Filed under: International markets, Other issues, Good news, Rants and raves, Competitive strategy, US Airways Group (LCC), Contl Airlines’B’ (CAL), Headline news, Delta Air Lines (DAL)

As regular readers might have observed I am one to mull things over a while before offering up a slice of investment opinion pie. A few weeks ago Barron’s (subscription required) ran a cover story titled “Open Skies” discussing the imminent deregulation of trans-Atlantic air routes.

In this context they reviewed the potential for airline mergers, (something I’ve written about before in Why no airline mergers? Finally the answer…) and they commented on who the winners and losers might be. The article highlights the fact that there has been a 30 year agreement in place, “the Bermuda airline agreement” that limited Heathrow-U.S. air traffic to just four airlines: two British and two U.S. Other foreign airlines were barred flying to the U.S. except from their own nation’s airports.

Under terms of a new agreement cast last April U.S and European Union airlines departing 27 nations will be able to fly direct routes. Barron’s does a fairly thorough analysis in my view of the potential success among various airlines and those that may come up short.

Under the heading of Dividing the Spoils they list the winners as Air France-KLM ADR (NYSE: AKH), Continental Airlines, Inc. (NYSE: CAL), Delta Airlines, Inc. (NYSE: DAL), Deutsche Lufthansa ADR (OTC: DLAKY), Ryanair Holdings plc (OTC: RYAAY), UAL Corporation (NASDAQ: UAUA), and the US Airways Group, Inc. (NYSE: LCC).

Without choosing sides and speculating as too which airlines might do the best financially in this new environment, as Barron’s has done, I would caution investors that it is all speculation. No doubt, this is a part of the investing world, still, there are industries that offer greater predictability than the the airline industry.

Airlines are capital intensive, subject to mountains of regulations and treaties, subject to fluctuations in fuel prices and politics, require heavy maintenance responsibilities, and must deal with unions and hijackings and more issues. Therefore while I’ve no reservations about making airline reservations to fly, I do get a queasy stomach when it comes to investing in them. If you normally think twice before investing, then think three times before you consider these stocks.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

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Filed under: Forecasts, Competitive strategy, Apple Inc (AAPL), Dell (DELL), Hewlett-Packard (HPQ)

The media is making much of Apple, Inc. (NASDAQ: AAPL)’s move above $200 and it is a nice milestone. What’s much more impressive is that about 20 months ago, the shares were only a bit above $50.

The question for Apple investors now is not how far the stock has come, but whether it can continue the trip. The company is now burdened by expectations which didn’t exist two or three years ago.

The assumptions on which a continued rise in the stock are based see the iPhone becoming a significant player in the smartphone market, the iPod continuing to sell tens of million of units a year, and the Mac getting well beyond 5% of the global Personal computer market.

The Mac goal may be more difficult than the others. With over a billion handsets sold a year worldwide, the thought that the iPhone could capture 20 million units a year is not astounding. And, with a dominant position in the multimedia player market, the iPod is prone to have long-term growth so long as consumers want music and video to go.

But, the computer market is a much tougher nut. Hewlett-Packard Company (NYSE: HPQ), Dell Inc. (NASDAQ: DELL), and Asia manufacturers Lenovo and Acer, are not going to give up the share that they have now, at least not without cutting costs and improving features. Apple may not be able to hold the expensive end of the market forever.

If Apple stumbles, it is prone to trip over expectations for the Mac.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Good news, Products and services, Competitive strategy, Costco Wholesale (COST)

Although there’s still need for concern about the retail sector, I must admit that I’m feeling fairly secure right now about Costco Wholesale Corp. (NASDAQ: COST). That’s why I see this morning’s 1.25% drop in Costco’s share price as an possible buying opportunity. Already, that share price is being supported and lifted from a low of $69.55 and I’d be willing to speculate that Costco shall end the day in positive territory.

A Wall Street Journal article this day puts a shine on Costco’s seasonal performance, indicating that management executed a seasonal plan which worked nicely within the fragility of today’s retail realm. Costco CFO Richard Galanti stated Monday, “We were left pretty clean in terms of seasonal markdowns.Generally speaking, our season went well.” Costco has already changed over its seasonal square footage to furniture offerings, something it began doing even before the Christmas season grinds to a stop.

The two issues to keep focus on regarding Costco this year is how well it takes advantage of new opportunities and the quality of its management team. Already, five NBA teams have joined with Costco to sell discounted game tickets through Costco’s website, according to SportsBusinessJournal.com.(registration required) This development may prove to be part of a marketing push which will see Costco attempting to sell more non-perishable goods via the World wide web.

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Filed under: Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

In November internet search engine rankings by comScore (NASDAQ: SCOR), Google (NASDAQ: GOOG) again lead the pack, with 5.9 billion core searches conducted — a 58.6% market share of all searches in the web. This was nearly the exact same level as October.

Coming up a distant second (as usual) was Yahoo! (NASDAQ: YHOO) with market share of 22.4%. The next three were Microsoft (NASDAQ: MSFT) at 9.8%, IAC/InterActiveCorp.’s (NASADAQ: IACI) Ask.com at 4.6% and Time Warner’s (NYSE: TWX) AOL at 4.5%. In November (a seasonally weak month for web searches), U.S. web searchers conducted 10 billion searches — a 5% decline from October.

