(Barron's) 4 Oversold Stocks to Buy (CREE, LL, HIBB, UNFI)

4 Oversold Stocks to Buy
The names highlighted here have fallen by more than 15% this year. Yet all have recently received at least two upgrades from analysts.

The U.S. stock market is trading near all-time highs, but there are some recent markdowns to be found. Among companies large and small in the Standard & Poor's 1500 Composite index, 168 have suffered share-price declines of at least 15% so far this year. Over the past month, 33 of these have attracted ratings upgrades from at least one analyst, according to FactSet.

Some of these are minority opinions. Whole Foods Market (ticker: WFM ), which has slashed its earnings guidance amid rising competition from both organic specialists and traditional grocers, has attracted two upgrades but four downgrades. For Dick's Sporting Goods ( DKS ), whose results have been dragged down by weakness in golf clubs and guns, the ratio is 1-to-7. Most are cases in which just one analyst has sweetened on shares; examples include GameStop ( GME ), Panera Bread ( PNRA ), Eaton Vance ( EV ), Kansas City Southern ( KSU ) and Arch Coal ( ACI ).

We found exactly four cases, however, of stocks that have fallen 15% this year and been the subject of more than one recent analyst upgrade.

* Cree ( CREE )
Down 22% YTD
3 upgrades, 0 downgrades
Cree specializes in light-emitting diodes, or LEDs. LED light bulbs last about six times longer than compact fluorescent bulbs and use half the energy. They're also more durable. And unlike fluorescents, they aren't made with mercury and harmful gases. But they cost more up front. Cree makes LED components and chips for other manufacturers and has been growing its own brand of LED lighting, which analysts say is causing tension with some of its component customers. The company has managed to top earnings estimates in recent quarters, but the bar has been moving lower. A year ago, Wall Street predicted Cree would earn $1.86 in its current fiscal year, which runs through this month. Now it says $1.64.

Gabelli & Company upgraded the stock to Buy from Hold in May, noting that while the timing of market adoption for LED lighting is uncertain, and could depend on prices moving lower, the long-term growth outlook is promising and Cree is a market leader. Shares trade at 26 times projected earnings for the coming fiscal year. Cree holds cash equal to one-fifth of its stock-market value.

* Lumber Liquidators Holdings ( LL )
Down 25% YTD
2 upgrades, 0 downgrades
Lumber Liquidators is the largest seller of hardwood flooring in North America and has expanded into other products such as vinyl and tile. It has just over 340 stores, and management says it can ultimately expand to more than 600 stores. Wall Street predicts yearly earnings growth of more than 20%, on average, over the next five years. Shares tumbled after the company reported first-quarter earnings that fell well short of estimates, blaming weather. Estimates for the current quarter have dipped slightly due to a spilling over of bad weather early in the quarter, but those for future quarters are unchanged. Investment bank Stephens upgraded the stock to Overweight from Equal Weight in May, citing high returns on equity, plenty of growth potential and a cash surplus. Shares trade at 23 times this year's earnings forecast and 18 times next year's.

* Hibbett Sports ( HIBB )
Down 20% YTD
2 upgrades, 0 downgrades
Hibbett Sports specializes in smaller markets, insulating it somewhat from competition by larger chains like Dick's and mass merchants like Wal-Mart. The company turns about 13 cents of each sales dollar into earnings before interest and tax, versus eight cents for Dick's. Shares have traded lower on a slight earnings miss last quarter amid weak results in general for retailers.

Sidoti & Company, which raised its rating on the stock to Buy from Hold last month, predicts that Hibbett will grow its store count by 60% through the early part of next decade and that margins will push higher starting next year. Hibbett trades at 19 times this year's earnings estimate of $2.89, with that number expected to grow more than 70% over the next four years.

* United Natural Foods ( UNFI )
Down 15% YTD
2 upgrades, 0 downgrades
United Natural Foods has been dragged down with organic grocers, but as a wholesaler, it's one step removed from price competition in stores. Its cost-plus contracts give it steady profit margins, and with exposure to both specialty stores and traditional grocers, it benefits from rising demand for organic and natural products, no matter where customers shop. Whole Foods contributes 36% of sales, versus 34% for independents and 25% for traditional grocers, and so is large enough to negotiate for lower prices, but its contract runs through 2020, according to investment bank Jefferies. Meanwhile, strong sales growth for a handful of natural-food producers, like WhiteWave Foods ( WWAV ) and Hain Celestial Group ( HAIN ), bodes well for industry-wide demand. Shares sell for 26 times projected earnings for United's current fiscal year, which runs through July.

