various media citations

Stock Sell-Off Causes VIX To Spike 5

UPDATE 1-Volatility index soars as US investors seek safety 6

Ticonderoga Securities; Ticonderoga Securities Further Expands Equity Derivatives Group with Four New Hires 8

Ticonderoga Securities Further Expands Equity Derivatives Group with Four New... 9

Option players brace for volatility on Exxon results 10

Ticonderoga Snags Four From Newedge 12

CRWENews Highlights: Ticonderoga Securities Further Expands Equity Derivatives Group with Four New Hires 13

Ticonderoga Bulks Up Equity Desk 15

Intel Outlook Spurs Chip Activity --- Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and 16

OPTIONS REPORT: Intel Forecasts Power Trades in Chip Sector 18

Intel Outlook Spurs Chip Activity; Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and 20

The Best Analysts of the Year 22

Ahead of Nvidia's Profit Report, Volatility Expectations Climb 56

OPTIONS REPORT: Volatility Views Rise In Nvidia Options 57

Trading in Symantec Takes Off 58

OPTIONS REPORT:Symantec, Boston Sci. Busy Before Earnings 59

Dollar's Drop May Move Stocks 60

OPTIONS REPORT: Dollar's Drop May Move Some Stocks 61

Options --- The Striking Price: Messy Manana for Miners 63

Barron's(5/29) The Striking Price: Messy Manana For Miners 65

Ahead of the Tape 67

HURRICANE OUTLOOK GENERATES AN ADVISORY FOR P&C INSURERS 69

OPTIONS BEAT-Hurricane headwinds could stir up insurers 70

Hurricane Outlook Generates An Advisory for P&C Insurers 72

UPDATE: OPTIONS REPORT: A Hurricane Season Related Trade 73

OPTIONS REPORT: Hurricane Season-Related Opportunities 75

Options --- The Striking Price: Oil, Oil Everywhere 77

Barron's(5/1) The Striking Price: Oil, Oil Everywhere 79

Sleepy Outlook for Chip Stocks Might Offer Opportunity in ETF 81

OPTIONS REPORT: Chipmakers Could See Volatility Ahead 82

CBOE to Start Trading Options On Volatility Index Next Month 83

OPTIONS REPORT: CBOE To Trade Options On VIX In Feb. 84

Newmont Shines on Gold's Rise 85

WSJ(12/9) Options Report: Newmont Shines On Gold's Rise Thu 86

= OPTIONS REPORT: Newmont Mining Active As Gold Gains 87

OPTIONS REPORT: Newmont Mining Active As Gold Gains 88

Options --- The Striking Price: Better Covered Calls 89

Options --- The Striking Price: Good Bye, Wild Child? 91

OPTIONS REPORT: Fifth Third Options Busy Amid M&A Rumors 93

OPTIONS REPORT: Albertson's Volatility Expected To Rise 94

Google Volatility Is Pushed Higher Ahead of Earnings 96

Options Report: Traders Gird For Google 97

Options --- The Striking Price: London Shock Fails To Jolt Volatility 98

Barron's(7/11) Market Week -- Options The Striking Price: No Fear: Bombs Fail To Raise Vix 100

AMR Isn't Following Oil's Lead 102

Options Report: AMR Volatility Low Despite Record Oil 103

Options --- The Striking Price: Ringing Up Verizon Calls --- By Kopin Tan 104

Options Report: Risk Worry Approaches Two-Month Low 106

Options --- The Striking Price: Options Forecast Somnolent Stocks 107

Options --- The Striking Price -- Flat-Lined Forever? Low VIX raises questions about its meaning 109

Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest in four years 111

DJ MARKET WEEK -- Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest 113

DJ Barron's(2/7) Steady As Gold: Xau's Implied Volatility Lowest In Four Years 114

Options --- The Striking Price -- Buck Up, Stock Owners: A strategy for retaking lost ground 115

Trading Is Mixed Amid Doubt, As Metals, Mines Get Defensive 117

DJ WSJ(10/19) Options Report: Metals, Mines Get Defensive 118

DJ Options Report: Trading Defensive in Industrials, Metals 119

Options Report: Trading Defensive in Industrials, Metals 120

Options --- The Striking Price -- Adding Some Fizz: Options can boost returns on Coke and Pepsi 122

DJ Barron's(10/11) The Striking Price: Adding Some Fizz: Options Can Boost Returns On Coke And Pepsi 124

Options Report: Trading Guarded, Some See Capped Upside 126

Options --- The Striking Price -- Surviving a Thin Harvest: Premium seekers might pluck Apple, or Kodak 128

Warnings Can Be Opportunities 130

Options Report: Profit Warnings Spur Trades; VIX Rises 131

Traders Focus More on the Risks Of Specific Stocks Than on Indexes 133

Options --- The Striking Price -- Calls of the Mild: Options stay in the summer doldrums 134

Options Report: Traders Turn To Stock-Specific Risks 136

Options Report: Traders Turn To Stock-Specific Risks 138

Options --- The Striking Price -- Oil Ennui: Crude prices soar, but oil stock options trade fitfully 140

As Dow Industrials Change, A Surprise Might Ensue --- Shares Dumped From Key Index Today Stand Chance to

Outpace Their Replacements, Trend... 142

IPO Outlook: Market Finds Itself A Victim Of Success 144

IPO Outlook: Hefty Price Tag May Accompany Growth in IPOs --- Increase in Share Offerings Might Contribute to

Dips In Overall Stock Market 146


Microsoft's Bulletin: Software giant's move sets traders scrambling 149

Cruising in Convertibles: For many, they're the vehicle of choice 151

Retailing, Software Poised For M&A Activity -CSFB Study 153


Building Your Portfolio 155

Rediscovering Taxes: Investors feel their impact more in the face of declining returns 157

Another Gunslinger Gone: John Muresianu retires as his famed Fidelity Fifty's outperformance seems most

outstanding 162

Investors get new tool to make decisions 167

Letters to the Editor - All victims of tragedy 169

of 169 2010 Factiva, Inc. All rights reserved.

Stock Sell-Off Causes VIX To Spike

Stock Sell-Off Causes VIX To Spike 91 words5 February 2010Derivatives WeekDERWEnglishCopyright 2010 Euromoney Institutional Investor plc. The Chicago Board Options Exchange Volatility Index jumped 21% to 26.08% Thursday after the worst sell-off in U.S. stocks since last May. “Investors are clamoring for protection,” according to Ryan Renicker, anequity derivatives strategist at broker-dealer Ticonderoga Securities. Renicker added that risks associatedwith sovereign debt contributed to investors’ desire to hedge their stock positions by buying put options onthe S&P500 and VIX call options. Click here to read the story from Reuters Document DERW000020100223e6250000a


UPDATE 1-Volatility index soars as US investors seek safety

UPDATE 1-Volatility index soars as US investors seek safety 642 words4 February 201017:10Reuters NewsLBAEnglish(c) 2010 Reuters Limited * S&P 500 historical volatility rising * VIX futures trade in 25 range for 2010 * Traders seek ETF put options as likely protection (Recasts lead, Adds details on ETF option volume inparagraph l3) By Doris Frankel CHICAGO, Feb 4 (Reuters) - Volatility has vaulted out of its slumber. The worst sell-off in U.S. stocks in more than nine months on Thursday sent Wall Street's favorite measureof investor anxiety, the Chicago Board Options Exchange Volatility Index <.VIX>, sharply higher as investorsscrambled to buy portfolio protection. The index, known as the VIX, jumped nearly 21 percent to 26.08 as U.S. stocks sank amid persistent fearsover European sovereign debt problems and an unexpected increase in U.S. jobless claims a day ahead ofcrucial payrolls data. "Investors are clamoring for protection," said Ryan Renicker, equity derivatives strategist at broker-dealerTiconderoga Securities. "The risks associated with sovereign debt and the uncertainty coming into Friday's jobs report haveprompted investors to hedge their stock positions by buying put options on the S&P 500 and VIX calloptions." Since topping out at a 28 reading on Jan. 22, the VIX had been trending lower over the past two weeks. Butit reversed course violently on Thursday, indicating expectations for future daily moves of 1.5 percent in theS&P 500. The VIX is a 30-day risk forecast priced off of Standard & Poor's index <.SPX> option prices and oftenmoves higher when the S&P benchmark falls sharply as investors bid up options to manage their stockmarket risk. Investors are concerned that stocks will keep falling in the near term. "Even in the exchange-traded fundsthat track major stock benchmarks and sectors, investors are aggressively buying insurance," saidoptionMonster analyst Chris McKhann. Another big driver is the actual volatility in the market, which has been rising. S&P 500 historical volatilityover the past 22 trading days stood at 18.71 percent up from 16.5 percent the previous day, Renicker said. Over the last 16 trading days, the S&P 500 has moved more than 1 percent on 10 of those days, accordingto Bespoke Investment Group, an investment firm in Harrison, New York. VIX futures are trading in the 25 range, also suggesting that traders are looking for wider stock marketswings at least for the next six months, McKhann said. BUSY ACTION IN ETF PUTS Many traders expecting downside movement turned to exchange-traded funds tracking the major


benchmarks and sectors to hedge risk. In the ETFs, about 3.40 million puts and 2.19 million calls traded, or 130 percent the recent average dailyturnover. By contrast 609,000 puts and 559,000 calls changed hands across all the cash indexes, whichrepresents approximate typical levels, according to option analytics firm Trade Alert. The action shows that increasing numbers of investors are turning to ETF puts rather than index puts whenhedging bets on volatility days, said WhatsTrading.com options strategist Fred Ruffy. Volume leaders were the SPDR S&P 500 ETF Trust , Powershares QQQ Trust Series 1 fund , the iSharesRussell 2000 Index , the iShares MSCI Emerging Markets Index . and the Select Sector SPDR Financialfund . Put-to-call ratios in the QQQQs, IWM, XLF and EEM are twice their recent average, said McKhann. Some traders have already employed their hedging and risk strategies. Options bets initiated last month inseveral ETFS suggested traders were positioning for a substantial pullback in the consumer, basic materials,banks and retail sectors by March expiration. For details, please see [nN22145195]. (Editing by Diane Craftand Leslie Adler) VIX-VOLATILITY/PROTECTION (UPDATE 1)|LANGEN|ABN|D|E|RBN|M|U|RNP|DNP Document LBA0000020100204e624001z0


Ticonderoga Securities; Ticonderoga Securities Further Expands Equity Derivatives Group with Four New Hires

Ticonderoga Securities; Ticonderoga Securities Further Expands Equity Derivatives Group with FourNew Hires 358 words30 January 2010Marketing Weekly NewsMRKWN148English© Copyright 2010 Marketing Weekly News via NewsRx.com 2010 JAN 30 - (VerticalNews.com) -- Ticonderoga Securities, an institutional broker dealer, announced theexpansion of its Equity Derivatives Group with the addition of four new hires. John Martin, former Head ofListed Equity Derivatives at Newedge, will run the marketing effort for the firm's listed options and OTCproducts. Joining Martin in this effort are Ernest Brooks, Matthew McNulty and Ryan Renicker, all also formerly ofNewedge. This expansion is the first step in the firm's effort to fully build out its equity derivatives platform,launched in November by Vuk Bulajic, Head of Equity Derivatives for Ticonderoga. "It is important to recognize and adjust to the ongoing changes in the market environment. With the additionof John and his team, Ticonderoga will be positioned to better serve clients' specific needs," said Bulajic. With the expansion of the Equity Derivatives Group, Ticonderoga continues to position itself as a leadingbroker dealer, concentrating on domestic and international equities with a focus on high-quality orderexecution alongside its differentiated research. Martin and his team will further diversify Ticonderoga'sproduct offerings by focusing on market intelligence and idea generation, incorporating strategies on bothcash and derivatives to create a more comprehensive product for a diversified customer base. Said Martin, "We are looking forward to the enormous opportunities the expanded group will present. We willbe able to occupy a unique presence in the market by exploiting synergies and optimizing our expertiseacross all equity products at Ticonderoga." Prior to Ticonderoga, Brooks served as a VP of Equity Derivatives at Newedge for four years. McNulty alsoserved as a VP of Equity Derivatives at Newedge after six years on the American Stock Exchange, where hestarted his career. Renicker joins Ticonderoga after serving as the Derivatives Strategist at Newedge. Beforethat he was Head of US Equity Option Strategy at Lehman Brothers and has been with three top-rankedteams in Equity Derivatives research. This article was prepared by Marketing Weekly News editors from staff and other reports. Copyright 2010,Marketing Weekly News via VerticalNews.com. Document MRKWN00020100122e61u0004a


Ticonderoga Securities Further Expands Equity Derivatives Group with Four New...

Ticonderoga Securities Further Expands Equity Derivatives Group with Four New Hires; New team tohelp grow firm's set of offerings 473 words11 January 201009:47PR Newswire (U.S.)PRNEnglishCopyright © 2010 PR Newswire Association LLC. All Rights Reserved. NEW YORK, Jan. 11 /PRNewswire/ -- Ticonderoga Securities, an institutional broker dealer, todayannounced the expansion of its Equity Derivatives Group with the addition of four new hires. John Martin,former Head of Listed Equity Derivatives at Newedge, will run the marketing effort for the firm's listed optionsand OTC products. Joining Martin in this effort are Ernest Brooks, Matthew McNulty and Ryan Renicker, all also formerly ofNewedge. This expansion is the first step in the firm's effort to fully build out its equity derivatives platform,launched in November by Vuk Bulajic, Head of Equity Derivatives for Ticonderoga. "It is important to recognize and adjust to the ongoing changes in the market environment. With the additionof John and his team, Ticonderoga will be positioned to better serve clients' specific needs," said Bulajic. With the expansion of the Equity Derivatives Group, Ticonderoga continues to position itself as a leadingbroker dealer, concentrating on domestic and international equities with a focus on high-quality orderexecution alongside its differentiated research. Martin and his team will further diversify Ticonderoga'sproduct offerings by focusing on market intelligence and idea generation, incorporating strategies on bothcash and derivatives to create a more comprehensive product for a diversified customer base. Said Martin, "We are looking forward to the enormous opportunities the expanded group will present. We willbe able to occupy a unique presence in the market by exploiting synergies and optimizing our expertiseacross all equity products at Ticonderoga." Prior to Ticonderoga, Brooks served as a VP of Equity Derivatives at Newedge for four years. McNulty alsoserved as a VP of Equity Derivatives at Newedge after six years on the American Stock Exchange, where hestarted his career. Renicker joins Ticonderoga after serving as the Derivatives Strategist at Newedge. Beforethat he was Head of US Equity Option Strategy at Lehman Brothers and has been with three top-rankedteams in Equity Derivatives research. About Ticonderoga Securities In May 2009, Ticonderoga Securities LLC acquired Reynders, Gray & Co. Inc. a respected firm with morethan 30-years experience and an enviable track record. Ticonderoga Securities operates a dual capabilitywith a New York Stock Exchange floor based team providing direct access as well as the desk basedmodels. The firm concentrates on domestic and international equities and focuses on high quality, conflictfree order execution, as well as a differentiated research offering to support its first class executioncapabilities. SOURCE Ticonderoga Securities 201001110947PR_NEWS_USPR_____NY35337.xml Document PRN0000020100111e61b004jy


Option players brace for volatility on Exxon results

Option players brace for volatility on Exxon results 599 words29 January 201017:21Reuters NewsLBAEnglish(c) 2010 Reuters Limited *Exxon option projected volatility rises into earnings *Exxon shares briefly notch 10-month lows *Exxon breaks key support at $64.46 a share By Doris Frankel CHICAGO, Jan 29 (Reuters) - Option activity in Exxon Mobil Corp picked up on Friday as investors brace forpotential share price movement after the oil company reports quarterly results on Monday. Exxon Mobil shares briefly touched lows not hit since March 2009 after earnings from Chevron Corp whichmissed Wall Street expectations. For details, please see [nN29120138]. In the options market, about 90,000 calls changed hands in Exxon, double their average daily volume andmore than three times the number of put options. "We are seeing signs from the options market that risk expectations for Exxon Mobil are relatively highahead of next week's earnings report," said Ryan Renicker, equity derivatives strategist at TiconderogaSecurities, an institutional broker-dealer in New York. Option implied volatility, a key component of an options price, measures the expected magnitude of shareprice movement and often moves up ahead of an event such as earnings that could potentially jolt the stock. "The stock's average implied volatility is up two percent to 25 percent as investors look for potential volatilityaround the earnings release," said WhatsTrading.com option strategist Frederic Ruffy. Exxon's at-the-money option implied volatility stood at 21 percent compared to historical volatility of 13.4percent on the stock over the past 22 trading days, Renicker said. In a research note on Friday, Renicker recommended that investors should consider a covered call strategyto cushion their existing positions heading into the earnings report after Chevron reported a decline inquarterly profits. Chevron, the second-largest U.S. oil company, on Friday posted a 37 percent drop in quarterly profit asrefining margins have suffered with pricier oil lifting costs even as the weak economy has shrunk fueldemand. "I believe these same factors could weigh on Exxon when the company reports next week," Renicker said. Wall Street analysts expect Exxon Mobil to report a profit of $1.19 per share, according to Thomson ReutersI/B/E/S. Exxon shares fell 53 cents to $64.43 on the New York Stock Exchange. "Traders looking at technical levels would consider Exxon shares to be vulnerable if they break key supportat $64.46 a level established on July 13, 2009," Renicker said. Renicker suggests that investors hedge their long exposure to Exxon by selling near-term February $65 callstrikes for a premium of about $1.08 in a so-called overwrite, a strategy that combines stock ownership and


options trading. "These calls are trading relatively rich when compared to Exxon's shares recent historical volatility," he said. The strategy would allow investors a partial hedge against a downside move in Exxon shares while at thesame time giving them upside exposure up to $66.08 -- the break-even point of the call trade as of Feb. 20expiration. "There has been quite bit of sellers of the Feb $65 calls today," said TD Ameritrade chief derivativesstrategist Joe Kinahan. There are two reasons for it, he said. The earnings are next week and Exxon is due to go ex-dividend on Feb8, "which if you are long the stock would be a nice addition to that return as well as premium received fromthe call sale." (Reporting by Doris Frankel; Editing by Diane Craft) EXXON-EARNINGS/HEDGE|LANGEN|ABN|E|RBN|U|O|OIL|RNP|DNP|PCO|PEN Document LBA0000020100129e61t002a2


Ticonderoga Snags Four From Newedge

Ticonderoga Snags Four From Newedge 107 words15 January 2010Wall Street LetterWLETEnglish© 2010 Euromoney Institutional Investor PLC. Ticonderoga Securities has added four staffers to its equity derivatives group, all from Newedge, in an effortto further position itself. John Martin, formerly head of listed equity derivatives at Newedge, has joined thefirm to run marketing for its listed options and over-the-counter derivatives offerings. Ernest Brooks andMatthew McNulty, both formerly v.p.'s for equity derivatives at Newedge, will support Martin. Ryan Renicker, who will also work on marketing for the listed options and OTC contracts, was formerly thederivatives strategist at Newedge and before that the head of U.S. equity option strategy at Lehman Brothers. Document WLET000020100202e61f00009


CRWENews Highlights: Ticonderoga Securities Further Expands Equity Derivatives Group with Four New Hires

CRWENews Highlights: Ticonderoga Securities Further Expands Equity Derivatives Group with FourNew Hires 777 words11 January 2010M2 PresswireMTPWEnglish© 2010, M2 Communications. All rights reserved. Las Vegas CRWENews.com is pleased to announce a stock highlight on Ticonderoga Securities, aninstitutional broker dealer, today announced the expansion of its Equity Derivatives Group with the additionof four new hires. John Martin, former Head of Listed Equity Derivatives at Newedge, will run the marketingeffort for the firm's listed options and OTC products. Joining Martin in this effort are Ernest Brooks, Matthew McNulty and Ryan Renicker, all also formerly ofNewedge. This expansion is the first step in the firm's effort to fully build out its equity derivatives platform,launched in November by Vuk Bulajic, Head of Equity Derivatives for Ticonderoga. "It is important to recognize and adjust to the ongoing changes in the market environment. With the additionof John and his team, Ticonderoga will be positioned to better serve clients' specific needs," said Bulajic. With the expansion of the Equity Derivatives Group, Ticonderoga continues to position itself as a leadingbroker dealer, concentrating on domestic and international equities with a focus on high-quality orderexecution alongside its differentiated research. Martin and his team will further diversify Ticonderoga'sproduct offerings by focusing on market intelligence and idea generation, incorporating strategies on bothcash and derivatives to create a more comprehensive product for a diversified customer base. Said Martin, "We are looking forward to the enormous opportunities the expanded group will present. We willbe able to occupy a unique presence in the market by exploiting synergies and optimizing our expertiseacross all equity products at Ticonderoga." Prior to Ticonderoga, Brooks served as a VP of EquityDerivatives at Newedge for four years. McNulty also served as a VP of Equity Derivatives at Newedge aftersix years on the American Stock Exchange, where he started his career. Renicker joins Ticonderoga afterserving as the Derivatives Strategist at Newedge. Before that he was Head of US Equity Option Strategy at Lehman Brothers and has been with three top-ranked teams in Equity Derivatives research. About Ticonderoga Securities In May 2009, Ticonderoga Securities LLC acquired Reynders, Gray & Co. Inc.a respected firm with more than 30-years experience and an enviable track record. Ticonderoga Securitiesoperates a dual capability with a New York Stock Exchange floor based team providing direct access as wellas the desk based models. The firm concentrates on domestic and international equities and focuses onhigh quality, conflict free order execution, as well as a differentiated research offering to support its first classexecution capabilities. Sign up to receive FREE Stock-PR alerts from CRWENewswire.com at http://www.crwenewswire.com/ About CRWENews.com CRWENews.com is an independent electronic informative online financial news publication companydedicated in providing company associates, business and financial professionals with economic andinvestment information, as well as stock highlights. CRWENews.com is a division of Crown Equity Holdings, Inc. CRWENews.com is not a registered investment advisor or broker-dealer. CRWENews.com and CrownEquity Holdings, Inc., (CRWE) affiliates, officers, directors, contractors and employees, including may buyand sell additional shares in any company mentioned herein and may profit in the event those shares rise invalue. Please do your own Due Diligence before investing in any of the stocks mentioned above. We encourage investors to join and receive CRWENews.com FREE e-mail news and stock watch alerts at http://www.crwenewswire.com/ and view our full disclaimer. Forward-Looking Statement: This release may contain forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of

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1934, as amended. All forward-looking statements and/or Safe Harbor Statement under the PrivateSecurities Litigation Reform Act of 1995 are inherently uncertain as they are based on current expectationsand assumptions concerning future events or future performance of the company. Readers are cautionednot to place undue reliance on these forward-looking statements, which are only predictions and speak onlyas of the date hereof. Risks and uncertainties applicable to the company and its business could cause thecompany's actual results to differ materially from those indicated in any forward-looking statements. M2 Communications disclaims all liability for information provided within M2 PressWIRE. Data prepared bynamed party/parties. Further information on M2 PressWIRE can be obtained at http://www.presswire.net onthe world wide web. Inquiries to [email protected]. Document MTPW000020100111e61b0053j

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Ticonderoga Bulks Up Equity Desk

Ticonderoga Bulks Up Equity Desk 126 words8 January 2010Derivatives WeekDERWEnglishCopyright 2010 Euromoney Institutional Investor plc. --Zeke Faux Institutional broker-dealer Ticonderoga Securities has hired four Newedge staffers, including John Martin,the former head of listed equity derivatives, for its new equity derivatives desk. Martin, who started last week, heads sales for over-the-counter and listed options. Ticonderoga has beenexpanding since hiring Vuk Bulajic, the former head of equity derivatives at Natixis, in November (DW, 11/2).Bulajic confirmed the hires and told Derivatives Week that he is looking to add more equity derivativestraders and salespeople. The other hires from Newedge are Ernest Brooks, v.p., Matthew McNulty, v.p., and Ryan Renicker,derivatives strategist. Prior to joining Newedge last year, Renicker was head of equity option strategy at Lehman Brothers. Document DERW000020100126e6180000j


Intel Outlook Spurs Chip Activity --- Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and

Options ReportIntel Outlook Spurs Chip Activity --- Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and By Tennille Tracy637 words31 August 2009The Wall Street JournalJC9English(Copyright (c) 2009, Dow Jones & Company, Inc.) NEW YORK -- The options market played host to robust activity in chip makers on Friday after Intel raised itsforecast on third-quarter sales and Marvell Technology Group reported quarterly results that beatexpectations. With a string of upbeat news coming out of the sector, chip stocks enjoyed some gains and options tradersemerged to speculate on future moves. Among the companies that attracted bullish attention was Advanced Micro Devices. Trading in theSunnyvale, Calif., company jumped to seven times the normal level, with investors picking up 61,000 callsthat allow them to buy the company's stock and 27,000 puts that allow them to sell it, according to TradeAlert. A bulk of the action took place in September $5 calls and October $5 calls. The latter are priced at 25 centsand show a profit if Advanced Micro's stock climbs above $5.25 before mid-October -- about 17% above theFriday close of $4.47, up 5.7% on the New York Stock Exchange. Similar activity took place in SanDisk and Nvidia. In SanDisk, traders gravitated toward October calls that convey the right to buy the Milpitas, Calif.,company's stock for $19. Priced at $1, the contracts show a profit if SanDisk rises above $20. It closed at18.03 Friday, up 1.7% on the Naqsdaq Stock Market. In Nvidia, whose stock hit a 52-week high on Friday, traders focused on September $15 calls. Some traders,however, appeared to be selling long-dated calls in what could have been part of "covered call" strategies. Ifthat was the case, traders who owned shares in Nvidia sold January $20 calls that expire in 2011. Thetraders collected about $1.75 by selling the calls, establishing positions that work best if the Santa Clara,Calif., company's shares rise to $21.75 in the next several months but not above that point. Nvidia's stock ended Friday at $14.73, up 5.1% on the Nasdaq. Meanwhile, in the Semiconductor Holdrs Trust, an exchange-traded fund that tracks several chip stocks, onetrader elected to "roll out" a short position in the fund's put options. Anticipating stability in the ETF's shares, this trader bought September $25 puts that had been sold inprevious sessions, thereby closing a short position in those contracts, and then sold longer-dated October$26 puts. The latter contracts generate $1.30 in premiums, so the position shows a profit as long as thesemiconductor fund stays above $24.70. It closed Friday at $25.69, up 1.9%. Fueling at least some of the day's action was Intel, which surprised investors by raising its third-quarterrevenue forecast to $9 billion, citing stronger-than-expected demand for its microprocessors. The trading also followed Marvell's second-quarter results, which topped estimates, and a better-than-expected third-quarter outlook. Still, some options strategists say it could be time to unwind out of chip stocks, particularly those that haverallied near their 52-week highs or even surpassed them, and to buy call options in the companies instead. This so-called stock-replacement strategy enables investors to lock in recent advances in the stocks, whilemaintaining exposure to future upside moves.


"The implied volatility has declined in line with this strong performance, so you can take advantage of thisenvironment and sell the shares while still having exposure to the upside by buying calls," said Ryan Renicker, derivatives strategist with Newedge USA. Among the companies that Mr. Renicker highlighted as potential candidates of the stock replacementstrategy are Marvell, Nvidia, Texas Instruments and Broadcom. License this article from Dow Jones Reprint Service Document J000000020090831e58v00006

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OPTIONS REPORT: Intel Forecasts Power Trades in Chip Sector

OPTIONS REPORT: Intel Forecasts Power Trades in Chip Sector By Tennille TracyOf DOW JONES NEWSWIRES718 words28 August 200915:30Dow Jones News ServiceDJEnglish(c) 2009 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--The options market played host to robust activity in semiconductor companiesFriday, after Intel Corp. raised its forecast on third-quarter sales and Marvell Technology Group Ltd. beatexpectations with its most recent quarterly report. With a string of upbeat news coming out of the sector, chip stocks enjoyed some gains and options tradersemerged to speculate on future moves. Among the companies that attracted some bullish attention was Advanced Micro Devices Inc. Trading in theCalifornia-based company jumped to six times the normal level, with investors picking up 58,000 calls thatallow them to buy the company's stock and 22,000 puts that allow them to sell it, according to Trade Alert. A bulk of the action took place in October $5 calls as well as longer-dated January $5 calls. The formercontracts are priced at 25 cents and make money if Advanced Micro's stock climbs above $5.25 before mid-October - about 17% above the recent price of $4.48, up 5.9%. Similar activity took place in SanDisk Corp. and Nvidia Corp. In SanDisk, traders gravitated toward October calls that convey the right to buy the stock for $19. Priced at$1, the contracts make money if SanDisk shares rise above $20. They recently traded for $18.11, gaining2.1%. In Nvidia, whose stock hit a new 52-week high on Friday, traders focused on September $15 calls. Thosecontracts are priced at 45 cents and make money if Nvidia shares jump above $15.45 before Sept. 18. Theyrecently traded for $14.77, up 5.4%, after retreating somewhat from a year-long high at $15.03. Other traders, meanwhile, appeared to be selling long-dated calls in Nvidia in what probably qualified as"covered call" strategies. If that were the case, traders who own shares in Nvidia sold batches of January$20 calls that expire in 2011. They collected $1.75 by doing so, establishing positions that work best if Nvidiarises to $21.75 but not above that point. Meanwhile, in the Semiconductor HOLDRS Trust, an exchange-traded fund that tracks several chip stocks,one trader elected to "roll out" a short position in the fund's put options. Anticipating stability in the ETF's shares, this trader bought September $25 puts that the trader had formerlysold, and then sold October $26 puts. The latter contracts generate premiums worth $1.30 and stand tomake money as long as the semiconductor fund stays above $24.70. The fund recently traded for $25.75, up 2.2%. Fueling at least some of the day's action was Intel, which surprised some Wall Street analysts by raising itsthird-quarter revenue forecast to $9 billion, citing stronger-than-expected demand for its microprocessors. The trading also followed Marvell's second-quarter results, which topped estimates, and better-than-expected third-quarter outlooks. Interestingly, some options strategists say it could be time to unwind out of chip stocks, particularly thosethat have rallied near their 52-week high points or even surpassed them, and to buy call options in thecompanies instead. This so-called stock-replacement strategy allows investors to lock in recent gains in the stocks, while


maintaining exposure to future upside moves. "The implied volatility has declined in line with this strong performance, so you can take advantage of thisenvironment and sell the shares while still having exposure to upside by buying calls," said Ryan Renicker,derivatives strategist with Newedge USA. Among the companies that Renicker highlighted as potential candidates of the stock replacement strategyare Marvell, Nvidia, Texas Instruments Inc. and Broadcom Corp. Back in the options market, there was also noteworthy trading in Novellus Systems Inc., but the activityappeared to reflect more mixed expectations for the stock. Traders picked up 7,000 calls and 6,000 puts in the California company, showing interest in both September$20 calls and September $17.50 puts. That company's stock recently traded for $19.57, up 3.4%. -By Tennille Tracy, Dow Jones Newswires; 212-416-2183; [email protected] (Jerry A. DiColo contributed to this report.) [ 08-28-09 1530ET ] 70699 Document DJ00000020090828e58s000ew


Intel Outlook Spurs Chip Activity; Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and

MarketsIntel Outlook Spurs Chip Activity; Bulls Place Their Bets on Advanced Micro Devices, SanDisk and Nvidia and By Tennille Tracy638 words31 August 2009The Wall Street Journal (Online and Print)WSJOMarkets; C9EnglishCopyright 2009 Dow Jones & Company, Inc. All Rights Reserved. NEW YORK -- The options market played host to robust activity in chip makers on Friday after Intel raised itsforecast on third-quarter sales and Marvell Technology Group reported quarterly results that beatexpectations. With a string of upbeat news coming out of the sector, chip stocks enjoyed some gains and options tradersemerged to speculate on future moves. Among the companies that attracted bullish attention was Advanced Micro Devices. Trading in theSunnyvale, Calif., company jumped to seven times the normal level, with investors picking up 61,000 callsthat allow them to buy the company's stock and 27,000 puts that allow them to sell it, according to TradeAlert. A bulk of the action took place in September $5 calls and October $5 calls. The latter are priced at 25 centsand show a profit if Advanced Micro's stock climbs above $5.25 before mid-October -- about 17% above theFriday close of $4.47, up 5.7% on the New York Stock Exchange. Similar activity took place in SanDisk and Nvidia. In SanDisk, traders gravitated toward October calls that convey the right to buy the Milpitas, Calif.,company's stock for $19. Priced at $1, the contracts show a profit if SanDisk rises above $20. It closed at18.03 Friday, up 1.7% on the Naqsdaq Stock Market. In Nvidia, whose stock hit a 52-week high on Friday, traders focused on September $15 calls. Some traders,however, appeared to be selling long-dated calls in what could have been part of "covered call" strategies. Ifthat was the case, traders who owned shares in Nvidia sold January $20 calls that expire in 2011. Thetraders collected about $1.75 by selling the calls, establishing positions that work best if the Santa Clara,Calif., company's shares rise to $21.75 in the next several months but not above that point. Nvidia's stock ended Friday at $14.73, up 5.1% on the Nasdaq. Meanwhile, in the Semiconductor Holdrs Trust, an exchange-traded fund that tracks several chip stocks, onetrader elected to "roll out" a short position in the fund's put options. Anticipating stability in the ETF's shares, this trader bought September $25 puts that had been sold inprevious sessions, thereby closing a short position in those contracts, and then sold longer-dated October$26 puts. The latter contracts generate $1.30 in premiums, so the position shows a profit as long as thesemiconductor fund stays above $24.70. It closed Friday at $25.69, up 1.9%. Fueling at least some of the day's action was Intel, which surprised investors by raising its third-quarterrevenue forecast to $9 billion, citing stronger-than-expected demand for its microprocessors. The trading also followed Marvell's second-quarter results, which topped estimates, and a better-than-expected third-quarter outlook. Still, some options strategists say it could be time to unwind out of chip stocks, particularly those that haverallied near their 52-week highs or even surpassed them, and to buy call options in the companies instead. This so-called stock-replacement strategy enables investors to lock in recent advances in the stocks, while


maintaining exposure to future upside moves. "The implied volatility has declined in line with this strong performance, so you can take advantage of thisenvironment and sell the shares while still having exposure to the upside by buying calls," said Ryan Renicker, derivatives strategist with Newedge USA. Among the companies that Mr. Renicker highlighted as potential candidates of the stock replacementstrategy are Marvell, Nvidia, Texas Instruments and Broadcom. Write to Tennille Tracy at [email protected] Document WSJO000020091006e58v001b5

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The Best Analysts of the Year

