Among the biggest winners in Monday's early trading are
China MediaExpress (Nasdaq:
Top Percentage Gainers -- Monday, July 12,
Company Name (Ticker)
*Table includes companies with minimum market
capitalizations of $200 million and three month trading
volumes of at least 100,000 shares. All percentage returns
are listed as of 10:44AM Eastern Standard Time . Click on
ticker symbols for up-to-the-minute price quotes and
percentage gain data.
Weyerhauser's Gift to Shareholders
Shares of paper goods maker
are up +5% this morning after the company announced a special
in anticipation of a conversion to becoming a
real estate investment trust (
. By returning more than 90% of their income to shareholders, REITS
can avoid high corporate tax rates and the income is instead taxed
on the shareholder's tax return. The dividend will be payable on
September 1 to shareholders of record as of July 22.
It's unclear why shares should be up so sharply. Weyerhauser had
already indicated such a move was coming, so the stock should have
already reflected any perceived benefit to shareholders. Then
again, those who sold their shares and helped push shares down from
$50 in April to a recent $35 are probably kicking themselves.
Action to Take -->
The $5.6 billion ($26.50 a share) payout is far larger than
investors will see in the future. (Notably, only one-tenth of
dividends will be paid out in cash, the rest in new shares). The
company's earnings streams are quite erratic, and future REIT
payouts are likely to wildly fluctuate.
As Weyerhauser's earnings remain well below historical norms, the
company is being valued on the basis of its assets. UBS believes
those assets are worth $54 a share. But they are likely to trade at
a large discount to that target -- at least while global demand for
paper and paper products remains subpar. Nevertheless, the recent
sell-off looks overdone, and shares should wend their way back into
Leapfrog gets a Boost
After a recent survey among its retail contacts, analysts at
Needham & Co. predicted that
would post impressive second-quarter results. Leapfrog's
educational electronic toys were once a hot item, though larger
rivals such as
eventually came up with copycat products to steal
. And that has led the company to lose money in each of the past
four years. As a result, Leapfrog's shares, which traded for nearly
$50 back in 2003, can now be had for less than $5.
But that may soon change, according to Needham. Leapfrog's latest
iteration of its "edu-tainment" toys are quite compelling, and as
interest rebuilds, the company looks set to post profits once again
this year. And they see earnings per share more than doubling next
year to around $0.60. The Needham upgrade to "strong buy" is
boosting shares nearly +11% this morning.
Action to Take -->
Needham is correct in noting that Leapfrog's
has taken place under the radar. The apparently robust
second-quarter sales trends have come at a time when its stock has
fallen from $7 in May to less than $5 today. Even with today's pop,
shares trade for less than ten times Needham's street-high 2011
profit forecast. If the analysts are correct in predicting that
second-quarter sales will be fairly robust, shares could quickly
move back to that recent $7 high.
China MediaExpress Holdings highlights the Contrarian
With every passing week, we read another story about how the
Chinese economy is about to hit a wall. To be sure, certain sectors
such as real estate and construction may be set to slow down, but
many aspects of the economy are just getting going, thanks to heavy
government spending on infrastructure over the last five years.
Well beyond Beijing and Shanghai, dozens of other cities with
populations in excess of one million residents are geared for
steady growth, thanks to a fast-rising consumer class.
China MediaExpress Holdings (Nasdaq:
has just reminded us of this notion, citing robust advertising
growth as a key factor behind just-raised earnings guidance. That's
pushing shares up nearly +12% in Monday trading. China Media
focuses on airport and bus-based ads, and looks set to post another
year of very robust growth. Yet Wall Street analysts have yet to
start covering the stock.
Action to Take -->
As this fast-grower starts to garner a following among analysts,
price-to-earnings ratio (P/E)
below six is bound to catch attention. The stock had fallen out of
bed recently -- dropping from $13.25 on May 28 to below $9 in early
July -- for no apparent reason. Shares are back up above $10 today,
and should push past the 52-week high of $14.82 when investors stop
fretting about China's growth rates.
-- David Sterman
David Sterman has worked as an investment analyst for nearly two
decades. He started his career in equity research at Smith Barney,
culminating in a position as Senior Analyst covering European
banks. David has also served as Director of Research at Individual
Investor and has made numerous media appearances over the years,
primarily on CNBC and Bloomberg TV. David has a master's degree in
management from Georgia Tech. Read More...
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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