Do these rankings surprise any web surfer? They shouldn’t — Google continues to dominate world wide web searches and Yahoo!’s Project Panama — even though technically a job well done — is probably too late to the party to put any significant pressure on Google. Microsoft’s Live Search push has garnered it about the same market share as in the past (a decent third place). The power of first-mover advantage is quite evident in Google’s placement, and I’d suspect it’s not going anywhere soon.

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Filed under: SEC filings, Deals, Press releases, Products and services, Management, Industry, Competitive strategy, General Electric (GE), Merrill Lynch (MER)

General Electric (NYSE: GE) and Merrill Lynch (NYSE: MER) announced a deal Monday, which will result in GE picking up most of Merrill’s commercial finance business.

The deal is expected to be finished during the first quarter of 2008, and will add an estimated $10 billion plus in assets to GE Capital. Merrill has been hit pretty hard this year with the subprime mortgage mess, and this deal will result in around $1.3 billion worth of capital that the company will be able to allocate elsewhere.

Merrill, which announced a big $8.4 billion worth of write downs back in October is in the middle of what it is calling a “strategic focus on divesting non-core assets.” This sale is beneficial to Merrill because the firm’s commercial-lending business has become reliant on companies that don’t posses investment-grade credit ratings and pose a financial risk that Merrill does not need to be assuming, especially after Merrill’s current write down.

Included in this deal will be Merrill Lynch Capital’s corporate, equipment, energy and healthcare finance units. Merrill’s commercial real estate finance unit, however, won’t be included.

This wasn’t the only piece of news this day regarding Merrill Lynch announced on Monday. The company also announced that it would be getting a nice $6.2 billion cash infusion from Singapore’s Temasek Holdings and Davis Selected Advisors LP.

In this other deal, Temasek will be laying out $5 billion for a less than 10% stake in the company, and Davis will be Advisors will be purchasing another $1.2 billion lot of the company’s stock.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor’s Observer.

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Filed under: Forecasts, Industry, Competitive strategy, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM), Economic data

It looked like Toyota (NYSE: TM) would pass GM (NYSE: GM) for the No. 1 spot in global car sales for 2007, but it is not clear that it happened. GM sales in China and South America might have been good enough for it to keep the lead spot.

Now Toyota has announced ambitious plans to up its sales 5.6% to 9.85 million cars in 2008. That would nearly certainly put it ahead of GM and break the U.S. automobile company’s all-time record year set 30 years ago.

According to The Wall Street Journal, “Katsuaki Watanabe, Toyota’s president, stated the company aims to accomplish its bold sales targets by expanding in fast-growing emerging markets.” That means the Japanese company will have to do well in growing markets like China and hold its own in the U.S.

But Toyota could be tripped up on its way to the record. The market in China is becoming much more competitive. Local companies like SAIC are trying to take market share from companies based outside the world’s most populated country.

In the U.S., Toyota hopes its sales can stay close to flat. But some predictions are that the vehicle market here will drop from just over 16 million automobiles sold in 2007 to 15 million in 2008. In that case, Toyota might have a very difficult time meeting its U.S. targets, especially if GM and Ford (NYSE: F) begin to offer huge discounts to lower inventories.

Also, automobile sales have been very weak in Toyota’s home market of Japan. It is possible that Toyota could lose ground there, which might undercut its production plan.

Toyota may think it will do well next year, but it is hardly a lock.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Bad news, Industry, Consumer experience, Competitive strategy, Wal-Mart (WMT), Target Corp. (TGT)

Early reports are that U.S. holiday sales this year were up only 3.6% over 2006 sales. According to The Wall Street Journal, “Factoring out spending on gasoline — which soared thanks to a 27% average price increase since this time last year — retail sales increased a lackluster 2.4%.” To make matters worse, research firm ShopperTrak RCT stated that consumers waited for discounts to deepen before making large purchases, which would hurt retail margins.

The single biggest loser of the holiday season may have been Target (NYSE: TGT), the country’s No. 2 retailer. The company said sales would be close to flat for December. Just over a month ago, the chain said sales would rise 3% to 5%.

Not many on Wall Street are surprised that overall retail sales were weak; analysts had been predicting that for some time. But Target was a surprise. Its skill with picking merchandise had kept its same-store sales ahead of rival Wal-Mart (NYSE: WMT) for some time. For most of the second half of 2007, Target’s stock had outperformed its larger rival by a significant amount.

It is not entirely clear what happened to Target, but there are some clues. The retailer moved a bit upscale from Wal-Mart and pushed into sales to the middle class. Its stores become trendy and fashionable. Customers who might have been uncomfortable going to Wal-Mart found Target to be a more acceptable substitute.

The strategy worked until the U.S. consumer got cheap — pinched by a tough real estate market, high credit card balances, and rising fuel prices. Going down-market suddenly became attractive.