The Best Analysts of the Year 24,736 words17 October 2006Institutional Investor - AmericasINVSEnglishCopyright 2006 Euromoney Institutional Investor plc. Click here to view the Rankings. Chemicals/Commodity Donald Carson Merrill Lynch Second Team: Sergey Vasnetsov Lehman Third Team: P.J. Juvekar Citigroup Runners-up: Robert Koort Goldman Sachs; Kevin McCarthy BofA; William Young Credit Suisse Keeping a good thing going, Donald Carson, 52, appears on the first team for a fourth year in a row asinvestors continue to praise his long support of Monsanto Co. The Merrill analyst upgraded the St. Louis-based seed and herbicide giant to buy in August 2003, at a split-adjusted price of $10.90, on the basis of itsrich agricultural-biotechnology pipeline. By year-end 2005, Monsanto shares had jumped to $38.49 (split-adjusted), outstripping the MSCI chemicals index last year by 43.7 percentage points. Carson kept raisinghis price targets, most recently in August, primarily owing to Monsanto's forthcoming drought-tolerant cornand other potential blockbusters. Shares rose to $44.24 through mid-September. "He has the courage of hisconvictions and helps us make money," explains one client. A bearish outlook cements a third consecutivesecond-place finish for Lehman's Sergey Vasnetsov. Last December he declared 2005 the peak year in theethylene cycle and downgraded to market weight Midland, Michigan-based Dow Chemical Co., thediversified goliath, at $43.84, and Olin Corp., a Clayton, Missouri-based chemicals and metal-productsproducer, at $19.21, among others. Through mid-September the shares had fallen 12.0 and 18.2 percent,respectively. "He was the first to reduce Dow, which is a barometer for the entire sector, and it was a wisedecision," observes one investor. Advancing from Runner-up: to third place, which he has occupied twice inthe past five years (2002 and 2004), P.J. Juvekar of Citigroup impresses clients with his "vast knowledge"and "deep thinking." Sponsors fondly recall a May report about ethanol, the corn-based alternative fuel,which "explained the science in the context of specific stocks," as one grateful customer puts it. Partlybecause of Monsanto's involvement in corn production, Juvekar, who also ranks third inChemicals/Specialty, upgraded the stock to buy in August 2005, at a split-adjusted $33.11. Through mid-September the shares were up 33.6 percent. Chemicals/Specialty Robert Koort Goldman Sachs Second Team: David Begleiter Deutsche Third Team: P.J. Juvekar Citigroup Runners-up: Donald Carson Merrill Lynch; Jeffrey Cianci UBS; Kevin McCarthy BofA; John McNulty CreditSuisse; Sergey Vasnetsov Lehman; Jeffrey Zekauskas J.P. Morgan In his fourth consecutive appearance on the first team, Robert Koort earns high marks for "keeping a sharp


eye on valuations," says one portfolio manager. Clients were especially grateful to the Goldman analyst forsteering them to Ecolab, a St. Paul, Minnesota-based supplier of institutional cleaning products. In October2005, Koort, 38, upgraded the stock to outperform, as a bargain at $31.49; by mid-September the shareshad risen to $41.98, an increase of 33.3 percent, compared with a 12.0 percent gain for the sector. Providingunrivaled access to senior managements is one way that repeat second-teamer David Begleiter of Deutscheendears himself to clients. "Dave brings corporates around to meet us, rather than having us go on fieldtrips, which is a nice time-saver," asserts one money manager. Another highlights his "unique perspective,"especially on Cytec Industries, a West Paterson, New Jersey, midcap manufacturer of adhesives and otherspecialized engineering materials. Begleiter upgraded Cytec to buy back in March 2004, at $32.29. In the 12months ended mid-September 2006, the stock rose 26.7 percent, to $54.63. P.J. Juvekar of Citigroup, whoalso ranks third in Chemicals/Commodity, debuts on the Third Team:. Dubbed "a storehouse of knowledge"by one client, Juvekar made a November counterconsensus upgrade to buy on Engelhard Corp., at $27.43,on the assumption that new diesel emissions standards for trucks would drive demand for the Iselin, NewJersey-based company's catalytic converters. The stock shot up to $38.00 in January after Germanchemicals giant BASF made a tender offer, and Juvekar downgraded it to hold, on valuation; when the dealclosed in June, Engelhard shares had settled at $38.98. "P.J. helps us make money," explains one happybuy-sider. Metals & Mining Peter Ward Lehman Second Team: Anthony Rizzuto Jr. Bear Stearns Third Team: Michael Gambardella J.P. Morgan Runner-up: John Hill Citigroup Repeating on the first-place team, Peter Ward impresses clients with his dedication and perseverance. TheLehman analyst has been bullish on copper since mid-2004, reasoning that because there have been fewsignificant new discoveries of copper mines, supplies will remain tight and prices will rise. During the 12months ended mid-September, prices almost doubled, from $16.78 per pound to $33.17, helped by strongdemand from China. Ward, 39, stuck with a June 2004 overweight on Phelps Dodge Corp., pegged at a split-adjusted price of $34.50, and added it to Lehman's short list of "Uncommon Values" in June 2005, at $45.46,and June 2006, at $77.58. Through mid-September the Phoenix-based copper producer had risen to $83.73,advancing 62.5 percent in the preceding 12 months and surpassing the sector average by 41.1 percentagepoints. Anthony Rizzuto Jr. finishes in second place for a fifth year running. The Bear Stearns analyst ishailed for "stock-picking dexterity," in the words of one investor, especially a May 2005 upgrade of AlleghenyTechnologies to outperform. Rizzuto believed that the Pittsburgh company, having just been freed from fixed-price contracts signed in 2001, was undervalued at $21.00. The specialty-metals and alloys producer soaredto $72.98 in April, at which point Rizzuto downgraded it, on valuation. By mid-September the shares hadfallen to $62.99. A bullish view of steel helps Michael Gambardella repeat in third. Since mid-2005 the J.P.Morgan analyst has stressed ever-rising steel prices. Clients applaud his March 2005 upgrades of NucorCorp., a Charlotte, North Carolina-based steel-mill operator, at a split-adjusted $30.88, and scrap-steelsupplier Steel Dynamics of Fort Wayne, Indiana, at $35.93. By mid-September the stocks had risen to$46.76 and $50.93, respectively. "No one knows more than Mike about the minutiae of steel," affirms onesupporter. Paper & Forest Products Chip Dillon Citigroup Second Team: Mark Connelly Credit Suisse Third Team: Peter Ruschmeier Lehman Runners-up: Richard Schneider UBS; George Staphos BofA; Mark Wilde Deutsche For the seventh time in ten years, Chip Dillon, 48, appears on the first team. The Citigroup analyst "makespaper interesting," says one investor. Dillon also makes it profitable. He upgraded Georgia-Pacific Corp. inJanuary 2002, at $25.66, and remained bullish on the stock even when its price slipped in the first half of lastyear, from $37.04 in January to $31.80 in June. In November shares soared to $47.28, after privately heldKoch Industries announced it would acquire the Atlanta-based wood producer for $13.2 billion. Dillon also


wins praise for not being afraid to issue sell ratings. Case in point: Louisiana-Pacific Corp. In March, Dillondowngraded the Nashville-based lumber supplier to sell, at $27.83, on pricing pressure. By July the stockhad fallen to $20.39, cheap enough that he upgraded to hold. In mid-September it was still hovering at about$20. Clients highly regard repeat second-teamer Mark Connelly for his knowledge and perspective. "No onehas a deeper or broader view of the sector," says one money manager. The Credit Suisse analyst earnspoints for his April 2005 upgrade of Rock-Tenn Co., a Norcross, Georgia-based paperboard manufacturer,judged a bargain at $9.85. As of mid-September 2006 the stock had more than doubled, to $20.18,advancing 33.9 percent in the preceding 12 months, while the sector was up 21.1 percent in the sameperiod. Peter Ruschmeier, who moves up a notch to third, "keeps his finger on the pulse of the industry,"says one buy-sider. Investors praise the Lehman analyst's ongoing bearish stand on Smurfit-StoneContainer Corp. He downgraded the Chicago-based containerboard producer to underweight in August2002, deeming it overpriced at $13.27; Smurfit's shares fell to $10.27 in July, and Ruschmeier upgradedthem to equal weight, on valuation. By mid-September they had edged up to $11.02. Aerospace & Defense Electronics Steven Binder Bear Stearns Second Team: Robert Stallard BofA Third Team: George Shapiro Citigroup Runners-up: Joseph Campbell Jr. Lehman; Douglas Harned Sanford C. Bernstein; David Strauss UBS; HeidiWood Morgan Stanley "It's amazing how well he understands the dynamics of these industries," asserts an enthusiast of BearStearns' Steven Binder, who outshines the competition for his eighth consecutive first-place finish. Investorspoint to the analyst's long-standing endorsement of Lockheed Martin Corp. Binder, 48, has recommendedthe Bethesda, Maryland-based defense contractor since July 1998 as undervalued at a split-adjusted $45.55.Through mid-September 2006 the shares reached $83.00, gaining a stunning 35.3 percent in the preceding12 months, when the sector as a whole rose 19.0 percent. Clients also mention an early June alert aboutpossible delays in Airbus Industrie's new A380 superjumbo plane, which came just days before the companyannounced a six-month delay. "He's got information sources like no one else," sums up one moneymanager. Newcomer Robert Stallard of BofA wows investors with the breadth of his coverage. "He picks upsome of the smaller names that are otherwise off our radar screens," says one client. The second-teamerhas favored Precision Castparts Corp., a Portland, Oregon-based midcap supplier to the aerospace industry,since August 2004, at a split-adjusted $27.13, because of its exposure to the improving aerospace sector.Through mid-September 2006 the stock had flown to $57.41. In third after four years at No. 2 is Citigroup'sGeorge Shapiro, who is "that rare analyst you can easily chat with and always learn something new," relatesone buy-sider. Shapiro, who has placed on the All-America Research Team for 23 straight years, continuesto win praise for his July 2004 buy recommendation of United Technologies Corp., at a split-adjusted $44.39,on its changing, diverse business mix. Through mid-September 2006 the Hartford, Connecticut-basedaircraft-engine maker had skyrocketed to $64.61, up 29.6 percent over the previous 12 months. Airfreight & Surface Transportation Edward Wolfe Bear Stearns Second Team: Kenneth Hoexter Merrill Lynch Third Team: Thomas Wadewitz J.P. Morgan Runners-up: John Larkin Stifel Nicolaus; Rick Paterson UBS It's four in a row for Edward Wolfe, who wins the top spot in a landslide. Investors praise what one deemsthe Bear Stearns analyst's "broad purview" and single out an August 2005 upgrade to outperform on small-cap freight railroad Genesee & Wyoming, at a split-adjusted $19.20, partly on its booming business inAustralia. In February the "independent thinker," as one supporter describes Wolfe, 40, downgraded theGreenwich, Connecticut-based G&W to peer perform, at $28.77, after the company announced a $941million gain from selling some routes in southern Australia, which prompted an abrupt hike in the share price.As of mid-September the stock had corrected to $23.55. Kenneth Hoexter leapfrogs two spots to the SecondTeam:. The Merrill analyst endears himself to clients with frequent, brief telephone conversations. Says onegrateful buy-sider, "Ken doesn't send out reams of paper or leave long, impersonal voice mails, as so many


other analysts do. He actually talks -- and answers questions off-the-cuff -- which is rare." Advocates alsoapplaud his recent emphasis on select railroad companies such as CSX Corp. Hoexter upgraded theJacksonville, Florida-based company to buy in September 2004, at $16.27 (split-adjusted), on its plans toimplement a new scheduling system. By mid-September 2006, CSX had charged to $31.61, advancing 43.9percent in the preceding 12 months. Newcomer Thomas Wadewitz joined J.P. Morgan from Bear Stearns inJune 2005 and hit the ground running. In July 2005 the third-teamer launched coverage of CSX with anoverweight rating, at a split-adjusted $21.74, enabling clients to capture an eye-popping 45.4 percent gainthrough mid-September 2006. "Tom does rigorous modeling and consequently has the best earningsestimates of anyone covering the space," declares one money manager. Business & Professional Services Andrew Steinerman Bear Stearns Second Team: Kelly Flynn UBS Third Team: Gregory Cappelli Credit Suisse Runner-up: Christopher Gutek Morgan Stanley Returning first-teamer Andrew Steinerman of Bear Stearns earns praise for an ongoing series of staffingreports. Steinerman, 38, has been stressing revenue growth and margin expansion at select companies withinternational exposure. "He pointed out that in some countries, industries were being deregulated and therewas high demand for skilled staffing services," recalls one investor. Last October, Steinerman highlightedManpower as undervalued, at $43.87; by mid-September shares of the Milwaukee-based internationaloutsourcer had climbed to $60.90. Other investors single out Steinerman's long-standing cautious stance onSpherion Corp., a temp agency headquartered in Fort Lauderdale, Florida, because of its lack ofinternational exposure. Year-to-date through mid-September, Spherion fell from $10.01 to $7.11, and thesector as a whole was flat. Moving up one rung to second is Kelly Flynn of UBS, who "really gets inside hercompanies," declares one investor. Flynn was especially astute in her coverage of Career Education Corp.,a Hoffman Estates, Illinois-based provider of postsecondary courses. Flynn issued a sell recommendation inSeptember 2004, at $30.50, largely because of federal investigations into allegations that the companysubmitted false claims to the Department of Education about costs and job placement of its students. Thestock seesawed until April 2006, when a Securities and Exchange Commission investigation ended with noenforcement action, and the price shot up to $41.70. Flynn stood her ground, insisting the company'saccreditation, and consequently its revenue, were still in danger from other, ongoing investigations. She wasright. The company missed its second-quarter earnings, and shares had plunged to $20.52 by mid-September. Though he slips one notch to third, Gregory Cappelli of Credit Suisse is "able to juggle a lot ofballs at once and never lose sight of what's important," says one investor. In September 2005, Capelliupgraded SkillSoft, at $3.85, believing the Dublin, Ireland-based developer of electronic-learning programswould benefit from the economic stability buoying its potential market. A year later the shares were up 72.7percent, to $6.65. Electrical Equipment & Multi-Industry Jeffrey Sprague Citigroup Second Team: Robert Cornell Lehman Third Team: John Inch Merrill Lynch Runner-up: Scott Davis Morgan Stanley Jeffrey Sprague, 45, wins the top spot for a seventh year in a row, impressing clients with what one calls his"Midas touch." Investors cite the Citigroup analyst's April 2005 buy recommendation on Washington-basedtoolmaker Danaher Corp., as a bargain at $49.82. Though a tad early -- the stock didn't gain lastingmomentum until November -- the recommendation proved wise when Danaher rocketed to $66.70 in mid-September. "He was ahead of the curve and stuck to his guns," observes one money manager. Clientscontinue to be pleased with Sprague's July 2004 buy on Textron, at $56.29, partly based on a big order forthe Providence, Rhode Island, company's Cessna business jets. By mid-September 2006 the shares hadsoared to $83.83, an increase of 20.8 percent over the preceding 12 months, while electrical equipmentshares were up 15.9 percent during the same period. Returning to the Second Team: for a seventhconsecutive year, Robert Cornell of Lehman is an analyst who one supporter says "never ceases to amaze";


recommendations from years past, such as Emerson Electric Co., continue to bear fruit. Cornell upgradedEmerson to buy in September 2002, at $39.35, based on the St. Louis company's impending transformationfrom a components builder to a diversified technology-based solutions provider; in the 12 months ended mid-September 2006, Emerson surged 27.1 percent, to $82.68. "No one has more knowledge or better instincts,"declares a satisfied client. No. 3 for a fourth year running, Merrill's John Inch earns praise for having "anagile mind," as one portfolio manager puts it. Last October, Inch issued a sell recommendation on ITT Corp.,a White Plains, New York-based supplier of electronic components, believing it was overpriced at a split-adjusted $55.08. A month later, when it had fallen to $49.27, he upgraded it to neutral, again on valuation;then in July, believing ITT was reasonably priced at $49.50, he upgraded it to buy. The shares were tradingat $49.18 in September. Environmental Services Leone Young Citigroup Second Team: Amanda Tepper J.P. Morgan Third Team: Lorraine Maikis Merrill Lynch Claiming victory for a sixth consecutive year, Citigroup's Leone Young is "always ahead of the curve," saysone money manager. Clients especially appreciate her ongoing coverage of Waste Management. Young, 45,upgraded the Houston-based, national sanitation giant back in August 2002, at $23.72, partly onmanagement's cost-cutting discipline. In August 2005, at $27.65, she believed it had new pricing power; inJanuary she dubbed it one of her top picks for 2006. By mid-September it had risen to $35.37, up 18.8percent year-to-date, while industrial conglomerates were down 1.7 percent during the same period. AmandaTepper, in second place for a fourth year running, garners accolades for the November 2005 installment ofher biannual survey of waste haulers, which indicated that companies could sustain sufficiently high priceincreases to offset rising energy costs. Tepper, who's also No. 3 in Packaging, favored Republic Services,first endorsed in November 2004, at $30.65, partly on its stock-repurchase program. Shares of the FortLauderdale, Florida-based nonhazardous-solid-waste remover jumped to $43.86 in April 2006 before slippingto $37.89 in mid-September. "She said it would be a good year for waste companies, and so far it looks to betrue," comments one investor. (Tepper left J.P. Morgan to join BofA in September as associate director ofequity research.) Merrill's Lorraine Maikis moves up a notch to third place. Backers single out her "in-depthapproach to corporate accounting," as one puts it, citing an April 2005 report, "Comparing Apples toOranges," which examined how industry accounting practices affect earnings. It explained, for instance, thata decline in Waste Management's free cash flow was the result of land purchases essential to expandingcapacity. She has backed the company since August 2003, at $22.14, on its strong pricing momentum. Machinery David Raso Citigroup Second Team: Joel Tiss Lehman Third Team: Ann Duignan Bear Stearns Runner-up: David Bleustein UBS Citigroup's David Raso stands victorious again with his sixth consecutive appearance on the first team, andwins praise for his coverage of Caterpillar. Raso, 36, downgraded the Peoria, Illinois-based engine builder tohold in September 2005, at $57.92, on pricing pressure from hurricane-induced interruptions in its supplychain. One month later, after Caterpillar announced disappointing third-quarter results and loweredexpectations for the fourth quarter, the stock plunged 12.2 percent in three days. Raso upgraded it to buy inJanuary, at $62.24, after his construction-equipment dealers survey indicated higher demand for Catproducts. By mid-September, Cat shares had climbed to $65.43. "He's got channels of information that makehim seem prescient," confides one advocate. Lehman's Joel Tiss jumps to the Second Team: from Runner-up:, earning accolades for having what one money manager calls the "broadest coverage universe on theStreet." Especially noteworthy was an October 2005 overweight on Manitowoc Co., a small-cap craneprovider based in Manitowoc, Wisconsin, in part on its booming business from rebuilding hurricane-ravagedareas, at a split-adjusted $23.96. By mid-September the shares had risen a whopping 86.7 percent, to$44.74, well outpacing the sector's 15.7 percent rise. "He's terrific at uncovering moneymaking ideas,"cheers one grateful client. Repeat third-teamer Ann Duignan -- known as "Ethyl Ann" for frequent TVappearances in which she discusses the prospects for ethanol -- shows it is possible to do well by doing


good. Customers applaud the Bear Stearns analyst's monthly "Green Machine Renewable Energy Update"as "concise" and "comprehensive." Backers especially praise Duignan's July 2005 upgrade of Deere & Co.,the agricultural-equipment goliath headquartered in Moline, Illinois, at $64.76, on rising demand because ofhigher corn prices. By mid-September 2006, Deere had jumped to $80.87. Packaging George Staphos BofA Second Team: Ghansham Panjabi Wachovia Third Team: Amanda Tepper J.P. Morgan George Staphos easily takes first for a third straight year (and the seventh time in eight years). The BofAanalyst impressed clients last fall with reports about hurricane-related interruptions in the supply of resinsused by flexible packagers such as Sealed Air Corp. of Elmwood Park, New Jersey, and Pactiv Corp. ofLake Forest, Illinois. Staphos, 41, downgraded Sealed Air to neutral in September 2005, at $49.41, on risingresin prices; one year later it had edged up only to $52.95. He stuck with his longstanding buy on Pactiv,though it had dropped 25.3 percent from the start of 2005, to $18.90. Largely betting on improving margins inthe company's Hefty-brand household-bags business, Staphos reiterated his endorsement; by mid-September 2006 the stock had rallied to $27.83, a gain of 47.2 percent; the sector was up just 2.6 percent."Why would I need to go to anyone else?" asks a satisfied buy-sider. Ghansham Panjabi, who returns tosecond place after a year in third, helps clients comprehend "true underlying value, which can be hard tocalculate given recent volatility in component costs," says one investor. Case in point: Crown Holdings. InAugust 2005, shortly after joining Wachovia, Panjabi backed the Philadelphia-based container maker asundervalued at $16.30, a position he reiterated strongly in May, when the stock slipped to $15.64. Hestressed Crown's true worth and resilience, given its wide penetration of the food and beverage industries.By mid-September the stock had climbed to $18.47. Trading places with Panjabi is No. 3 Amanda Tepper(who also ranks in Environmental Services). Though she ceased coverage for J.P. Morgan in June toprepare for her September move to BofA, followers prize her nod last November to Sonoco Products Co., aHartsville, South Carolina, supplier of paperboard cans and tubes, for its recent cost-cutting efforts. Sonocorose from $27.48 at the time of the call to $33.90 in mid-September. Airlines David Strine Bear Stearns Second Team: Michael Linenberg Merrill Lynch Third Team: Jamie Baker J.P. Morgan Runner-up: Garrett Chase Lehman David Strine of Bear Stearns jets into the top spot among airlines analysts, up from No. 2 last year. Strine,37, is a 1990 University of Vermont graduate and former corporate lawyer who says a fascination withbusiness and an early internship in finance lured him back to Wall Street, where his bullish calls have helpedclients make money over the past year -- at least those who paid attention. Most airlines analysts turnedbearish on USAirways Group after it merged with America West Airlines, but Strine saw value and rated thestock an outperform in September 2005, at $20.21, reasoning that competitors' route cutbacks in East Coastmarkets and Southwest Airlines' fare raises would help the carrier. He was right. By mid-September 2006,USAirways' stock had soared 128.7 percent, to $46.23, while the sector was up 13.7 percent over thatperiod. "He's a good stock picker," says one buy-sider. Adds another: "He doesn't get rattled by day-to-dayevents." Though he drops from the first team to the second, Michael Linenberg continues to impressinvestors with the timeliness of his calls. In July the Merrill analyst downgraded USAirways, AMR Corp.(parent of American Airlines) and Continental Airlines, to neutral, believing they were "getting ahead ofthemselves," he says. By mid-September the stocks had slipped 13.5, 12.9 and 6.3 percent, respectively,since the time of Linenberg's downgrade. "There's Michael, and there's everybody else," says one portfoliomanager. "He is as good as it gets." Repeating on the Third Team:, Jamie Baker earns praise for being "veryearly in seeing through the effects of high oil prices and hurricanes," says one client. The J.P. Morgananalyst was bullish on not only USAirways but also American and Continental. Last October, Bakerrecommended overweighting the latter two. By mid-September, American's shares had jumped 86.5 percent,and Continental had skyrocketed 145.9 percent, since Baker's recommendation.


Apparel, Footwear & Textiles Robert Ohmes BofA Second Team: Robert Drbul Lehman Third Team: Jeffrey Edelman UBS Runners-up: Lizabeth Dunn Prudential; Virginia Genereux Merrill Lynch; Margaret Mager Goldman Sachs Robert Ohmes, 37, of BofA steps up from Second Team: last year to this year's top spot with what onepleased buy-sider calls "great perspective in a space where it's easy to struggle." A micro approach -- usingchannel checks and detailed financial models -- helps Ohmes determine which companies can gain marketshare and provide earnings surprises. Clients especially appreciated Ohmes's buy rating on activewearmaker Under Armour of Baltimore, inaugurated in mid-March at $27.42. "Others focused on the stock's highmultiple," observes one investor. "He saw how the company was taking market share and how it wouldtranslate into higher earnings." As of mid-September, Under Armour had risen to $39.60. Ohmes, who holdsa B.A. from Vanderbilt University and an MBA from the University of Maryland University College, workedpreviously as a Retailing/Softlines analyst for Morgan Stanley. Losing his four-year foothold in first place,Robert Drbul slips to No. 2, but backers say he is still "a reliable gut-check when the Street is overly positiveor negative." The Lehman researcher, who ranks third in Retailing/Broadlines & Department Stores, issuedan overweight rating on a beat-up Phillips-Van Heusen Corp. of New York in October 2005, at $27.73,because he believed that, with the Calvin Klein brand on track, the company had some of the best growthprospects in apparels. The stock had risen to $41.83 by mid-September. Holding steady in third place,Jeffrey Edelman has what one investor calls the "exceedingly rare qualities of experience and judgment."That judgment led the UBS analyst to downgrade Kellwood Co. of St. Louis and Columbia Sportswear ofPortland, Oregon. He placed a reduce rating on Kellwood in June at $30.88 and a neutral rating on Columbiain April at $55.01. The stocks were trading at $28.29 and $53.80, respectively, in mid-September. Autos & Auto Parts Ronald Tadross BofA Second Team: Rod Lache Deutsche Third Team: Himanshu Patel J.P. Morgan Runners-up: Darren Kimball Lehman; Jon Rogers Citigroup "An all-around solid analyst who's not afraid to get down in the muck" is how one money manager describesRonald Tadross, who zooms from Runner-up: to the first team. The BofA analyst says he has beenenamored of Wall Street ever since he commuted to Prudential Securities in New York, where he workedpart-time while earning a degree in finance at Connecticut's Fairfield University in 1993. Tadross, 35, is oneof the few U.S. analysts to follow Toyota Motor Corp. He pinned a buy on the stock in October 2005, at$91.87, largely on the strength of the new-product pipeline at its North American operations, anddowngraded to neutral in May, at $116.67, after the stock gained 27.0 percent and overtook Tadross' targetprice of $104. By mid-September the shares had slipped back to $106.16. Rod Lache, who repeats on theSecond Team:, wins accolades as much for his "good work on the fundamentals" as for his "phenomenal listof industry contacts," says one portfolio manager. Investors praise the Deutsche analyst for his series ofcalls on Johnson Controls, beginning with a buy recommendation last November. At the time the Milwaukeeparts manufacturer's shares were trading at $68.94; in June, when the share price hit $89.35, Lachedowngraded to hold. By mid-September the stock had slipped to $71.86. Advancing from Runner-up: to thirdis J.P. Morgan's Himanshu Patel, who is "an independent thinker in an industry where there's a herdmentality," says one client. Patel believed that fears of a General Motors Corp. bankruptcy were overblownand recommended overweighting the stock in January, at $18.36, after the company launched its T900platform for SUVs. In August he downgraded to neutral, at $30.99. Investors who listened locked in gains of68.8 percent. Beverages


William Pecoriello Morgan Stanley Second Team: John Faucher J.P. Morgan Third Team: Robert van Brugge Sanford C. Bernstein Runners-up: Michael Branca Lehman; Carlos Laboy Bear Stearns; Bryan Spillane BofA "He has some of the best industry data, is incredibly accessible and is extremely valuable in giving you asense of what the consensus is thinking," says one money manager of William Pecoriello, 41, who finisheson the first team for a fourth consecutive year. The Morgan Stanley analyst upgraded Atlanta-based Coca-Cola Enterprises in June, at $19.16, owing to several factors, among them new CEO John Brock'swillingness to leverage Coke's assets (including distributing non-Coke products, if necessary) and theintroduction of several new tea beverages. By mid-September the shares had risen 8.2 percent, to $20.74,versus gains of 6.6 percent for the sector and 6.4 percent for the Standard & Poor's 500 index. JohnFaucher, who repeats in the No. 2 spot, is "a great sounding-board and voice of reason," according to onemoney manager. The J.P. Morgan analyst was bullish on PepsiCo, urging investors to overweight it inSeptember 2005, at $54.42, largely on stronger-than-expected sales of Gatorade. "They enabled PepsiCo tosignificantly exceed expectations and outperform the market, the beverage group and consumer staples,"says Faucher. By mid-September 2006, Pepsi's share price had risen 19.5 percent, to $65.03, sinceFaucher's call, while beverages were up 9.0 percent over that period. Another satisfied client notes thatFaucher "gives straightforward, honest assessments of businesses and management teams, irrespective ofhis ratings. I also like his somewhat holistic approach in understanding the whole consumer staplesuniverse." A willingness to take a contrarian stand helps Robert van Brugge rise from Runner-up: to third.The Sanford C. Bernstein analyst initiated coverage of Fairport, New York-based Constellation Brands inApril 2005, at a split-adjusted $29.10, breaking from consensus to put an underperform rating on the shares.That October, when the shares had fallen to $22.25, van Brugge upgraded to market perform. Through mid-September the shares had risen 25.0 percent, to $27.81, since his upgrade. Cosmetics, Household & Personal Care Products Wendy Nicholson Citigroup Second Team: Lauren Lieberman Lehman Third Team: Amy Low Chasen Goldman Sachs Runners-up: John Faucher J.P. Morgan; William Pecoriello Morgan Stanley; William Schmitz Deutsche Capturing first place for the first time, Wendy Nicholson "knows the short term, but she doesn't lose sight ofthe big picture," says one supporter. The Citigroup analyst, ranked third for the past two years, is a 1990University of Pennsylvania graduate who worked in Citi's investment banking department for eight yearsbefore transferring to research in 1998. Nicholson, 38, wins accolades for her call on Avon Products of NewYork, which she upgraded in October 2005, at $24.12, on the company's restructuring and cost-cuttinginitiatives. By mid-September the shares had risen 22.5 percent, to $29.54. "I was particularly impressed byher willingness to go against the grain when Avon sold off last year," explains one investor. "It was a gutsymove on her part." Another consensus-breaker, Lauren Lieberman, debuts on the Second Team:. TheLehman analyst was not as enthusiastic as her peers about Procter & Gamble Co.'s $57 billion acquisition ofthe Gillette Co. last year, believing that investors were already paying for all of the promised cost synergiesand step-up in long-term revenue growth from the acquisition. After peaking in March at $61.56, P&G sharessank to $52.94 by early June. Two weeks later, Lieberman upgraded the stock to market perform. By mid-September the shares were up 11.6 percent since Lieberman's upgrade; the personal products subsectorwas flat over that period. Amy Low Chasen, who slips one notch to third after five straight years at No. 2,continues to win praise for her coverage of longtime favorite Colgate-Palmolive Co. of New York. TheGoldman analyst first upgraded the stock in December 2004, at $48.21, on the belief that companyrestructuring would eventually pay off for investors -- and she has maintained that stance despitedisappointing results. The past year proved her right: For the 12-month period ended mid-September,Colgate's stock rose 19.8 percent. Food Andrew Lazar Lehman


