>>> Barron's weekend summary: Cover positive on CBS and speculates about it buyi

Barron's weekend summary: Cover positive on CBS and speculates about it buying VIAB; positive on COF, SAVE 

- Cover story : Amid ongoing turmoil at VIA, simple management changes, such as the departure of interim chief executive Tom Dooley, won't be enough to fix the problems; The company should consider a sale, with CBS the most natural buyer-though the network's investors will likely prosper with or without such a deal. With or without a Viacom deal, CBS shares might double in the next 4 years.

- Features : 1) Positive on COF: Firm's skillful loan underwriting and its growing commitment to credit cards that offer rewards have put it in a strong competitive position relative to other issuers and regional banks; 2) Positive on SAVE: Though rivals have adapted some of the discount carrier's business strategies, both the fares it charges and the share price should rise soon, giving earnings a boost.

- Technology Trader : Positive on DLPH, MAG: Automotive parts makers play a key role in the development of new cars, so their shares-which have reasonable valuations-are a good way for investors to gain exposure to the growing autonomous vehicle sector. 

- Trader : The Fed's lower rate expectations have longer-term implications for defensive stock sectors such as utilities, telecoms, and staples, according to Michael Yoshikami of Destination Wealth Management; Positive on WFM: Concerns about growing competition, slowing sales growth, and the need to lower prices have been discounted into the grocer's share price, and a little good news could send it higher; Spending on healthcare is denting consumer finances, despite a healthy jobs and housing market, low gas prices, and rising wages. 

- Interview : Jamie Cook, an analyst at CSFB, talks about what companies will benefit if the next president ramps up infrastructure spending (Positive on CMI, DE, CAT, PH, ACM). 

- Alternative Investments : Richard Merage runs MIG Capital with a long/short strategy that focuses on the consumer and invests with a longer time line than most peers (top 10 holdings: S, RCL, AAPL, Liberty Global, CCOI, CPRT, CCI, VSAT, DSW, CMG). 

- Small Caps : Positive on KLXI: "Distributor of aerospace parts is poised to benefit from a new aircraft-maintenance cycle, which could help lift the stock price more than 30%." 

- Follow-Up : Positive on SRPT: Following the recent FDA approval of Sarepta's Duchenne muscular dystrophy drug, Exondys 51, shares could see more upside, and the company could become a lucrative biotech play in the coming years. 

- International Trader : Positive on Dufry: Operator of duty-fee and retail stores at airports, seaports, and railway stations has 24% market share in airport travel retail and should continue to provide investor gains. 

- Asian Trader : Even if the Bank of Japan succeeds in boosting long-term bond yields, earnings at Japanese banks will hardly improve, says BNP Paribas analyst Toyoki Sameshima; Unlike in Europe, negative interest rates don't work in Japan. 

- Emerging Markets : It's not yet clear whether infrastructure spending can contribute to Brazil's economic growth, though that question shouldn't dampen investor enthusiasm for the country. 

- Commodities : Demand for lead in China has slowed, and supplies of the metal are ample, but that won't necessarily halt recent price gains. 

- Streetwise : The Fed should take its time raising rates, says columnist Ben Levisohn, who adds that "Economic growth is still sluggish, and inflation is low, leaving no real reason for an increase except a desire to get one done."

>>> Tuifly subject of sale talks with easyJet, other airlines - Boersen-Zeitung

Tuifly subject of sale talks with easyJet, other airlines - reports

Tuifly, the German airline owned by German travel group TUI [LON:TUI], is a subject of sale talks with easyJet [LON:EZJ] and other airlines, Boersen-Zeitung reported.

The German-language daily cited unidentified sources close to the Tui supervisory board as saying that Tui is in different sets of negotiations on selling Tuifly. It said the potential buyers are easyJet, the British low-cost airline, and other air transportation players.

However, a message to Tuifly's employees by the business unit's leadership denied that easyJet is seeking any cooperation or equity investment, the article noted.

A report in the UK newspaper The Daily Mail on Saturday, 24 September mentioned talk that easyJet was in negotiations with Tui about acquiring Tuifly's fleet of 41 aeroplanes. The item quoted Tui, which said the speculation was baseless.

However, The Daily Mail report also quoted Martin Lochler, a member of Tuifly's supervisory board, who said easyJet and Tuifly had been in discussions for a while.