As the economy turned, Target may have been cornered by its own success.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Before the bell, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), Time Warner (TWX), Amazon.com (AMZN), Ford Motor (F), General Motors (GM), Walt Disney (DIS), IAC/InterActiveCorp (IACI), FedEx Corp (FDX)

Before the bell: Will stocks continue Friday’s trend?

If people still had any doubt about the inroads Apple’s (NASDAQ: AAPL) laptops are making, they just had to look at Amazon’s (NASDAQ: AMZN) list of bestselling personal this Christmas eve. Somehow, despites often being more costly and offering less features than Personal computers, the Macs oversold their counterparts, taking three of the top ten spots, including the top one. As the new Apple commercial says: You better watch out… Oh, right, it was a Christmas carol, not a warning to Computers — or was it?

The IRS has challenged FedEx Corp.’s (NYSE: FDX) business model for contracting with independent drivers, the company said Friday. The company may have to pay tax and penalties of $319 million plus interest for 2002, while the IRS is reviewing similar issues for calendar years 2004 through 2006.

Following as strong performance last week with I Am Legend, movies continued to show decent numbers this weekend. Walt Disney’s (NYSE: DIS) National Treasure: Book of Secrets with Nicolas Cage opened as the weekend’s No. 1 motion picture with $45.5 million. This is a sequel to National Treasure, which debuted with $35.1 million on its way to a $173 million total.

Following the energy bill that was signed last week, mandating tougher fuel-economy standards, many analysts now anticipate a change in the automakers’ industry. As car makers will try to make automobiles lighter, lightweight materials such as aluminum, carbon fiber and other could see increased demand while steel could see less.

On Friday, comScore released November U.S. search engine rankings. Not a lot of surprises there: Number one, of course, was Google (NASDAQ: GOOG) where its sites share of core searches inched higher to 58.6%, compared to 58.4% in October. Second place was Yahoo! (NASDAQ: YHOO) with its sites’ share of searches inching down to 22.4% from 22.8%. The remaining three in the opening five were, Microsoft (NASDAQ: MSFT), Ask Network (NASDAQ: IACI) and Time Warner Network (NYSE: TWX) with the highest share point gain during the month to 4.5%.

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Filed under: Analyst reports, Industry, Competitive strategy, Wal-Mart (WMT), Circuit City Stores (CC), Costco Wholesale (COST), Economic data

Based on recent figures, retailers who offered the best discounts may have pulled in the lion’s share of holiday shoppers.

“I have never seen consumers more cautious, more bargain driven, more savings obsessed than I have this year,” Britt Beemer, founder and chairman of American Research Group, told Reuters..

American Research found the most aggressive discounter were Wal-Mart (NYSE: WMT) and Costco (NASDAQ: COST). The companies that might have failed to discount enough included Macy’s (NYSE: M) and Circuit City (NYSE: CC).

The figures may be a tiny misleading. A chain that discounted merchandise 10% more than competitors but brought in only 8% more traffic might not have been superior off.

The real advantage for the holiday sales period might go to a firm like Wal-Mart. It has low labor and other operating costs and is large enough to get the ideal deals at wholesale. Deep discount might have effected its margins less than it would at many other chains.

But, based on numbers from companies tracking shopping activity, the consumer was tight everywhere he went.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Bad news, Industry, Competitive strategy

I was alarmed to read an article on Bloomberg early this Sunday morning about Texas high school football. While I am a recovering football addict, I still jump at the opportunity to even watch Pop Warner football on Television at 3 AM. But enough with my issues. There is something really serious going on in Texas and internationally with certain drug-resistant staph bacteria. This bacteria, a type that’s plagued hospitals for decades, has made its way into the general population in recent years.

Without proper treatment, it can spread to internal organs and bones after reaching the bloodstream, causing organ failure. Texas faces a certain type of this bacteria with the acronym, MRSA.

Bloomberg reports that this MRSA has migrated to playing fields in Texas, particularly on artificial turf. Texas has artificial turf at 18 percent of its high school football stadiums. It also has an MRSA infection rate among players that is 16 times higher than the estimated national average, according to three studies by the Texas Department of Say Health Services.

Scary, totally. What makes this even more troubling is that there doesn’t seem to be an accepted practice by the medical profession to treat MRSA. Doctors have differing views as to what drugs to use as first-line treatments. One company that provides such a drug is ViroPharma (NASDAQ: VPHM), a small-cap bio firm with a market cap of around $600 million.

ViroPharma markets Vancocin(R) capsules as “the only antibiotic approved to treat two significant bacterial infections of the lower digestive tract. The product is indicated for oral administration for treatment of enterocolitis caused by Staphylococcus aureus (including methicillin-resistant strains).”

ViroPharma started marketing Vancocin in 2004 and sales of the antibiotic have grown 22% in the first nine months of this year. Stock has gotten pummeled off of disappointing results of clinical trials for a hepatitis C drug and heating up of competition surrounding Vancocin. That said, ViroPharma has an extremely strong balance sheet with about $300 million of net cash/investments and some nice cash flow.

Let’s hope that the medical community finds a way to treat MRSA. Regardless, ViroPharma seems poised to continue going long in this market.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author doesn’t own shares in VPHM.

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