Second Team: Terry Bivens Bear Stearns Third Team: David Nelson Credit Suisse Runner-up: Eric Katzman Deutsche On the first team for a fourth year in a row, Andrew Lazar “is one of the few sell-side analysts who candifferentiate between management teams that are taking the correct actions to build longer-term franchisevalue versus those that are just out to make short-term profits,” says one money manager. The Lehmananalyst did just that with his coverage of Kellogg Co., which he upgraded in September 2005, at $43.01, onexpectations of more-aggressive share repurchases going forward and the sustainability of earnings-per-share growth. By mid-September 2006 shares of the Battle Creek, Michigan–based breakfast cerealmanufacturer had risen 15.6 percent, to $49.71, compared with 12.4 percent for the sector and 8.6 percentfor the S&P 500. Lazar, 40, understood Kellogg’s “dedication to sustaining superior topline growth whilereinvesting in the business,” says one buy-sider. Terry Bivens catapults from Runner-up: to second place onthe strength of calls “that continue to be money-making for his constituents,” according to one investor. Casein point: H.J. Heinz Co. The Bear Stearns analyst highlighted his outperform call last December, at $33.28,citing the Pittsburgh-based company’s strong cash position and appealing price-earnings ratio. As of mid-September the shares were up 23.1 percent, to $40.98. “Bivens couples his business acumen with greatcommunication skills to deliver a unique research product,” says one longtime client. David Nelson, whoslips to third place after two years at No. 2, “has a very deep understanding and knowledge of all theplayers,” says one investor. These qualities prompted the Credit Suisse analyst to upgrade Tyson Foods inApril, at $12.85, on the belief that fears of avian flu were overstated. By mid-September shares of theSpringdale, Arkansas–based poultry processor had risen 24.1 percent, to $15.95. Gaming & Lodging Joseph Greff Bear Stearns Second Team: David Anders Merrill Lynch Third Team: Harry Curtis J.P. Morgan Money managers say they hit the jackpot with Joseph Greff, who leaps from Runner-up: to first team fordelivering “very thorough work and timely research calls” in an industry prone to gambling fever. The BearStearns analyst, who earned an MBA from New York University’s Stern School of Business in 1999,impressed clients with his coverage of Shuffle Master. Greff, 36, upgraded the Las Vegas–based gamemanufacturer to outperform in March, at $26.23, then downgraded six weeks later, at $39.59, asserting thatthe stock had reached its peak. By mid-September, Shuffle shares had fallen to $26.79, a 32.3 percent dropfrom the time of Greff’s downgrade. “That was a gutsy call,” says one buy-sider, noting that many of Greff’speers were betting for more upside. “Joe is an independent thinker who’s willing to break from the pack.”David Anders of Merrill, who repeats in second place, wins praise for being “logical — he doesn’t just comeout with an opinion and try to justify it,” says one satisfied client. The San Francisco–based analyst has beenurging investors to shun gaming stocks and stick with hotels because demand is outstripping supply. Sharesof Beverly Hills, California–based Hilton Hotels Corp., Washington-based Marriott International and WhitePlains, New York–based Starwood Hotels & Resorts Worldwide were up 16.9, 16.1 and 16.0 percent,respectively, year-to-date through mid-September. Returning to third place after two years as Runner-up:,Harry Curtis “puts on the best gaming conference in the industry,” says one European investor, who treks toLas Vegas every March to attend. Among the J.P. Morgan analyst’s favorite stocks is Wynn Resorts, whichCurtis has rated overweight since 2003. Shares of the Las Vegas–based casino operator were up 50.5percent for the year ended mid-September. Homebuilders & Building Products Ivy Zelman Credit Suisse Second Team: Margaret Whelan UBS Third Team: Stephen Kim Citigroup Ivy Zelman is back on top. Investors especially praise the Credit Suisse analyst, who scored six straight first-


team finishes before slipping to third last year, for her July 2005 report warning that “excessive speculation”and gimmicky mortgage instruments such as interest-only loans were creating artificially inflated housingprices, resulting in “alarming” risk in the sector. Zelman, 40, urged investors to sell. Among her mostprescient downgrades: M.D.C. Holdings of Denver, down 42.0 percent since Zelman’s call; KB Home of LosAngeles, down 37.9 percent; and Beazer Homes USA of Atlanta, down 31.3 percent. “While others weretrying to justify why earnings could go down slowly,” says one portfolio manager, “Ivy said they wouldplummet.” Margaret Whelan, who slips a notch to second place, is “knowledgeable and good at identifyingtrends,” says one client. The UBS analyst acknowledges she was blindsided by the size and starkness of thehousing slump. “Everybody was anticipating the downturn,” she says. “I just thought it would be softer.”Despite staying bullish too long on some stocks, Whelan gets credit for her timely call on Furniture BrandsInternational, a St. Louis–based manufacturer she downgraded in July 2005, at $21.25, because of stiffcompetition from low-cost Asian rivals. Share prices started to slip the following month, and by mid-September were down 10.2 percent, to $19.09. Though he drops from second place to third, Stephen Kim ofCitigroup still earns clients’ praise for his “detailed work” on the land inventory held by bigger builders. Kimnoted that property acquired in 2002 is more valuable and less costly to have on the books than landacquired in 2005. “It’s very important because companies that have the oldest land are the safest,” says oneinvestor. Leisure Robin Farley UBS Second Team: David Anders Merrill Lynch Third Team: Felicia Kantor Hendrix Lehman Runners-up: Scott Barry Credit Suisse; Timothy Conder A.G. Edwards; Dean Gianoukos J.P. Morgan It’s five in a row for Robin Farley, who is “the first person I go to for knowledge,” as one money manager putsit. The UBS analyst keeps her eye not only on stocks but also on the weather: In March she downgradedRoyal Caribbean Cruises and lowered earnings estimates for Carnival Corp., both of Miami, on the beliefthat fear of hurricanes would prevent travelers from booking. Through mid-September, Royal Caribbean’sshares were down 15.5 percent since Farley’s call. Although she maintained a buy on Carnival, “herearnings estimates were lower than everybody’s before the stock fell,” explains one client. Carnival’s stockwas down 14.9 percent over the same period. In August she impressed investors with her assessment of theimpact of Alaska’s new, $50-per-person tax on cruise ship passengers. Farley, 36, reasoned that costswould not be passed along to consumers and would hit earnings by only several pennies a share. Advancingfrom Runner-up: to second place, David Anders wins praise for his April report, “Jumping Ship to NeutralTerritory,” in which he too downgraded Royal Caribbean and Carnival, at $41.07 and $47.03, respectively.The Merrill analyst, who is also on the Second Team: in Gaming & Lodging, upgraded both in June, at$37.83 and $39.84, believing that the lower prices accurately reflected fears of a weather-related downturn inbusiness. As of mid-September, Royal Caribbean stock was holding steady, but Carnival’s had climbed backto $43.81. It was “a damn good call,” says one investor. Dropping to No. 3 after four years in second, FeliciaKantor Hendrix is “thorough and balanced,” says one buy-sider. Customers especially appreciated theLehman analyst’s bullishness on Vail Resorts of Avon, Colorado, which she upgraded to buy in January.Year-to-date through mid-September, the stock was up 21.5 percent. “That was a stellar recommendation,”says one supporter. Restaurants Joseph Buckley Bear Stearns Second Team: John Glass CIBC Third Team: Andrew Barish BofA Runners-up: John Ivankoe J.P. Morgan; David Palmer UBS On the first team for a sixth year in a row — and in a landslide — Joseph Buckley, 52, is “easy to work withand has a good nose for the stocks,” says one investor. In September 2005 the Bear Stearns analyst sniffedout opportunities sectorwide, urging clients to overweight because “restaurant stocks had overreacted toconcerns about Hurricane Katrina and the related run-up in gasoline prices,” Buckley explains, adding thathe thought the earnings performance of the industry would be better than what the market seemed to be


expecting at that time. Buckley called on McDonald’s Corp. to outperform, and it did, rising 15.1 percent forthe 12 months ended mid-September, compared with 7.5 percent for the S&P 500. Vaulting from Runner-up:to second place, John Glass “is one of the few analysts who does actual research rather than taking whatthe companies say and inserting the data into his models,” observes one buy-sider. “He’s also not afraid tomake negative calls.” The CIBC researcher made a negative call on casual-dining restaurants lastDecember, concluding that in 2006 supply growth would outpace demand for the first time in a decade. “Wearrived at this conclusion by doing a thorough, bottom-up analysis of public and private chains within casualdining,” says Glass. Year-to-date through mid-September, the median casual-dining restaurant was down18.0 percent. Andrew Barish, who falls from second place to third, “has a lot of perspective on the industry,”says one money manager. In May that perspective prompted the San Francisco–based BofA analyst to urgeclients not to increase their exposure to casual-dining restaurants, which were losing business to quick-service establishments. “We steered people away from turnaround situations like Applebee’s [International]and OSI Restaurant Partners, which are still trying to turn around,” explains Barish. Retailing/Broadlines & Department Stores Deborah Weinswig Citigroup Second Team: Christine Augustine Bear Stearns Third Team: Robert Drbul Lehman Runners-up: Dana Cohen BofA; Michael Exstein Credit Suisse Deborah Weinswig claims the top spot for a third consecutive year on the basis of her “wide-rangingperspective on companies,” according to one money manager, and her “overarching view of the sector,”according to another. The Citigroup analyst’s insightful reporting earns raves from clients at a time when hercoverage universe has been down; it lost 6.6 percent year-to-date through mid-September, compared withthe S&P 500’s 5.7 percent gain. Weinswig, 36, issued a report in April stating that, with department storeconsolidations thinning the “overcrowded middle,” Kohl’s Corp. of Menomonee Falls, Wisconsin, and J. C.Penney Corp. of Plano, Texas, could not only survive but thrive; she recommended buying both. From thetime of her report through mid-September, the stocks had risen 26.1 and 1.8 percent, respectively. Investorsalso value Weinswig’s conference calls, which “provide access to informative industry contacts,” in the wordsof one buy-sider. Advancing one place to second, Christine Augustine gets high marks from customers for“excellent model work” and “great stock picking.” Case in point: Dollar General Corp., which the BearStearns researcher downgraded from outperform to underperform in January, at $17.82, as rising gas andhome-heating prices were putting pressure on low-income consumers. In August she upgraded to peerperform, at $13.39, after a change in top management at the Goodlettsville, Tennessee– based retailer. By mid-September the share price had inched up to $14.42. Robert Drbul, who debuts in thirdplace, wins praise for keeping “a long-term focus,” says one backer. In February the Lehman analyst, who’son the Second Team: in Apparel, Footwear & Textiles, highlighted his buy call on Kohl’s, first recommendedin November 2002. In mid-September the stock was up 42.8 percent, to $66.85, since Drbul’s most recentrecommendation. “He made me nice money,” says one client who heeded Drbul’s advice. Retailing/Food & Drug Chains Meredith Adler Lehman Second Team: Stephen Chick J.P. Morgan Third Team: John Heinbockel Goldman Sachs Runner-up: Neil Currie UBS Finishing on the first team for a fifth straight time — and by a wide margin, at that — Meredith Adler “isclearly confident in her knowledge and brings gravitas to the job,” observes one money manager. TheLehman analyst earns particular praise for her work on quantifying the impact of drug-industry changes suchas the mass movement of seniors to the Medicare Part D plan and the $11 billion to $23 billion worth ofprescription brands facing generic competition in 2006 alone. With company forecasts that look out ten years— estimating future demands for and costs of capital, and taking into account off-balance-sheet financing ofsuch items as leases, real estate and tax credits — Adler, 52, makes “solid investment cases” and offers a“uniquely thorough understanding of how companies can create value,” says one supporter. Adler’s


overweight recommendation on longtime favorite CVS Corp. of Woonsocket, Rhode Island, “continues towork well for our portfolios,” says another. The stock was up 32.0 percent year-to-date as of the middle ofSeptember, compared with a 5.7 percent rise in the S&P 500. Stephen Chick, in second place for a thirdyear in a row, “is not afraid to tell you he’s negative about a company or to avoid a stock.” The J.P. Morgananalyst did just that in January, reiterating his underweight ratings on Whole Foods Market of Austin, Texas,and Supervalu of Eden Prairie, Minnesota; the shares fell by 29.2 and 16.5 percent, respectively, throughmid-August, at which point Chick upgraded both to neutral. Clients say returning third-teamer JohnHeinbockel offers a “good veteran perspective of the industry” and a “good sense of current marketsentiment.” In January the Goldman analyst was bullish on Walgreen Co. of Deerfield, Illinois, among others,on the belief that the sharp increase in generics sales would be a growth catalyst. He was right. Year-to-datethrough the middle of September, Walgreen’s stock had risen 13.4 percent. Retailing/Hardlines Alan Rifkin Lehman Second Team: Colin McGranahan Sanford C. Bernstein Third Team: Gary Balter Credit Suisse Runner-up: Matthew Fassler Goldman Sachs Alan Rifkin, who takes top honors for the first time, is “by far the most thoughtful analyst in retail,” accordingto one money manager. Rifkin, 42, second last year, earned an MBA from Syracuse University in 1987 andworked at Thomas Weisel Partners before joining Lehman in 2000. Clients say he makes “excellent sellcalls,” such as the ones he made on RadioShack Corp. in June 2005, at $24.84, and Pier 1 Imports in July2005, at $13.60. By mid-September shares of the Fort Worth, Texas–based retailers had fallen 22.3 and49.9 percent, respectively. Investors also appreciate his buy calls, such as an early January overweightrecommendation on top pick Best Buy Co. Year-to-date through mid-September, shares of the Minneapolis-based electronics retailer had risen 24.2 percent. Though he slips to second, Colin McGranahan thrilledcustomers with his call on Office Depot. “We made a lot of money because of Colin,” says one buy-sider,and the sentiment is echoed by many others. The Sanford C. Bernstein analyst issued an outperform ratingon the Delray Beach, Florida–based retailer in early February, at $32.83, on his belief that cost reductionsand gains in efficiency would boost margins. By mid-September the shares had risen 20.9 percent, to$39.70. McGranahan “has done a phenomenal job of navigating a treacherous sector and avoiding valuetraps,” says one portfolio manager. Advancing from Runner-up: to third, Gary Balter is “in a league of hisown,” says one client, for his ability to spot turnaround opportunities. Case in point: OfficeMax, which theCredit Suisse analyst upgraded to outperform in August 2005, at $26.92, when he believed that the Itasca,Illinois–based retailer would be rife for margin improvement under new management. By mid-September thestock had risen 49.0 percent, to $40.11. Retailing/Specialty Stores Brian Tunick J.P. Morgan Second Team: Stacy Pak Prudential Third Team: Dana Cohen BofA Runner-up: Kimberly Greenberger Citigroup It’s a first-time first-team finish for Brian Tunick, last year’s No. 2. The J.P. Morgan analyst is a “breath offresh air,” says one portfolio manager. Tunick, 32, is a 1995 graduate of American University with a degreein finance who covered the sector for Bear Stearns before moving to J.P. Morgan in 2002. Clients praise himfor continuing to find value in Men’s Wearhouse; shares of the Houston-based retailer were up 24.0 percentyear-to-date through mid-September. Tunick also wins praise for standing firm on Abercrombie & Fitch Co.“A lot of analysts wavered when the stock became volatile, but he didn’t,” says one investor. The NewAlbany, Ohio–based retailer’s stock began the year at $66.00 and went as low as $50.80 in July beforerebounding to $68.00 in mid-September. Stacy Pak returns to the Second Team: after a year as Runner-up:,with clients lauding the analyst’s “great insights into the fashion business,” her “eye for spotting trends prettyearly” and her “conviction in a space where most competitors’ calls are filled with caveats.” Investors wereespecially impressed with the Prudential analyst’s coverage of Pacific Sunwear of California, which Pakdowngraded in May. She suspected something was amiss when the Anaheim, California–based company


switched its guidance from earnings per share to net income growth. Pacific Sun’s shares have sinceplummeted 34.0 percent, through mid-September. Holding steady in third, Dana Cohen leverages her“incredible Rolodex of contacts” to get the broadest possible perspective, says one investor. In August 2005the BofA researcher upgraded women’s apparel maker AnnTaylor Stores Corp. to buy, at $25.60, on thebelief that new management would have a positive effect. One year later, when shares of the NewYork–based retailer were up 61.8 percent, Cohen downgraded to neutral. Tobacco David Adelman Morgan Stanley Second Team: Bonnie Herzog Citigroup Third Team: Robert Campagnino Prudential Runner-up: Judy Hong Goldman Sachs David Adelman, 39, earns his fourth consecutive No. 1 finish for being “the best analyst in the group, handsdown,” says one enthusiast. The Morgan Stanley researcher has been bullish on the sector throughout2006, and tobacco stocks were up 11.3 percent year-to-date through mid-September, compared with 5.7percent for the S&P 500. Adelman’s top picks have been Carolina Group of New York, which was up 54.0percent for the 12-month period ended mid-September, and Altria Group, also of New York, which was up20.1 percent during the same period. “He recommended Carolina Group before the others, and hisconviction on the bullish call for the group never wavered, which has helped investors,” says one gratefulclient. Bonnie Herzog, who takes second place for a third consecutive year, impressed investors with whatone buy-sider calls her “strong and timely call” on Reynolds American. The Citigroup researcher upgradedthe Winston-Salem, North Carolina, cigarette manufacturer in January, at a split-adjusted price of $48.56, inthe belief that the company’s then-pending $3.5 billion acquisition of smokeless tobacco producer Conwoodwould spur stronger earnings growth. It did. (The Conwood acquisition was completed in May.) By mid-September, Reynolds’ share price had risen 35.1 percent, to $65.60. Holding steady in third place, RobertCampagnino also wins praise for his coverage of Carolina Group. In January the Prudential researcherupgraded the stock to overweight, in anticipation of a benefit to earnings from the settlement of a class-action lawsuit in Florida. By the middle of September, Carolina’s shares were up 34.0 percent. Electric Utilities Steven Fleishman Merrill Lynch Second Team: Daniel Ford Lehman Third Team: Gregory Gordon Citigroup Talk about going out on top: Steven Fleishman, who announced last month that he was retiring as a utilitiesanalyst for Merrill to pursue other interests, finishes in first place for a tenth consecutive year. Fleishman, 37,“works harder than any other analyst I know,” says one money manager. Fleishman maintained his bullishstance this year, focusing on power generators such as TXU Corp. of Dallas. When TXU shares fell to$45.79 in April, down 19.3 percent from their presplit high in October 2005, Fleishman declared them cheapunder any scenario. Clients listened, and the shares rebounded to $61.45 in mid-September. Buy-siders alsopraise Fleishman’s in-depth yet concise written work, such as a July report on tightening power markets andtheir impact on generators. “Not only does he know the ‘trees,’ but he still can step back and see the ‘forest,’”says one portfolio manager. Hailed as “the smartest guy out there” by one client, Lehman’s Daniel Ford isNo. 2 for a sixth straight year. “He really gets the big-picture stuff and has done good work on the cap-excycles in the industry and the impact on power market supply,” says one investor. Negative on the sectoroverall, which was flat in the 12 months ended mid-September, Ford favors companies with exposure tonuclear powers, such as Entergy Corp. of New Orleans, which he recommended at $70.11 in September2005, after the market overreacted to financial damage from last year’s hurricanes; the shares were tradinga year later at $73.38. Citigroup’s Gregory Gordon, repeating in third place, “approaches stocks from aunique angle and does not hesitate to be nonconsensus in his views,” according to one client. Gordonfocuses on companies with pricing power, such as Allegheny Energy of Greensburg, Pennsylvania, which herecommended in December 2005 at $29.90; by mid-September the shares had risen 32.0 percent, to$39.47. Integrated Oil


Neil McMahon Sanford C. Bernstein Second Team: Douglas Terreson Morgan Stanley Third Team: Arjun Narayana Murti Goldman Sachs Runners-up: Paul Cheng Lehman; Mark Flannery Credit Suisse; Doug Leggate Citigroup; Paul SankeyDeutsche In a very close finish, Sanford C. Bernstein analyst Neil McMahon, 37, rises one notch to first team. Praisedfor his “original thinking,” McMahon evaluates oil prices by focusing on unique demand metrics, such asconsumer spending as measured by restaurant traffic, rather than relying only on oil-supply inventory data.Last fall the London-based analyst, who earned a Ph.D. in geology and geophysics from the University ofEdinburgh in 1996 and was a management consultant at McKinsey & Co. before joining Bernstein in 2002,urged clients to shift into integrated oils rather than pure plays in refining and marketing or exploration andproduction. McMahon’s top picks include Irving, Texas–based Exxon Mobil Corp., whose shares rose from$54.50 at his late-October 2005 nod to $64.65 in mid-September; and San Ramon, California–basedChevron Corp., whose shares rose from $57.65 at his May recommendation to $61.79 in mid-September.McMahon, says one investor, “has bold calls but backs them up with plenty of insightful analysis andsupporting statistics.” Morgan Stanley’s Douglas Terreson, who slips from first team to second, still “hasdistinguished himself by developing a long-term thesis and sticking to it,” says one money manager. Theanalyst’s ongoing “Golden Age of Refining” call — beginning in 2002, Terreson predicted that refiningmargins in 2004–’06 would be the strongest in a generation — has been “deadly accurate and exceptionallywell timed,” says another. In February, Terreson projected a rebound in North American refining margins; inthe next two months margins rose from $2.39 per barrel to $22.53; shares of independent refining-and-marketing stocks, such as San Antonio–based Valero Energy Corp. rose 65.0 percent for the 12 monthsended mid-September. Praised as a good stock-picker and independent thinker, Goldman’s Arjun NarayanaMurti takes third for a fourth straight year. Murti’s extreme bullishness — even as others called formoderation — proved right; the sector continued to outperform in 2006, gaining 17.0 percent versus the S&P500’s 5.7 percent gain. Natural Gas Scott Soler Morgan Stanley Second Team: Ronald Barone UBS Third Team: Richard Gross Lehman Runner-up: Faisel Khan Citigroup For a third — and perhaps final — consecutive time, Scott Soler takes the top spot in the Natural Gas sector.The 37-year-old analyst left Morgan Stanley in August to join Quantum Energy Partners, a Houston-basedprivate equity group that focuses on exploration and production. Soler, a former auditor, wins high praise forhis grasp of the financials of companies and for what one investor call his “highly lucrative recommendationsof Williams Cos. and Questar Corp.” Soler put a buy on Tulsa-based Williams in August 2003, at $6.01, andmaintained that stance on this “continually undervalued” company until his departure. Through mid-September the shares had skyrocketed to $23.04. Questar, based in Salt Lake City, went on Soler’s buy listin March 2005, at $53.16; shares were trading at $78.96 in mid-September. “He understood the upstreampart of the business better than his pipeline-focused peers,” explains one buy-sider. In second for a thirdconsecutive year is UBS’s Ronald Barone, “a true veteran in the business who has been around so long thathe knows everything about all the companies,” says one investor. Bullish on much of his group, Barone iswidely praised for his timely upgrade of El Paso Corp. in May 2005, at $10.00, on the turnaround efforts ofnew management; shares of the Houston-based company advanced 34.6 percent, to $13.46, by the middleof September. Richard Gross, who advances one position to No. 3, “has less of a herd mentality” than hispeers, says one customer. The Lehman researcher, who has been following the energy business for 30years, is particularly skilled at culling the non-company-specific issues that affect his sector. Clients alsovalue his trading calls in stocks such as Williams and Questar, which were up 0.6 and 5.2 percent,respectively, year-to-date through mid-September. Oil & Gas Exploration & Production Robert Morris


BofA Second Team: Thomas Driscoll Lehman Third Team: Benjamin Dell Sanford C. Bernstein Runners-up: F. Lloyd Byrne Morgan Stanley; William Featherston UBS; Ellen Hannan Bear Stearns Robert Morris of BofA lands in first place — and by a wide margin — for a fifth year in a row. Morris, 44, islauded for his frequent and highly detailed company reports; a rare analyst who takes a very long-term viewon companies, he often forecasts financials such as production growth and expected returns by oil field toproject forward five years. Still bullish on the sector overall, Morris has a bias toward oil-sensitive namessuch as Occidental Petroleum Corp. of Los Angeles, which he recommended at a split-adjusted $41.81 inDecember 2005; the shares were up 5.4 percent, to $44.05, in mid-September. “His monthly survey has allthe information I’m looking for,” says one portfolio manager. Advancing from Runner-up: to Second Team:,Lehman’s Thomas Driscoll wins praise for having “an excellent understanding” of the markets, says oneinvestor, as well as discipline in his valuations: “He doesn’t bend metrics for the equity,” says another.Driscoll made an early cautious call in February 2006, downgrading the sector to neutral just as the groupturned negative; natural-gas spot prices fell nearly 50 percent in the first quarter. Clients also cite Driscoll’sability to look at valuation in new ways, such as through a debt-adjusted-per-share growth metric hechampioned in a March report, “What Drives E&P Share Prices?” New to the team this year is Benjamin Dellof Sanford C. Bernstein, who claims third place. He has wowed clients with what one terms “impressive andoriginal analytical work,” including an early downgrade of the group to neutral last October, when theaverage composite spot price for gas was $15.00 per million BTU; as of mid-September the price had fallento $4.60. Dell earned his wings under Bernstein’s Neil McMahon, first-teamer in Integrated Oil, and hasindustry experience as an exploration geologist with BP. Oil Services & Equipment James Crandell Lehman Second Team: James Stone UBS Third Team: James Wicklund BofA Runners-up: Michael LaMotte J.P. Morgan; Ole Slorer Morgan Stanley In a very close finish, Lehman’s James Crandell rises one notch to first. Crandell, 53, “is thorough, objectiveand very accessible,” says one money manager.” He has, adds another, “been through enough cycles to beable to put information into context.” Crandell was one of the first, in August 2004, to foresee an extendeddrilling cycle and highlight the attractiveness of Houston-based Weatherford International — which providesdrilling equipment and services — based on accelerating revenue and earnings growth from internationalexpansion. The shares rose 10.6 percent in the 12 months ended mid-September, while the sector was up8.4 percent over that period. The analyst also reiterated his bullish stance on equipment producer NationalOilwell Varco of Houston, first recommended in February 2004 at $28.99. By mid-September 2006, the pricehad more than doubled, to $59.16. Though he slips one rung to second, James Stone of UBS “does a greatjob of describing how fundamentals within and outside his industry impact his companies,” according to oneinvestor. Stone has been bullish on the sector since June 2004, and last year focused investors’ attention ontop picks Cameron International Corp., a Houston-based company whose shares rose 24.2 percent, from$35.92 to $44.60, over the 12 months ended mid-September. James Wicklund of BofA returns to the ThirdTeam:, the position he held in 2004 before finishing unranked last year. “Jim is a walking encyclopedia of oil-services knowledge, with the added benefit of a colorful personality,” says one satisfied buy-sider. “He knowsthe technology and the businesses, but he also knows a great deal about the people running thecompanies.” Wicklund recommended Schlumberger, a New York–headquartered oilfield services company,in October 2005, at a split-adjusted $39.40, calling it “the poster child for the future,” with strong internationalgrowth and the best drilling technology in the business; as of mid-September, the shares had jumped to$56.28. Banks/Large-Cap Lori Appelbaum Goldman Sachs


Second Team: Jason Goldberg Lehman Third Team: John McDonald BofA Runner-up: Michael Mayo Prudential Buy big banks. That’s what Lori Appelbaum told clients as interest rates rose and the real estate marketcooled in 2006, and that advice helped the Goldman analyst take first-team honors for an eighth year in arow. Drilling into bank records and talking to managers, Appelbaum concluded that most big banks wouldavoid major writeoffs, thanks to good loan quality and reserves. “She has very useful company and industryfinancial data, especially regarding loan quality,” says one investor. Year-to-date through mid-September,diversified bank stocks were up 8.5 percent, while the S&P 500 rose 5.7 percent. Several clients lauded hertimely pick of Charlotte, North Carolina–based Bank of America Corp., which Appelbaum named a hot buy inJuly, at $48.61, anticipating strong results from its expanding investment banking business. The stock hadclimbed 6.1 percent, to $51.58, in five weeks through mid-August, when she downgraded to neutral. “Greatcall on Bank of America,” says one client. Moving up one notch to the Second Team:, Lehman’s JasonGoldberg earns high marks as an analyst with a knack for spotting the catalysts that move bank stocks. (Healso tops the Banks/Midcap category.) “His detailed reports are valuable resources for anyone looking atthese stocks,” says one investor. In February, Goldberg named New York’s JPMorgan Chase & Co. one ofhis top picks for 2006 on the expectation of above-average earnings growth; as of mid-September the shareshad risen 14.5 percent from the date of his call. A Runner-up: last year, John McDonald of BofA rises to thirdplace for his cautious approach to the sector. McDonald downgraded New York–based Citigroup from buy toneutral in early January, reasoning that it would underperform other banks as it made the transition from anacquisition strategy to one of internal growth. Citigroup dropped 5.9 percent the following month from its$46.90 price. Banks/Midcap Jason Goldberg Lehman Second Team: Kenneth Usdin BofA Third Team: Heather Wolf Merrill Lynch Runners-up: Lori Appelbaum Goldman Sachs; Keith Horowitz Citigroup; Kevin St. Pierre Sanford C.Bernstein Jason Goldberg, 33, who takes top honors for a fifth straight year, has a knack for sniffing out takeover talk.In January the Lehman analyst (who ranks second in Banks/Large-Cap) accurately predicted a lacklusteryear for midcaps but offered a smart money play, identifying North Fork Bancorp. of Melville, New York, andCompass Bancshares of Birmingham, Alabama, as potential takeover targets. Capital One Financial Corp. ofMcLean, Virginia, agreed to snatch up North Fork in March for $31.18 a share, 18.0 percent above itsJanuary price. Compass remains independent, but persistent merger rumors helped move the stock up 22.7percent from Goldberg’s call through mid-September. “Jason is great at providing a lot of detail andperspective on issues affecting the banks in his coverage,” says one satisfied buy-sider. Debuting on theSecond Team: after only his second year covering midcap banks, Kenneth Usdin of BofA impresses clientswith his signature report, a concise quarterly review that offers a one-paragraph take on each of the eightbanks he covers. “Ken brings it together to help you make decisions quicker,” notes one portfolio manager.Usdin picked Marshall & Ilsley Corp. as a top performer in early January, foreseeing a bump in income fromthe Milwaukee-based bank’s data processing subsidiary. The stock rose from $42.85 to $48.30 by mid-September, up 12.7 percent, while the S&P 500 gained just 4.0 percent. Merrill’s Heather Wolf advancesfrom Runner-up: to No. 3 for what one client calls her “take-no-prisoners march” through the midcap bankssector. Wolf downgraded stocks over the past year until six of the 14 she covers were sells. Though some ofher sells have yet to pan out, one was a direct hit: UnionBanCal Corp., the San Francisco– based holding company for Union Bank of California, which she downgraded in June at $65.83, had dropped7.1 percent, to $61.47, by mid-September. Brokers & Asset Managers Guy Moszkowski Merrill Lynch


Second Team: Glenn Schorr UBS Third Team: Charles (Brad) Hintz Sanford C. Bernstein Guy Moszkowski, 48, takes first-team honors for a third straight year, displaying a depth of knowledge thatclients say is hard is beat. “Guy is the dean of the brokerage industry,” says one investor. “He has the bestknowledge and the best perspective.” In May 2005, when Goldman Sachs Group and Lehman BrothersHoldings slipped, the Merrill analyst resisted downgrading and instead reiterated his buy rating, which he hasmaintained. The sector in general and those two stocks in particular were strong enough to rebound quickly,he reasoned. Since hitting bottom at $94.48 in late May 2005, Goldman was up 72.2 percent through mid-September; Lehman gained 65.3 percent from its split-adjusted low point of $43.32 in mid-May 2005. GlennSchorr, who captures the second-team spot for a third consecutive year, “does a very good job of leveragingpeople at his firm, and it shows with him having a deeper understanding of industry issues,” says one buy-sider. The UBS analyst’s October 2005 country-by-country report on Asia assessed population, incomes andregulatory issues and concluded that adept U.S. brokerages could double their business in the region, withGoldman, which outperforms its peers in generating revenue from equity underwriting, the most likelyultimate winner. Schorr upgraded Goldman to buy in mid-May at $147.85; the stock was up 10.1 percent asof mid-September. In third place for a fourth year running, Charles (Brad) Hintz of Sanford C. Bernsteincontinues to enjoy support from clients despite being fined $200,000 in February by NASD in a case thatrevolved around trades he made in companies he covered as well as stock options he carried over from aprevious job at one of the companies he now covers. Hintz admitted no wrongdoing in the settlement. One ofhis top picks this year has been Merrill Lynch & Co., up 15.1 percent year-to-date through mid-September. Insurance/Life Andrew Kligerman UBS Second Team: Colin Devine Citigroup Third Team: Eric Berg Lehman Runners-up: Jamminder (Jimmy) Bhullar J.P. Morgan; Nigel Dally Morgan Stanley; Thomas G. GallagherCredit Suisse; Edward Spehar Merrill Lynch After four years on the Second Team:, Andrew Kligerman captures first place, garnering praise for his“extremely detailed approach — not only in company-specific research, but also industry research as awhole,” says one portfolio manager. The UBS analyst, who earned an MBA from Columbia Business Schoolin 1998, was an insurance analyst for Bear Stearns before joining UBS in 2003. He impressed clients withhis coverage of Ameriprise Financial. In October 2005, after the Minneapolis-based insurance and assetmanagement firm was spun off from American Express Co., Kligerman broke with consensus and issued abuy rating, at $34.34, though he warned investors that share prices would probably drop in the first fewweeks. Shares hit bottom in mid-October, at $32.06, before steadily climbing higher; as of mid-September,Ameriprise shares had risen 36.3 percent, to $46.80. Kligerman, 43, says the former American ExpressFinancial Advisors remains undervalued. Though he slips to second place after six years in first, ColinDevine “has a unique combination of street smarts and industry contacts, mixed with a deep understandingof the arcane industry of life insurance,” observes one client. “This leads to trustworthy and powerful calls inthe space.” One such call was Principal Financial Group. Devine upgraded the Des Moines, Iowa–basedasset management firm in January, at $47.29, because “it has the strongest growth rate of any company wecover,” Devine says. Year-to-date through mid-September, the stock was up 13.2 percent, to $53.52. EricBerg repeats in third place. Customers say they like the Lehman analyst’s in-depth thinking and his habit oflooking ahead to spot industry issues before others notice. Case in point: MetLife. Taking advantage of newregulations requiring the disclosure of assets held in insurance companies’ equity portfolios, Berg concludedthat the New York–based insurer’s guidance “was way too conservative.” He upgraded the stock in May, at$53.19; by mid-September the shares had risen to $56.00. Insurance/Nonlife Todd Bault Sanford C. Bernstein Second Team: Jay Cohen Merrill Lynch Third Team: Jay Gelb Lehman


