TheChek News Flow

SAP AG Reports prelim FY13 non-IFRS software, software-related service +11% y/y

Wall Street analysts love the stock, which has risen 115 percent during the past 12 months.

“The stock has done amazing,” Amy Yong, cable and satellite analyst with Macquarie Capital, told The Post. “The free cash flow, it’s an under-penetrated asset, it’s got [John Malone] backing and there are M&A aspects.”

Starz is barred from holding sales talks for a year since it was spun off (by Liberty Media), sources said.

The most obvious suitor for Starz is Cablevision CEO James Dolan, sources suggested, though other names continually crop up — like CBS, Viacom and 21st Century Fox.

Dolan has long held talks with Liberty Media — chaired by John Malone — over what might happen with Starz, several sources said, but the question is whether Dolan-controlled AMC Networks is a good fit.

AMC Networks’ recent $1 billion acquisition of Liberty Global’s Chellomedia may have killed much of its ability to make a play for Starz, one source said.

The pay-TV service is now in 22 million homes and has added subscribers — thanks to new promotions from Time Warner Cable — even while losing a massive content deal with Disney.

Starz loses Disney content at the end of 2015.

The company has said it will replace the Disney content in part with original content.

Michael Bay-produced “Black Sails,” a pirate drama, is set to debut Jan. 25.

The firm also did a major deal with Fox TV Distribution mid-year.

“There’s not an obvious combination that’s bigger than the sum of the parts,” Vasily Karasyov, entertainment sector analyst at Sterne Agee, told The Post, adding that “revenue trends are improving and it’s still cheap and there’s upside to estimates.”

Buy AKE, DSM, Linde

--> Key Recommendations

Buy AKE, DSM, Linde; Sell LXS, EVK, Solvay. We believe stocks with specific drivers beyond sensitivity to the improving macroeconomy that trade below peer group averages are best placed to outperform.

Cyclical stocks in segments suffering overcapacity look least well placed.

Swatch Group CEO: Sees good growth in mainland China and mid-price segment

- Sees double digit sales growth in 2014
- Sees improvement at high-end

*MAERSK, SYNGENTA ENTER MACQUARIE MARQUEE IDEAS BUY LIST

*VALLOUREC ENTERS MACQUARIE MARQUEE IDEAS BUY LIST

*AIR LIQUIDE, GALP, RIO TINTO EXIT MACQUARIE MARQUEE IDEAS BUYS

*UNITED UTILITIES, WPP EXIT MACQUARIE MARQUEE IDEAS BUY LIST

*BCP REPLACES ANTOFAGASTA ON MACQUARIE MARQUEE IDEAS SELL LIST

*MORRISON RAISED TO NEUTRAL AT MACQUARIE

Swatch Misses 2013 Sales Target

Swiss Watch-Maker Upbeat on Growth This Year

ZURICH— Swatch Group AG UHR.VX +3.91% Friday said the strength of the Swiss franc against the dollar and Asian currencies ensured it fell short of its full-year revenue target though gross sales improved 8.3% from 2012.

The maker of high-end Omega watches as well as its famous namesake plastic brand said operating profit and net profit for the year to Dec. 31 were "good" while sales growth should improve this year.

Biel-based Swatch said sales for all its brands in the first few days of January were strong, with "dynamic growth" is expected for the entire year.

Chief Executive Nick Hayek had alerted investors last October that the Swiss currency's strength would peg back sales growth in 2013, describing the value of the dollar and Japanese yen as "catastrophically low."

Swatch should benefit this year from the integration of Harry Winston, the U.S. watch and jewelry business immortalized by Marilyn Monroe that Swatch bought for $750 million last year, the launch of the Sistem51 mechanical Swatch watch and Omega's sponsorship of the winter Olympics.

Swatch said gross sales rose 8.3% to 8.817 billion Swiss francs in 2013. That was also below analysts' forecasts for sales of 8.89 billion Swiss francs. Gross sales is a measure that excludes the effect of discounts.

Swatch said steep falls in the value of the yen and the dollar weighed on revenue, pushing gross sales below the company's 9 billion-Swiss-franc ($9.9 billion) goal.

The watchmaker derives more than half of revenue from Asia and nearly 10% from the Americas, with 35% from Europe, according to Bank Vontobel VONN.EB -0.40% in Zurich

Falling foreign currencies means Swatch earns fewer Swiss francs, its reporting currency, for the watches it sells abroad.

Swatch is due to release 2013 earnings on Feb. 20.

Apollo Secures $18.4 Billion War Chest for Private Equity

Leon D. Black, the head of Apollo Global Management, said last year that his firm was “selling everything that’s not nailed down.”

But this year, the private equity giant has more than $18 billion of fresh buying power.