RTR - Big Tobacco squares up as EU rules aim to track every cigarette

(Reuters) - It takes a British American Tobacco (BATS.L) factory machine three minutes to load 4 million cigarettes onto a truck in northern Bavaria - but it can take a lot longer to figure out whether those cigarettes end up where they should.

So the EU is asking tobacco firms to do more to track and trace their goods, in order to tackle a huge black market and ultimately prevent some of the 700,000 deaths each year in the EU from smoking-related diseases.

The legislation, which takes effect over the next two years, is part of a package that also slaps no-holds-barred pictures of the health effects of smoking on packets, and bans menthol. Alongside it, an international treaty ratified by 178 countries - the Framework Convention on Tobacco Control (FCTC) - aims to ensure similar measures are introduced right across the world.

There's one problem, however: The big international tobacco firms - Philip Morris International (PM.N), British American, Japan Tobacco (2914.T) and Imperial Tobacco (IMT.L) already use a track and trace system called Codentify, developed by Philip Morris, which they say works perfectly well.

They do not want to have to add costly third-party systems to their massive operations, which turned out more than 2 trillion cigarettes last year.

"Our biggest concern is proprietary solution providers pushing unproven solutions on to governments," said Daniel Hubert, BAT's supply chain tracking and verification program manager and a director of the Digital Coding & Tracking Association (DCTA), a group made up of BAT, Philip Morris, Japan Tobacco and Imperial.

But tobacco industry critics say Codentify is simply not good enough, because it focuses too much on production and does not store product codes or track them. Last year Luk Joossens, advocacy officer of the Association of European Cancer Leagues, and Anna Gilmore, director of the University of Bath's Tobacco Control Research Group, published a report listing the system's technical and ethical limitations.

"Codentify is not up to the task and worse than that, it puts the fox in charge of the hen-house," Gilmore told Reuters.

In response, Big Tobacco acknowledges that Codentify only does part of the job, and says critics fail to include third-party technology used alongside it to make it fully compliant.

EU member states have two years to bring their national legislation into line with the new tobacco directives. So most of the new rules will apply in the first half of 2016. In the interim, experts are analyzing the feasibility and cost of a range of alternative track and trace options from security printing companies and IT/data processing companies, and will report back at the end of the year.

For now it is not clear what they will recommend, but industry sources doubt Codentify will be adopted without at least significant changes.

"There's a lot of resistance to allowing the tobacco industry to use its own technology," said Euromonitor International analyst Shane MacGuill.

WHO MAKES POLICY?

Track and trace technology aims to pinpoint cracks in the supply chain where cigarettes fall into illicit trade, which according to the WHO, makes up about 10 percent of the global tobacco market, robs governments of over $30 billion a year in taxes and undermines public health goals with a cheap supply.

In order to comply with the EU laws, governments must impose complex control systems on manufacturers that track every pack from factory floor to store shelf, through all the hands it passes with details such as time and place of production, intended market, names of buyers and payment records.

The industry has reason to help. By stamping out illicit trade, it would recoup millions in annual revenue lost to counterfeits and lower the chances of costly "seizure payments" when its goods turn up contraband.

Over three days in March, private investigators working for Philip Morris say they made 23 purchases of illicit tobacco in London's central borough of Westminster, from well-known international brands to so-called illicit whites - fake cigarette labels made outside the EU especially for smuggling.

"If we're finding product here, what is it like elsewhere in more of the deprived areas?" said Will O'Reilly, a former Detective Chief Inspector with the Metropolitan Police now working for Philip Morris, the world's No. 1 tobacco company.

In 2012 Philip Morris donated 15 million euros ($20.42 million) over three years to Interpol - the world's biggest police force, which had total operating income of 70 million euros that year - to help it fight the black market.

Interpol says the donation was in full compliance of its rules which allow it to accept private money "when it is in the best interests of the organization to do so ... and when Interpol itself decides how the money is to be used."

But skeptics say that help from the industry allows it to maintain influence with governments and public agencies.