Runners-up: Charles Gates Credit Suisse; Alain Karaoglan Deutsche; Brian Meredith BofA Todd Bault, 41, nabs a first-team finish for a third consecutive year. Hurricanes were the big news inproperty/casualty insurance, and two of the Sanford C. Bernstein analyst’s most successful calls wereinfluenced by last year’s destructive weather. In October 2005, as the storm season was winding down,Bault recommended Bermuda-based reinsurer RenaissanceRe Holdings, at $39.88, and Chubb Corp. ofWarren, New Jersey, at a split-adjusted $41.89, because of their reduced risk profiles. By August, when hedowngraded the stocks to neutral, share prices had risen 19.9 and 14.4 percent, respectively, while thebroad market was up 3.1 percent. “They were downgraded as part of my overall cycle call,” Bault explains.“As the market anticipates that property pricing will not be up as much next year, we forecast that the stockscould come under valuation pressure.” Hurricanes also influenced the recommendations of Jay Cohen, whoreturns in second place. The Merrill analyst, praised by investors for his “responsiveness” and “willingness tohelp,” issued a buy recommendation on Allstate Corp. of Northbrook, Illinois, in January 2005, at $48.98. Hedowngraded to neutral in July, at $60.11, as the hurricane season was gathering momentum, then upgradedto buy in October, post-Katrina and Rita, at $53.55. By mid-September, Allstate’s shares had risen 12.3percent, to $60.12, since Cohen’s upgrade. Advancing from Runner-up: to third place, Jay Gelb is “first andforemost an actual insurance guy,” says one money manager. “He came from the industry and really knowsthe nuts and bolts of products, pricing and the process.” The Lehman analyst also made a post-Katrina buycall on Allstate, “based on my view that the market was overly concerned about losses from hurricanes.” Forthe 12-month period ended in mid-September, Allstate’s shares were up 12.9 percent. Mortgage Finance Bruce Harting Lehman Second Team: Eric Wasserstrom UBS Third Team: Kenneth Posner Morgan Stanley Runners-up: Bradley Ball Citigroup; David Hochstim Bear Stearns; Moshe Orenbuch Credit Suisse Interest rates were up, sales and appreciation were down, but Bruce Harting didn’t move; he finishes on thefirst team for a second year in a row. (He also captures first place in Specialty Finance and is the onlyanalyst to win two sectors this year.) “He doesn’t let short-term volatility distract him from the rightconclusions,” says one investor. Case in point: Radian Group. In October 2005 the Lehman analyst said thePhiladelphia-based credit-protection provider’s stock was heading up; it promptly lost 3.7 percent over thenext two days. But then the more favorable economics that Harting predicted kicked in, and Radianbounced. By mid-September the stock had risen 21.9 percent. Harting, 48, scored a similar coup withlongtime favorite Golden West Financial Corp., which he upgraded to a top pick in January. Shares of theOakland, California–based company were already on the rise when Wachovia Corp. announced a takeoverin May for $25.5 billion. By mid-September the stock was at $75.95, a 15.5 percent increase for the year,while the sector was up 3.6 percent over that period. Eric Wasserstrom vaults from Runner-up: to secondplace, thanks in part to his client services “Eric is always available and returns calls and e-mails promptly,”says one buy-sider. Though cautious on the sector overall, the UBS analyst issued a buy recommendation inDecember 2005 on PMI Group, at $40.47; shares of the Walnut Creek, California–based surety and titleinsurance provider hit $46.67 in April, a 15.3 percent increase, before slipping back to $44.69 by mid-September. “He’s been more cautious on the mortgage space than other analysts, and he’s been right,” saysone money manager. For a fourth year in a row, Kenneth Posner of Morgan Stanley captures third place,winning praise for comprehensive company and industry reports. “Ken consistently provides a uniqueanalytical perspective to his coverage, and his industry pieces serve as a very useful reference,” says oneinvestor. REITs Jonathan Litt & team Citigroup Second Team: Ross Smotrich & team Bear Stearns Third Team: Ross Nussbaum & team BofA Runners-up: David Harris & team Lehman; Stephen Sakwa & team Merrill Lynch Jonathan Litt leads the Citigroup team to a fourth consecutive first-team finish for having “breadth of


coverage that is among the best on Wall Street,” says one money manager. Litt, 42, and his ten-memberteam impressed investors last year with reports in March and April on real estate held by U.S. corporationsin the S&P 500 and the Russell 2000 index. Undervalued companies with substantial property holdings areattractive acquisition targets for private equity firms looking for real estate investment but wary of the housingmarket. Of the 103 companies the Citigroup team cited in 2005, 14 have since been acquired throughmerger or acquisition. Rising one notch to second place, Ross Smotrich and his team at Bear Stearns winpraise from money managers for being both “timely” and “accessible.” In January the five-member crewreiterated its positive outlook on real estate investment trusts, based on increased liquidity and risingdemand. In multifamily, Smotrich recommended Camden Property Trust of Houston, up 35.8 percent year-to-date through mid-September, and Archstone-Smith Trust of Englewood, Colorado, up 34.7 percent. RossNussbaum and his seven-member BofA team, which debuts in third place, win praise for their timelycoverage of Mills Corp. The team urged investors to sell their shares of the Arlington, Virginia–based trust inMarch, at $36.05, on the belief that the value of the real estate was well below where the stock was trading.In August, when the price had fallen to $12.94, the team upgraded to neutral, arguing that the lower pricemore accurately reflected the asset’s worth. By mid-September the stock had climbed back to $17.63. “Hewas one of the first to go negative on Mills, and he was correct in a big way,” says one grateful moneymanager. Specialty Finance Bruce Harting Lehman Second Team: Howard Mason Sanford C. Bernstein Third Team: Moshe Orenbuch Credit Suisse Runners-up: David Hochstim Bear Stearns; Eric Wasserstrom UBS After three years on the Second Team:, Bruce Harting moves up to first, thanks in part to the strength of hisindustry contacts and insight. (He also finishes first in Mortgage Finance.) “He knows managements andtheir strategic goals better than anyone,” says one portfolio manager. In evaluating CIT Group, which fell 5.6percent in the first half of 2005, the Lehman analyst saw an opportunity for loan growth and better overallperformance after the New York–based consumer finance company unloaded noncore businesses. He ratedthe stock a buy in July 2005, at $43.39; by the time he downgraded in April, it had risen 27.9 percent, to$55.49, while the S&P 500 rose 7.9 percent during the same period. Harting, 48, also receives high marksfor his analysis of the impact of a lawsuit that requires Visa USA and MasterCard International to pay acombined $3.0 billion to settle a fee dispute with merchants. Howard Mason, who slips to the Second Team:after three years in first, retains a loyal following of clients who eagerly await his reports. The Sanford C.Bernstein analyst “highlights interesting issues and analyzes them in intricate and intellectual ways,” saysone investor. Although a number of analysts upgraded American Express Co. over the past year, Masonstuck with his January downgrade, in which he reasoned that the spin-off of the company’s financial advisingbusiness, Ameriprise, would not be enough to boost the bottom line. Year-to-date through the middle ofSeptember, Amex shares gained 5.2 percent. Moshe Orenbuch claims the third-team spot for a fourthconsecutive year, thanks in part to some well-timed stock picks. He caught the swing in CIT perfectly, toutingthe stock through its rise in early 2006, then downgrading it in April at its peak. Since then, CIT’s sharesdropped 14.7 percent through the middle of September. Biotechnology Mark Schoenebaum Bear Stearns Second Team: Geoffrey Porges Sanford C. Bernstein Third Team: Maykin Ho Goldman Sachs Runners-up: Eric Ende Merrill Lynch; Steven Harr Morgan Stanley; Craig Parker Lehman; Eric SchmidtCowen; Elise Wang Citigroup Mark Schoenebaum repeats on the first team after weathering what he calls “a sort of perfect storm” ofearnings disappointments, brewing competition among traditional pharmaceuticals companies andmanufacturers of generic rivals, and questions surrounding options accounting. During a difficult time theBear Stearns analyst “leveled with us and gave us back our sense of perspective,” says one portfoliomanager. Schoenebaum, 33, also helped investors turn one of the worst biotechnology blowups of last year


into a buying opportunity. In August 2005 he recommended Amylin Pharmaceuticals of San Diego when itsexenatide long-acting release diabetes therapy delivered encouraging early results. Amylin’s stock, whichspent most of 2005 in decline after earlier diabetes treatments failed to win Food and Drug Administrationapproval, has been rising. Year-to-date through mid-September, shares were up 11 percent; the sector wasdown 4.7 percent. Leaping from Runner-up: to second place, Geoffrey Porges brings clients the benefit ofhis medical training, as well as his professional experience as COO of London-based technology licensingfirm BTG. The Sanford C. Bernstein analyst wins praise for “reports that are very thorough and informative,”in the words of one money manager. His most popular call: longtime favorite Vertex Pharmaceuticals.Porges reiterated his earlier outperform call on the Cambridge, Massachusetts, antiviral drug developer inJune 2005, at $13.55, on the rising prospects for the company’s VX-950 treatment for hepatitis C; by mid-September 2006 the stock had shot up 143.4 percent, to $32.98. Maykin Ho slips one place to third, but shecontinues to impress investors as “probably the single most comprehensive analyst on the Street,” as onesays. In December the Goldman analyst raised eyebrows for going neutral on the sector as a whole andunderscoring the long-term focus of even her outperform recommendations, such as Gilead Sciences. Horeaffirmed the Foster City, California, AIDS drug maker, at $54.07. By mid-September, Gilead had risen 19.8percent, to $64.75. Health Care Facilities Adam Feinstein Lehman Second Team: Kenneth Weakley UBS Third Team: Gary Taylor BofA Adam Feinstein, 34, holds on to the top spot for “missing nothing,” one client says, in his efforts to keepinvestors out of trouble: “comprehensive” and “thorough” come up a lot when money managers describe hiswork. The Lehman analyst surprised investors last October by downgrading his entire sector to neutral, citingrising debt and disappointing patient-admission levels; members of his 24-stock universe subsequently fellan average of 7.5 percent through mid-September, compared with a 7.6 percent gain for the S&P 500.Feinstein impressed buy-siders with his June prediction that at least one hospital group would soon acceptan LBO bid. At the time, Nashville-based HCA, the nation’s biggest hospital operator, was trading at $42.60;four weeks later, Kohlberg Kravis Roberts & Co., a private equity firm, offered $51 a share, or $33 billion, totake the company private. Kenneth Weakley repeats at No. 2, as clients praise what one dubs his “propheticand admirably cautious” view. The UBS analyst issued a much-appreciated report in May 2005 noting thathospital insiders were selling their shares and that the sector overall was in decline. “He’s been great atkeeping us grounded,” says a grateful customer. Weakley did see a glimmer of hope in longtime favoriteCommunity Health Systems, which he first recommended in May 2004, at $25.87. Over the 12 monthsended mid-September, shares of the Brentwood, Tennessee–based company were down 2.1 percent, to$37.30, but Weakley believes there is still potential for growth. No. 3 for a third year running, Gary Tayloridentifies opportunities for clients by looking beyond his coverage area to companies that either sellequipment to hospitals or compete directly with them. Investors were grateful for the BofA analyst’s “moretrading-oriented” focus, such as a buy recommendation on Intuitive Surgical in June 2005, at $48.45. By mid-September 2006 shares of the Sunnyvale, California, manufacturer had more than doubled, to $99.38. Health Care Technology & Distribution Lawrence Marsh Lehman Second Team: Robert Willoughby BofA Third Team: Lisa Gill J.P. Morgan Runners-up: Thomas Gallucci Merrill Lynch; Ricky Goldwasser UBS; Christopher McFadden GoldmanSachs Lawrence Marsh, in first place for a third year in a row and the sixth time in seven years, is “truly aninstitution,” says one money manager. “Virtually no one in the sector offers the background and knowledgebase that he possesses.” Supporters credit the Lehman analyst with “great calls,” such as his November2005 buy recommendation on Fisher Scientific International. Marsh, 46, believed the Hampton, NewHampshire–based surgical equipment developer was undervalued at $56.64, and he repeated that viewthree times over the next six months. In May the company agreed to merge with Thermo Electron Corp., aWaltham, Massachusetts–based developer of analytical instruments, for the equivalent of $78.90 a share,


generating a gain of 39.3 percent over the period. On the distribution side, Marsh identified PriorityHealthcare Corp. of Lake Mary, Florida, as a potential M&A candidate in November 2004, at $18.65; in July2005, Express Scripts, a pharmacy management company based in Maryland Heights, Missouri, announcedthat it would buy the niche dispensary at $28 a share. Robert Willoughby repeats in second place fordemonstrating a “deep understanding of the varied motivations for investing in the space,” according to oneclient. The BofA analyst’s model portfolio of five top picks outperformed the S&P 500 by an average of 7.0percentage points year-to-date through mid-September. For example, Laboratory Corp. of America, aBurlington, North Carolina–based developer of specialty tests, was up 24.1 percent year-to-date. Lisa Gilladvances from Runner-up: to the Third Team:, winning praise from customers because “she has the bestunderstanding of pharmacy benefit managers on the Street,” says one. The J.P. Morgan analyst upgradedMedcoHealth Solutions, a Franklin Lakes, New Jersey, provider of pharmacy benefit programs, in November2005, at $52.47. By mid-September it had risen 18.1 percent, to $61.96. Managed Care John Rex Bear Stearns Second Team: Joshua Raskin Lehman Third Team: Charles Boorady Citigroup “There are times when we feel that every report he writes is taking us closer to a sort of promised land,” saysone money manager of John Rex, first-team finisher for a third year in a row. Bearish on the sector since thestart of the year because of anxiety over the latest wave of Medicare privatization, the Bear Stearns analystadvised clients to steer clear of bellwether Cigna Corp., believing it would lead a downward march. Rex, 44,was right. Shares of the Philadelphia-based employee health plan provider started to stumble in April; by mid-June they had sunk to $89.36, 32.9 percent down from their March high of $133.19. Repeating in secondplace, Joshua Raskin exhibits “extraordinary acumen for balancing the scenarios in Washington” as hescrutinizes Medicare policy, says one client. The Lehman researcher says a push for lower costs will comefrom the government as private health providers take on a bigger share of Medicare business; in themeantime, Raskin is not afraid to point out shorter-term opportunities when he finds them. He raised hisoutlook on Magellan Health Services in March 2005, at $34.92, on the Farmington, Connecticut–basedcompany’s efforts to mold its members’ behavior into more-healthy (and thus less expensive) patterns. Bymid-September 2006 the shares had risen 20.9 percent, to $41.97. Charles Boorady repeats in third on thestrength of what clients call a “very in-depth look at tough issues” and a “correctly bullish outlook.” TheCitigroup analyst recommended health insurer Anthem in late 2004 (shortly before its acquisition ofWellPoint Health Networks) and advised clients against selling shares in the Indianapolis-based benefitscompany even as HMOs were losing ground. After touching an April low of $67.50, the stock recovered andwas trading at $78.63 in mid-September, up 6.5 percent during the preceding 12 months. Medical Supplies & Devices Robert Hopkins Lehman Second Team: Michael Weinstein J.P. Morgan Third Team: Glenn Reicin Morgan Stanley Runner-up: Frederick Wise Bear Stearns Robert Hopkins of Lehman makes his first appearance on the first team thanks to a “healthy cynicism” aboutthe growth prospects of orthopedic-product manufacturers. “He’s very open that his sector doesn’t offer a lotof value,” says one money manager. An MBA graduate of Columbia Business School in 1995, Hopkinsstarted his analytic career covering HMO stocks at Donaldson, Lufkin & Jenrette (now part of Credit Suisse)almost a decade ago; he shifted to devices in 1999 and to Lehman in 2002. Hopkins, 39, initiated coverageof CR Bard in April, at $68.76, with an outperform rating on what he saw as one of the few moneymakingopportunities in the sector. Shares of the Murray Hill, New Jersey, broadline medical supplies maker hadrisen 10.8 percent, to $76.20, by the middle of September. After three years on the first team, MichaelWeinstein slips to No. 2. The J.P. Morgan analyst spent a lot of time last year recommending “defensivetypes of names,” recalls one money manager. In January, Weinstein upgraded Abbott Laboratories andBaxter International. Both the Abbott Park, Illinois, company and the Deerfield, Illinois, business handilyoutperformed the broad market, up 19.3 and 18.8 percent, respectively, by mid-September. Returning to theThird Team: after a year as Runner-up:, Glenn Reicin says he spent much of the past year working on the


collapsing valuations in the sector. In July the Morgan Stanley analyst got widespread attention for pointingout that formerly richly valued orthopedic and cardio companies such as Biomet and Boston Scientific Corp.were still churning out substantial cash and as such might be ripe for leveraged buyouts. “The LBO reportgot me thinking,” says one client. “There’s still a story to be told here.” Pharmaceuticals/Major Richard Evans Sanford C. Bernstein Second Team: David Risinger Merrill Lynch Third Team: C. Anthony Butler Lehman Runners-up: Timothy Anderson Prudential; Jami Rubin Morgan Stanley In a tight finish, Richard Evans leaps from Runner-up: to the first team. “His reports are by far better than anyother research I have read,” says one enthusiastic investor. Evans, 44, who earned a master’s degree fromthe Yale School of Management in 1991, spent seven years as a manager at Swiss giant Roche beforegoing to the Street in 1998. The Sanford C. Bernstein analyst recommended Pfizer in October 2005, tellingclients that the New York–based company would be undervalued at $20.72 even if it were to lose the patenton its blockbuster cholesterol-lowering drug, Lipitor. (The patent has been challenged in court by Indiangeneric drug maker Ranbaxy Laboratories.) In February, after the shares ran up 21.7 percent, to $25.21, hedowngraded them to market perform. Moving up a notch to second, David Risinger offers similarly trading-oriented recommendations, such as his March downgrade of Eli Lilly & Co. The Merrill analyst noted that theIndianapolis-based company was struggling to find market share for its antidepressant Cymbalta, so he cuthis rating to neutral. By mid-September the share price had fallen 5.5 percent. “He has excellent industryknowledge and takes the long view,” says one money manager. Though he slips from first place to third, C.Anthony Butler wins praise for being “the most unfailingly responsive of all the analysts I deal with,” says onebuy-sider. The Lehman analyst remains bullish on Merck & Co. despite ongoing litigation and potentialliability associated with the Whitehouse Station, New Jersey–based company’s arthritis drug Vioxx. Merckhas posted the best performance of any member of the Big Pharma group, up 49.4 percent for the yearended mid-September, compared with an 8.7 percent gain for the MSCI pharmaceuticals index during thesame period. Pharmaceuticals/Specialty David Maris BofA Second Team: Gregory Gilbert Merrill Lynch Third Team: Richard Silver Lehman David Maris, 38, earns his sixth consecutive first-team finish for having the courage to match his convictions.In January, when the rest of the Street was shrugging off a warning from Bausch & Lomb that it would berestating results from a few of its overseas units, the BofA analyst started digging into the company’spotential for further accounting surprises and urged his clients to dump their shares of the Rochester, NewYork–based contact lens maker. “He had the most negative opinion on Bausch & Lomb,” one clientremembers. News flow and Maris’s outlook became more “colorfully blunt” after the company pulled aproduct from store shelves in April. In May he warned of “sizable” collateral damage to the company’s entireconsumer line and, eventually, a cash flow crunch and possible credit squeeze. The stock shed 31.0 percentof its value year-to-date through the middle of September. “I wish other analysts had this level of conviction,”says one grateful client. Gregory Gilbert, who captures second place for a third year in a row, gratifiesinvestors with what one calls his “quietly effective style.” In September 2005 the Merrill analystrecommended Andrx Corp., at $14.97, because the Davie, Florida, generic drugmaker’s manufacturingdispute with the FDA had made it unappealing to investors and he thought the reaction was overblown. Thestock quickly regained its footing, rising 60.3 percent to hit a plateau at about $24.00 in mid-March, nearGilbert’s $25.00 target. Holding steady at No. 3 for a third straight year, Richard Silver is a “tireless thinkerwith an extraordinarily well reasoned take on the industry,” says one money manager. In May 2005 theLehman analyst recommended Nektar Therapeutics of San Carlos, California, at $15.64, asserting that theshare price did not adequately reflect the blockbuster potential of its inhalable insulin, Exubera. Over thenext 12 months, the stock rose 47.7 percent, to $23.10, at which point Silver downgraded to neutral becausethe product’s market debut was delayed.


Cable & Satellite Craig Moffett Sanford C. Bernstein Second Team: Aryeh Bourkoff UBS Third Team: Douglas Shapiro BofA Runners-up: Richard Bilotti Morgan Stanley; Vijay Jayant Lehman Craig Moffett, who advances from second place to take top honors, impresses investors with his “insider’sview of the telecom industry,” as one portfolio manager puts it. Moffett, 44, who earned an MBA fromHarvard Business School in 1989, spent 11 years as a telecommunications consultant at Boston ConsultingGroup before joining Sanford C. Bernstein in 2002. During the past year the analyst broke with consensus,which has been generally bearish on the sector, and started emphasizing the growing demand for high-speed applications. In April he highlighted his call to buy Comcast Corp., at $26.38. By the middle ofSeptember, shares of the Philadelphia-based goliath had risen 30.6 percent, to $34.46, while the S&P 500’sgain during the same period was 1.9 percent. “For a long-term investor, Craig’s perspective is invaluable,”says one supporter. Though he drops from first place to second, Aryeh Bourkoff continues to receive highmarks for covering a wider range of companies than his competitors, which gives the UBS analyst “a morerobust view of the big picture,” explains one buy-sider. Bourkoff is another Comcast convert. He upgradedthe stock to buy in October 2005, at $27.30, as the company began to roll out its voice over Internet protocolservices; through the middle of September, the shares rose 26.7 percent. Moving from Runner-up: to theThird Team:, Douglas Shapiro has been “one of the go-to analysts this past year,” says one investor.Shapiro thought the competitive dynamic in cable would be more benign than the Street feared, and he wasright. The BofA researcher began aggressively recommending DirecTV Group last December, at $13.63, onthe belief that management would begin to buy back stock, which it did. By the middle of September, sharesof the El Segundo, California–based company’s stock had climbed 37.4 percent, to $18.73. Entertainment Michael Nathanson Sanford C. Bernstein Second Team: William Drewry Credit Suisse Third Team: Anthony Noto Goldman Sachs Runners-up: Richard Bilotti Morgan Stanley; Jessica Reif Cohen Merrill Lynch; Spencer Wang Bear Stearns Previously unranked Michael Nathanson leaps onto the first team only a year and a half after launchingcoverage of the Entertainment sector for Sanford C. Bernstein. Nathanson, 43, who earned a master’sdegree in public and private management from the Yale School of Management in 1990, worked at TimeWarner’s Time division before joining Sanford C. Bernstein in 1998. The analyst, who also ranks third inRadio & TV Broadcasting, “provides a single perspective across a much broader space compared to hispeers,” says one investor. Nathanson’s top pick: News Corp. He initiated coverage with an outperform ratingin March 2005, at $16.33, owing, he says, to its “unique position of possessing the fastest long-term growthat the lowest earnings multiple.” He remained bullish even when the stock dipped to $15.95 that Septemberover cost concerns stemming from Internet acquisitions. Year-to-date through mid-September, the NewYork–based giant’s shares had risen 21.9 percent, to $20.14. Moving up a notch to second, William Drewry,with a daunting breadth of coverage, “is a kind of one-stop shop,” as one buy-sider puts it. Customersespecially appreciated the Credit Suisse researcher’s bullish stance on Walt Disney Co.’s acquisition ofPixar when other analysts were expressing skepticism. In early October, Drewry recommended the Burbank,California–based studio at $23.84 and Pixar at $44.52. The deal was announced in January and finalized inMay, by which time Pixar’s stock had risen to $67.69. In mid-September, Disney’s shares were trading at$30.31. Anthony Noto, a first-team finisher in Internet, captures third place in Entertainment after beingunranked in this sector last year. The Goldman analyst wins praise for his “timely updates” and for being“well versed in the key issues,” according to one money manager. Noto has been bullish on Disney, alongtime favorite, since September 2003. In 2006 through mid-September, the stock had risen 26.4 percent. Publishing & Advertising Agencies Craig Huber


Lehman Second Team: Alexia Quadrani Bear Stearns Third Team: Lauren Rich Fine Merrill Lynch Craig Huber vaults from Runner-up: to the first team for being a straight shooter. The Lehman analyst “tookthe most aggressive approach in his negative view of the newspaper space,” explains one portfolio manager.“Unlike most other sell-side analysts, he was unafraid to come out and speak negatively about thefundamentals of newspaper companies, which are quite bad.” Huber, 39, who earned an MBA from theUniversity of California, Davis, Graduate School of Management in 1992, covered the publishing sector atMorgan Stanley for nearly ten years before moving to Lehman in mid-2004. He initiated coverage ofnewspaper stocks a few months later, in October, with a sell rating on all ten papers he followed. From thetime of his downgrade through mid-September 2006, the stocks in Huber’s group declined 28.0 percent, onaverage, while the S&P 500 rose 17.4 percent. On the Second Team: for a third consecutive year, AlexiaQuadrani wins praise for her realism. The Bear Stearns researcher “has great drill-down on inputs thatmatter in valuing the space,” says one client. In February, Quadrani issued an outperform rating onOmnicom Group, at $81.18, on signs that the European ad market was improving. By the middle ofSeptember, the New York–based advertising agency’s shares had risen to $92.07. After three years on thefirst team, Lauren Rich Fine drops to third. “Her knowledge of the publishing players’ strengths andweaknesses is unparalleled,” asserts one buy-sider. The Merrill analyst also recommended Omnicom inFebruary; customers who followed her advice enjoyed the shares’ gain of 11.7 percent by mid-September.“She is an experienced voice of reason,” says one happy investor. Radio & TV Broadcasting Victor Miller IV Bear Stearns Second Team: Jonathan Jacoby BofA Third Team: Michael Nathanson Sanford C. Bernstein Runners-up: Anthony DiClemente Lehman; Laraine Mancini Merrill Lynch; Mark Wienkes Goldman Sachs For a fifth year in a row — and by a wide margin — Victor Miller IV finishes on the first team. The BearStearns analyst wins praise for having “the best industry contacts and relationships,” according to onemoney manager. Miller, 42, highlighted Univision Communications in October 2005, at $24.70, suggestingthat the Los Angeles–based Spanish-language media company might soon be on the auction block. InFebruary the company announced it was up for sale. A consortium of private equity firms made a $12.3billion offer that was approved by a majority of shareholders last month; the deal still must win regulatoryapproval. From Miller’s recommendation through mid-September, Univision shares rose 41.2 percent, to$34.88. Moving up one notch to the Second Team:, Jonathan Jacoby shows “unflinching honesty,” as onecustomer says, and helps keep investors out of trouble. Case in point: Sirius Satellite Radio of New York,which the BofA researcher downgraded to sell in December 2005, at $7.17, on the bleak outlook for localbroadcast revenues. Year-to-date through mid-September, shares had sunk 43.0 percent, to $4.09. Jacobyalso has been an advocate of Univision, highlighting the shares in August 2005, at $27.11. Since thenthrough the middle of September, the stock price has risen 28.7 percent. Making his debut appearance onthe Third Team:, Michael Nathanson “produces very in-depth and thought-provoking pieces on his industrythat help frame future investment decisions,” observes one money manager. The Sanford C. Bernsteinanalyst, who is on the first team in Entertainment, initiated coverage of Clear Channel Communications inMarch 2005, at $31.04. Although the stock has lost ground, declining by 5.9 percent through the middle ofSeptember 2006, Nathanson continues to recommend the San Antonio–based company for its LBOpotential. Computer Services & IT Consulting Rod Bourgeois Sanford C. Bernstein Second Team: Adam Frisch UBS Third Team: James Kissane Bear Stearns


Runner-up: Patrick Burton Citigroup After two years in second place, Rod Bourgeois moves to the first team on the strength of research that is“the deepest in the group and essential reading for those following the sector,” according to one buy-sider. InJanuary 2005 the Sanford C. Bernstein analyst, who earned an MBA from Harvard Business School in 1995and is a former McKinsey & Co. consultant, published a black book on the offshoring trend in informationtechnology in which he reasoned that the growth of the Indian players was not coming at the expense ofsuch traditional companies as Electronic Data Systems, but instead was creating new markets, ascompanies were choosing to outsource additional functions. Bourgeois, 37, initiated coverage of Hyderabad,India–based Satyam Computer Services in September 2005, at $27.90, as a bet on the offshore market,starting with an outperform rating. Satyam shares overall rose 50.9 percent, to $42.09, in early March, atwhich point Bourgeois downgraded them to market perform. By the middle of September, the price hadslipped to $38.29; IT services shares overall were up 11.1 percent for the preceding 12-month period. AdamFrisch, who drops to No. 2 after three years on the first team, continues to win praise for having “developedthe best network of industry insiders,” in the words of one investor. That network helped the UBS analystidentify an opportunity in BearingPoint. In May 2005, when shares of the McLean, Virginia–based consultingfirm sank to $5.74 because of delayed 10-Q and 10-K filings, Frisch began telling clients it was a turnaroundstory with great management and acquisition potential. By mid-September 2006 the stock had risen 50.9percent, to $8.66. Returning third-teamer James Kissane of Bear Stearns scores points with customers wholike what one dubs his “long-term view on the fundamentals of the companies he covers.” One of Kissane’stop picks was Automatic Data Processing, which he upgraded in mid-May, at $43.54, in anticipation of anew, shareholder-friendly CEO at the Roseland, New Jersey–based company. By the middle of September,the stock was up 8.8 percent, to $47.37. Electronics Manufacturing Services Michael Walker Credit Suisse Second Team: Scott Craig BofA Third Team: Steven Fox Merrill Lynch Runners-up: Louis Miscioscia Cowen; Jim Suva Citigroup Michael Walker of Credit Suisse rises to the first team after spending the past two years at No. 3. Walker,34, who earned a degree in economics from the Wharton School of the University of Pennsylvania in 1995,worked at Donaldson, Lufkin & Jenrette, joining Credit Suisse when the two firms merged in 2000. Heimpresses investors with “the best written reports in the sector,” according to one portfolio manager, and he“digs deeper into the industry and the companies than his peers,” according to another. In September 2005,Walker upgraded Amphenol Corp., a Wallingford, Connecticut, company that is the world’s third-biggestmanufacturer in the connector industry, when it was at $38.25; in late December, when it rose to $44.08, hemade it his top pick for 2006. By mid-September, Amphenol had risen to $60.75, a 58.8 percent rise sinceWalker’s upgrade. Scott Craig leaps from Runner-up: to the Second Team: for what one client calls his “no-nonsense analytical opinion.” The BofA analyst urged customers to stick with quality names and avoidrestructuring stocks. In January he recommended Molex, at $30.13, after concluding that the Lisle,Illinois–based electromechanical component manufacturer’s growth rate was accelerating faster thaninvestors thought and that the market wasn’t giving it credit for the savings associated with shutting plants.By mid-September shares had risen 25.4 percent, to $37.77. Rising from Runner-up: to the Third Team:,Steven Fox is commended by one satisfied buy-sider for “helping us in making informed decisions.” TheMerrill analyst was also bullish on Amphenol, on valuation; he made it one of his top picks for 2006. Year-to-date through mid-September, the stock was up 37.5 percent. Imaging Technology Benjamin Reitzes UBS Second Team: Caroline Sabbagha Lehman Third Team: Jay Vleeschhouwer Merrill Lynch Runners-up: Shannon Cross Cross Research/Soleil; Matthew Troy Citigroup


Benjamin Reitzes earns his fifth consecutive first-team finish — by a landslide — thanks to his “intellectualhonesty,” as one investor puts it, and his “stock-picking ability,” according to another. Reitzes, 34, whomakes the Second Team: in IT Hardware, has been highlighting Electronics for Imaging, a stock he firstrecommended in June 2005, at $19.66, because he expects new color and monochrome products frommajor copier companies to boost business for the Foster City, California, provider of print server technology.The UBS analyst reiterated his call in November, February and April, when share prices hit $29.18. “Weidentified a new product cycle,” he says. The stock has since pulled back to $23.64, as of mid-September,but Reitzes remains bullish. “He understands both the market fundamentals and market psychology,” saysone buy-sider. Caroline Sabbagha’s call on Adobe Systems demonstrates what one client calls “anunparalleled depth of knowledge of the industry and her companies.” The Lehman analyst, who takessecond place for a fourth straight year, was more cautious than her peers about the San Jose,California–based software developer because of concerns about the company’s ability to maintainmomentum between product cycles. Sabbagha upgraded Adobe in June, at $28.84, after the stock haddropped 25.0 percent in one month in response to disappointing earnings results. By mid-September, Adobehad climbed 28.3 percent, to $37.00. Jay Vleeschhouwer grabs third place for a third year running, garneringpraise from one customer for “knowing his companies inside and out, from products to management tofinancials.” The Merrill analyst downgraded Navteq Corp., a Chicago-based provider of navigation software,in late April, at $53.10. The stock was trading at $26.35 in mid-September, down 50.4 percent.Vleeschhouwer had concerns when the high-multiple company underperformed in its biggest revenuesegment, mapping licenses for navigation in the automotive market. Internet Anthony Noto Goldman Sachs Second Team: Imran Khan J.P. Morgan Third Team: Robert Peck Bear Stearns Runners-up: Douglas Anmuth Lehman; Mark Mahaney Citigroup; Benjamin Schachter UBS Landing in the top spot for a fourth year in a row, Anthony Noto “is a great strategic thinker on the Internetsector,” observes one portfolio manager. The Goldman analyst, who ranks third in Entertainment, pleasedclients with his independent stance on Baidu.com, China’s most popular search engine. Noto, 38, advisedclients to sell, even though Goldman was the lead underwriter on the Beijing-based company’s August 2005IPO. Noto initiated coverage in mid-September 2005, at $112.25; one year later the stock had fallen 21.8percent, to $87.75. He remains bearish on Baidu, believing that the fair-market value is between $27.00 and$45.00 a share. One money manager says, “I respect him for coming out with a sell on Baidu when Goldmandid the deal.” Repeating on the Second Team:, Imran Khan offers “data-driven analysis” of the sector“without getting caught up in the fads,” as one investor puts it. The J.P. Morgan analyst made a strong callon Seattle-based Amazon.com, issuing a sell rating in January, at $47.87. Khan believed large-cap rivalssuch as EBay and Google would force Amazon to make increased technology investments, putting pressureon margins. Through mid-September the stock dropped 32.1 percent, to $32.52, and the sector lost 23.4percent. “Imran really nailed it in 2006 — he told us to stay away from Amazon,” says one grateful buy-sider.Rising from Runner-up: to the Third Team:, Robert Peck is “not afraid of writing challenging commentary,”explains one money manager. The Bear Stearns researcher raised eyebrows when he downgraded Ebay ofSan Jose, California, in September 2005, at $37.10, despite the online auctioneer’s robust business at thetime. Peck made an early call that growth was slowing faster than expected. One year later the stock wasdown 24.9 percent, to $27.85. IT Hardware A.M. (Toni) Sacconaghi Sanford C. Bernstein Second Team: Benjamin Reitzes UBS Third Team: Andrew Neff Bear Stearns Runners-up: Keith Bachman BofA; Harry Blount Lehman; Laura Conigliaro Goldman Sachs; RichardGardner Citigroup A.M. (Toni) Sacconaghi earns his fifth consecutive first-team finish because he is a “thought leader,” says


one investor, and is not “afraid to go against consensus,” says another. The Sanford C. Bernstein analystdowngraded Sun Microsystems to sell in early January, at $4.71, reasoning that the Santa Clara, California,company’s quarterly results would be weak and its workforce reductions lower than expected. He was right.In July, when shares had sunk to $3.82, Sacconaghi upgraded to neutral. “The valuation was much morefavorable at that point,” he says. Sacconaghi, 41, says he has never had a buy on the stock because hebelieves Sun faces structural challenges with its core Unix server market, under attack by Intel Corp. In mid-September the shares had risen to $5.28. Benjamin Reitzes, who rises a rung to second place, continues towin praise for his stock picking. “He has helped me make money,” sums up one satisfied client. The UBSanalyst, who also makes the first team in Imaging Technology, upgraded Hewlett-Packard Co. in September2005, at $27.73, believing the Palo Alto, California–based computer manufacturer had the advantage overrival Dell of Round Rock, Texas, which he downgraded the following month, at $31.88. Through mid-September, Hewlett-Packard was up 30.5 percent, to $36.18, while Dell was down 33.0 percent, to $21.35.Investors laud third-teamer Andrew Neff, who advances from Runner-up:, for seeing “that corporatetransformations can keep juicing earnings beyond what may seem calculable at first,” according to one buy-sider. The Bear Stearns analyst also upgraded Sun in July, at $4.09, concluding that the new CEO and CFOwere serious about cost-cutting and finally turning the company around. By mid-September the stock hadrisen 29.1 percent since Neff’s upgrade. Semiconductor Capital Equipment Timothy Arcuri Citigroup Second Team: Jay Deahna J.P. Morgan Third Team: James Covello Goldman Sachs Both “impassioned” and “reasonable,” according to investors, Timothy Arcuri leapfrogs from third to the firstteam. Arcuri, 35, who earned a chemical engineering degree from Villanova University in 1993, joinedCitigroup in 2004 after working as an analyst with Deutsche Bank Securities. His best call, say observers,was his February recommendation to sell the sector. Arcuri reasoned that the industry was adding capacityat a rate that would result in a peak in chip capacity use (and thus equipment orders) in the third quarter.From his downgrade through mid-September, the Philadelphia semiconductor index fell 14.7 percent; duringthat same period the S&P 500 was up 2.9 percent. Arcuri remains bearish: “The trajectory of capacityaddition by chip makers continues to be too aggressive.” Jay Deahna advances from Runner-up: to secondplace. Clients praise the J.P. Morgan analyst and his team for their responsiveness as well as for the annualconference they hold at the Semicon West trade show every summer. “It is a credit to Jay,” says one fan,“that some of those who have worked for him have become lead analysts at other brokerage firms.” In thirdplace after two years on top, James Covello of Goldman highlighted his buy rating on longtime favoriteFormFactor, first recommended in February 2004, at $18.59. The Livermore, California, semiconductor toolmanufacturer led the group with an 84.5 percent rise year-to-date through mid-September. “Many otheranalysts can track overall capital spending levels for the industry,” says one money manager, “but Jim’scloser connections to the day-to-day operations of those firms that purchase tools is invaluable.” Semiconductors Adam Parker Sanford C. Bernstein Second Team: Christopher Danely J.P. Morgan Third Team: Mark Edelstone Morgan Stanley Runners-up: Mark Lipacis Prudential; Michael Masdea Credit Suisse; Joseph Osha Merrill Lynch For a third straight year, Sanford C. Bernstein’s Adam Parker earns a first-team ranking, and his continuedsuccess can be traced to calls such as the one he made on Advanced Micro Devices. Parker upgraded theSunnyvale, California, company in September 2005 because consensus revenue estimates were too lowand “AMD’s product superiority would result in server share gain,” he says. He was right. The stock rosefrom $22.55 when he made the call to $42.10 in February; he downgraded in early March, on valuation, andby mid-September the shares had dropped to $26.53. Parker, 37, went overweight on the group in July,believing that inventory reductions would be positive for ongoing profitability. By the middle of September,the semiconductor sector had gained 12.7 percent. Advancing from Runner-up: to the Second Team:,Christopher Danely “obtains leading-edge data earlier than many others, thinks independently and is notafraid to make a controversial call,” says one money manager. The J.P. Morgan analyst was the first to