Boersen-Zeitung

>>> GKN suitor SAIC Motor Corp said to be sounding out US groups for possible co

GKN suitor SAIC Motor Corp said to be sounding out US groups for possible consortium bid - report

SAIC Motor Corporation and its adviser JPMorgan were said to have contacted several US-based industrial groups regarding a potential consortium bid for the FTSE-100 engineering company GKN [LON:GKN], The Daily Mail reported.

The newspaper’s market report section cited City sources who said JPMorgan had already sounded out US-based groups including Northrop Grumman Corporation [NYSE:NOC] and United Technologies Corporation [NYSE:UTX] about forming a consortium with SAIC to make a offer for GKN.

SAIC is keen to acquire GKN’s land systems and driveline businesses, the item said. Any bid partner would therefore be looking to acquire GKN’s aerospace operations, the report added. The article said the prospective consortium offer could value GKN at GBP 7bn (EUR 8.07bn).

Making a joint offer with a western partner would mitigate the political or regulatory concerns regarding an offer from SAIC, which is backed by the Chinese government, the item said.

The report also mentioned the UK-base industrial groups BAE Systems [LON:BA], Rolls-Royce [LON:RR] and Melrose [LON:MRO] as potential consortium partners.

GKN’s share price closed 2.3p up at 323.2p in London on Friday, 23 September, giving the company a market capitalisation of GBP 5.54bn.

>>> J Sainsbury shareholder Qatar Investment Authority could attract offer for 2

J Sainsbury shareholder Qatar Investment Authority could attract offer for 22% stake from Chinese bidder - report

The Qatar Investment Authority’s 22% shareholding in the UK-based supermarket company J Sainsbury [LON:SBRY] is said to have attracted interest from a potential bidder from Asia, The Daily Mail reported.

The newspaper’s market report section cited one senior investment banker who claimed that there was interest in the QIA’s stake from China.

J Sainsbury’s share price closed 2.2p up at 253.9p in London on Friday, September 24, giving the company a market capitalisation of GBP 5.55bn (EUR 6.40bn).

FT : When is insider trading not insider trading?

When is insider trading not insider trading?

Hedge fund founder Leon Cooperman will find out in court

If a hedge fund manager buys shares ahead of a major corporate announcement but fails to lock in his profits from the resulting price rise, could it still count as insider trading?
Leon Cooperman, the billionaire founder of Omega Advisors, and the US Securities and Exchange Commission are now going to court to find out.

This week, the SEC filed civil insider trading charges against Mr Cooperman and Omega, alleging that they “generated substantial illicit profits”of $4.1m by buying shares, bonds and options in Atlas Pipeline Partners after receiving information about a planned asset sale from a company executive in July 2010. The SEC also says Mr Cooperman explicitly promised not to trade on the information, which later boosted Atlas’ share price by 31 per cent when it was made public.
Mr Cooperman “categorically” denies wrongdoing, writing in a letter to his investors that his Atlas investment “was based on fundamental research, rigorous analysis, and insight — not inside information.” He also pointed out that Omega had been investing in the company since 2007, and the shares bought in July 2010 represented a tiny fraction of the firm’s total investment.
Crucially for his fight against the SEC, Mr Cooperman also argues that he never made money from his July 2010 trading. Although Atlas shares leapt to $16.22 when the asset sale was announced, Mr Cooperman and Omega did not sell, and ended up losing money on their investment when they sold out last year. Mr Cooperman also argues that the options he bought offset a different set of options he had previously sold — so he did not make any money from them either. “In short, none of the trading is indicative of someone trying to . . . reap profits from inside information,” he wrote.
All these details matter because of a quirk of US law. While the UK and EU defines market abuse to include almost any trading while in possession of non-public, market-moving information, the American rule is much narrower. It requires enforcers to show that confidential information was intentionally “misappropriated”. If Mr Cooperman’s lawyers can show the July 2010 trades were a minor part of a broader — ultimately unsuccessful — investment strategy, the SEC may well have trouble proving he meant to misuse inside information.
But do not count the regulators out — they have a couple of key weapons.
First, they are bringing a civil case, so they have a lower standard of proof than a criminal prosecution. Second, they have neatly sidestepped a controversial 2014 appeals court decision that makes it harder for regulators to prove insider trading. This ruling requires proof that the person who tips off a trader has reaped financial benefit. But the SEC alleges that Mr Cooperman effectively stole the information, so there was no tipper.
Finally, on the important question of bad intent, the SEC has highlighted Mr Cooperman’s behaviour when he learnt regulators were on his tail. The complaint alleges that the hedge fund titan contacted the Atlas executive and sought assurances that there had been no sharing of confidential information “despite knowing this was not true.” The executive “believed Cooperman was trying to fabricate a story in case the two were questioned.”
Now it will be up to a court to decide: Does the alleged cover-up show that Mr Cooperman knew he was trading on inside information? Or is his failure to sell his shares proof that he is, as he insists, an innocent man? Stay tuned.