Apollo has finished raising $17.5 billion from outside investors for its eighth private equity fund, the firm said on Thursday. It is the largest such fund the firm has ever raised, underscoring investors’ confidence that Apollo can find buying opportunities at a time when stock prices have risen drastically.

In addition to the outside capital, the fund includes $880 million from Apollo and affiliated investors, including employees of the firm, bringing the total to about $18.4 billion.

Apollo was particularly active in selling its holdings. In the third quarter, the firm sold shares in the chemical maker LyondellBasell Industries, an investment that is expected to be the most profitable in the firm’s history, Marc Spilker, Apollo’s president, said on a conference call at the time.

Mr. Black, Apollo’s chief, remarked in April that it was a “fabulous environment to be selling.”

Reaping big gains, private equity firms returned a record amount of net cash to investors last year, according to the placement agent Triago. Now, investors with Apollo are betting that the firm can replicate its past successes.

“We are very grateful for the overwhelming support for Fund VIII, which includes significant commitments from a preeminent global investor base consisting of both longstanding existing limited partners as well as many new investors,” Mr. Black said in a statement on Thursday.

It’s not just Apollo that has managed to attract a large amount of money for private equity deals. Over all, the industry raised $365 billion last year, Triago said in December, predicting that fund-raising would rise in 2014.

Apollo’s private equity business, which had assets under management of about $43 billion as of Sept. 30, focuses on buyouts, distressed investments and corporate carve-outs. The firm as a whole had assets under management of about $113 billion as of the end of September.

A federal jury will decide whether Mathew Martoma, the former hedge fund manager, cheated when he worked at SAC Capital Advisors, but there’s no denying he cheated when he falsified his grades at Harvard Law School some 15 years ago.

In 1999, Mr. Martoma was expelled from Harvard for creating a false transcript when he applied for a clerkship with a federal judge, court papers unsealed on Thursday showed. Mr. Martoma used a computer program to change several grades from B’s to A’s, including one in criminal law, and then sent the forged transcript to 23 judges as part of the application process.

Then, during a Harvard disciplinary hearing to determine whether he should be expelled, Mr. Martoma tried to cover his tracks by creating a fake paper trail that included fabricated emails and a counterfeit report from a computer forensics firm that Mr. Martoma had created to help conceal his activities.

Nearly a decade after he was kicked out of Harvard, federal prosecutors contend, Mr. Martoma carried out one of the largest insider trading schemes while working at Steven A. Cohen’s hedge fund. He is charged with using inside information to help SAC avoid losses and generate profits totaling $276 million by recommending the firm sell all of its holdings in two drug companies, Elan and Wyeth, in July 2008.

The disclosure of Mr. Martoma’s expulsion from Harvard came as a jury of seven women and five men was seated for his trial after two days of selection. Lawyers for the prosecution and defense are expected to deliver opening statements on Friday in a Lower Manhattan federal courtroom. The trial is expected to last four weeks.

It is not clear whether the bizarre twist in the case will ever be introduced into evidence, because Mr. Martoma is unlikely to testify in his own behalf. Negative character evidence can generally be used at trial only to impeach a person’s testimony or rebut a line of argument raised by the defense as a potential alibi.

The prosecution argues in court papers that Mr. Martoma’s deception is relevant to show that he has the technical knowledge to alter computer files. That could be relevant, prosecutors say, if Mr. Martoma’s lawyers seek to argue he never received a copy of a confidential report that discussed problems with a clinical trial for an experimental Alzheimer’s drug being developed by Elan and Wyeth.

Prosecutors charge that Mr. Martoma recommended that SAC sell its shares in Elan and Wyeth after receiving the report from a key cooperating witness in the case, Dr. Sidney Gilman, and then flying to Ann Arbor, Mich., to discuss the results of the trial with him.

Mr. Martoma’s lawyers at Goodwin Procter, in the run-up to the trial, have raised questions about the government’s failure to find any email evidence that Dr. Gilman sent Mr. Martoma a copy of the report. Dr. Gilman, 81, who received a nonprosecution agreement from the government, is expected to testify that he sent the report to Mr. Martoma and discussed the findings both on the phone and when the two men met a few days before SAC began selling the companies’ shares.

Prosecutors have conceded they have not found any email evidence to support Dr. Gilman’s contention that he sent a copy of the report to Mr. Martoma. But they said Mr. Martoma’s pattern of deception at Harvard is “evidence of the defendant’s capacity to destroy or fabricate electronic forensic evidence.”

Lou Colasuonno, a spokesman for Mr. Martoma, said: “This event of 15 years ago is entirely unrelated to, and has no bearing on, this case.” He added that the prosecution, in raising the issue, was trying to “unduly influence the ongoing court proceedings.”

James M. Margolin, a spokesman for Preet Bharara, the United States attorney in Manhattan, declined to comment.

When he was at Harvard, Mr. Martoma told the law school administrators that he had falsified his transcript as a joke and did it mainly to impress his parents.