downgrade Intel Corp. of Santa Clara, in July 2005 at $25.64, convinced that Intel’s margins were peakingand that inventory was building up in the PC components subsector. Year-to-date through athe middle ofSeptember, Intel’s shares were down 21.1 percent, to $19.51. Mark Edelstone repeats in third place. TheMorgan Stanley analyst turned cautious on the semiconductor group in the first quarter, believing thatcompanies and investors were too bullish about end-market demand. But he remained upbeat on longtimefavorite Nvidia Corp. because he thought the Santa Clara–based programmable graphics creator wouldcontinue to profit from notebook PCs and Sony Corp.’s PlayStation 3 video game. Nvidia has consistentlyexceeded earnings expectations, and its shares were up a stunning 80.0 percent for the year ended mid-September. Software Heather Bellini UBS Second Team: Richard Sherlund Goldman Sachs Third Team: Charles DiBona Sanford C. Bernstein Runner-up: John DiFucci Bear Stearns Advancing from Second Team: to first, Heather Bellini wins kudos from clients for providing “detailed work onall her companies,” as one portfolio manager says. The UBS analyst, who earned an MBA in finance fromColumbia Business School in 1997, has been covering software since 2000, when she was at SalomonSmith Barney; she joined UBS in March 2003. Bellini, 36, broke with consensus in January to make OracleCorp. one of her top picks for 2006, concluding that the Redwood City, California, company would enjoymore licensing opportunities for its database. Oracle was up 33.7 percent year-to-date through the middle ofSeptember, compared with the sector’s 6.1 percent gain. After 17 years in the top spot, Richard Sherlundslips to second place. The Goldman analyst continues to win praise from investors for his insightful coverageof Microsoft Corp. “Rick has by far the most detailed understanding of all of Microsoft’s segments andcompetitors and the forces affecting change,” says one backer. The Redmond, Washington–based softwaregiant was up 3.8 percent year-to-date through mid-September, outperforming the Nasdaq composite indexby 2.4 percentage points, and Sherlund remains bullish. He believes Microsoft’s new Windows Vistaoperating system and Office 2007, scheduled to be launched in January (after several delays), will have apositive impact, and he added them to his list of best ideas, “Americas Conviction Buy List,” in June. Repeatthird-teamer Charles DiBona has a “very deep understanding of the technical trends of the software industrythat helps him identify the long-term winners,” says one money manager. Clients were particularly impressedwith the Sanford C. Bernstein analyst’s May report on Microsoft, which explained why the company’scontroversial $2.3 billion investment in MSNBC.com is critical if it is to compete with Google. Data Networking & Wireline Equipment Ehud Gelblum J.P. Morgan Second Team: Tal Liani Merrill Lynch Third Team: Nikos Theodosopoulos UBS Runners-up: Jeffrey Evenson Sanford C. Bernstein; B. Alexander Henderson Citigroup Ehud Gelblum, 37, claims first place for the first time, rising from third last year. The J.P. Morgan analyst,who earned a Ph.D. in electrical engineering from Columbia University in 1998, previously coveredtelecommunications for Merrill and Credit Suisse. Clients praise his “great call on Cisco Systems,” as oneinvestor characterizes it, and his pointing out that its Scientific-Atlanta acquisition would drive higher growth.That Atlanta-based company was a “business that was poised for exploiting,” Gelblum recalls, even as SanJose, California–based Cisco was “in a revenue box,” with little growth in sight. In December 2005, onemonth after Cisco announced it would acquire Scientific-Atlanta for $6.9 billion, Gelblum upgraded the stockto buy, at $17.50; by the middle of September, the shares had risen 29.8 percent, to $22.72. Tal Liani ofMerrill, who jumps from Runner-up: to the Second Team:, wins praise for not confining his research tosubsectors but for covering the entire telecommunications space, from wireless and wireline to datanetworking and even some communications software names. Among his top calls was an early-September2005 upgrade of Tellabs, a telecoms equipment manufacturer based in Naperville, Illinois. By late Decemberthe stock had shot up 27.6 percent, from $8.80 to $11.23, and Liani downgraded it to neutral, on valuation.As of the middle of September, the price had dropped back to $10.51. Nikos Theodosopoulos of UBS, who


slips from second place to third, also got Tellabs right: His buy in June 2005 was followed by a downgrade inJanuary, after a 47.0 percent gain. He is still neutral on the stock, wary of pricing pressure on the company’snewer products. Theodosopoulos expressed caution about the telecom equipment sector during aconference call with clients in March, concerned over slowing growth and declining profit margins; the sectorpeaked three weeks later and in mid-September was down 4.9 percent since that call. Telecom Equipment/Wireless Timothy Luke Lehman Second Team: Ehud Gelblum J.P. Morgan Third Team: Timothy Long BofA For a seventh year in a row, Timothy Luke of Lehman tops the Telecom Equipment/ Wireless group as investors continue to view him as “thorough, flexible, and well-supported analyst with along-term track record of performance,” as one puts it. That record was bolstered by his success withFinland’s Nokia Corp., which Luke, 39, upgraded from equal weight to overweight in July 2005, attracted byits growth prospects and historically low valuation. Nokia was showing returns of 17.5 percent (trailing 12months) and 6.7 percent (year-to-date) in mid-September. Schaumburg, Illinois–based Motorola, upgraded toLuke’s top pick in 2005, had risen 10.7 percent year-to-date through the middle of September, comparedwith 5.7 percent for the S&P 500. “Continued focus on supply-chain management and design is expected tohelp drive further margin improvement in Motorola’s handset business,” Luke asserts. J.P. Morgan’s EhudGelblum, who makes the first team in Data Networking & Wireline Equipment this year, ranks second inTelecom Equipment/Wireless, rising from Runner-up: last year. Gelblum, who offers a “unique perspective,”according to one money manager, is also a fan of Motorola. He first upgraded the stock to overweight inSeptember 2003, at $9.27, and has been bullish ever since, even as the stock has fallen in and out of favorwith other analysts. In the 12 months ended mid-September, the stock had risen 5.8 percent, to $24.85.Timothy Long of BofA, who holds the third-team position for a second year in a row, also includes Motorolaamong his top calls. He downgraded the stock to neutral in July 2005, after it had gained 42.5 percent on aMarch buy recommendation, then upgraded it to buy in May, on increasing investor interest. Since thenshares have risen 17.5 percent. Telecom Services/Wireless Philip Cusick Bear Stearns Second Team: Thomas Lee J.P. Morgan Third Team: David Barden BofA Runners-up: Blake Bath Lehman; Simon Flannery Morgan Stanley; Jeffrey Halpern Sanford C. Bernstein;Richard Prentiss Jr. Raymond James; Michael Rollins Citigroup Repeating on the first team, Philip Cusick “knows the sector landscape well and drills down on valuationvariables to make things clear,” one investor reports. “His models provided us particular insights into trendsand allowed us to be better positioned within our sector weightings.” Among the Bear Stearns analyst’s bestcalls over the past year were buys on regional service providers Alamosa Holdings of Lubbock, Texas,UbiquiTel of Conshohocken, Pennsylvania, and Nextel Partners of Kirkland, Washington, which Cusick, 32,identified as acquisition targets. Sprint Nextel Corp. paid big premiums for all three in late 2005 through2006. Cusick also initiated an outperform rating on Leap Wireless in June 2005 and kept that rating untilJanuary; the stock jumped 44.4 percent during the period, from $26.95 to $38.92. He now rates the SanDiego–based carrier as peer perform; as of the middle of September, its shares were trading at $48.18.Thomas Lee of J.P. Morgan, who claims second place for a second consecutive year, “looks at the telecomindustry in a way no other analyst does,” says one client. “He tends to focus less on the industry buzzwordsand sees his stocks for what they are: investments in real businesses that either can or can’t generate strongcash flows in the future.” Case in point: Dobson Communications Corp. of Oklahoma City, which Leerecommended in July, at $6.95, as significantly undervalued. Through mid-September the price had risen 3.9percent, to $7.22; Lee continues to recommend the company because its margins are improving andsubscriber growth is accelerating. BofA’s David Barden, rising from Runner-up: to the Third Team:, is laudedfor his understanding of macro themes, especially those concerning the tower industry, and for his support ofAmerican Tower Corp., which has been a strong performer. Barden upgraded the Boston-based company in


mid-May 2005, at $17.07. By the middle of September 2006, the shares had more than doubled, to $36.71. Telecom Services/Wireline Simon Flannery Morgan Stanley Second Team: Jeffrey Halpern Sanford C. Bernstein Third Team: John Hodulik UBS Runners-up: David Barden BofA; Michael McCormack Bear Stearns For a fifth consecutive year, Morgan Stanley’s Simon Flannery is the first-team pick in this category.Flannery, 44, wins praise for his “big-picture thinking,” as one investor puts it, and for looking to the longterm. He has stayed overweight on longtime favorite AT&T, citing merger synergies that are likely to lead tosubstantial cost savings for the San Antonio–based company. In mid-September the stock had climbed to$31.86, up 40.3 percent over the preceding 12 months. He is also bullish on Canadian telecoms because, hesays, cell phone penetration and use in Canada are below U.S. levels, so there is more growth potential.North-of-the-border favorites include Rogers Communications and Telus, which have gained 22.7 and 37.0percent year-to-date, respectively as of the middle of September. Jeffrey Halpern makes the Second Team:this year, up from third last year, and impresses customers with “reports that dig deep and find opportunitiesthat others miss,” according to one buy-sider. In January 2005 the Sanford C. Bernstein analyst was amongthe first to recommend Qwest Communications International. At a time when many analysts were down onthe stock, Halpern concluded that cost-cutting and debt reduction would lead to higher ebitda and free cashflow for the Denver-based provider. The stock had advanced 22.4 percent by the time he downgraded it tomarket perform one year later, concluding that it no longer offered investors an attractive risk-reward profile.John Hodulik drops from second place to third, but the UBS analyst still pleases clients with “thorough andtimely understanding of the issues” affecting his sector, as one money manager explains. Last November,following the acquisition of AT&T by SBC Communications, Hodulik upgraded the stock, at $23.85, on thebelief that earnings-per-share estimates were too low. As of mid-September the stock had risen 33.6 percent. Accounting & Tax Policy Patricia McConnell Bear Stearns Second Team: David Zion Credit Suisse Third Team: Janet Pegg Bear Stearns Runner-up: Robert Willens Lehman The big story in accounting is the ongoing federal investigations into employee stock option backdating, andmoney managers say no one has covered the issue better than Patricia McConnell, who returns on the firstteam for a 16th consecutive year. The Bear Stearns analyst wowed clients with a revelatory report in May,“Digging up Dinosaur Bones: 20 Frequently Asked Questions on Stock Option Backdating,” that warned of alooming financial crisis at some 900 companies using questionable methods to backdate options. “In somecases companies may have intentionally retroactively set the exercise price of their stock options tocorrespond with the market price of the stock on dates when the stock price was particularly low and claimedthat these dates were the grant dates,” she wrote. In other cases, transaction dates were unintentionallyrecorded incorrectly. Either way, she says, “the result is an understatement of stock option expense in thefinancial statements.” McConnell, 57, updated her report in August, estimating that “over $8 billion of stockoption expense has vanished from future income statement recognition.” David Zion, on the Second Team:for a fourth year in a row, “was way out in front on the options backdating issue,” says one client. In July theCredit Suisse researcher informed investors that annual employee stock option costs for companies in theS&P 500 had plunged from a peak of $104 billion in 2000 to just $30 billion in 2005. “Stock options has beenthe most important topic over the past two years, and Dave has been all over it,” observes one client. One ofMcConnell’s colleagues at Bear Stearns, Janet Pegg, repeats on the Third Team:. “She makes complicatedissues easy to understand,” says one money manager. “Her work goes beyond factual changes anddiscusses their implications at the market, sector and stock level.” Convertibles


Venu Krishna & team Lehman Second Team: Yaw Debrah & team Merrill Lynch Third Team: Lynn Hambright, Adrian Miller, Stuart Novick Citigroup In first place for a third straight year, Venu Krishna, 40, and his two Lehman teammates have “great skill inrecognizing trends within the convertibles market,” says one portfolio manager. In their monthly “Outlook”report for January, the team predicted that convertibles arbitrage would outperform long-only in the comingyear (even though just the opposite had occurred for the previous three years), outflows would abate, andsmall-cap convertibles would outperform large-caps. They have been right on all three counts. By the end ofthe second quarter, the Dow Jones convertible-arbitrage index was up 8.24 percent, compared with 6.17percent for Lehman Brothers’ U.S. convertible composite index (the benchmark for a convertibles long-onlystrategy). After seven consecutive quarters of outflows, the convertibles market saw a net inflow of $791million in the second quarter. Small-cap convertibles were up 7.7 percent year-to-date through August 31,while large-caps were up 5.6 percent. Yaw Debrah, who leads his three-member Merrill team to a repeatsecond-place finish, “has developed one of the most comprehensive databases in the industry,” says onemoney manager. That database helps the team analyze trends and make predictions, such as their forecastof an upswing in new issuance. Convertibles came off a major sell-off in 2004 and 2005, but in January theMerrill team predicted that the market would reverse course. “After $37 billion in 2005, we called for at least$50 billion in 2006, and we are seeing the numbers come in,” Debrah says. “We had $40 billion in the firsteight months, so we could see $60 billion” by the end of the year. In third place is Citigroup’s team of LynnHambright, Adrian Miller and Stuart Novick. Unranked last year, the researchers win praise from clients notonly for their macro commentary, but also for innovative ways of providing access to management, such astheir annual Silicon Valley bus tour and quarterly bring-your-own-idea investment-brainstorming dinners. Economics Ed Hyman ISI Group Second Team: David Malpass Bear Stearns Third Team: David Rosenberg Merrill Lynch Runners-up: Maury Harris UBS; Nancy Lazar ISI Group Ed Hyman, the reigning champ of the All-America Research Team, finishes on the first team for the 27thyear in a row. The ISI Group co-founder wins praise for research that is “timely, prescient and oftencontrarian,” as one client puts it. Hyman, 61, began alerting clients in September 2005 that the long-awaitedslowdown in the housing market would materialize in 2006, and in February he cited statistics from aUniversity of Michigan report, “Good Time to Buy a House?,” in which only 59 percent of respondents saidthat current conditions were favorable for purchasing a residence, down from 75 percent a year earlier. Theweakness in housing will prompt growth of consumer spending to slow to 1.0 percent because of “theunprecedented mortgage equity withdrawal that is likely to unwind,” Hyman predicted. By September,Deloitte Research’s leading index of consumer spending had dipped to 2.82 percent, down from 3.38percent one year earlier. David Malpass repeats in second place. Clients praise the Bear Stearns chiefeconomist’s March 2005 report that challenged the assumption that U.S. savings rates are low, noting thatgovernment statistics often exclude realized gains on equities, houses and mortgage refinancings. Whenthose factors are taken into account, the savings rate is closer to 10 percent than the oft-cited 2 percent, hesays. Malpass “is capable of taking a different view from almost everybody else and sticking to it,” says onebuy-sider. David Rosenberg holds on to the third position, winning praise for drawing investors’ attention inApril to the fact that the National Association of Home Builders index, which leads the S&P 500 by about ayear at a correlation close to 80 percent, has been declining; in August it hit its lowest point since 1991. TheMerrill economist “has been the most articulate and persistent advocate of the decelerating economicenvironment that we now find ourselves in,” says one client. Equity Derivatives Maria Grant & team Goldman Sachs


Second Team: Gabriela Baez, Evren Ergin, Ryan Renicker & team Lehman Third Team: Heiko Ebens & team Merrill Lynch Maria Grant and her 16-member team at Goldman repeat in the top spot for their willingness to “go the extramile,” as one money manager puts it. The strategists earn compliments for their weekly reports, whichhighlight trends in the market and routinely include about ten trading ideas. Grant, 31, notes that “business isbooming” since investors have realized how options can be used to hedge risk. Since February, when theChicago Board of Exchange began trading options on its volatility index, “we have covered them activelywith instructions to clients on what the products are and how to use them,” she says. Another area ofspecialization: mutual funds selling covered calls to enhance yield, a strategy that works well in a time of lowvolatility. The Goldman team “is always worth listening to because they always have something new to say,”notes one investor. Lehman’s eight-member team, co-led by Gabriela Baez, Evren Ergin and Ryan Renicker, takes second place for a second year in a row. The analysts are “on the forefront of providingunique reports and insights in terms of what is going on within the index world,” says one portfolio manager.One index fund client praises the Lehman team for their advice on using futures to manage some cashpositions and trade others in the two weeks preceding Russell Investment Group’s annual reconstitution ofits indexes, which the Tacoma, Washington, investment management firm conducts each June. The strategyhelped the index fund outperform its benchmark, Baez says. At No. 3 again is Merrill’s three-member team,led by Heiko Ebens. The analysts are highly regarded for their reporting, such as an August 2005 missivequantifying the stock, sector and industry group impact of the transition of the S&P indexes to free-floatindexes. The Merrill team is “unique with its research on volatility,” says one investor. Portfolio Strategy François Trahan Bear Stearns Second Team: Richard Bernstein Merrill Lynch Third Team: Michael Goldstein Empirical Research Runners-up: Tobias Levkovich Citigroup; Henry McVey Morgan Stanley; Jason Trennert ISI Group; VadimZlotnikov Sanford C. Bernstein On the first team for a second year in a row, François Trahan is a “rare, must-read information source,” saysone money manager. The Bear Stearns strategist doesn’t publish a lot of reports, “so when he hassomething to say, it’s useful,” says another, citing Trahan’s November 2005 report that forecast an end toFederal Reserve Board tightening but noted that this might not be the buy signal it has been in the recentpast. “The 1960s, not the 1980s–’90s, is the better model of what to expect from the upcomingposttightening environment,” wrote Trahan, 37, urging investors to “wait until leading economic indicatorsbegin to reaccelerate before assuming an aggressive position in equities.” One buy-sider says that Trahan“added the most value last year by linking market similarities between the current period and the late ’50s toearly ’60s. Numerous other ideas came from that insight.” Advancing from Runner-up: to second, RichardBernstein “stands out for his independent thinking, analytical discipline and the frequency and relevance ofhis communications,” observes one portfolio manager. Last November the Merrill strategist identified threeindustry turnaround possibilities — media, pharmaceuticals and diversified telecoms — on the belief thatthey were undervalued, and he reiterated his call throughout the year. By mid-September the sectors hadgained 7.2, 18.2 and 26.9 percent, respectively, while the S&P 500 was up 4.9 percent. Michael Goldsteinslips one notch to third. The Empirical Research strategist, who’s also on the Third Team: in QuantitativeResearch, “combines the role and approach of a technical strategist with his excellent skills at quant work,”says one client. A strategy Goldstein has developed is a “Distrusted 50” screen featuring stocks that havebeen overlooked. Year-to-date through mid-September, Goldstein’s selections were up 10.6 percent,compared with 5.7 percent for the S&P 500. Quantitative Research Vadim Zlotnikov Sanford C. Bernstein Second Team: Keith Miller; Citigroup Third Team: Michael Goldstein Empirical Research


Runners-up: Richard Bernstein Merrill Lynch; Edward Keon Jr. Prudential; Pankaj Patel Credit Suisse Holding on to his first-team position, Vadim Zlotnikov “has a very disciplined approach and might have thehighest humility-to-talent ratio on Wall Street,” says one admirer of the Ukraine-born analyst. The chief equitystrategist at Sanford C. Bernstein alerted investors to opportunities in tech shares in April, noting that cash attop technology companies amounted to 25 percent of assets by year-end 2005, up from 12 percent in 1991,and compared with an average 9 percent for S&P 500 companies (versus 7 percent in 1991). Zlotnikov, 44,also predicted that the Fed’s pause in interest rate hikes would have a limited long-term effect, as economicgrowth would continue to be muted by high energy prices and slow consumer spending. He says the S&P500 will gain no more than 5.0 percent by the end of the year; year-to-date through mid-September, it was up5.7 percent. Leaping to second after two years as Runner-up:, Keith Miller is “very creative and thorough,”says one money manager. Investors especially value the Citigroup analyst’s sector-specific stock-selectionmodels. For example, Miller’s health care stock selection model outperformed the Russell 1000 health carebenchmark by 6.2 percentage points in the 12 months ended August 31, and his consumer-staple stockselection model outpaced the Russell 1000 consumer staples benchmark by 5.8 percentage points over thesame period. Though he drops a notch to third, Michael Goldstein is “without a doubt, the single mostvaluable research tool available to me,” says one money manager. The Empirical Research analyst, who’salso on the Third Team: in Portfolio Strategy, wins praise from one money manager for his workdemonstrating that, when all the companies in a particular industry group are valued similarly, investors arenot rewarded for taking the risk of owning a higher-beta stock. Goldstein is “creative, consistent andthorough,” that investor says. Small Companies James Furey Lehman Second Team: Steven DeSanctis Prudential Third Team: Satya Pradhuman Merrill Lynch James Furey, 46, repeats in the top position for providing research that “fuses fundamental, technical andmarket insights in a pragmatic and user-friendly manner,” says one portfolio manager. Last October, whenthe Russell 2000 hit a post-Katrina low of 621.57, the Los Angeles–based Lehman analyst urged investors tobuy small-cap stocks, believing the market was overstating the hurricane’s impact. The index began risingand, when it reached 717.18 in February, Furey downgraded to neutral. The index went on to peak at 781.83in May before dropping back to 671.94 in July; in mid-September it stood at 729.46, up only 1.7 percentsince Furey’s downgrade. Repeating second-teamer Steven DeSanctis provides service that “is second tonone,” according to one buy-sider. The Prudential strategist wowed clients with his research attributing theextended small-cap rally to hedge funds, which since 2002 have been gobbling up big chunks of ISharesRussell 2000 (an exchange-traded fund that tracks the index), and noting that hedge fund investment makesthe small-cap sector especially vulnerable to volatility. DeSanctis is “an excellent source of information,” saysone money manager. Customers praise Satya Pradhuman, who is No. 3 for a third year in a row, for hisresearch into private equity acquisitions in the small-cap arena. In August the Merrill strategist noted that inthe second quarter private equity investment had risen to a six-year high of $47 billion. Investors willcontinue to eye smaller companies with low returns on equity and stable cash flows, Pradhuman says, withthe result being few venture-backed small-cap IPOs in the coming year. Technical Analysis Jeffrey deGraaf Lehman Second Team: John Mendelson Stanford Third Team: Ralph Acampora Knight Runners-up: Mary Ann Bartels Merrill Lynch; John Roque Natexis Bleichroeder; Louise Yamada LYTechnical Research Jeffrey deGraaf earns his second consecutive first-team finish because “he looks at parameters andindicators that are not on anyone’s radar screen and makes his analysis based on the totality of them,” saysone portfolio manager. The Lehman strategist impressed investors by accurately predicting, in August 2005,a massive upswing in gold prices in the second half of the year. He has maintained that position, and in the


12 months ended mid-September, gold rose 26.3 percent, to $574.40 per ounce. DeGraaf, 38, also winspraise for his daily e-mail updates. “He sticks his neck out every day, trying to call both short-term andsecular moves in the market. He’s a moneymaker!” exclaims one buy-sider. “When it comes to technicalanalysis, John Mendelson has been right in his calls more than anyone else,” says one money manager ofthe Stanford analyst who debuts on the Second Team:. In May, Mendelson urged investment in mediastocks, particularly News Corp., based on its price pattern and volume. At the time of his call, the sharesstood at $18.21; by mid-September they had risen 10.6 percent, to $20.14; the media sector was up 4.1percent during that period. Mendelson is “willing and almost seems to enjoy making recommendations thatrun counter to common wisdom,” observes one client. Ralph Acampora, who repeats in third place, “is one ofthe few tech analysts who makes a strong call and sticks to it — no waffling,” says one investor. One suchcall: The Knight analyst predicts that large caps that have underperformed for years, including AT&T, Oracleand Baxter International, will lift a back-to-basics market in 2007, which Acampora says will be a verypositive year. Washington Research Thomas D. Gallagher & team ISI Group Second Team: Charles Gabriel Jr. & team Prudential Third Team: Kim Wallace & team Lehman Runner-up: Leslie Alperstein & team Washington Analysis For a fourth year in a row — and by a landslide — Thomas D. Gallagher leads his two-member ISI Groupteam to a first-place finish in Washington Research. “Tom and his team are very much in the political flowand, consequently, always on top of the political agenda,” notes one money manager. Gallagher, 52, built uphis D.C. network during eight years as a federal employee, followed by 13 years at Lehman. In January theISI team warned investors of increased volatility in financial markets in connection with Benjamin Bernanke’staking over as chairman of the Fed, and in June they said the cessation of interest rate hikes would not beshort-lived, but lasting. “He correctly called the recent pause and believes the Fed is done. We agree withhim and have tailored our investment portfolio accordingly,” says one customer. Leading the repeating No. 2team, Charles Gabriel Jr. “is the consummate Washington insider, with contacts everywhere,” says one buy-sider. Gabriel and his four-member Prudential team in Washington impressed clients with a string of reportsassessing the risk of legislation affecting Fannie Mae and Freddie Mac, as well as the political landscapeassociated with the issue. “I have always found Chuck Gabriel to be the go-to guy for Washington issues,”says one money manager. Lehman’s Kim Wallace and his five-person team in Washington hold on to thirdplace. One investor says Wallace has “a unique ability to encapsulate complex political-governmentinformation into relevant bullet points for investors, such as how policy affects a particular company orindustry.” In February the team predicted Congress would pass controversial pension reform legislationbefore its summer recess. Congress approved the bill in August — then went on vacation. Document INVS000020070205e2ah00004


Ahead of Nvidia's Profit Report, Volatility Expectations Climb

Options ReportAhead of Nvidia's Profit Report, Volatility Expectations Climb By Mohammed Hadi428 words8 August 2006The Wall Street JournalJC4English(Copyright (c) 2006, Dow Jones & Company, Inc.) Traders bid up volatility expectations on Nvidia Corp. ahead of an earnings report by the semiconductormaker. Nvidia is expected to post second-quarter earnings of 27 cents a share, on Thursday, compared with 17cents a year earlier, according to an average of analysts' estimates collected by Thomson Financial.Yesterday, as more than 9,100 calls and 8,300 puts on the company changed hands, implied volatility in thecompany's options jumped to 63% from 53%, according to Track Data. Before yesterday, options on Nvidia were already implying a move of about 10% following the earningsreport according to Lehman Brothers options strategist Ryan Renicker, and the rise left implied volatility inthese options at its highest level in at least two years. Although option traders might be forecasting a big move in Nvidia shares, many research analysts aren'texpecting much. For example, JP Morgan Securities analyst Shawn Webster expects results to be in linewith expectations and noted that, when it comes to the stock, "we believe lack of upside to consensusestimates should limit out-performance." But option traders might be thinking of things other than earnings. In particular, at $23.71, Nvidia's shareswere up 34% in the two weeks since Advanced Micro Devices Inc. announced plans to buy Nvidia rival ATITechnologies Inc. This despite the fact that some analysts worried that a tie up between AMD and ATITechnologies could bode poorly for Nvidia -- which generates about a quarter of its revenue from AMD,according to one estimate. Still, the run-up in implied volatility levels on Nvidia has created an alluring opportunity for shareholders.Nvidia's September $26.25 calls turned up on a recent screen for attractive overwriting (or covered-callselling) candidates run by Merrill Lynch quantitative analyst Siddharth Kariwala. Holders of Nvidia shares who sell the September $26.25 calls will collect about $1.10 for them, or almost 5%of the current stock price. If shares don't move sharply higher before these calls expire in mid-September,that $1.10 effectively serves as a dividend -- adding to returns or easing any pullback. If shares do rally and rise past $26.25, overwriters will have to sell their stock position, but for an effectiveprice of $27.35. That's a further 15% gain over current levels. The call seller, of course, would miss out onany gains above that 15% though. License this article from Dow Jones Reprint Service Document J000000020060808e2880000e



OPTIONS REPORT: Volatility Views Rise In Nvidia Options

OPTIONS REPORT: Volatility Views Rise In Nvidia Options By Mohammed HadiOf DOW JONES NEWSWIRES465 words7 August 200615:30Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Traders bid up volatility expectations on Nvidia Corp. ahead of an earnings reportby the semiconductor maker. On Thursday, Nvidia is expected to post second-quarter earnings of 27 cents a share, compared with 17cents a year ago, according to Thomson First Call. On Monday, as more than 7,900 calls and 6,500 puts onthe company changed hands, implied volatility in the company's options jumped to 64% from 53%, accordingto Track Data. Before trading started Monday, options on Nvidia were already implying a move of about 10% following theearnings report, according to Lehman Brothers options strategist Ryan Renicker, and at 64% the impliedvolatility reading was at its highest level in at least two years. Although option traders might be forecasting a bigger than expected move in the stock, many researchanalysts aren't expecting much. JP Morgan Securities analyst Shawn Webster expects results to be in linewith expectations and noted that, when it comes to the stock, "we believe lack of upside to consensusestimates should limit out-performance." But option traders might be thinking of things other than earnings. In particular, at $23.74 Nvidia's shareshave shot up 34% in about two weeks since Advanced Micro Devices Inc. announced plans to buy ATITechnologies Inc. These gains came despite the fact that some are worried that a tie up between AMD andATI Technologies could bode poorly for Nvidia - which generates about a quarter of its revenue from AMD,according to one estimate. Still, the run-up in implied volatility levels on Nvidia has created an alluring opportunity for shareholders.Nvidia's September $26.25 calls turned up on a recent screen for attractive overwriting candidates - or calloptions that can be sold to add to returns on, or create an attractive way to exit, an existing stock position -run by Merrill Lynch quantitative analyst Siddharth Kariwala. Stockholders who sell the September $26.25 calls will collect about $1.10 for them, or almost 5% of thecurrent stock price. If shares don't move sharply higher before these calls expire in mid-September, that$1.10 effectively serves as a dividend - adding to returns or padding any decline. If shares do rally and rise past $26.25 - a valid concern, given Thursday's earnings report - overwriters willhave to sell the stock position, but for an effective price of $27.35. That is a further 15% gain over currentlevels. The call seller, of course, would miss out on any gains over that 15% though. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] [ 08-07-061530ET ] 70699 Document DJ00000020060807e287000dv


Trading in Symantec Takes Off

Options ReportTrading in Symantec Takes Off By Mohammed Hadi284 words27 July 2006The Wall Street JournalJC4English(Copyright (c) 2006, Dow Jones & Company, Inc.) Trading was heavy and expectations for stock-price volatility rose in options on Symantec Corp. and BostonScientific Corp., ahead of earnings reports from both companies. With more than 43,000 calls on Symantec changing hands, implied volatility in these options rose to 39%from 33%, according to Track Data. Puts were also active -- with more than 23,000 trading. As Symantec shares rose 36 cents, or 2.3%, to $15.80 at 4 p.m. on the Nasdaq Stock Market yesterday,trading was heavy in the August 17.50 calls. More than 12,200 of these changed hands, compared with2,547 previously outstanding. After the close of trading, the security-software maker reported a 52% drop in its quarterly profit to $94.8million. The stock rose 6% to $16.76 in after-hours trading. Ryan Renicker, an options strategist at Lehman Brothers Holdings Inc., noted that since January 2004,Symantec shares have moved an average of almost 5.5% on the day following earnings -- a bigger movethan reflected in the price of options ahead of trading yesterday. Traders also got in position for swings in the price of options on Boston Scientific. The medical-device makeris expected to report earnings before the start of trading today -- its first report since it closed the acquisitionof Guidant Corp. At $17.06 yesterday on the New York Stock Exchange, the stock is down 30% this year. Yesterday, morethan 27,300 calls on Boston Scientific changed hands. Among active options were the September 17.50calls. More than 2,800 of these traded. License this article from Dow Jones Reprint Service Document J000000020060727e27r0000x



OPTIONS REPORT:Symantec, Boston Sci. Busy Before Earnings

OPTIONS REPORT:Symantec, Boston Sci. Busy Before Earnings By Mohammed HadiOf DOW JONES NEWSWIRES417 words26 July 200615:30Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Trading was heavy and expectations for stock price volatility rose in options onSymantec Corp. and Boston Scientific Corp. ahead of earnings reports from both companies. With more than 28,000 calls on Symantec changing hands during the session, implied volatility in theseoptions rose to 38% from 33%, according to Track Data. Puts were also active - with more than 14,000trading. As Symantec shares rose 46 cents, or 3%, to $15.90, trading was heaviest in the August 17.50 calls. Morethan 10,400 of these changed hands, compared with 2,547 previously outstanding, and they rose 18 cents to25 cents on the Chicago Board Options Exchange. After the close of trading Wednesday, the company is expected to report earnings of 21 cents a share,according to Thomson First Call. Other software companies were also drawing special interest Wednesdayafter Hewlett-Packard Co.'s announced a $4.5 billion purchase of Mercury Interactive Corp. The pickup in expectations for volatility in Symantec shares wasn't unwarranted. Lehman Brothers optionsstrategist Ryan Renicker noted that since January 2004, Symantec shares have moved an average ofalmost 5.5% on the day following earnings - a bigger move than reflected in the price of options ahead oftrading Wednesday. Meanwhile, traders also got in position for swings in the price of options on Boston Scientific. The medical-device maker is due to report its second-quarter earnings before the start of trading Thursday.Wall Street expects earnings of 17 cents a share, according to First Call. Investors have much to consider. This is the first earnings report since the company closed its acquisition ofrival Guidant Corp., and at $17.04, the stock is down 30%, partly because of product recalls. On Wednesday, more than 24,600 calls on Boston Scientific changed hands, and Paul Foster, who tracksoptions activity for theflyonthewall.com, noted that implied volatility in August options on Boston Scientificstood at 53%, sharply above its 26-week average of 34%. Among active options were the September 17.50 calls. More than 2,700 of these traded, compared with 604previously outstanding. These rose 15 cents to 95 cents on the International Securities Exchange. Also active were September 15 calls and August 17.50 calls. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] [ 07-26-061530ET ] 70699 Document DJ00000020060726e27q000jv