Barron's : Deutsche Bank’s Woes: Will Germany’s Sick Man Infect Global Markets?

Deutsche Bank’s Woes: Will Germany’s Sick Man Infect Global Markets?

Options investors bet that battered stock will keep falling. Bank’s problems include possibility of huge fine from U.S. regulators.

Does the black swan speak German?

It’s a question worth pondering, as investors wager that Deutsche Bank might be unable to cure itself of a litany of woes that this year have nearly cut its stock price in half.

The bank’s challenges are immense. They range from restructuring operations and modernizing infrastructure to reducing balance-sheet risk and trying to negotiate a reduction in a U.S. fine that could run as high as $14 billion.

In totality, those challenges are arguably more menacing to the global markets’ stability than the Federal Reserve decision on whether to raise interest rates by a quarter-percentage point, or whether Hillary Clinton or Donald Trump becomes the next U.S. president.

A SMALL RATE HIKE should be easily digestible, even if it would initially disrupt the financial market’s post-crisis high. The American political system has been dysfunctional for so long that the election should be a non-event, especially if Congress remains gridlocked, which would checkmate the White House, regardless of who’s in it. But Deutsche Bank is deeply intertwined with the global capital markets. If it can’t cure itself, it could infect the markets or weaken already wobbly investor confidence.

Those overhangs have many investors viewing the German giant with extreme mistrust. Even though they have humiliated the stock (ticker: DB), they could inflict still more misery on it. From a technical viewpoint, the stock chart seems to be indicating that a new 52-week low is near. Over the past year, the share price, recently around $13, has ranged from $12.43 to $30.82.

“The European Central Bank, through negative interest rates, has essentially made it impossible for Deutsche Bank to make money. And the U.S. government has thrown them a fine” tied to a probe of mortgage-securities “that is essentially greater than their market cap of 14.4 billion euros [$16.4 billion],” one of the Street’s top financial traders says.

John Cryan, the bank’s CEO, has a monumental task. He reportedly explored a merger with Commerzbank (CRZBY), Germany’s second-largest bank, but that led nowhere. Some investors fear Germany’s once mighty No. 1 bank might be forced to raise money, by issuing more stock or taking on debt, to enhance operations.

“Deutsche Bank has seen among the weakest earnings momentum in the sector, as falling global fee pools and deleveraging have weighed on revenues, and high restructuring and litigation charges have weighed on costs,” John Pease, a Credit Suisse bank analyst, recently told clients.

OPTIONS TRADING PATTERNS show that investors largely are betting that the stock collapses. The most widely-held positions include some 46,000 January 5 puts, about 34,000 January 13 puts that expire in 2018, and 30,000 January 10 puts. Last week, investors bought January $5 puts that expire in 2018, and December $12 puts.

Of course, it is hard to know if the stock will tumble as sharply as anticipated by the downside puts. The January 5 puts that expire in 2017 are offered around 10 cents. If the stock falls to $4, they’re worth $1. Risking 10 cents to make $1 could produce a phenomenal return. Should the stock never trade below $5, the trade will fail, but who cares that much on a 10-cent contract?

Whether you buy Deutsche Bank’s $5-strike puts is perhaps immaterial. What is material is that Deutsche Bank’s difficulties are a reminder, in an uncertain season, that the real risks are usually rarely discussed in the media. Trade it or fade it, but add the German institution’s stock ticker to your trading screen, right next to the VIX.

In short, Deutsche Bank is a tier-one risk factor.

Barron's : Airport Vendor Dufry Could Rise 20% or More

Airport Vendor Dufry Could Rise 20% or More

The Swiss-based company, which has expanded rapidly, boasts a 24% market share in airport travel retail. The stock looks inexpensive.