This is particularly worrying, they say, given historical evidence of links between the industry and smugglers: Several cigarette makers have been accused of oversupplying markets with porous borders on the edge of the EU, or other low-tax markets, in order to benefit from the additional revenues.

In 2004 Marlboro-maker Philip Morris struck a $1.25 billion deal with EU regulators to end a legal dispute over its role in smuggling cigarettes into the bloc. Japan Tobacco, maker of the Winston and Camel brands, settled a similar dispute in 2007, and BAT and Imperial, maker of Gauloises, reached voluntary agreements with EU regulators in 2010. Their combined payments were around $2 billion.

SCALE OF THE CHALLENGE

The industry's current standard, Codentify, which is used in 50 world markets, focuses on product authentication, volume control and tax verification. It does not store codes, create a database or register the product's journey - hence critics' claims that the system is inadequate.

Back at BAT's plant midway between Berlin and Munich, Bernd Meyer, head of manufacturing for Western Europe, oversees operations that track cartons of Lucky Strikes and Pall Malls from production line to first customer, usually a wholesaler.

However, shipments often pass through several independent distributors after that, and gathering that information is the biggest challenge.

Another difficulty is tracking individual packs - which are packed inside cartons that are fitted into cases that are placed onto pallets, which are loaded onto trucks that leave Bayreuth, BAT's largest factory by volume, at a rate of about 40 per day.

Meyer says he is in the process of implementing changes expected to cost 100 million to 200 million euros, some of which relate to track and trace.

With the Codentify technology Meyer is installing, the Digital Coding & Tracking Association says each production line will have a code generator that feeds into a central server overseen by a government. Each pack would be printed with unique codes, which would link to the codes on cartons and cases and be scannable in transit - allowing the government and customs agents to trace its journey.

"We are intensifying our work in this area," Meyer told Reuters. "It's a lot of money because you have to equip every single machine with that track and trace technology."

Nonetheless, critics still question whether Codentify meets the independence test, especially that of the FCTC, which states that "obligations assigned to a party (country) shall not be performed by or delegated to the tobacco industry."

To get around this, the industry says it is willing to hand over Codentify's intellectual property or open itself to audits. "We're open to any level of inspection," said BAT's Hubert, on behalf of the DCTA.

THE PRICE OF INDEPENDENCE

Any alternative system will be pricey, insiders say.

"By definition, any system where they self-regulate and where they choose the functionality they want is going to be cheaper than any system that comes from the outside," said Christine Macqueen, director of corporate affairs for SICPA, a Swiss company that sells rival authentication technology.

It is also likely to be multi-layered as countries will have different needs and thus need different functionalities.

Several different options are on the table at the moment.

SIPCA, which operates a tobacco tracking programs in Brazil and Morocco and could benefit from Codentify's rejection, says it offers among other things data aggregation from pack to carton and carton to master case, and supply chain visibility by consolidating data from SICPA systems and other sources.

Britain's De La Rue (DLAR.L), which also makes banknotes and passports, provides authentication systems alongside track and trace solutions that include tax stamps, although some in the industry worry that affixable stamps can be removed.

In fact, the EU's feasibility experts are more likely to recommend standards or business requirements than specific technologies, says Michael Eads, president of Sovereign Border Solutions, one of the companies carrying out the EU's feasibility study.

Their aim, he added, is to find a standard that takes into account not just the mandates of law enforcement and public health but also consumer protection and business efficiency.

"That's the holy grail," Eads told Reuters, then added: "Whether or not we can achieve that with this particular project, I'm not sure."