Dollar's Drop May Move Stocks

Options ReportDollar's Drop May Move Stocks By Mohammed Hadi322 words6 June 2006The Wall Street JournalJC4English(Copyright (c) 2006, Dow Jones & Company, Inc.) A lousy quarter for the dollar could mean an increase in volatility for some U.S. stocks. And even with late gains yesterday, the dollar touched its lowest level in a year, relative to the euro, and atits current level the New York Board of Trade's U.S. Dollar Index has dropped just over 6% so far in thesecond quarter. "The fairly big swing in the dollar this quarter should help companies with large export sales and revenues,"said Fred Dickson, chief market strategist at D.A. Davidson. A weak dollar makes U.S. products comparatively less expensive for foreign buyers, and that is a boon forcompanies such as some drug developers, industrial-products makers and many technology companies, Mr.Dickson said. At the same time, though, "the downside to the weaker dollar is higher product costs for importers," he said. This might create an opportunity for options traders, particularly as companies "pre-announce" their quarterlyresults because of the dollar's fluctuations, said Ryan Renicker, chief options strategist at Lehman Brothers. Picking from a group of companies identified by fellow analysts at Lehman Brothers as having a largeproportion of revenue or income from foreign sources, Mr. Renicker identified five with relatively inexpensiveoptions. Included on the list are Pfizer, which generated 89% of its pretax income from foreign sources in 2005, andNvidia, a maker of graphics chips, which generated 86% of its revenue from foreign sources. The others onthe list are Eli Lilly, Colgate-Palmolive and Chevron. Meanwhile, yesterday's stock pullback ensured that volatility expectations rose sharply. The Chicago BoardOptions Exchange volatility index, or VIX, jumped 2.33 points, or more than 16%, to 16.65. The ratio of putsto calls on individual stocks traded at the CBOE stood at 0.79. License this article from Dow Jones Reprint Service Document J000000020060606e2660002d



OPTIONS REPORT: Dollar's Drop May Move Some Stocks

OPTIONS REPORT: Dollar's Drop May Move Some Stocks By Mohammed HadiOf DOW JONES NEWSWIRES483 words5 June 200615:30Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--A lousy quarter for the dollar could mean an increase in volatility for some U.S.stocks. In overnight trading Monday, the dollar touched its lowest level in a year, relative to the euro, and at itscurrent level of about 83.89 the New York Board of Trade's U.S. Dollar Index has dropped 6.5% so far in thesecond quarter. That index tracks the level of the dollar relative to a basket of six other currencies. This is kind of a big deal. Since its creation in 1973, the dollar index lost more than 6% on only 11 otheroccasions, notes Ryan Renicker, chief options strategist at Lehman Brothers. "The fairly big swing in the dollar this quarter should help companies with large export sales and revenues,"notes Fred Dickson, chief market strategist at D.A. Davidson. A relatively weak dollar makes U.S. products relatively less expensive for foreign buyers, and that is a boonfor companies such as some drug developers, industrial products company's and many technologycompanies, Dickson said. At the same time, though, "the downside to the weaker dollar is higher product costs for importers," likeretailers, he notes. This might create an opportunity for options traders, particularly as companies "pre-announce" their quarterlyresults because of the dollar's fluctuations, Lehman's Renicker thinks. Picking from a group of companies identified by fellow analysts at Lehman Brothers as having a largeproportion of revenue or income from foreign sources, Renicker identified five with relatively inexpensiveoptions. Included on the list are companies like Pfizer Inc., which generated 89% of its pre-tax income from foreignsources, and Nvidia Corp., which generated 86% of its revenue from foreign sources, in 2005. The others onthe list are Eli Lilly & Co., Colgate-Palmolive Co., and Chevron Corp. To capture the "potentially high volatility for these names" that could result from currency-relatedannouncements, buy options on these companies, he suggested. Meanwhile, a pullback in stocks Monday ensured that volatility expectations jumped sharply higher. TheChicago Board Options Exchange volatility index, or VIX, jumped 2.10 points, or nearly 15%, to 16.42. Not surprisingly, investors remained fairly cautious and puts traded actively. In fact, the equity-only put-callratio at the CBOE remained relatively elevated at about 0.65. That is in line with its 21-day moving average,according to Chris Johnson, market strategist at Schaeffer's Investment Research, and a sign of growingguardedness among investors. Still, "the activity over the last week or so has been cautious; it has not yet reached something that I wouldcategorize as fearful," he said. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] [ 06-05-061530ET ] 70699


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Options --- The Striking Price: Messy Manana for Miners

MARKET WEEKOptions --- The Striking Price: Messy Manana for Miners By Kopin Tan750 words29 May 2006Barron'sBM11English(c) 2006 Dow Jones & Company, Inc. Change is in the air, and the option market can smell it. Peru heads to the polls June 4 to elect a presidentfrom two candidates who, as far as mining companies are concerned, might as well be named Bad andWorse. Their real names are Alan Garcia, a former president who once shifted banking-industry control tothe government, and Ollanta Humala, who now threatens to slap foreign miners with windfall taxes. Nationalism is to South America what eyebrow-shaping is to men -- a troubling recent trend -- and Venezuelaand Bolivia have already pushed to reclaim oil-and-gas assets. Peru is the world's second-biggest producerof silver, third-biggest producer of zinc and fourth-biggest producer of copper; it accounts for 40% of sales atDenver-based Newmont Mining (ticker: NEM) and about 67% of sales at Pan American Silver (PAAS). No surprise, then, to see increased hedging of stocks with Peruvian exposure, though some likely has beendriven as well by the recent pullback in metals stocks. Option prices and projected volatility have risennoticeably in Newmont, Pan American, Barrick Gold (ABX) and Southern Copper (PCU). In Newmont's case,for instance, traders have accumulated 0.94 puts for every call outstanding, the highest ratio in a year. Potential fallout may prove less than election rhetoric suggests, and even Senors Garcia and Humala bothmust realize the importance of foreign investment. But analysts at the very least expect international miningcompanies to owe increased royalties and face greater pressure to share more of their profits. Nor shouldshort-term risks be underestimated, as news headlines and post-election chest-thumping could keep stocksvolatile. A recent call by Robbert van Batenburg, Louis Capital's head of research, to hedge Newmont and PanAmerican has worked out well over the past two weeks, and he thinks caution is still warranted. A shortposition on Newmont, for example, might also be hedged with a long sector position using streetTracks GoldShares (GLD), just as a bearish bet on Pan American might be hedged with the iShares Silver Trust (SLV).After all, if Peru's political climate worsens enough to thwart Newmont's supply, the ensuing uptick in pricescould help others less dependant on Peru. Further north and along the Atlantic coast, the winds of change become less metaphorical as hurricaneseason approaches. Projected volatility of some property and casualty insurers including Montpelier ReHoldings (MRH), Allstate (ALL) and Chubb (CB) picked up last week, in part as the market sold off, and afterLehman Brothers' option strategist Ryan Renicker suggested buying options to guard against the tumult theseason can wreak. Over at Sara Lee (SLE), change will involve shedding its apparel business to become a leaner foodcompany. Last week the struggling Chicago conglomerate filed documents to spin off, by September, aHanesbrands unit that will trade publicly under the symbol HBI. The plan to spin out Hanesbrands -- which includes Hanes clothing, Champion sportswear and Wonderbra --failed to provide the desired lift when it was first announced, and Sara Lee shares are slumping near a five-year low as investors fret about its bleak turnaround. But are there reasons to hope? Hanes has long been an uneasy fit in the Sara Lee pantry (or is it closet?). Long marketed as a staple youneed rather than want, Hanes clothing, its supporters believe, could thrive once it leaves the unfashionableparent, the way Coach (COH) prospered after it broke free of Sara Lee. While the stock sags for goodreason, investors' clamor for newly public household names, and the Street's bearish stance, all suggestpotential upside should good news emerge. Bulls can buy shares, but Credit Suisse strategist Edward Tom believes options are a wiser bet. "A Sara Leecall implicitly embeds a `free' call option on the Hanesbrands IPO," allowing one to capture any upsideahead of the IPO, he notes. And because call-buying risks no more than the premium paid, losses are


capped should Sara Lee slip further. Longer-dated calls seemed to have priced in IPO benefits, so hesuggests buying October calls -- in part because debut stocks often reap the bulk of their gains early on asthe market rushes to embrace the new. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020060527e25t0000z

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Barron's(5/29) The Striking Price: Messy Manana For Miners

Barron's(5/29) The Striking Price: Messy Manana For Miners 767 words26 May 200620:08Dow Jones Commodities ServiceOSTDJEnglishCopyright 2006, Comtex News Network. All Rights Reserved. May 27, 2006 (DJCS via Comtex) -- (From BARRON'S) By Kopin Tan

Change is in the air, and the option market can smell it. Peru heads to the polls June 4 to elect a presidentfrom two candidates who, as far as mining companies are concerned, might as well be named Bad andWorse. Their real names are Alan Garcia, a former president who once shifted banking-industry control tothe government, and Ollanta Humala, who now threatens to slap foreign miners with windfall taxes. Nationalism is to South America what eyebrow-shaping is to men -- a troubling recent trend -- and Venezuelaand Bolivia have already pushed to reclaim oil-and-gas assets. Peru is the world's second-biggest producerof silver, third-biggest producer of zinc and fourth-biggest producer of copper; it accounts for 40% of sales atDenver-based Newmont Mining (ticker: NEM) and about 67% of sales at Pan American Silver (PAAS). No surprise, then, to see increased hedging of stocks with Peruvian exposure, though some likely has beendriven as well by the recent pullback in metals stocks. Option prices and projected volatility have risennoticeably in Newmont, Pan American, Barrick Gold (ABX) and Southern Copper (PCU). In Newmont's case,for instance, traders have accumulated 0.94 puts for every call outstanding, the highest ratio in a year. Potential fallout may prove less than election rhetoric suggests, and even Senors Garcia and Humala bothmust realize the importance of foreign investment. But analysts at the very least expect international miningcompanies to owe increased royalties and face greater pressure to share more of their profits. Nor shouldshort-term risks be underestimated, as news headlines and post-election chest-thumping could keep stocksvolatile. A recent call by Robbert van Batenburg, Louis Capital's head of research, to hedge Newmont and PanAmerican has worked out well over the past two weeks, and he thinks caution is still warranted. A shortposition on Newmont, for example, might also be hedged with a long sector position using streetTracks GoldShares (GLD), just as a bearish bet on Pan American might be hedged with the iShares Silver Trust (SLV).After all, if Peru's political climate worsens enough to thwart Newmont's supply, the ensuing uptick in pricescould help others less dependant on Peru. Further north and along the Atlantic coast, the winds of change become less metaphorical as hurricaneseason approaches. Projected volatility of some property and casualty insurers including Montpelier ReHoldings (MRH), Allstate (ALL) and Chubb (CB) picked up last week, in part as the market sold off, and afterLehman Brothers' option strategist Ryan Renicker suggested buying options to guard against the tumult theseason can wreak. Over at Sara Lee (SLE), change will involve shedding its apparel business to become a leaner foodcompany. Last week the struggling Chicago conglomerate filed documents to spin off, by September, aHanesbrands unit that will trade publicly under the symbol HBI. The plan to spin out Hanesbrands -- which includes Hanes clothing, Champion sportswear and Wonderbra --failed to provide the desired lift when it was first announced, and Sara Lee shares are slumping near a five-year low as investors fret about its bleak turnaround. But are there reasons to hope? Hanes has long been an uneasy fit in the Sara Lee pantry (or is it closet?). Long marketed as a staple youneed rather than want, Hanes clothing, its supporters believe, could thrive once it leaves the unfashionableparent, the way Coach (COH) prospered after it broke free of Sara Lee. While the stock sags for goodreason, investors' clamor for newly public household names, and the Street's bearish stance, all suggestpotential upside should good news emerge.


Bulls can buy shares, but Credit Suisse strategist Edward Tom believes options are a wiser bet. "A Sara Leecall implicitly embeds a `free' call option on the Hanesbrands IPO," allowing one to capture any upsideahead of the IPO, he notes. And because call-buying risks no more than the premium paid, losses arecapped should Sara Lee slip further. Longer-dated calls seemed to have priced in IPO benefits, so hesuggests buying October calls -- in part because debut stocks often reap the bulk of their gains early on asthe market rushes to embrace the new. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . (END) Dow Jones Newswires 05-27-06 0008ET Document OSTDJ00020060527e25r000ec




Ahead of the Tape

Ahead of the TapeAhead of the Tape By Justin Lahart408 words26 May 2006The Wall Street JournalJC1English(Copyright (c) 2006, Dow Jones & Company, Inc.) [Today's Market Forecast] Financial Storm Season Investors see stocks as riskier assets than they did a few weeks ago. But they don't view all stocks asequally risky. These days, they seem especially worried about the financial-services sector. The standard way to gauge risk in stocks is to look at the behavior of investors in stock options. Options giveinvestors the right to sell a stock (in the case of a put option) or buy a stock (in the case of a call) at a setprice. They are often used by investors to protect their portfolios from big swings in the stock market. Themore they worry about such swings, the more they're willing to pay for options. So higher options pricesmeans investors expect more volatility. On Tuesday, the CBOE Market Volatility Index, or VIX, hit its highest level in two years, though it's eased abit since. That shows how overall fears have risen. Taking a closer look at option pricing in different industries, Stephen Gallagher, chief U.S. economist at SGCIB, found that the rise in expected volatility has been uneven. In some areas, such as health-care stocks,the increase in volatility has been gentle. In others, especially financial stocks, it hasn't. Drilling down further, Mr. Gallagher found that the recent rise in implied volatility for shares of brokerageshas been especially large. This has come hand-in-hand with a drop in financial-services stock prices -- theDow Jones U.S. Investment Services Index has fallen 8% this month. Investor worries haven't been confined to U.S. stocks -- they're viewing everything from emerging-marketstocks to high-yield bonds to commodities as riskier lately. Brokerages, it so happens, are exposed to all ofthese areas through their investing and trading operations. Their fortunes may also turn on the success ofclients, such as hedge funds, that have been playing aggressively in these risky markets. There's one financial-services sector where expected volatility has been relatively low lately, says LehmanBrothers options strategist Ryan Renicker. That's property-and-casualty insurers. With another busyhurricane season potentially around the corner, that seems odd. But investors are more worried right nowabout financial storms than real ones. --- Send comments to [email protected]


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HURRICANE OUTLOOK GENERATES AN ADVISORY FOR P&C INSURERS

HURRICANE OUTLOOK GENERATES AN ADVISORY FOR P&C INSURERS Mohammed Hadi143 words25 May 2006Insurance Information Institute DatabaseIIIDPage C2English(c) 2006 Insurance Information Institute, Inc. . This options report calls attention to a research note from Ryan Renicker, a Lehman Brothers optionsstrategist, recalling that at the beginning of the 2005 hurricane season options on a number of property andcasualty insurers with exposure to hurricanes underestimated the volatility of the stocks of these companies.Renicker said that the average implied volatility on property and casualty insurers is not sufficiently takinginto account hurricane risk. Renicker pointed out that the National Oceanic and Atmospheric Administrationsaid that there was an 80 percent chance that this year’s Atlantic hurricane season would be above normal.He also noted that if the hurricane losses for 2006 are not severe, the value of property and casualtyinsurance stocks could increase significantly. Source: The Wall Street Journal Article ID Number: 2006052505 Document IIID000020060601e25p0001q


OPTIONS BEAT-Hurricane headwinds could stir up insurers

OPTIONS BEAT-Hurricane headwinds could stir up insurers By Doris Frankel557 words25 May 200614:18Reuters NewsLBAEnglish(c) 2006 Reuters Limited CHICAGO, May 25 (Reuters) - There is still time to buy inexpensive insurance or to catch a rally on propertyand casualty insurers before the 2006 hurricane season starts because option prices on the group areundervalued relative to the broader stock market, analysts say. The 2006 Atlantic hurricane season, which starts on June 1, is predicted to be a busy one with up to 10hurricanes. And if last year was any indication, property and casualty insurers saw higher projected and realized volatilitywith the catalyst being the record-breaking 2005 hurricane season which had an unprecedented 28 tropicalstorms -- 15 of which became full-blown hurricanes. In a research note, Lehman Brothers' options strategist Ryan Renicker wrote that medium-term impliedvolatility in the group, which includes Everest Re Group Ltd. , Montpelier Re Holdings Ltd. and Chubb Corp. ,continues to be low relative to the Standard & Poor's 500 <.SPX> index's implied volatility of roughly 14percent. Implied volatility is a statistical measure related to how much a stock is expected to move up or down in arolling 12-month period calculated by current options prices. "Since several independent weather forecasters are predicting another active hurricane season this year, webelieve stocks within this industry could experience higher volatility, which the options market has yet to fullyprice in," Renicker said. MARKET RISK EYED "So far, it does not appear that the possible market risk from hurricanes has moved onto the radar screensof many options traders," said Frederic Ruffy at Optionetics, a Redwood, California-based options educationfirm. One way to profit from anticipating higher volatility in this stocks later this year would be an options strategythat encompasses buying options premium. Two strategies which accomplish this are straddles and strangles, and involve the purchase of puts and callson the same stock. An equity call gives the right to buy the underlying security at a preset price within a specified time periodwhile a put conveys the right to sell the stock. "There are a lot of unknowns and, as a result, many traders might find it hard to place money on the line andawait word of a developing hurricane to hit the newswires and ... cause an increase in volatility in insurancestocks," Ruffy said "Many might prefer to wait for further confirmation that this year will indeed see a number of hurricanes makelandfall on U.S. shores," he said. Renicker recommends buying October straddles on insurers such as Chubb, which expire on Oct. 21, nearthe end of the hurricane season. Investors typically buy straddles -- calls and puts with the same strike price and expiration -- if they expect abig move in the underlying stock but are uncertain about the direction.


The strangle, which involves the same expiration months and different strike prices, is cheaper and requiresless capital, Ruffy said. It also has a higher probability that both options will expire worthless if the stocks donot move. "Nevertheless since implied volatility is relatively low, the trade is relatively cheap to establish and willgenerate profits if insurance stocks move dramatically higher or lower during the next few months," Ruffysaid. FINANCIAL-OPTIONS-INSURERS|LANGEN|ABN|E|RBN|U|D|RNP|DNP|PCO Document LBA0000020060525e25p0020d


Hurricane Outlook Generates An Advisory for P&C Insurers

Options ReportHurricane Outlook Generates An Advisory for P&C Insurers By Mohammed Hadi359 words25 May 2006The Wall Street JournalJC2English(Copyright (c) 2006, Dow Jones & Company, Inc.) The government says it learned from last year's hurricane season. Options investors should do the same. In a research note, Lehman Brothers options strategist Ryan Renicker wrote that, at the beginning of the2005 hurricane season, options on a number of property and casualty, or P&C, insurers with exposure to thehurricanes underestimated the coming volatility in those companies' stock. "We believe average implied volatility on P&C insurers is not pricing in hurricane risk sufficiently," Mr.Renicker wrote. Mr. Renicker noted that the National Oceanic and Atmospheric Administration said there is an 80% chanceof an "above normal" Atlantic hurricane season, which officially begins June 1. At the same time, though, hethinks that "if hurricane losses in 2006 are not severe, P&C insurance stocks could rally." In other words, these stocks could make "substantial moves in either direction," but the price of options onmany of them has yet to reflect that. Mr. Renicker suggests investors take advantage of this and buy straddles -- which involves buying both a putand a call on a stock at the same strike price in order to profit from a move in the stock, regardless of thedirection of that move. Meanwhile, there was a surge of trading in options on Sepracor Inc., ahead of the company's presentation ofclinical trial data on its pulmonary disease treatment Arformoterol. More than 67,300 calls on the Marlborough, Mass., drug maker traded, and with the stock up $1.38 to$50.04 in 4 p.m. Nasdaq Stock Market composite trading, the heaviest activity was in the June 60 calls. Paul Foster, who tracks options activity for theflyonthewall.com, noted that the activity was particularly heavyin the last 30 minutes of trading yesterday. It wasn't until well after the close of trading however, that the company issued a press release indicating thatit had presented favorable results. That release coincided with the company's presentation at the conferencein San Diego. License this article from Dow Jones Reprint Service Document J000000020060525e25p0000o



UPDATE: OPTIONS REPORT: A Hurricane Season Related Trade

UPDATE: OPTIONS REPORT: A Hurricane Season Related Trade 517 words24 May 200616:46Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. (Updating with information about activity in Sepracor Inc. options and presentation in final paragraphs,updating prices)

By Mohammed Hadi Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The U.S. government says it learned from last year's hurricane season. Optionsinvestors should do the same. "We believe average implied volatility on P&C insurers is not pricing in hurricane risk sufficiently," wroteLehman Brothers options strategist Ryan Renicker. Renicker noted that the National Oceanic and Atmospheric Administration said there is an 80% chance thatthe Atlantic hurricane season - which officially begins June 1 - will be "above normal." At the same time,though, he thinks that "if hurricane losses in 2006 are not severe, P&C insurance stocks could rally." In other words, these stocks could make "substantial moves in either direction," but the price of options onmany of them has yet to reflect that. Renicker suggests investors take advantage of this and buy straddles - which involves buying both a put anda call on a stock at the same strike price. The position aims to profit from a move in the stock, regardless ofwhether the move is a gain or loss. There was a surge of trading in options on Sepracor Inc. (SEPR), ahead of the company's presentation ofclinical trial data on its pulmonary disease treatment Arformoterol. More than 67,300 calls on the drug maker traded, and with the stock up $1.38 to $50.04, the heaviest activitywas in the June 60 calls. Paul Foster, who tracks options activity for theflyonthewall.com noted that the activity was particularly heavyin the last 30 minutes of trading, ahead of a presentation made by the company at the American ThoracicSociety meeting in San Diego. It wasn't until after the close of trading that the company issued a press release indicating that it hadpresented favorable results. That release coincided with the company's presentation at the conference inSan Diego. Finally, options investors were taking no chances Wednesday as stocks struggled to define a floor for theirrecent reversal, and puts traded heavily. For example, the International Securities Exchange Sentiment Index, a ratio of calls traded per put on theelectronic exchange, fell back to 106, reflecting caution among investors. That compares with a 50-daymoving average of 154. -By Mohammed Hadi; Dow Jones Newswires; 201-938-4049; [email protected] Corrected May 24, 2006 17:06 ET (21:06 GMT) [ 05-24-06 1646ET ] There was a surge of trading in options on Sepracor Inc. (SEPR), ahead of the company's presentation ofclinical trial data on its pulmonary disease treatment Arformoterol.


It wasn't until after the close of trading that the company issued a press release indicating that it hadpresented favorable results. That release coincided with the company's presentation at the conference inSan Diego. (An update to the Options Report at 16:46 EST incorrectly said that the presentation occurred before theclose of trading). [ 05-24-06 1702ET ] 70699 Document DJ00000020060524e25o000i7


OPTIONS REPORT: Hurricane Season-Related Opportunities

OPTIONS REPORT: Hurricane Season-Related Opportunities By Mohammed HadiOf DOW JONES NEWSWIRES499 words24 May 200615:30Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--The U.S. government says it learned from last year's hurricane season. Optionsinvestors should do the same. In a research note this week, Lehman Brother's options strategist Ryan Renicker noted that, at thebeginning of the 2005 hurricane season, options on a number of property and casualty, or P&C, insurerswith exposure to the hurricanes underestimated the coming volatility in those companies' stock prices. History might be repeating itself, and that creates an opportunity for options investors, Renicker thinks. "We believe average implied volatility on P&C insurers is not pricing in hurricane risk sufficiently," he wrote. Though Renicker notes that the National Oceanic and Atmospheric Administration said there is an 80%chance that the Atlantic hurricane season - which officially begins June 1 - will be "above normal," herealizes that nothing is certain. "If hurricane losses in 2006 are not severe, P&C insurance stocks could rally," he wrote. In other words,these stocks could make "substantial moves in either direction," but the price of options on many of themhas yet to reflect that perception. Renicker suggests investors take advantage of this and buy straddles on these stocks. A straddle involvesbuying both a put and a call on a stock, at the same strike price. The position aims to profit from a move inthe stock, regardless of whether the move is a gain or loss. Consider Everest Re Group Ltd., which has relatively high exposure to hurricanes (there are others withhigher exposure but fairly illiquid options). With its shares at $89.02, the October 90 straddle currently costsabout $10.30, based on ask prices. The stock has to move above or below the $90 mark by at least that much for the trade to break even. Thatisn't a small amount, but on the other hand the most the trade can lose is the amount paid for the options. Of course, relatively inexpensive options are also an opportunity for those looking to protect a portfolio bybuying puts. And, as always, those with more confidence about which direction a stock will move can, ofcourse, spend about half the money. Meanwhile, options investors were taking no chances Wednesday as stocks struggled to define a floor fortheir recent pullback, and the amount of puts traded relative to calls climbed sharply. The International Securities Exchange Sentiment Index, a ratio of calls traded per put on the electronicexchange, fell sharply and approached its 52-week low of 102. Most recently, the index had a value of 106,compared with Tuesday's close of 196. Also reflecting rising caution, the put/call ratio at the Chicago Board Options Exchange climbed to 1.48, fromits closing level of 1.14 on Tuesday. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] [ 05-24-061530ET ] 70699 Document DJ00000020060524e25o000eq


Options --- The Striking Price: Oil, Oil Everywhere

MARKET WEEKOptions --- The Striking Price: Oil, Oil Everywhere By Kopin Tan770 words1 May 2006Barron'sBM18English(c) 2006 Dow Jones & Company, Inc. The earth is two-thirds water, but it is oil that has seeped into its collective consciousness. On Main Street,pricey oil is a unifying grievance as the summer driving season beckons. On Wall Street, big oil companiesreported quarterly profits counted in flashy billions. And on Capitol Hill, the cry to funnel big-oil gains intoboosting supply has swelled into the political gush du jour. All this attention has pumped up option premiums in many energy stocks. Take ConocoPhillips (ticker:COP), for example. Its option prices held firm even after the third-largest oil and gas company reportedearnings midweek. Shares had fallen about 10% early last week, before the company topped toughcomparisons from a year earlier to report a 13% rise in first-quarter profits. As the stock stabilized, the paceof call buying gained -- especially after crude oil prices climbed Friday. Call buyers' cautious optimism is understandable: The Houston company said it will sell billions ofnonstrategic assets over the next 18 months to pare debt accumulated from its $35 billion acquisition ofBurlington Resources, and buying a large German refinery also boosted its global refining capacity.Oppenheimer analyst Fadel Gheit called ConocoPhillips "one of the most undervalued stocks" in the oil andgas sector. With investors flocking toward calls, bulls might also consider selling puts to harvest premiums and to setbelow-market prices for buying stock. With shares at 67.75, out-of-the-money November 65 puts weretrading at about $4.10 -- "a little more than the price for a gallon of gas" and a rich premium of 6.1% to thestock price, says Oppenheimer's chief option strategist, Michael Schwartz. The put seller commits to buyshares at 65 over the next six months if ConocoPhillips tanks, but the premium earned drops the purchaseprice to 60.90 -- a 10.1% discount to the current market price. In contrast, option prices on some oil indexes look muted -- chiefly as option buyers turned their attention toindividual companies that are reporting earnings. Projected annualized volatility of the Select Energy SPDRFund (XLE), for instance, hovers at just 29%, compared with its one-year range between 18% and 86%,according to Schaeffer's Research. For investors with exposure to oil stocks, inexpensive XLE options offeryet another way to hedge their risks. Oil isn't the only volatile commodity. Liquid gold's solid counterpart saw a rush Friday after the UnitedNations faulted Iran for failing to meet a deadline for halting uranium enrichment. Gold stocks surged as goldfutures pushed above $658 an ounce. Newmont Mining (NEM), to cite one example, has rallied 25% inseven weeks. Its options, too, are pricey, with nine-month options trading near a two-year high. In contrast,option premiums on Phelps Dodge (PD) declined after the copper producer reported earnings last week andlook relatively cheap, says Lehman Brothers' option strategist Ryan Renicker. Because the firm's metals analyst believes potentially higher gold prices are substantially factored intoNewmont stock while global copper supply will stay tight, Renicker suggests selling January options onNewmont to finance the purchase of Phelps Dodge options. Specifically, those who believe longer-term risksare greater for Newmont than Phelps Dodge might consider selling out-of-the-money January call spreads onNewmont to finance the purchase of out-of-the-money January call spreads on Phelps Dodge, structuring thetrades to net a credit. Meanwhile, earnings remain the chief catalyst for short-term traders. Marko Kolanovic, Bear Stearns'derivatives strategist, compared the extent to which front-month options were bid up compared with longer-term ones, and estimates that the market is bracing for a 7.5% move up or down when Humana (HUM)reports Monday. Other anticipated earnings-related shifts this week could include a 5.9% move for EastmanKodak (EK), 5.8% for Career Education (CECO), 5.8% for Cognizant Technology (CTSH), 5.2% for Cigna(CI), 4.9% for Archer Daniels Midland (ADM) and 4.5% for Whole Foods (WFMI). Cognizant, an IT consulting and outsourcing company that relies heavily on Indian workers, has seen shares


rise 50% over the past year to an all-time high near 64. As it prepares to report earnings Wednesday, bullshoping for continued outsourcing growth have amassed 1.67 calls for every put outstanding, near the highestlevel in a year. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020060429e25100018




Barron's(5/1) The Striking Price: Oil, Oil Everywhere

Barron's(5/1) The Striking Price: Oil, Oil Everywhere 787 words28 April 200620:10Dow Jones Commodities ServiceOSTDJEnglishCopyright 2006, Comtex News Network. All Rights Reserved. Apr 29, 2006 (DJCS via Comtex) -- (From BARRON'S) By Kopin Tan

The earth is two-thirds water, but it is oil that has seeped into its collective consciousness. On Main Street,pricey oil is a unifying grievance as the summer driving season beckons. On Wall Street, big oil companiesreported quarterly profits counted in flashy billions. And on Capitol Hill, the cry to funnel big-oil gains intoboosting supply has swelled into the political gush du jour. All this attention has pumped up option premiums in many energy stocks. Take ConocoPhillips (ticker:COP), for example. Its option prices held firm even after the third-largest oil and gas company reportedearnings midweek. Shares had fallen about 10% early last week, before the company topped toughcomparisons from a year earlier to report a 13% rise in first-quarter profits. As the stock stabilized, the paceof call buying gained -- especially after crude oil prices climbed Friday. Call buyers' cautious optimism is understandable: The Houston company said it will sell billions ofnonstrategic assets over the next 18 months to pare debt accumulated from its $35 billion acquisition ofBurlington Resources, and buying a large German refinery also boosted its global refining capacity.Oppenheimer analyst Fadel Gheit called ConocoPhillips "one of the most undervalued stocks" in the oil andgas sector. With investors flocking toward calls, bulls might also consider selling puts to harvest premiums and to setbelow-market prices for buying stock. With shares at 67.75, out-of-the-money November 65 puts weretrading at about $4.10 -- "a little more than the price for a gallon of gas" and a rich premium of 6.1% to thestock price, says Oppenheimer's chief option strategist, Michael Schwartz. The put seller commits to buyshares at 65 over the next six months if ConocoPhillips tanks, but the premium earned drops the purchaseprice to 60.90 -- a 10.1% discount to the current market price. In contrast, option prices on some oil indexes look muted -- chiefly as option buyers turned their attention toindividual companies that are reporting earnings. Projected annualized volatility of the Select Energy SPDRFund (XLE), for instance, hovers at just 29%, compared with its one-year range between 18% and 86%,according to Schaeffer's Research. For investors with exposure to oil stocks, inexpensive XLE options offeryet another way to hedge their risks. Oil isn't the only volatile commodity. Liquid gold's solid counterpart saw a rush Friday after the UnitedNations faulted Iran for failing to meet a deadline for halting uranium enrichment. Gold stocks surged as goldfutures pushed above $658 an ounce. Newmont Mining (NEM), to cite one example, has rallied 25% inseven weeks. Its options, too, are pricey, with nine-month options trading near a two-year high. In contrast,option premiums on Phelps Dodge (PD) declined after the copper producer reported earnings last week andlook relatively cheap, says Lehman Brothers' option strategist Ryan Renicker. Because the firm's metals analyst believes potentially higher gold prices are substantially factored intoNewmont stock while global copper supply will stay tight, Renicker suggests selling January options onNewmont to finance the purchase of Phelps Dodge options. Specifically, those who believe longer-term risksare greater for Newmont than Phelps Dodge might consider selling out-of-the-money January call spreads onNewmont to finance the purchase of out-of-the-money January call spreads on Phelps Dodge, structuring thetrades to net a credit. Meanwhile, earnings remain the chief catalyst for short-term traders. Marko Kolanovic, Bear Stearns'derivatives strategist, compared the extent to which front-month options were bid up compared with longer-term ones, and estimates that the market is bracing for a 7.5% move up or down when Humana (HUM)reports Monday. Other anticipated earnings-related shifts this week could include a 5.9% move for EastmanKodak (EK), 5.8% for Career Education (CECO), 5.8% for Cognizant Technology (CTSH), 5.2% for Cigna


(CI), 4.9% for Archer Daniels Midland (ADM) and 4.5% for Whole Foods (WFMI). Cognizant, an IT consulting and outsourcing company that relies heavily on Indian workers, has seen sharesrise 50% over the past year to an all-time high near 64. As it prepares to report earnings Wednesday, bullshoping for continued outsourcing growth have amassed 1.67 calls for every put outstanding, near the highestlevel in a year. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . (END) Dow Jones Newswires 04-29-06 0010ET Document OSTDJ00020060429e24t000e8