A Harvard Law School spokeswoman said on Thursday that the university had no record of Mr. Martoma’s graduating but could not comment further. She could not confirm whether he had attended or was expelled.

In the weeks leading up to the trial, Mr. Martoma’s lawyers had sought to keep their client’s expulsion from Harvard quiet, arguing the issue had nothing to do with the charges he faces.

But Judge Paul G. Gardephe rejected that argument and in a Dec. 28 decision ordered that the court papers be unsealed. The filings remained sealed until Thursday while Mr. Martoma’s lawyers appealed unsuccessfully.

It is not clear whether SAC knew about Mr. Martoma’s expulsion from Harvard or the reason he changed his name when he was hired as a health care portfolio manager in 2006. An SAC spokesman, Jonathan Gasthalter, declined to comment.

Erik M. Gordon, a professor at the University of Michigan Law School, said SAC had to be given the benefit of doubt that it did not know about Mr. Martoma’s expulsion. But he said the fact that Mr. Martoma landed a job at SAC would seem to justify the government’s contention that the firm has been a “magnet for bad people who do bad things.”

To date, eight people, including Mr. Martoma, have been criminally charged with insider trading while working for Mr. Cohen. Except for Mr. Martoma, all of them have either pleaded guilty or been convicted at trial.

The jurors who will sit in judgment of Mr. Martoma come from the Bronx, Manhattan and Westchester and Rockland Counties. They include the chief executive of the Jones Group, the shoe and accessory company, and a New York City bus driver.

Some of the jurors have training in law and finance. One juror said she was an insurance underwriter for the American International Group, while another has a law degree and works at the accounting firm PricewaterhouseCoopers. Another juror is an employment and labor lawyer who said his firm’s work included internal investigations for corporations related to the Foreign Corrupt Practices Act.

Emerging market shares may rise 13% to 15% over the next five years, trouncing expected U.S. gains.

Slumping emerging-market stocks are now priced to return an average of 13% to 15% a year over the next five years. But soaring U.S. shares are priced to return just 2% to 4% over the same stretch. That's according to Jason Hsu, chief investment officer at Research Affiliates, a Newport Beach, Calif. money manager with more than $150 billion linked to its strategies.

Over the past three years, U.S. shares have shined, returning 13.1% a year, according to index publisher MSCI. That compares with 6.4% for euro zone shares and a yearly loss of 5.3% for emerging markets. A popular explanation for the wide performance gap is that the U.S. economic recovery appears to be gaining strength, while growth is slowing in markets like China.

However, there are two problems with that reasoning. First, China's economy with its slowing growth rate has nonetheless expanded more than twice as fast as the U.S. economy in recent years. Second, the link between economic growth and stock returns is a weak one, according to a Vanguard white paper published last September, which looked at country returns from 1970 through 2012.

Stock valuations are a more important factor, according to that paper, which builds on similar research presented in a 2010 report. In a sign of how quickly emerging markets have fallen out of favor with stock investors, the first report argued against betting too heavily on emerging markets because of their speedy economic growth. The second report argued against betting too lightly on emerging markets because of their slowing growth. Price-to-earnings ratios across regions are now similar, suggesting future returns could be similar, too, according to Vanguard.

Not so, says Hsu. He prefers to look at price-to-earnings ratios based on a 10-year average of earnings in order to smooth results for boom and bust periods of corporate profitability. That's important now, because U.S. profit margins are near record highs, while those in emerging markets are normal. Based on cyclically adjusted earnings, emerging markets have a P/E ratio of 13, compared with 25 for the U.S., according to Hsu. An examination of past returns from those starting levels tells him that emerging markets are poised to perform three to four times as well as U.S. shares.

Hsu's firm is best known for its fundamental indexes, which weight companies by economic factors like cash flow and dividend spending. The approach gives the indexes more exposure to value-priced shares and less to expensive ones than traditional stock indexes, which weight companies by stock market value. That should afford them a long-term performance edge. PowerShares FTSE RAFI US 1000 Portfolio (ticker: PRF), an exchange-traded fund based on a Research Affiliates index for U.S. shares, has returned 21.3% a year over the past five years, versus 17.6% for the Standard & Poor's 500, according to Morningstar.

Last August, Schwab launched a series of exchange-traded funds based on Research Affiliates indexes. Among them is Schwab Fundamental Emerging Markets Large Company (FNDE). It carries yearly expenses of 0.46%, versus just 0.15% for Schwab Emerging Markets Equity (SCHE), which uses a traditional index approach. The higher costs may be worth it though. The cyclically adjusted-P/E ratio for the Research Affiliates emerging market index is just nine and the dividend yield is nearly 4%, according to Hsu. That makes the newer fund, ticker FNDE, a bargain hunter's approach to a bargain-priced region.