Dufry, which operates duty-free and retail stores at airports, seaports, and railway stations, could offer an attractive destination for investors.

The Basel, Switzerland–based company, whose network comprises more than 2,200 outlets in 63 countries—including the U.S.-based Hudson Group and its Hudson News chain of newsstands—has expanded rapidly in the past two years. It generates approximately three-quarters of its sales from perfumes and cosmetics, foods, wines and spirits, and tobacco, and it boasts a 24% market share in airport travel retail.

Analysts worry that Dufry (ticker: DUFN.Switzerland) will struggle to grow revenue at a faster pace than passenger traffic, but those fears may be overblown. Air traffic is forecast to grow 4.5% annually for the next 20 years, according to aircraft maker Airbus (AIR.France).

Dufry’s shares, which closed in Zurich Friday at 116.90 Swiss francs ($120.45), have fallen 22% in the past two years, including a 2.8% drop since the start of 2016.

The stock seems inexpensive at 12.2 times estimated 2017 earnings. By comparison, the Stoxx Europe 600 index’s consumer-services sector trades at a far richer 15.9 times. At 15 times next year’s forecast earnings, Dufry’s shares could be worth CHF143.25, more than 20% above the latest price.

Gilles Guibout, a portfolio manager at AXA Investment Managers’ WF Framlington Eurozone fund, sees two drivers for growth at Dufry: rising global demand for air travel boosting the top line, and opportunities to cut costs following a period of rapid expansion.

“To me, it is a pretty straightforward investment case,” says Guibout, who has owned Dufry shares for about six months. He sees a potential upside of about 30% in the next two years.

DUFRY, WHICH TRACES ITS ORIGINS TO 1865, only entered the duty-free sales business in 1948, but it has taken its biggest strides in the past few years.

Since the millennium, the company has been at the forefront of industry consolidation. In 2014, it acquired Swiss rival Nuance Group for CHF1.5 billion, bolstering its presence in Europe, Asia, and the U.S., and followed last year with the purchase of World Duty Free from the holding company of Italy’s Benetton family for 3.6 billion euros ($4.04 billion).

Group sales are forecast to reach CHF7.86 billion this year, up from CHF6.13 billion in 2015 and approaching twice the CHF4.20 billion sales of 2014.

The Nuance and WDF transactions are expected to contribute to earnings in the second year after completion. The deals could yield synergies of CHF175 million in earnings before interest, tax, depreciation, and amortization by 2018, the company says.

Expansion has come at a price. Dufry’s net debt has ballooned from CHF1.75 billion at the end of 2013 to CHF3.96 billion at the end of last year, a ratio of net debt to adjusted Ebitda of 3.92 times.

The company intends to reduce net debt to two to three times adjusted Ebitda by the end of 2017. That shouldn’t be too onerous because the business generates huge amounts of cash, but acquisitions remain a key plank in Dufry’s growth strategy, so more transactions can’t be ruled out. However, any additional purchases are likely to be bolt-on rather than transformational ones.

THE NUANCE AND WDF ACQUISITIONS ensure that Dufry has a strong footprint that allows it to withstand softness in some markets. In the first half of 2016, for example, it was hurt by a decline in the number of Russian travelers, especially in Turkey, a popular destination, but the effect was mitigated by strong growth in Spain and parts of the Caribbean, and an improvement in Brazil.

Even the United Kingdom’s departure from the European Union appears manageable. In July, Dufry reported an “acceleration in turnover growth” in the U.K. due to the steep drop in the value of the British pound. It sees no impact on margins, although there could be a translation effect when it consolidates numbers in Swiss francs. The U.K. accounts for 18% of sales.

POTENTIALLY THE BIGGEST CHALLENGE that Dufry faces is the pressure to increase margins. Dufry, along with other travel-based retailers, needs to deliver 0.3 to 0.4 percentage point of margin improvement in order to offset the erosion from higher concession fees. The company is projected to deliver an Ebitda margin of 12.2% this year, compared with 11.8% in 2015.

This year, Dufry is expected to report net income of CHF53 million, or CHF7.62 a share, rising next year to CHF170 million, or CHF9.55 a share.

Debt repayments mean there are no dividends for shareholders, but the issue could be on the table in a couple of years’ time.