Sleepy Outlook for Chip Stocks Might Offer Opportunity in ETF

Options ReportSleepy Outlook for Chip Stocks Might Offer Opportunity in ETF By Mohammed Hadi451 words4 March 2006The Wall Street JournalJB5English(Copyright (c) 2006, Dow Jones & Company, Inc.) NEW YORK -- Intel Corp. might not roil the market like it once did with earnings warnings, but that doesn'tmean other semiconductor makers won't create volatility in the near future. On Friday, Intel surprised investors by warning that its first-quarter revenue will fall short of the company'stargets. After an initial fall the company's shares regained ground and ended down 17 cents at $20.32, and broadmeasures of semiconductor stocks like the Semiconductor Holdrs Trust, or SMH, an exchange-traded fundthat includes Intel in its basket of holdings, spent much of the session in positive territory. The SMH endeddown 56 cents at $37.94. But there is a great deal of news ahead from Intel's rivals and other semiconductor makers that might createsome volatility in the sector. On Monday, Texas Instruments Inc. will provide a mid-quarter update, and is expected by analysts to raiseits outlook for the first quarter. While it isn't a direct competitor to Intel -- Texas Instruments makes chipsused in cellphones and televisions -- the company has a heavy weighting in the SMH. Other updates are also expected next week from Xilinx Inc., and Altera Corp., and there's also earningsahead from National Semiconductor Corp.on Thursday. Despite this, "we believe options market participants are pricing in very low risk expectations for theSemiconductor Holdrs Trust," Lehman Brothers' options strategist Ryan Renicker wrote in a note Friday. That means options are relatively cheap, and now is a good time to buy. There are many ways to take advantage of inexpensive options, Mr. Renicker noted. Investors with a bullishview, for example, can buy March calls on the SMH. With the exchange-traded fund at $37.94, those whoare feeling aggressive could go for the March 40 calls, which on Friday were going for about 15 cents, basedon ask prices, while those feeling cautious can turn to the March 37.50 calls for about $1.05, Mr. Renickersaid. For a longer-term view, consider the May 40 calls instead, he said. But if you aren't sure which way this ETF will head, you could just take a position that profits from increasedvolatility, but doesn't favor a direction, by buying both calls and puts, Mr. Renicker said. For example, the March 37.50 straddle -- which involves buying equal numbers of March 37.50 calls and atMarch 37.50 puts -- is currently going for about $1.55, again based on ask prices. --- Donna Fuscaldo contributed to this story License this article from Dow Jones Reprint Service Document J000000020060304e23400005



OPTIONS REPORT: Chipmakers Could See Volatility Ahead

OPTIONS REPORT: Chipmakers Could See Volatility Ahead By Mohammed HadiOf DOW JONES NEWSWIRES474 words3 March 200615:29Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Intel (INTC) might not roil the market like it once did with earnings warnings, butthat doesn't mean other semiconductor makers won't create volatility in the near future. On Friday, Intel surprised investors by warning that its first-quarter revenue will fall short of the company'sown initial targets. Ho hum. After an initial fall the company's shares regained ground and were recently off about 5 cents at$20.42, and broad measures of semiconductor stocks like the Semiconductor Holdrs Trust, or SMH, anexchange traded fund that includes Intel in its basket of holdings, spent much of the session in positiveterritory. Most recently the SMH was was down 12 cents at $38.38. But there is a great deal of news ahead from Intel's rivals and other semiconductor makers that might createsome volatility in the sector. On Monday, Texas Instruments Inc. (TXN) will provide a mid-quarter update, and is expected by analysts toraise its outlook for the first quarter. While it isn't a direct competitor to Intel - Texas Instruments makes chipsused in cellphones and televisions - the company has a heavy weighting in the SMH. Other updates are also expected next week from Xilinx Inc. (XLNX), and Altera Corp. (ALTR), and there'salso earnings ahead from National Semiconductor Corp. (NSM) on Thursday. Despite this, "we believe options market participants are pricing in very low risk expectations for theSemconductor Holdrs Trust," Lehman Brother's options strategist Ryan Renicker wrote in a note Friday. That means options are relatively cheap, and now is a good time to buy. There are many ways to take advantage of inexpensive options, Renicker noted. Investors with a bullishview, for example, can buy March calls on the SMH. With the exchange traded fund at $38.38, those whoare feeling aggressive could go for the March 40 calls, which on Friday were going for about 20 cents, basedon ask prices, while those feeling cautious can turn to the March 37.50 calls for about $1.25, Renicker said. For a longer-term view, consider the May 40 calls instead, he said. But if you aren't sure which way this ETF will head, you could just take a position that profits from increasedvolatility, but doesn't favor a direction, by buying both calls and puts, Renicker said. For example, the March 37.50 straddle - which involves buying equal numbers of March 37.50 calls and atMarch 37.50 puts - is currently going for about $1.65, again based on ask prices. (Donna Fuscaldo contributed to this story) By Mohammed Hadi; Dow Jones Newswires; 201-938-4049; [email protected] [ 03-03-061529ET ] 70699 Document DJ00000020060303e233000eb


CBOE to Start Trading Options On Volatility Index Next Month

Options ReportCBOE to Start Trading Options On Volatility Index Next Month By Mohammed Hadi Dow Jones Newswires422 words12 January 2006The Wall Street JournalJC4English(Copyright (c) 2006, Dow Jones & Company, Inc.) Volatility junkies will soon have another way to get their fix. The Chicago Board Options Exchange plans to start trading options on its volatility index -- better known asthe VIX -- at the end of February. (The exchange's futures business, called the CBOE Futures Exchange,already trades futures on the VIX.) The VIX, derived from options in the Standard &Poor's 500, is a measure of risk perception in the broadmarket. When the VIX rises, it means expectations for market volatility are on the rise, and the converse istrue when it falls, so options on the VIX are a way for investors to take a position on which way volatilityexpectations are headed -- though not which way the stock market is headed. The VIX, currently at 10.94, remains close to a 10-year low, though in a recent note Lehman Brothers'options strategist Ryan Renicker wrote that there are several reasons implied volatility could rise in 2006.These include an end to the Federal Reserve's relative predictability in recent months. "The Fed has induced relatively low uncertainty by consistently raising interest rates at a `measured pace.'As the end of the rate hikes approaches, there is a lack of consensus about the future direction of monetarypolicy and its ultimate impact on the economic climate," Mr. Renicker wrote. Other factors that could drive implied volatility in the stock market higher include housing-market weakness,fluctuations in energy price -- basically the kinds of things that can make traders edgy. One thing that always makes traders edgy is earnings season, which is why "as earnings seasonapproaches volatility starts to creep up," said Randy Frederick, director of derivatives at Charles Schwab. That's particularly true in individual stocks. Because implied volatility is an important part of an option's price,as it rises the price rises and as it falls the price of the option falls. That creates a fairly predictable way toprofit by buying options ahead of that rise in implied volatility and then selling them once it gets high. One rookie mistake investors make with this strategy is waiting too long to sell, Mr. Frederick said. That'sbecause once earnings are released, implied volatility is likely to slump. "Volatility goes up because of uncertainty, once earnings are announced, there's no more uncertainty,"hence the slump, Mr. Frederick explained. License this article from Dow Jones Reprint Service Document J000000020060112e21c00015



OPTIONS REPORT: CBOE To Trade Options On VIX In Feb.

OPTIONS REPORT: CBOE To Trade Options On VIX In Feb. By Mohammed HadiOf DOW JONES NEWSWIRES451 words11 January 200615:32Dow Jones News ServiceDJEnglish(c) 2006 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Volatility junkies will soon have another way to get their fix. The Chicago Board Options Exchange plans to start trading options on its volatility index - better known asthe VIX - at the end of February. (The exchange's futures business, called the CBOE Futures Exchange,already trades futures on the VIX.) The VIX, derived from options on the Standard & Poor's 500, is regarded as a measure of risk perception inthe broad market. In simplest terms, when the VIX rises, it means expectations for market volatility are onthe rise, and the converse is true when it falls, so options on the VIX are a way for investors to take aposition on which way volatility expectations are headed - though not which way the stock market is headed. The VIX, currently at 10.93, remains close to 10-year lows, though in a recent note Lehman Brothers' optionsstrategist Ryan Renicker wrote that there are several reasons implied volatility could rise in 2006. Theseinclude an end to the Federal Reserve's relative predictability in recent months. "The Fed has induced relatively low uncertainty by consistently raising interest rates at a 'measured pace.'As the end of the rate hikes approaches, there is a lack of consensus about the future direction of monetarypolicy and its ultimate impact on the economic climate," Renicker wrote. Other factors that could drive implied volatility in the stock market higher include housing market weakness,fluctuations in energy price - basically the kinds of things that can make traders edgy. One thing that always makes traders edgy is earnings season. "An interesting thing happens in optionsaround every earnings season," said Randy Frederick, director of derivatives at Charles Schwab. "Asearnings season approaches implied volatility starts to creep up." That's particularly true in individual stocks, and creates an opportunity for watchful investors. Becauseimplied volatility is an important part of an option's price, as it rises the price rises and as it falls the price ofthe option falls. That creates a fairly predictable way to profit by buying options ahead of that rise in impliedvolatility and then selling them once it gets high. One rookie mistake investors make with this strategy is waiting too long to sell, Frederick said. That'sbecause once earnings are released, volatility is likely to slump. "Volatility goes up because of uncertainty, once earnings are announced, there's no more uncertainty,"hence the slump, Frederick explained. -By Mohammed Hadi; Dow Jones Newswires; 201-938-4049; [email protected] [ 01-11-061532ET ] 70699 Document DJ00000020060111e21b000cu


Newmont Shines on Gold's Rise

Options ReportNewmont Shines on Gold's Rise By Mohammed Hadi Dow Jones Newswires296 words9 December 2005The Wall Street JournalJC4English(Copyright (c) 2005, Dow Jones & Company, Inc.) Investors took a shine to options on Newmont Mining Corp., as the company's shares skirted a 52-week highand the price of gold continued to rise. Shares of the Denver gold miner reached $50.55, their highest level in 12 months, on Wednesday, and weretrading close to that level yesterday. Meanwhile, gold remained at levels not seen for nearly a quarter-century. More than 46,000 Newmont Mining options traded Thursday, compared with about 24,341 on a typical day inNovember. With the company's shares up 69 cents to $50.28 in 4 p.m. New York Stock Exchange composite trading,the busiest among these were January 55 calls, which traded 9,078 contracts and rose 20 cents to $1.05 onthe International Securities Exchange. Buyers of these calls are expecting the company's shares to risealmost 12% by the time the options expire in January. Meanwhile, Lehman Brothers' options strategist Ryan Renicker noted that implied volatility on some energyinvestments remains low relative to historical realized volatility -- which creates an option-buying opportunityfor investors because as implied volatility catches up to realized, options prices will rise. For example, options on the Merrill Lynch Oil Service Holdrs Trust, or OIH, and the Energy Select SectorSPDR Fund, or XLE, are reflecting less stock price movement than has historically occurred, Mr. Renickersaid. Volatility in these exchange-traded funds could be driven by a number of factors, Mr. Renicker said, such asdomestic weather patterns, fluctuations in oil-inventory data, upcoming figures on oil demand from China,and potential political and economic instability in oil-producing nations. License this article from Dow Jones Reprint Service Document J000000020051209e1c90000q



WSJ(12/9) Options Report: Newmont Shines On Gold's Rise Thu

WSJ(12/9) Options Report: Newmont Shines On Gold's Rise Thu 311 words8 December 200515:05Dow Jones Commodities ServiceOSTDJEnglishCopyright 2005, Comtex News Network. All Rights Reserved. Dec 08, 2005 (DJCS via Comtex) -- (From THE WALL STREET JOURNAL) By Mohammed Hadi Dow Jones Newswires

Investors took a shine to options on Newmont Mining Corp., as the company's shares skirted a 52-week highand the price of gold continued to rise. Shares of the Denver gold miner reached $50.55, their highest level in 12 months, on Wednesday, and weretrading close to that level yesterday. Meanwhile, gold remained at levels not seen for nearly a quarter-century. More than 46,000 Newmont Mining options traded Thursday, compared with about 24,341 on a typical day inNovember. With the company's shares up 69 cents to $50.28 in 4 p.m. New York Stock Exchange composite trading,the busiest among these were January 55 calls, which traded 9,078 contracts and rose 20 cents to $1.05 onthe International Securities Exchange. Buyers of these calls are expecting the company's shares to risealmost 12% by the time the options expire in January. Meanwhile, Lehman Brothers' options strategist Ryan Renicker noted that implied volatility on some energyinvestments remains low relative to historical realized volatility -- which creates an option-buying opportunityfor investors because as implied volatility catches up to realized, options prices will rise. For example, options on the Merrill Lynch Oil Service Holdrs Trust, or OIH, and the Energy Select SectorSPDR Fund, or XLE, are reflecting less stock price movement than has historically occurred, Mr. Renickersaid. Volatility in these exchange-traded funds could be driven by a number of factors, Mr. Renicker said, such asdomestic weather patterns, fluctuations in oil-inventory data, upcoming figures on oil demand from China,and potential political and economic instability in oil-producing nations. (END) Dow Jones Newswires 12-08-05 1938ET Document OSTDJ00020051209e1c800067


= OPTIONS REPORT: Newmont Mining Active As Gold Gains

= OPTIONS REPORT: Newmont Mining Active As Gold Gains 404 words8 December 200515:05Dow Jones Commodities ServiceOSTDJEnglishCopyright 2005, Comtex News Network. All Rights Reserved. NEW YORK, Dec 08, 2005 (DJCS via Comtex) -- By Mohammed Hadi Of DOW JONES NEWSWIRES

Investors took a shine to options on Newmont Mining Corp., as the company's shares skirted a 52-week highand the price of gold continued to rise. Shares of the Denver gold miner reached $50.55, their highest level in 12 months, on Wednesday, and weretrading close to that level on Thursday. Meanwhile, gold remained at levels not seen for nearly a quarter-century. More than 39,163 Newmont Mining options traded Thursday, compared with about 24,341 on a typical day inNovember. With the company's shares up 56 cents to $50.15 in New York Stock Exchange composite trading, thebusiest among these were January 55 calls, which traded 6,537 contracts and rose 10 cents to 95 cents onthe International Securities Exchange. Buyers of these calls are expecting the company's shares to risenearly 12% by the time the options expire in January. Among the puts, most active were the December 50 puts which traded 3,113 contracts and fell 30 cents to$1 on the International Securities Exchange. Meanwhile, Lehman Brothers' options strategist Ryan Renicker noted that implied volatility on some energyinvestments remains low relative to historical realized volatility - which creates an option-buying opportunityfor investors. For example, options on the Merrill Lynch Oil Service Holdrs Trust, or OIH, and the Energy Select SectorSPDR Fund, or XLE, are reflecting less stock price movement than has historically occurred, Renicker said. Volatility in these exchange-traded funds could be driven by a number of factors, Renicker noted, such asdomestic weather patterns, fluctuations in oil-inventory data, upcoming figures on oil demand from China,and potential political and economic instability in oil-producing nations - basically anything that influences theprice of crude oil because these ETFs are strongly correlated to movement in crude prices. So what's an investor to do to take advantage of this? Well, if you are bullish about oil stocks, buy calls; ifyou are bearish, buy puts; and if you aren't sure, then buy a straddle or a strangle that will profit as long asthe ETF/index moves, regardless of which direction. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] (END) Dow Jones Newswires 12-08-05 1533ET Document OSTDJ00020051208e1c800374


OPTIONS REPORT: Newmont Mining Active As Gold Gains

OPTIONS REPORT: Newmont Mining Active As Gold Gains By Mohammed HadiOf DOW JONES NEWSWIRES397 words8 December 200515:33Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Investors took a shine to options on Newmont Mining Corp., as the company'sshares skirted a 52-week high and the price of gold continued to rise. Shares of the Denver gold miner reached $50.55, their highest level in 12 months, on Wednesday, and weretrading close to that level on Thursday. Meanwhile, gold remained at levels not seen for nearly a quarter-century. More than 39,163 Newmont Mining options traded Thursday, compared with about 24,341 on a typical day inNovember. With the company's shares up 56 cents to $50.15 in New York Stock Exchange composite trading, thebusiest among these were January 55 calls, which traded 6,537 contracts and rose 10 cents to 95 cents onthe International Securities Exchange. Buyers of these calls are expecting the company's shares to risenearly 12% by the time the options expire in January. Among the puts, most active were the December 50 puts which traded 3,113 contracts and fell 30 cents to$1 on the International Securities Exchange. Meanwhile, Lehman Brothers' options strategist Ryan Renicker noted that implied volatility on some energyinvestments remains low relative to historical realized volatility - which creates an option-buying opportunityfor investors. For example, options on the Merrill Lynch Oil Service Holdrs Trust, or OIH, and the Energy Select SectorSPDR Fund, or XLE, are reflecting less stock price movement than has historically occurred, Renicker said. Volatility in these exchange-traded funds could be driven by a number of factors, Renicker noted, such asdomestic weather patterns, fluctuations in oil-inventory data, upcoming figures on oil demand from China,and potential political and economic instability in oil-producing nations - basically anything that influences theprice of crude oil because these ETFs are strongly correlated to movement in crude prices. So what's an investor to do to take advantage of this? Well, if you are bullish about oil stocks, buy calls; ifyou are bearish, buy puts; and if you aren't sure, then buy a straddle or a strangle that will profit as long asthe ETF/index moves, regardless of which direction. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] [ 12-08-051533ET ] 70699 Document DJ00000020051208e1c80015v


Options --- The Striking Price: Better Covered Calls

MARKET WEEKOptions --- The Striking Price: Better Covered Calls By Kopin Tan726 words28 November 2005Barron'sBM7English(c) 2005 Dow Jones & Company, Inc. Selling call options against stocks has always been popular with investors looking to monetize their shares'upside potential. But with closed-end funds raising $18 billion over the past 16 months in pursuit of thisfamiliar strategy, more people are seeking an edge when writing covered calls. A Lehman Brothers study,which shows how covered-call sellers might improve their returns, could be of some help here. Covered-call sellers often look for volatile stocks, since these offer richer premiums. "When volatility is high,some investors are tempted to write more calls," says Lehman derivatives strategist Ryan Renicker. "Butprojected volatility also is highest when the market is pricing in its worst fears." At these junctures, stockscan turn the corner and rally on the slightest bit of good news -- a bummer for covered-call sellers who haveagreed to cap their stock gains. No surprise, then, that strategies featuring covered-call selling -- also known as overwriting or buy-writing --tend to outperform stocks in flat or declining markets, but lag when stocks surge. Because returns depend sosubstantially on the direction of the underlying stocks, "overwriting strategies that are dynamicallyrebalanced ahead of large market rallies or downturns can naturally enhance the returns generated," sayRenicker and Lehman's Devapriya Mallick. To test their theory, Renicker and Mallick constructed a seemingly counterintuitive portfolio that sells fewercalls when volatility is high, and more when volatility and premiums are low. Specifically, they would writejust 0.75 of a call against an index when projected volatility is more than one standard deviation above theaverage, and increase that to 1.25 calls when projected volatility falls more than one standard deviationbelow average. The result? This approach drummed up average annual returns of 7.9% between January 1997 andSeptember 2005 -- compared with 6.6% for a basic overwriting portfolio (that systematically sells one-monthat-the-money calls against the index), and 5.5% for the S&P 500. Applied to the Nasdaq 100, it producedannual returns that averaged 9.8% over the past nine years -- compared with 8.8% for the basic overwritingportfolio and 7.1% for underlying index. The phones of many brokers and strategists rang furiously Nov. 18, a day after November index optionstraded their final session. Settlement prices -- used to value expiring options -- turned out to be surprisinglyhigh, and flummoxed investors demanded explanations. For instance, November S&P 500 options hadexpired that Thursday night, and the value of outstanding options would depend on where the index settledFriday morning. But while the 500-stock benchmark flitted between 1240.71 and 1249.58 that Friday, it wasdeemed to have settled at 1254.85. How is that possible? Can an index ever settle outside its trading range? "Absolutely!" says Bill Ryan, a lead specialist at the Options Industry Council's call center. The discrepancystems from a little-known difference between how option-settlement values and index readings arecalibrated. The option-settlement value of the S&P 500 is calculated from the opening price of each component onexpiration Friday. It can be disseminated only after each of the 500 stocks has begun trading. In contrast,index readings are published throughout the trading day, typically at regular intervals of several seconds.The first tick occurs an instant after the opening bell, when "it is very probable that most stocks have notopened in their primary markets," Ryan says. Index calculations draw from the last reported price, whichoften is the closing price the day before. On certain expiration Fridays when shares open sharply higher before retreating, the option-settlement value(drawn from the first ticks of 500 stocks) can exceed the index's readings (drawn as much from previous-dayclosing prices as from market prices after the open).


This happened when June S&P options expired, although conspiracy theorists were most incensed by therecent November expiration, when settlement values for the S&P 500, Nasdaq 100 Index and Dow JonesIndustrial Average all surpassed the reported highs of each of these benchmarks that day. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020051126e1bs00014




Options --- The Striking Price: Good Bye, Wild Child?

MARKET WEEKOptions --- The Striking Price: Good Bye, Wild Child? By Kopin Tan760 words24 October 2005Barron'sBM12English(c) 2005 Dow Jones & Company, Inc. For the longest time, the Nasdaq 100 index was regarded as a more volatile benchmark than the Standard &Poor's 500, and option prices reflected that conventional wisdom. But something historic happened on the way to Thursday's closing bell: The volatility forecast for the Nasdaq100, as measured by the VXN indicator, dipped below the broad-market volatility forecast as measured bythe VIX, and the two have been inseparable since. In other words, option traders now expect the Nasdaq100 to be as staid in the near future as the S&P 500. The convergence wasn't a total shock. But like a solar eclipse, its occurrence felt no less remarkable, evento those who saw it coming. Once home to high-octane growth stocks, the wild child that was the Nasdaq100 has grown calmer as components like Microsoft (ticker: MSFT) and Dell (DELL) grew heftier andmatured. Not surprisingly, the VXN-VIX spread has narrowed steadily over the past four years, from morethan 55 points in the aftermath of the technology-bubble to about six points as 2005 began. That gap has continued to constrict until VXN eventually met VIX below the 16% mark. "It seems optionbuyers have given up hope of the Nasdaq ever being volatile again," says Kyle Rosen, president of RosenCapital Management. "You can argue that an index with Apple Computer (AAPL), Amgen (AMGN), eBay(EBAY) and Starbucks (SBUX) will become as stable as a broad-based one with General Electric (GE) andCitigroup (C), but that's a tough argument to make." Among sophisticated traders, the convergence set off a search for arbitrage plays. Other investors,especially those holding tech names, might consider buying Nasdaq-related options instead of those peggedto the S&P. In fact, money managers hedging their portfolios often look reflexively to S&P 500 options -- onereason demand and premiums for these options are so robust. And if the past is prologue, the Nasdaq 100 may still have some oomph left. The tech stock-laden index hasremained more historically erratic than the S&P 500. Realized volatility over the past month was about13.3% for the Nasdaq 100, compared with 11.4% for the S&P 500. As benchmarks go, the Nasdaq also is less diversified than the S&P, and its components offer less of adividend cushion. "Nasdaq 100 stocks in general also sell at much higher price-earnings multiples," Rosenadds. By assigning the two comparable volatility forecasts, the market seems to be "ignoring the extra risk." When Johnson & Johnson (JNJ) reported earnings last week, it seized the spotlight to declare it was alsoreviewing its $25 billion agreement to buy Guidant (GDT). To analysts, the announcement was a bargainingploy by JNJ to renegotiate a lower price for the maker of cardiac devices, which has been plagued byproduct recalls. To Guidant investors, it was a pulse-quickening moment that triggered last week's stockselling. And to option sellers, it was the sound of opportunity knocking. As questions about Johnson & Johnson's commitment increased, prices of Guidant options surged. Short-term Guidant options projected an annualized volatility of about 48%, up sharply from 27% at week's start. Ryan Renicker, Lehman Brothers' option strategist, suggests selling strangles -- such as November 70 callsand November 60 puts -- to harvest the rich premiums. The strangle was trading at about $2.55, and thetrade will be profitable if shares remain between 57.45 and 72.55 before November options expire. Manyanalysts don't expect JNJ to bail completely, but reckon the purchase price might be lowered 10%, from 76per Guidant share to about 68. And while the stock can fall further if the deal disintegrates, Guidant's intrinsicvalue and other potential suitors could put a floor under the stock. William Lefkowitz, a vFinance Investment strategist, suggests selling January 2007 50 puts trading near$1.90. Guidant hasn't skidded below 50 in the past two years. And while the put seller commits to buying


shares at 50 over the next 14 months, the put premium probably will collapse once JNJ unveils revisedterms and the uncertainty passes -- a good opportunity then to buy back the puts and close out the position. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020051022e1ao0000y




OPTIONS REPORT: Fifth Third Options Busy Amid M&A Rumors

OPTIONS REPORT: Fifth Third Options Busy Amid M&A Rumors By Mohammed HadiOf DOW JONES NEWSWIRES517 words20 October 200515:38Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Investors have taken a notable interest in Fifth Third Bancorp's options this week,and Thursday was no exception. Implied volatility, or the expectation for stock price movement in the Cincinnati bank's short-term options is atelevated levels these days. What is notable about this is that the company reported its third-quarter earningson Tuesday, and "volatilities tend to go down after earnings," explained Paul Foster, options strategist atfinancial-information Web site StreetInsider.com. The fact that they remain high is a sign that, "the optionguys are looking for some news," and earnings weren't it, Foster said. Speculation about Fifth Third being a take-over target isn't new, but it heated up this week after a Cincinnatitelevision station aired a report saying the bank is in merger talks with a couple of potential buyers. The company's Chief Executive George A. Schaefer Jr. described the news report as "based onunsubstantiated rumor" in comments to his employees, but to analysts like Punk Ziegel & Co.'s RichardBove, the bank "may now be the most attractive acquisition candidate in the banking industry." Still, thereare plenty on Wall Street who doubt that a deal is in the works. Activity in the options is heavy. All told, more Fifth Third calls have changed hands so far this week than inthe four preceding weeks combined. On Thursday, with Fifth Third's shares down 37 cents to $37.93 inNasdaq Stock Market composite trading, November 40 calls traded 4,113 contracts and slipped 10 cents to60 cents on the International Securities Exchange. January 40 calls were also active. Meanwhile, concern about Johnson & Johnson's pending acquisition of Guidant Corp. continues, and theuncertainty has left implied volatility in Guidant's short-term options at levels not seen since July, accordingto Track Data. This elevated concern creates an opportunity for investors who think that it will in fact close, even if it is at alower price, said Lehman Brother's equity derivative strategist Ryan Renicker. Renicker suggests investors sell strangles in Guidant's November options. By selling the November 60 put,and also selling the November 70 call, investors will collect $2.40, based on current bid prices and profit aslong as Guidant's shares remain between $57.60 and $72.45 by the November expiration date, Renickersaid. Lazard Capital Markets analyst Alexander Arrow wrote Thursday that he thinks if the deal price is lowered, itwill be cut by about 10% to $68, and noted that company statements make a deal termination seem unlikely.Other analysts have expressed similar expectations. Still, it is important to note that Arrow thinks that if thedeal is terminated, Guidant could fall to $56, below a profitable level for strangle sellers. -By Mohammed Hadi, Dow Jones Newswires; 201-938-4049; [email protected] -(David Enrich contributed to this article) [ 10-20-05 1538ET ] 70699 Document DJ00000020051020e1ak000j6


OPTIONS REPORT: Albertson's Volatility Expected To Rise

OPTIONS REPORT: Albertson's Volatility Expected To Rise 526 words10 October 200515:34Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc.

Christina Cheddar Berk Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Albertson's Inc. shares have hardly been on special sincethe supermarket chain announced it is weighing strategic alternatives for itsbusiness early last month. But if its options are any judge, Albertson'sshareholders might consider checking out a little protection if they plan tohold onto the stock.

Traders, anticipating greater stock movement, are bidding up Albertson's options and sending the expectedstock volatility to relatively high levels. This is a sign that there is some uncertainty about the stock'smovement over the next few months. Shares in the Boise, Idaho, company are trading at about $24.71.Although the stock has pulled back from a 52-week high of $26.51 set last month, it's still far above its lowfor the year of $19.26, which it reached in March. The rally in Albertson's stock may have gotten ahead of itself. Lehman Brothers is putting the company'sbreak-up value at $20 a share. Lehman Brothers equity-derivatives strategist Ryan Renicker suggestsAlbertson's shareholders consider hedging against a possible pullback in the stock by selling out-of-the-money December 27.50 calls. On Monday, Apple Computer Inc.'s short-term options were active ahead of the company's fourth-quarterearnings release planned for Tuesday afternoon. The report will provide the first glimpse at sales of theCupertino, Calif., company's slim iPod Nano digital music player. Also, causing a stir is a widely anticipatednew product announcement, which is expected from Apple on Wednesday. Apple shares recently traded at $50.47, down 83 cents, or 1.6%. Meanwhile, the company's October 45 putstraded 10,868 contracts, compared with 28,866 previously outstanding. The puts were unchanged at 40cents at the International Securities Exchange. The volatility implied by Apple's options also has beencreeping up in recent trading sessions, according to Track Data. Meanwhile, the bankruptcy of Delphi Corp., the world's largest auto supplier by revenue, sparked optionsactivity throughout the auto sector. Among the most active options in the group were puts for General MotorsCorp. Although Delphi is no longer a unit of the Detroit auto maker, GM remains Delphi's top customer, andDelphi's bankruptcy could disrupt the flow of parts to GM or force it to renegotiate the price it pays for Delphiparts. GM shares recently tumbled $2.24, or 8%, to $26.03. Meanwhile, the company's October 30 puts traded15,516 contracts, compared with the 31,527 contracts previously outstanding, and rose $1.25 to $3.40 onthe ISE. In the broader market, there were increased expectations for stock movement, according to the ChicagoBoard Options Exchange's volatility index, or VIX. This 30-day forecast of stock-market volatility, recentlyrose 0.91 point to 15.50, as traders bid up options on the Standard & Poor's 500 Index. -By Christina Cheddar Berk, Dow Jones Newswires; 201-938-5166; [email protected] [ 10-10-05 1534ET ] 70699 Document DJ00000020051010e1aa000af


Google Volatility Is Pushed Higher Ahead of Earnings

Options ReportGoogle Volatility Is Pushed Higher Ahead of Earnings By Cynthia Schreiber Dow Jones Newswires453 words18 July 2005The Wall Street JournalJC3English(Copyright (c) 2005, Dow Jones & Company, Inc.) The rise in Google stock over the past year may appear to be saying go, go, go, but its options lately aresaying not so fast. Google next month will mark the one-year anniversary of its trading debut at $85. The stock has more thantripled in value since then and added 30 cents to $301.19 on Friday, after a Lehman Brothers stock analystlast week raised his price target on the shares to $350. Smith Barney has a stock-price target of $360. Google capped off a series of highs last month at $309.25 -- records that came on a decline in stock-tradingvolume that left the shares more vulnerable to a pullback, noted Richard Dickson, senior market strategist attechnical-analysis firm Lowry's Reports. The stock has been stuck in a range since then. Traders, anticipating greater stock movement, are bidding up Google options and sending expected stockvolatility to relatively high levels -- an indication of uncertainty about the stock's near-term movement headinginto the Internet-search company's earnings report Thursday. With options prices rising, Lehman Brothers equity-derivatives strategist Ryan Renicker said investors mightconsider selling Google's out-of-the-money August 320 call options against stock that is owned, pocketingabout $10.50 for each Google share. This way, investors bullish on Google stock could maintain theirstance, he said, while partially protecting against a downturn in the stock. On Friday, Google's in-the-money August 300 calls traded 3,341 contracts and rose 40 cents to $18.40 atthe International Securities Exchange. Its August 300 puts traded 1,395 contracts and fell 10 cents to $16 atthe ISE. "If you had deep pockets and a lot of guts, you could sell that straddle and come back in a week,"said Jeff Shaw, head trader at Timber Hill, the market-making unit of Interactive Brokers Group. (Selling astraddle would involve selling both a call and a put with August 300 terms, collecting $34.40 a share andhoping the stock won't be as volatile as the market seems to think.) The Standard &Poor's 500-stock index finished at another four-year high, and volatility expectations droppedto the near single digits, marking the lowest reading the Chicago Board Options Exchange volatility indexhas given since late 1995. This 30-day forecast of stock-market volatility, known as the VIX, fell 0.48 point to10.33. It is now about a point away from a record low hit in 1993. License this article from Dow Jones Reprint Service Document J000000020050718e17i0000r



Options Report: Traders Gird For Google

Options Report: Traders Gird For Google By Cynthia SchreiberOf DOW JONES NEWSWIRES591 words15 July 200515:30Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--The rise in Google Inc. stock over the past year may appear to be saying go, go,go, but its options of late are saying not so fast. Google next month will mark the one-year anniversary of its trading debut at $85. The stock has more thantripled in value since then, adding $1.11 to $302 on Friday, after a Lehman Brothers stock analyst this weekraised his price target on the shares to $350. Smith Barney has a stock-price target of $360. Google capped off a series of highs last month at $309.25 - records that came on a decline in stock-tradingvolume that left the shares more vulnerable to a pullback, noted Richard Dickson, senior market strategist attechnical-analysis firm Lowry's Reports. The stock has been stuck in a range since then. Traders, anticipating greater stock movement, are bidding up Google options and sending expected stockvolatility to relatively high levels - an indication of uncertainty about the stock's near-term movement headinginto the Internet-search company's earnings report on Thursday. With options prices rising, Lehman Brothers equity-derivatives strategist Ryan Renicker said investors mightconsider selling Google's out-of-the-money August 320 call options against stock that is owned, pocketingabout $10.80 (intraday) for each Google share. This way, investors bullish on Google stock could maintaintheir stance, he said, while partially protecting against a downturn in the stock. Google's in-the-money August 300 calls traded 2,509 contracts and rose 30 cents to $18.30 at theInternational Securities Exchange. Its August 300 puts traded 868 contracts and were at $16.10. "If you haddeep pockets and a lot of guts, you could sell that straddle and come back in a week," said Jeff Shaw, headtrader at Timber Hill, the market-making unit of Interactive Brokers Group. (A straddle would involve sellingboth a call and a put with August 300 terms, collecting $34.40 a share and hoping the stock isn't as volatileas the market expects.) Puts on rival Yahoo Inc., which plans to report earnings on Tuesday, were active as the volatility implied bythose options rose - a sign of expected stock-price fluctuations in the sector. The shares eased 11 cents to$36.75, as the August 35 puts traded 9,935 contracts and rose 5 cents to 95 cents at the ISE. Volatility in Check Point Software Technologies Ltd., a provider of Internet-security software, also rose inadvance of the company's earnings report Tuesday. Buyers targeted the company's August 22.50 calls, asthe stock rose 20 cents to $21.53 at the Nasdaq. Major stock benchmarks pushed toward new 2005 highs, and volatility expectations dropped to the nearsingle digits, marking the lowest reading the Chicago Board Options Exchange volatility index has givensince late 1995. This 30-day forecast of stock-market volatility, known as the VIX, fell 0.62 point to 10.20. It isnow less than a point away from a record low hit in 1990. Customers at the ISE bought 1.66 new calls for every new put, up from 1.39 on Thursday but below the 10-day moving average of 1.77, the exchange's ISEE sentiment index showed. -By Cynthia Schreiber, Dow Jones Newswires; 201-938-2408; [email protected] [ 07-15-051530ET ] 70699 Document DJ00000020050715e17f000jj


