and Freddie to survive and build their capital, to avoid a repeat of their collapse during the financial crisis. He maintains that the government would benefit from such an approach because it owns almost 80% of both Fannie and Freddie through warrants. "We're prepared to sit down and make a deal tomorrow," Ackman added.

LIBERTY GLOBAL WAS LAUDED by Coatue's Laffont because of its strong position in the European cable-TV market; its shareholder-friendly management, led by Malone; and its takeover appeal to a host of potential buyers, including Vodafone (VOD) and perhaps even Comcast (CMCSA). Laffont contended that the shares, now at about $42, could hit $100. European cable providers have a lot of room to grow because they're less dominant in providing video and broadband services than their U.S. counterparts.

Liberty Global should benefit from the rollout of bandwidth-heavy services such as streaming video, as companies like Netflix expand in Europe. Laffont said Liberty trades for just 11 times free cash flow, and that the company is likely to aggressively repurchase shares in coming years. "We have incredible confidence in management," he added.

Gundlach called the single-family housing market "overrated." He said that it had gotten artificial support from cash buyers, including companies formed by the likes of Blackstone Group (BX), but that those purchasers are pulling back. "The argument for pent-up demand is dubious," Gundlach argued, pooh-poohing the theory that young people who put off buying homes in the wake of the 2008-'09 financial crisis will storm into the market. "Where are the first-time buyers?" he asked. Amid weak incomes and higher apartment rents, it's tough for young adults to save for a down payment. It's no wonder that sales of new single-family homes have been persistently weak. Pressure on the housing market could come from sales by aging baby boomers, too. Gundlach is also skeptical of the widespread view that annual housing starts, now running below one million units, will rebound. "For the rest of my career, we may never see a year of 1.5 million starts again," he said. Starts topped two million in 2006. He suggested that investors short the SPDR S&P Homebuilders ETF (XHB).

Grant made a case for what he called a "reviled business," Gazprom, the Russian behemoth that controls about 17% of global natural-gas reserves. The risks, he said, are "too obvious" for a company that "is an instrument of Vladimir Putin's not universally popular foreign policy." Gazprom's appeal is a superlow valuation—less than three times projected 2014 and 2015 net income—and profits that, Grant joked, come "after stealing." Noting that "good things happen to cheap stocks," Grant said positive developments could include a long-term deal to supply gas to energy-hungry China. Based on reserves, Gazprom is valued at less than 10% of ExxonMobil (XOM), and has a dividend yield of about 5%.

PointState Capital's Schreiber said U.S. crude prices, now around $100 per barrel, "are going lower, much lower." With the nation's production projected to rise by one million barrels a day in both 2014 and 2015, "an ocean" of oil could form in the middle of the country, depressing the price of the U.S. benchmark, West Texas Intermediate. It could drop as low as $80 a barrel without prompting drilling cutbacks, Schreiber predicted. Refiners like Valero and Marathon Petroleum could benefit because they purchase U.S. crude and sell petroleum products based on higher global prices. They have free-cash yields of about 11%; shareholder-friendly managers who are returning cash to holders through dividends and buybacks; and opportunities to sell assets, at attractive prices, to master limited partnerships that they control, he concluded.

Paul Tudor Jones said that times are tough for macro investors. "This is as difficult a year as I have ever seen in my career," he lamented. His fund is down about 4% in 2014, The Wall Street Journal reported. A key reason is low volatility as the Federal Reserve and other major central banks keep short rates near zero. Tudor Jones said the Treasury market's recent reaction to strong April employment data was a big surprise. "You had everything you wanted for fixed income to get killed, and yet at the end of the day bonds closed up."

CHRIS SHUMWAY of Shumway Capital recommended Moody's (MCO) because of its high returns; good growth prospects; and duopolistic market position with rival Standard & Poor's, which is owned by McGraw-Hill Financial (MHFI). "We focus on long-term after-tax returns, and Moody's fits that to a T," he said. He maintains that Moody's can turn mid-single-digit revenue growth into a 20% annual total return on its stock through operating leverage and share buybacks. In his view, Moody's, now trading at about $80, could have 80% upside.

Mariko Gordon of Daruma Capital recommended a trio of stocks. Electronics for Imaging (EFII) is a play on the shift to digital printing, she said, adding that its shares, recently around $38, could hit $60. H.B. Fuller (FUL), a maker of specialty adhesives, is getting a lift from a management team that has stabilized margins in the face of volatility in raw-materials prices. Gordon sees upside to $70 for the stock, recently around $47. Her third pick, Pacira Pharmaceuticals (PCRX), is a play on its postoperative pain killer, Exparel, a longer-acting form of a generic drug. Gordon sees increasing use of Exparel leading to a potential doubling in the stock from a recent $75.

The Sohn conference sponsors an annual investment-presentation contest judged by Einhorn, Ackman, and others. The winner this year was a Columbia University M.B.A. candidate, Michael Guichon, who pitched Fiat (FIATY), arguing that the Italian auto maker, which owns Chrysler, is significantly undervalued. "It's the cheapest auto manufacturer in the world," he said, trading for about three times earnings before interest, taxes, depreciation, and amortization. Guichon says Fiat is inexpensive, based on potential profits and a sum-of-the-parts analysis that reflects its valuable high-end Ferrari, Alfa Romeo, and Maserati franchises, as well as Chrysler. Guichon likes management, led by Sergio Marchionne, and says profits could hit 2.5 euros a share by 2016, versus 74 European cents last year. His price target is €16.50 ($22.83), just over double the recent quote of €8.