NY Post : T-Mobile honcho scoffs at AT&T-only Amazon phone

Jeff Bezos’ new Amazon phone is getting panned before it’s even unveiled.
One issue is Amazon’s plan to sell the new phone, which is slated to launch on Wednesday, exclusively through AT&T.
Reports of such a deal the day before the big launch prompted comparisons to Facebook’s doomed line of phones, which were also exclusively sold by AT&T.
Sales of Facebook’s line of phones were so poor that the latest phone, known as the HTC First, went on sale last year for 99 cents — down from $99.
“Let’s hope @amazon doesn’t fall victim to the @att curse that is the facebook phone,” T-Mobile’s colorful CEO John Legere tweeted on Tuesday.
It wasn’t just Legere, AT&T’s competitor, who raised eyebrows. Analysts and bloggers questioned the rationale of selling a phone so late in the game through just one provider.
“A lot of questions remain as to why Amazon would enter a market where so many have failed before them,” said Julie Ask, Forrester Analyst and co-author of “The Mobile Mind Shift.”
“Amazon will need something big to get attention,” Ask said.
Yet Ask and other analysts questioned whether Amazon’s planned 3-D interface will do the trick. The company may need to give away some products and services, such as video streaming and delivery, at a discount to gain traction, said Amir Rozwadowski, a telecom analyst with Barclays.
“Historically, hardware hasn’t changed the game in unseating the incumbents,” Rozwadowski said of the mobile-phone industry.
Amazon has yet to confirm the new phone, but it’s widely expected to debut a mobile device at an event in Seattle on Wednesday.
The goal is to collect consumers’ data to allow more targeted selling of products, said Michael Pachter, a technology analyst with Wedbush Securities.
“So if a person watches ‘Transformers,’ they could offer the toys, DVD or video game. If they watch documentaries on fishing, they could offer rods and reels,” Pachter explained.

(BFW) Novartis CEO Says No Intention to Exit Roche Stake

BFW 06/18 07:58 *NOVARTIS CEO SAYS NO INTENTION TO EXIT ROCHE STAKE
 BN 06/18 07:57 *NOVARTIS CEO SAYS NO INTENTION TO EXIT ROCHE STAKE
 BN 06/18 07:49 *NOVARTIS BUSINESS SERVICES DIVISION HAS $6B BUDGET, CEO SAYS
 BN 06/18 07:44 *NOVARTIS CEO SAYS 'I'M NOT HAPPY' WITH GROWTH RATE IN ALCON
 BN 06/18 07:43 *NOVARTIS: GLOBAL HEALTH SPENDING MAY DOUBLE TO $15.6T BY 2025
 BN 06/18 07:42 *NOVARTIS CEO JIMENEZ COMMENTS IN PRESENTATION TO INVESTORS
 BN 06/18 07:42 *NOVARTIS SAYS HEALTH-CARE SPENDING IS 'GOING NOWHERE BUT UP'
Novartis CEO Says No Intention to Exit Roche Stake
2014-06-18 08:01:37.286 GMT


By Allison Connolly and Simeon Bennett
     June 18 (Bloomberg) -- Novartis CEO Joe Jimenez comments at
investor conference.
  * CEO says not happy with Alcon growth rate
  * Says business services unit has $6b budget
  * NOTE: Earlier, Novartis Expects to Improve Core Operating
    Income Margin {NSN N7CMKY6JTSEY<Go>}

Link to Company News:{NOVN VX <Equity> CN <GO>}
Link to Company News:{ROG VX <Equity> CN <GO>}

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

To contact the reporter on this story:
Allison Connolly in London at +44-20-3525-7043 or
aconnolly4@bloomberg.net

To contact the editor responsible for this story:
Allison Connolly at +44-20-3525-7043 or
aconnolly4@bloomberg.net

(BFW) KPN May Face Shareholder Pressure Over M&A Stance: MergerMarket

KPN May Face Shareholder Pressure Over M&A Stance: MergerMarket
2014-06-18 07:25:16.638 GMT


By Sam Chambers
     June 18 (Bloomberg) -- Two of KPN’s minority shareholders
are open to joining up with Paulson & Co. to pressure KPN’s mgmt
over its stance on consolidation, MergerMarket reports.
  * Paulson is currently in “efficiency” talks with KPN mgmt
    and may be ready to dispute co.’s stance on consolidation,
    according to a person familiar with matter
  * Minority shareholders say KPN should “acquire or be
    acquired”
  * America Movil will re-evaluate its stance over KPN after the
    outcome of the proposed sale of E-Plus is known, according
    to a person familiar
  * NOTE: Paulson & Co. acquired 4.5% stake in KPN in March
    * KPN shareholders here
  * NOTE: EU has set a deadline of July 10 to rule on proposed
    sale of E-Plus
  * NOTE: Dutch govt plans to create a law to safeguard national
    security if a telco receives a takeover approach


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

To contact the reporter on this story:
Sam Chambers in London at +44-20-7673-2021 or
schambers7@bloomberg.net
To contact the editor responsible for this story:
James Ludden at +44-20-7673-2645 or
jludden@bloomberg.net