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Michael Novogratz of Fortress Investment Group recommended Brazilian stocks, which have fallen from favor in recent years amid an economic slowdown, stubbornly high inflation, and problems at state-controlled Petrobras (PBR). Though he didn't offer specific stock picks, he said the market looks appealing and could get a lift if Brazil's President Dilma Rousseff loses her re-election bid this year.

EVEN THE BEST INVESTORS make bad calls— something to keep in mind when assessing the Sohn speakers' selections. Many of last year's picks and pans were unexceptional, as the table on this page shows.

Several of the bullish recommendations trailed the Standard & Poor's 500, which rose 16% in the past year. Notable winners were Level 3 Communications (LVLT), up 90%, and Google (GOOGL), 25%. The biggest loser was Dex Media (DXM), the Yellow Pages company, which fell 44%.

Jim Chanos' idea of shorting disk-drive makers Seagate Technology (STX) and Western Digital (WDC) didn't pan out; they rose 19% and 43%, respectively. Nor did Gundlach's short recommendation for Chipotle Mexican Grill (CMG), up 42%. But Jon Jacobson of Highfields Capital was on target with his bearish call on Digital Realty Trust (DLR), an owner of buildings that house server farms for cloud-based computing and other services. It fell 21%.

FT : Pfizer launches fight back against AstraZeneca takeover critics

Pfizer launches fight back against AstraZeneca takeover critics

21 Aug 2009, San Diego, California, USA --- Scientist Joan Cao works in a lab at Pfizer on Friday, August 21, 2009 in San Diego, CA. Many pharmaceutical companies are in a race to find cancer killing drugs. --- Image by © Sandy Huffaker/Corbis©Corbis
Pfizer has launched a fight back against critics of its proposed £63bn takeover of AstraZeneca but did not make any fresh promises on jobs or investment despite pressure from the UK government for stronger commitments.
Instead, Pfizer reiterated its intention to keep a big presence in the UK and said the deal would be a “win-win” for shareholders and patients.

The comments from Ian Read, Pfizer chairman and chief executive, signalled an attempt to get back on the front foot after a week in which the proposed takeover has faced mounting resistance from politicians and scientists.
In a video statement on Saturday, Mr Read said the strength of AstraZeneca’s UK-based science and its plan to build a new research centre in Cambridge was one of the main attractions for buying the company.
“By combining these two companies we . . . strengthen the ability to bring products to patients,” he said. “I see this as a win-win for society, a win-win for shareholders, and a win-win for stakeholders.”
Pfizer has promised to keep 20 per cent of the two companies’ combined research workforce in the UK for at least five years after a merger, but critics have highlighted the company’s record of making big cuts to R&D after previous takeovers.
George Osborne, UK chancellor, on Saturday said he would take a “hard-nosed” approach to any deal. “We have to make sure those are real promises that we can hold them to,” he told BBC Radio 4’s Today programme. “My only interest in the potential bid that Pfizer might make for AstraZeneca is securing good British jobs and good British science.”
Mr Read is due in London on Tuesday and Wednesday to be quizzed by UK lawmakers in separate hearings by parliament’s business and science committees.
In his video statement, he said: “When we looked at AZ, we liked their science. We liked where their science is being done, which is in the UK, and we know we have good science in the UK in the Cambridge, Oxford, London and other universities.”
David Cameron, UK prime minister, this week floated the possibility of expanding government powers to subject the proposed deal to a “public interest test” but Mr Osborne on Saturday said the UK must remain an open economy.
“We have benefited enormously from foreign companies like Tata coming in and turning around our car industry or Nissan creating its cars in the north east of England,” he said. “AstraZeneca itself, of course, is a British company that grew by taking over foreign companies.”
Mr Read admitted there would be cuts in some parts of the two companies but said this would be good for society as well as shareholders by increasing efficiency.
“Governments are all around the world pressurising the industry to produce products of higher value and with more productivity, at lower cost,” he said. “One way of doing that is to consolidate and is to take out overlapping functions.”
Political scrutiny of the proposed deal has spread across the Atlantic in recent days with some Democrats on Capitol Hill critical of Pfizer’s plan to shift its tax domicile to the UK to escape higher rates in the US.
Mr Read said tax and cost savings resulting from the merger would allow the company to invest more in science.
Mr Osborne told the BBC that the UK’s so-called patent box tax break that Pfizer has cited as an incentive for buying AstraZeneca would only benefit the US company if it was “generating real intellectual activity in the UK”.
AstraZeneca, Britain’s second-biggest pharmaceuticals company, has so far refused to enter talks over what would be the biggest foreign takeover in UK history.
However, there is widespread expectation among investors that Pfizer will return with an improvement on its latest £50-per-share cash and stock proposal before the May 26 deadline for it to make a firm bid.
Mr Read said the deal would allow AstraZeneca shareholders to “get an immediate benefit from the cash that we would pay them, it allows them to participate in a very strong combined company with great cash flows and great portfolio, and it allows a very efficient allocation of capital by my company.”
Dismissing concern from AstraZeneca over the risks involved in such a big takeover, Mr Read said he thought it would be “easy” to integrate the companies’ research operations.
His statement came a day after Pfizer announced a research partnership with several top UK universities to hunt for cures to rare diseases. The tie-up with scientists from Cambridge university, Imperial College London, King’s College London, Queen Mary University London, University College London and Oxford university was portrayed by Pfizer as further evidence of its commitment to UK science.