Options --- The Striking Price: London Shock Fails To Jolt Volatility

MARKET WEEKOptions --- The Striking Price: London Shock Fails To Jolt Volatility By Kopin Tan712 words11 July 2005Barron'sBM8English(c) 2005 Dow Jones & Company, Inc. The world is a vulnerable place, but does that make the stock market a volatile place? The answer,according to option traders last week, was a resounding No, after bomb blasts roiled London on Thursdayand raised the specter of more terrorism -- but did little to rouse the option market's risk forecast. Traders bidding up index options had initially driven the market's fear gauge, the VIX, or Chicago BoardOptions Exchange volatility index, up 13% Thursday morning. But with stock investors treating the early dipas a buying opportunity, option investors quickly began selling puts and calls to collect premiums, essentiallybetting that any angst would soon pass. "There was some anxious watching as the market waited to see if these were isolated incidents," says PaulKepes, a senior partner of the option specialist firm Chicago Trading. The initial clamor for option protectionalso centered on short-term options, "an indication people don't expect this to be a drawn-out issue." ByThursday's closing bell, VIX's rise would fizzle to 1.8%, all of which vanished Friday as the suspensesurrounding the June jobs report passed. Projections of ensuing market volatility will, of course, vary with the severity, shock and proximity of eachterrorist attack. But the market also can grow familiar with -- if not exactly weary of -- terrorism's omnipresentthreat; VIX had jumped 31% in the first trading day after the Sept. 11 attack, and climbed 11% after theMarch 2004 Madrid train bombing. On Thursday, customers at the International Securities Exchange bought1.5 new calls for every new put -- a more measured pace than the 10-day average of 1.82 and hardly apicture of worry. By Friday, call-buying picked up merrily enough to propel that number above 1.9. The bullish impulse is spurred in part by hopes as companies report second-quarter earnings. Pepsi BottlingGroup (ticker: PBG) reported a 4% profit increase and raised its forecast, which inspired call-trading inPepsiCo (PEP) and Coca-Cola Enterprises (CCE). "Recent August call-buyers may be speculating on anoverall improvement in trends in the broader beverage sector," note Susquehanna Financial Group analystsMichael Thurow and Neil Cataldi. Takeover speculation also fueled some option buying. Premiums of Charles Schwab (SCH) options surgedto a year high as investors accumulated calls over much of last week. But implied volatility fell markedly aftermanagement declared Thursday it had "no interest in selling," and reiterated the company's claim toindependence. Still, traders stoked on discount-brokerage consolidation figured that might not rule out the$16 billion company making an acquisition, and E*Trade (ET), which recently considered a combination withAmeriTrade (AMTD), was among those to see its option volume jump as implied volatility soared to a yearhigh near 46% Thursday from 28% a day earlier. Options on Harley-Davidson (HDI) also look pricey. "The large implied move does not seem unrealistic" afterthe stock's 17% drop following its last earnings report, say Goldman Sachs strategists Maria Grant and JohnMarshall. But the option market is anticipating a 9% move up or down when Harley reports earningsWednesday. In fact, implied volatility of one-month options is at its highest in a year. Investors willing to buystock at certain prices might consider selling puts to earn premiums, while those willing to sell shares atcertain prices might think about selling calls. In contrast, options on several sector exchange-traded funds look cheap -- most notably the Nasdaq 100Tracking Stock (QQQQ) and the Semiconductor Holdrs Trust (SMH). Implied volatility of these ETFs relativeto the broad market is approaching the lowest level in years, says Lehman Brothers strategist Ryan Renicker. Implied correlation -- the projected tendency of shares to move together in a group -- also hasdeclined as traders focused on picking individual stocks. Those who believe the tech and chip segments arevulnerable to volatility might buy ETF puts or calls -- before a semiconductor conference this week and asearnings season starts. ---


For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020050709e17b00003




Barron's(7/11) Market Week -- Options The Striking Price: No Fear: Bombs Fail To Raise Vix

Barron's(7/11) Market Week -- Options The Striking Price: No Fear: Bombs Fail To Raise Vix 733 words9 July 200516:05OsterDowJones Commodity WireOSTDJEnglishCopyright 2005, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. Jul 09, 2005 (ODC via Comtex) -- (From BARRON'S)

By Kopin Tan The world is a vulnerable place, but does that make the stock market a volatile place? The answer,according to option traders last week, was a resounding No, after bomb blasts roiled London on Thursdayand raised the specter of more terrorism -- but did little to rouse the option market's risk forecast. Traders bidding up index options had initially driven the market's fear gauge, the VIX, or Chicago BoardOptions Exchange volatility index, up 13% Thursday morning. But with stock investors treating the early dipas a buying opportunity, option investors quickly began selling puts and calls to collect premiums, essentiallybetting that any angst would soon pass. "There was some anxious watching as the market waited to see if these were isolated incidents," says PaulKepes, a senior partner of the option specialist firm Chicago Trading. The initial clamor for option protectionalso centered on short-term options, "an indication people don't expect this to be a drawn-out issue." ByThursday's closing bell, VIX's rise would fizzle to 1.8%, all of which vanished Friday as the suspensesurrounding the June jobs report passed. Projections of ensuing market volatility will, of course, vary with the severity, shock and proximity of eachterrorist attack. But the market also can grow familiar with -- if not exactly weary of -- terrorism's omnipresentthreat; VIX had jumped 31% in the first trading day after the Sept. 11 attack, and climbed 11% after theMarch 2004 Madrid train bombing. On Thursday, customers at the International Securities Exchange bought1.5 new calls for every new put -- a more measured pace than the 10-day average of 1.82 and hardly apicture of worry. By Friday, call-buying picked up merrily enough to propel that number above 1.9. The bullish impulse is spurred in part by hopes as companies report second-quarter earnings. Pepsi BottlingGroup (ticker: PBG) reported a 4% profit increase and raised its forecast, which inspired call-trading inPepsiCo (PEP) and Coca-Cola Enterprises (CCE). "Recent August call-buyers may be speculating on anoverall improvement in trends in the broader beverage sector," note Susquehanna Financial Group analystsMichael Thurow and Neil Cataldi. Takeover speculation also fueled some option buying. Premiums of Charles Schwab (SCH) options surgedto a year high as investors accumulated calls over much of last week. But implied volatility fell markedly aftermanagement declared Thursday it had "no interest in selling," and reiterated the company's claim toindependence. Still, traders stoked on discount-brokerage consolidation figured that might not rule out the$16 billion company making an acquisition, and E*Trade (ET), which recently considered a combination withAmeriTrade (AMTD), was among those to see its option volume jump as implied volatility soared to a yearhigh near 46% Thursday from 28% a day earlier. Options on Harley-Davidson (HDI) also look pricey. "The large implied move does not seem unrealistic" afterthe stock's 17% drop following its last earnings report, say Goldman Sachs strategists Maria Grant and JohnMarshall. But the option market is anticipating a 9% move up or down when Harley reports earningsWednesday. In fact, implied volatility of one-month options is at its highest in a year. Investors willing to buystock at certain prices might consider selling puts to earn premiums, while those willing to sell shares atcertain prices might think about selling calls. In contrast, options on several sector exchange-traded funds look cheap -- most notably the Nasdaq 100Tracking Stock (QQQQ) and the Semiconductor Holdrs Trust (SMH). Implied volatility of these ETFs relativeto the broad market is approaching the lowest level in years, says Lehman Brothers strategist Ryan


Renicker. Implied correlation -- the projected tendency of shares to move together in a group -- also hasdeclined as traders focused on picking individual stocks. Those who believe the tech and chip segments arevulnerable to volatility might buy ETF puts or calls -- before a semiconductor conference this week and asearnings season starts. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . (END) Dow Jones Newswires 07-09-05 0001ET Document OSTDJ00020050709e1790005t




AMR Isn't Following Oil's Lead

Options ReportAMR Isn't Following Oil's Lead By Cynthia Schreiber Dow Jones Newswires355 words1 July 2005The Wall Street JournalJC4English(Copyright (c) 2005, Dow Jones & Company, Inc.) One option where oil's historic high this week has yet to leave a visible mark is AMR Corp. -- an airlinewhose profits are tied to the cost of fuel. Oil finished above the $60-a-barrel mark for the first time on Monday, but you wouldn't necessarily know itfrom the prices of short-term puts and calls on AMR, the parent of American Airlines. The volatility implied bythese options is near a one-year low compared with that of the S&P 500 index, according to LehmanBrothers equity-derivatives strategist Ryan Renicker. This makes short-term options on the stock relativelyinexpensive. Buying options at prices that imply low stock-price volatility can be a low-cost way of making a wager on astock. Mr. Renicker says investors bearish on the prospects for AMR might consider buying relatively cheap,out-of-the-money puts to profit from potential stock-price losses. The risk is that oil prices may decline further(crude has slipped from its peak), causing a potential rally in the shares. The strategist said investors canhedge this risk by selling relatively expensive calls on the Energy Select Sector SPDR Fund, or XLE, a fundtracking the energy sector that likely would decline along with oil prices. Conversely, those who are bullish on the prospects for AMR might consider buying relatively cheap, out-of-the-money calls to profit from potential stock-price gains. Investors can hedge the bet by selling puts on theXLE, Mr. Renicker added, in case oil prices continue to rise and airline stocks come under pressure. More broadly, risk perception in the options market rose after the Federal Reserve raised interest rates forthe ninth time in a year, as expected, but gave no indication of when it may pause. As stocks fell, theChicago Board Options Exchange volatility index gained 0.27 point to 12.04, as investors bid up options onthe S&P 500. License this article from Dow Jones Reprint Service Document J000000020050701e1710000o



Options Report: AMR Volatility Low Despite Record Oil

Options Report: AMR Volatility Low Despite Record Oil By Cynthia SchreiberOf DOW JONES NEWSWIRES370 words30 June 200515:30Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--One option where oil's historic high has yet to leave a visible mark is AMR Corp. -an airline whose profits are tied to the cost of fuel. Oil surpassed the $60-a-barrel mark this week, but you wouldn't know it from the prices of short-term putsand calls on AMR, the parent of American Airlines. The volatility implied by these options is near a one-yearlow compared with that of the Standard & Poor's 500-stock index, says Lehman Brothers equity-derivativesstrategist Ryan Renicker. This makes short-term options on the stock relatively inexpensive. Buying options at prices that imply low stock-price volatility can be a low-cost way of making a wager on astock. Renicker says investors bearish on the prospects for AMR might consider buying relatively cheap, out-of-the-money puts to profit from potential stock-price losses. The risk is that oil prices may decline, causing apotential rally in the shares. The strategist said investors can hedge this risk by selling relatively expensivecalls on the Energy Select SPDR Fund, or XLE, a fund tracking the energy sector that likely would declinealong with oil prices. Conversely, those who are bullish on the prospects for AMR might consider buying relatively cheap, out-of-the-money calls to profit from potential stock-price gains. Investors can hedge the bet by selling puts on theXLE, Renicker added, just in case oil prices continue to rise and airline stocks fall. More broadly, the options market's short-term risk forecast was nearly unchanged after the Federal Reserve,as widely expected, raised its target for the federal funds rate to 3.25% from 3%, and gave no sign it is aboutto take a break. As stocks fell on the news, the Chicago Board Options Exchange volatility index eased 0.04point to 11.73 - a sign traders sense few threats to stock prices ahead of the Fourth of July weekend. -By Cynthia Schreiber, Dow Jones Newswires; 201-938-2408; [email protected]. [ 06-30-051530ET ] 70699 Document DJ00000020050630e16u000h2


Options --- The Striking Price: Ringing Up Verizon Calls --- By Kopin Tan

MARKET WEEKOptions --- The Striking Price: Ringing Up Verizon Calls --- By Kopin Tan 753 words20 June 2005Barron'sBM14English(c) 2005 Dow Jones & Company, Inc. It has a certain, beguiling ring -- cheap calls at Verizon! -- except these aren't made over telephones. As Verizon Communications (ticker: VZ) trudges ahead with a $8.4 billion agreement to buy MCI (MCIP),prices of its calls and puts have declined noticeably. On the surface, this suggests that the option marketexpects Verizon stock to hold steady, despite the telecom industry's uncertain outlook and potential volatilityas Verizon labors to close the contentious deal. In actual fact, Verizon's option premiums have becomeartificially depressed because of arbitrage trades. Under the agreement, each MCI share will give holders $5.60 in cash and 0.5743 Verizon shares, with aminimum of $20.40 worth of Verizon stock. This assures MCI shareholders of at least $26 in cash and stockif Verizon trades at or below 35.52 when the deal closes -- and more if Verizon shares soar. "This payoffstructure basically replicates a Verizon call option with a $35.52 strike price, and the value of this call will beembedded in MCI shares until the merger closes," explains Ryan Renicker, Lehman Brothers' equity-derivatives strategist. Not surprisingly, arbitrageurs who buy or hold MCI shares have sought to monetize this embedded option byselling Verizon calls expiring next January, around the time the deal is projected to close. And arbs aren't alone. Morgan Stanley, for example, this month suggested that investors consider swappingout of Verizon stock and into MCI -- essentially since that offers the potential for further gains while downsiderisk is capped. Some of the more option-savvy investors who heeded this call wrote Verizon calls againsttheir MCI shares. The selling has led to "lower-than-justified implied volatility" for Verizon options maturing early next year,Renicker says. For instance, implied volatility of seven-month options is at its lowest in more than a year.Implied volatility also appears muted, compared with historical volatility over recent months. For some investors, the dampened premiums offer a cheap, leveraged bet on potential stock movement.Sure, buying options seems reckless in a yawning, range-bound market at the start of summer, andtelephone stocks have been grinding lower in unspectacular fashion for some time now. But there is stilluncertainty on the horizon, as Verizon labors to quell dissension among pockets of MCI investors. Questionsalso remain over the future of phone services, and the sector's valuation continues to spur speculation ofconsolidation. Just last week, Deephaven Capital Management, which owns nearly 5% of MCI shares, told regulators itplans to canvass shareholders for proxy votes against the Verizon-MCI deal. The proxy solicitation hasn't yetbegun, but some disaffected hedge funds -- several of which had held out for the $9.7 billion bid from Qwest(Q) that MCI board spurned -- indicated they would support this latest uprising, in part because the proxiesare revocable if Qwest doesn't spring into fruitful action. Matthew Halbower, a Deephaven portfolio manager,argues that "every shareholder, with the exception of Verizon, has an incentive to give us their proxy, sincethat makes it more likely that Qwest will bid again." With Verizon at $35.03 Friday, its January 35 calls were trading near $1.35, while the January 35 puts wereat $1.80. Annualized volatility implied by these options is slumping near 14%. Also slumping is the stock market's short-term volatility forecast, as shares climbed last week to a three-month high and near levels where they began the year. The VIX, or Chicago Board Options Exchangevolatility index, fell toward 11 and is near its 15-year low. Meanwhile, the pace of call-buying crept toward itsmost bullish this year, as customers at the International Securities Exchange bought nearly two new calls forevery new put midweek, according to the electronic market's ISEE sentiment gauge. Demand for July options could wilt further. Come Monday, many new August stock options will be added


after June options expire this weekend. Only 10% of the S&P 500 companies in terms of market cap haveconfirmed they will report earnings before July options expire July 15, according to Goldman Sachs' optionstrategists: "We expect demand for July options on most stocks to dry up as investors shift their focus toAugust." --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020050618e16k00005




Options Report: Risk Worry Approaches Two-Month Low

Options Report: Risk Worry Approaches Two-Month Low By Cynthia SchreiberOf DOW JONES NEWSWIRES433 words15 June 200515:30Dow Jones News ServiceDJEnglish(c) 2005 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--The option market's perception of stock-market risk approached a two-month lowas stocks struggled to move higher. The Chicago Board Options Exchange volatility index, which fell to itslowest level in nearly four months intraday, fell 0.12 point to 11.67 - approaching its lowest closing level sinceApril 12 and indicating a sense of complacency in the broad market. Meantime, investors bought June put options on Winnebago Industries, probably to hedge stock positionsbefore the motor-home maker's quarterly report early Thursday. Analysts expect the Forest City, Iowa,company to earn 49 cents a share in the third quarter, down from 64 cents a share a year earlier. Up nearly 18% since late April, Winnebago's shares eased 91 cents to $33.38 in New York Stock Exchangecomposite trading. Its June 35 puts traded 1,237 contracts, compared with 548 previously outstanding, androse 45 cents to $2.05 at the Chicago Board Options Exchange. The volatility implied by respiratory-services provider Lincare Holdings' short-term options rose to about 36%from 31% on Monday. This is a sign traders expect Lincare's stock will be more volatile, although a reasonfor the expected movement wasn't clear. As Lincare shares shed 10 cents to $44.05 in light trading at the Nasdaq, buyers targeted puts that expire inJuly and August. The July 42.50 puts traded 765 contracts, compared with 676 previously outstanding, androse 15 cents to $1.10 at the International Securities Exchange. The August 45 puts traded 1,198 contracts,compared with 524 already outstanding, and rose 20 cents to $2.75. Volatility in Verizon Communications's January 2006 options has fallen as risk arbitrageurs sell the calls totake advantage of terms of Verizon's pending merger with MCI, said Ryan Renicker, equity-derivativesstrategist at Lehman Brothers. He calculates that Verizon's seven-month volatility is at its lowest level inmore than a year compared with that of the Standard & Poor's 500-stock index. Given the low prices of Verizon's January 2006 options, investors might consider buying them in line withdirectional stock views, Renicker said. As Verizon shares slid 11 cents to $34.89 on the Big Board, itsJanuary 35 2006 calls fell 10 cents to $1.35. The January 35 puts were at $1.85. -By Cynthia Schreiber, Dow Jones Newswires; 201-938-2408; [email protected] [ 06-15-051530ET ] 70699 Document DJ00000020050615e16f000f1


Options --- The Striking Price: Options Forecast Somnolent Stocks

MARKET WEEKOptions --- The Striking Price: Options Forecast Somnolent Stocks By Kopin Tan1,173 words6 June 2005Barron'sBM16English(c) 2005 Dow Jones & Company, Inc. Welcome to the option market's annual summer sale, where prices are marked down, but few are buying. If some semblance of a consensus has emerged -- as Treasury yields retreated for much of last week andstocks rallied on hopes of an end to interest-rate increases -- it is that the U.S. economy will grow at aplodding pace. Not surprisingly, option traders expect the major stock indexes to be staid. What's remarkable, however, is how this muffled volatility forecast now extends to a vast roster of individualstocks. After all, investors desperately looking for winners will pile in and out of different stocks in reaction tonews and rumors, all of which should move stock prices even if the overall market barely budges. But ifdeclining option prices are any indication, traders just don't expect many stocks -- including sometraditionally volatile technology names -- to be too risky or fickle over the next year. Consider the evidence: Of 600 stocks with actively traded options, 362 have three-month option prices in thebottom 10% of their five-year range, according to independent research firm OptionMetrics. At least 115stocks have implied volatilities in the bottom 2% of their five-year range, which means their three-monthoptions are at or near their cheapest in five years. Many are widely held stocks spanning sectors, althoughlarge tech companies are well represented, and include Amgen (ticker: AMGN), Amazon.com (AMZN),Yahoo! (YHOO), Eli Lilly (LLY), Hilton Hotels (HLT), Cisco Systems (CSCO), Dell Computer (DELL), SiriusSatellite (SIRI), Qualcomm (QCOM), General Electric (GE), Biotechnology Holdrs Trust (BBH) and InternetHoldrs Trust (HHH). Also on this list is Texas Instruments (TXN), whose stock could move with its mid-quarter update and withIntel's (INTC) this week. The heavily-traded Nasdaq 100 Tracking Stock (QQQQ), or Qubes, has three-month options that imply an annualized volatility of 15.4%, compared with levels between 15% and 66.5%over the last five years. The volatility forecast is similarly serene over the one-year horizon. David Hait, OptionMetrics' president,examined one-year option prices and found 322 stocks with implied volatilities in the bottom 10% of their five-year range -- including 102 at the cheapest 2%. Intel one-year options imply a volatility of 22.8%, theabsolute bottom of its five-year range of 22.8% to 60.8%. Others include Medtronic (MDT), SanDisk (SNDK),Texas Instruments, Yahoo!, Semiconductor Holdrs Trust (SMH), Priceline (PCLN) and Network Appliance(NTAP). With premiums down and traders non-committal, strategists prodded investors to buy puts and calls toposition for future price fluctuations. As Lehman Brothers upgraded the drug and health-care equipmentsectors, citing factors like improving revenue outlook and the potential for prescription-volume growth, thefirm's option strategist, Ryan Renicker, screened for favorably rated health-care stocks with inexpensivelong-term options. He came up with Pfizer (PFE), Sepracor (SEPR), Ivax (IVX), Teva Pharmaceutical(TEVA), Boston Scientific (MSX) and Medtronic, all candidates on which bulls might buy one-year calls. In a sea of cheap options, the few pricey ones stand out. MBNA (KRB) options imply a volatility of about39%, near their year peak. As takeover speculation swirled, traders betting on a big-bank acquisition of thecredit-card issuer have accumulated more than 4.1 outstanding calls on MBNA for every put. Options onKrispy Kreme Doughnuts (KKD) also aren't cheap, as the sugar-rush peddler struggles to file financialreports and detail its turnaround plan. Here, volume is driven by put buyers who are looking to hedge stockrisk, and who have amassed more than 2.3 outstanding puts for every call -- near the highest in a year. The Philadelphia Stock Exchange has signed an agreement with the electronic-trading platform NexTrade todevelop "expirationless options," essentially puts and calls with no expiration dates. Terms aren't disclosed.With the pact, the PHLX says it gains the right to license expirationless options (dubbed XPOs) to otherexchanges or firms. "We are exploring the development potential of XPOs and, interestingly, we havereceived significant interest in Europe," says Dan Carrigan, PHLX's vice president for product development.


NexTrade has been pushing XPOs for some time now (see "Perpetual Motion," Feb. 16, 2004). Theseoptions raise interesting questions about potential demand and use, and have spawned discussion amongtraders and academics about how they ought to be priced (for instance, how traders might factor in futuredividend payouts or cuts). The PHLX plans to begin listing expirationless options on an index-related product, specifically the Standard& Poor's Depositary Receipts (SPY), or Spiders. It is seeking regulatory approval, Carrigan says, and isdiscussing with the Options Clearing Corp. how to arrange for the clearing of this new class of derivatives.The exchange is gunning for a fall debut on its electronic platform. Hoping to attract more individual investors to trade futures, the Chicago Mercantile Exchange (CME) onMonday will begin trading futures on two popular exchange-traded funds, the Nasdaq 100 tracking stock andthe S&P Spiders. Futures on a third, the iShares Russell 2000 (IWM), will begin trading June 20. The largest U.S. futures exchange already lists various derivatives that track the S&P 500, Nasdaq 100 andthe Russell 2000. But the new ETF futures offer the smallest bite sizes -- and, in that regard, may be moreaccessible for small investors. Each Spider ETF future, for example, covers 100 shares of the Spider ETFand has a notional value of about $12,000 -- a fraction of the $60,000 for the corresponding e-mini contractand about $300,000 for each standard S&P future contract. More than 800,000 S&P 500 e-mini contractsalready trade each day -- evidence of growing demand for smaller-sized futures, and the CME hopes thenew ETF futures will lure more retail customers. Investors will need a futures-trading account. "Clearly, the more choices you have for trading a product, thebetter it is for investors," says Tony McCormick, Charles Schwab's vice president of derivatives. Butinvestors must weigh any leverage they might gain from trading futures against the cost involved. ETF futures, for example, allow investors to bet against an index without borrowing shares from the broker.While commissions and specifics vary, the margin required for ETF futures is generally less than that forunderlying ETFs. (For example, a customer with the online brokerage optionsXpress might put up 20%margin to trade ETF futures, and about 50% margin for ETFs). Meanwhile, optionsXpress (OXPS) says itplans to launch a futures-trading platform this month that will allow customers to trade futures, options andstocks side by side using one universal account. --- E-mail: [email protected] --- --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020050604e16600011




Options --- The Striking Price -- Flat-Lined Forever? Low VIX raises questions about its meaning

MARKET WEEKOptions --- The Striking Price -- Flat-Lined Forever? Low VIX raises questions about its meaning By Gaston F. Ceron911 words14 February 2005Barron'sBMW7English(c) 2005 Dow Jones & Company, Inc. Options-market players spent much of last year tracking the steady retreat of volatility on their tradingscreens. The object of their attention was the VIX, the Chicago Board Options Exchange's volatility index,which shed 27.4% in 2004. Things seem to be getting even worse this year, and the subtitles of two recentbrokerage-firm research notes captured the mood: "The Incredible Vanishing Vol," said one; "One-DigitVIX?" asked the other. We're not quite there yet, but the downward trend is continuing. Through Thursday, the VIX was down13.4% from the end of 2004; moreover, its average close so far this year, 12.9 through Thursday, is down16.8% from 2004. And when VIX reached an intraday low of 10.9 on Feb.4, it slipped below the 11 mark forthe first time in years. But what do the grim numbers really mean? One view would hold that a low VIX -- often called a "feargauge," the index is based on options on the Standard & Poor's 500 index -- hints at an overly complacentmindset among investors. In other words, watch out. But with the VIX so low, this view is getting anotherlook. The absence of a steep, prolonged market drop during the VIX's recent run to the downside causesJohn Roque, a technical stock analyst at Natexis Bleichroeder, to suggest that the VIX "is not the contrarianindicator that it proved to be in a prior cycle." Greg Robin, chief options strategist at Rochdale Securities, takes issue with the complacency argument."The VIX dropping to record lows has many dusting off their `investor-complacency' arguments, but in termsof options sentiment, it's a gross oversimplification," he says "Instead, the lack of realized volatility is moreresponsible for current options prices." He notes that the VIX just measures the market's expectation of 30-day volatility. "It's saying, `Hey, we don'texpect much in the next 30 days,"' Robin says. "But it doesn't even take us into the next earnings quarter" orclose to a "possible Fed inflection point" -- the stage at which the Federal Reserve may stop raising short-term rates. Still, it's hard to completely write off one of the market's best-known barometers just because it recentlyhasn't delivered for contrarian investors. The year's young, and there's no telling what may happen. Thecomplacency some see reflected in today's low VIX could still set a trap for investors and hint at a marketdrop. "I think that, many times, indicators are like people," says Roque. "They go through cycles when theywork well and when they don't work well." It's not just the VIX that's down, as Credit Suisse First Boston's Ryan Renicker pointed out to clients thisweek. The derivatives strategist noted the steep drop in implied volatility that has accompanied a recent rallyin the Semiconductor Holdrs Trust exchange-traded fund. This chip-sector play, know better by its tickersymbol SMH, lost 19.4% of its value last year and it's still a loser so far in 2005, down by 1.7 % on the yearthrough Thursday. But it has bounced back a bit recently, gaining 10.5% since touching a 2005 low of 29.67in late January. The rally has pushed down SMH's implied volatilities, which to Renicker suggests "that option-marketparticipants are pricing in extremely low risk expectations for the SMH in the coming months, both on anabsolute basis, as well as relative to the broader equity market." He argues that this complacency may be unwarranted. His suggestion? Sell S&P 500 puts to fund thepurchase of SMH puts. "The advantage of implementing a zero-cost long/short put option strategy is twofold.First, the trade is most likely to pay off in a declining equity market environment." That's when the SMHwould be likely to underperform the S&P 500, making the SMH puts valuable. "Second, if there is a strongmarket rally from now to the expiration date, both put-option trades will likely end up out of the money andthe investor will have no exposure or loss."


For those with an interest in the semiconductor sector, Renicker says that, among other strategies, onemove for bearish investors could be to buy out-of-the-money puts on the SMH. "Investors not having adirectional bias one way or the other, but expecting greater-than-anticipated realized volatility amongsemiconductor stocks, should consider going long volatility through either straddles or strangles." -- The initial public offering of chicago online broker OptionsXpress Holdings (OXPS), which is particularlyknown for its options-trading tools and capabilities, was initially well received by stock investors but hasrecently given back some of its gains. The shares rose as much as 44.8% from their offering price in theirlate-January debut. On Thursday, they ended at $18.82, up 14% from their $16.50 IPO price. OXPS optionsalso have been listed. --- Gaston F. Ceron is a reporter for Dow jones Newswires. E-mail: [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020050212e12e00013




Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest in four years

MARKET WEEKOptions --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest in four years By Kopin Tan716 words7 February 2005Barron'sBMW7English(c) 2005 Dow Jones & Company, Inc. Charles dickens summed up two familiar notions when he wrote the phrase "as good as gold": The metal isboth a coveted asset and a yardstick for measuring value. But can options on a gold index help measurefuture economic risk? The Philadelphia Gold & Silver Index, or XAU, is a benchmark of 12 stocks, with Newmont Mining, BarrickGold and AngloGold Ashanti accounting for 55% of its weight. Options on this index trade actively amonginstitutional investors, many ofwhom bid up XAU options when they expect gold stocks to become more vola-tile -- typically in times of economic duress. The next few months apparently isn't one of those times. The XAU's implied volatility -- as seen through theprism of three-month option prices -- last week declined to its lowest level in at least four years. The indexitself has fallen 17% since late November, and could fluctuate further, given uncertainty about the dollar,ballooning trade deficits and the pace of economic growth. But none of these seem to worry option traders,as projected XAU volatility subsides. "It indicates that the market is extremely comfortable with the overalllevel of macro risks," says Ryan Renicker, a Credit Suisse First Boston derivatives strategist. Strictly speaking, declining implied volatility in the XAU merely points to diminished expectations of indexmovement. But XAU options have come to be seen as a barometer of economic fear. Implied XAU volatilityspiked after the Sept. 11 terrorist attacks, even though gold prices didn't jump or fluctuate as much. It surgedduring the accounting scandals and stock selloff of the 2002 summer, and, more recently but lessdramatically, last May as traders fretted about aggressive rate hikes and the fluttering dollar. The current ebb in implied XAU volatility doesn't surprise some commodity traders. Gold prices have fallenfrom a 16-year high just above $457 an ounce in early December to about $417 Thursday. While suchdeclines might normally trouble the market and drive up implied volatility, many seem to believe the metalwon't slip much further, given existing fiscal and currency concerns. Misguided or not, that conviction helpsstabilize gold-mining stocks, since the two often trade in tandem. At a mining conference last week,Newmont's president, Pierre Lassonde, said that 2005 could be "a bit of a quiet year" for gold, and that thedollar could bounce after last year's slide. But he said gold could soar in the future, if rising oil costs andmounting budget deficits take their toll on the economy -- as they did in the 1970s. For those who believe the market has underestimated the proximity and extent of economic risks, the lull inXAU implied volatility is a chance to buy options to brace for a rockier road ahead, Renicker says. Advancedtraders might buy cheap XAU options while selling in recently volatile sectors like insurance, autocomponents, drugs and tobacco. Meanwhile, there are other gold-sector securities like the IAU, or iSharesComex Gold Trust, or the GLD, or streetTracks Gold Trust. But neither has listed options. Away from gold, there were other signs of dulling economic fears. Implied correlation -- the projectedtendency of stocks to trade en masse in one giant cluster -- also is breaking down, as even stocks within asector move divergently. For Example? Ebay was drubbed after issuing a drab outlook that left its peersunscathed. And Wednesday, a strong earnings report lifted Google while Amazon.com slipped (before itreported earnings). The waning correlation indicates that traders see fewer macro catalysts that can drive the entire market. "Italso tells me there's just not that much new money in the market that can move the whole group, and it's justmoney moving from one stock to another," says Robert Wilson, Susquehanna Financial Group's chief optionstrategist. "It's plain and simple: We're now in a stockpicker's market." --- KOPIN TAN covers the options markets for Dow Jones Newswires.


E-mail: [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 82340 Document B000000020050205e1270000r




DJ MARKET WEEK -- Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest

DJ MARKET WEEK -- Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest 743 words5 February 200515:05OsterDowJones Commodity WireOSTDJEnglishCopyright 2005, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. Feb 05, 2005 (ODC via COMTEX) -- DJ MARKET WEEK -- Options --- The Striking Price -- Steady as Gold: XAU's implied volatility lowest in fouryears ---- By Kopin Tan Charles dickens summed up two familiar notions when he wrote the phrase "as goodas gold": The metal is both a coveted asset and a yardstick for measuring value. But can options on a goldindex help measure future economic risk? The Philadelphia Gold & Silver Index, or XAU, is a benchmark of12 stocks, with Newmont Mining, Barrick Gold and AngloGold Ashanti accounting for 55% of its weight.Options on this index trade actively among institutional investors, many ofwhom bid up XAU options whenthey expect gold stocks to become more vola-tile -- typically in times of economic duress. The next fewmonths apparently isn't one of those times. The XAU's implied volatility -- as seen through the prism of three-month option prices -- last week declined to its lowest level in at least four years. The index itself has fallen17% since late November, and could fluctuate further, given uncertainty about the dollar, ballooning tradedeficits and the pace of economic growth. But none of these seem to worry option traders, as projected XAUvolatility subsides. "It indicates that the market is extremely comfortable with the overall level of macro risks,"says Ryan Renicker, a Credit Suisse First Boston derivatives strategist. Strictly speaking, declining impliedvolatility in the XAU merely points to diminished expectations of index movement. But XAU options havecome to be seen as a barometer of economic fear. Implied XAU volatility spiked after the Sept. 11 terroristattacks, even though gold prices didn't jump or fluctuate as much. It surged during the accounting scandalsand stock selloff of the 2002 summer, and, more recently but less dramatically, last May as traders frettedabout aggressive rate hikes and the fluttering dollar. The current ebb in implied XAU volatility doesn'tsurprise some commodity traders. Gold prices have fallen from a 16-year high just above $457 an ounce inearly December to about $417 Thursday. While such declines might normally trouble the market and driveup implied volatility, many seem to believe the metal won't slip much further, given existing fiscal andcurrency concerns. Misguided or not, that conviction helps stabilize gold-mining stocks, since the two oftentrade in tandem. At a mining conference last week, Newmont's president, Pierre Lassonde, said that 2005could be "a bit of a quiet year" for gold, and that the dollar could bounce after last year's slide. But he saidgold could soar in the future, if rising oil costs and mounting budget deficits take their toll on the economy --as they did in the 1970s. For those who believe the market has underestimated the proximity and extent ofeconomic risks, the lull in XAU implied volatility is a chance to buy options to brace for a rockier road ahead,Renicker says. Advanced traders might buy cheap XAU options while selling in recently volatile sectors likeinsurance, auto components, drugs and tobacco. Meanwhile, there are other gold-sector securities like theIAU, or iShares Comex Gold Trust, or the GLD, or streetTracks Gold Trust. But neither has listed options.Away from gold, there were other signs of dulling economic fears. Implied correlation -- the projectedtendency of stocks to trade en masse in one giant cluster -- also is breaking down, as even stocks within asector move divergently. For Example? Ebay was drubbed after issuing a drab outlook that left its peersunscathed. And Wednesday, a strong earnings report lifted Google while Amazon.com slipped (before itreported earnings). The waning correlation indicates that traders see fewer macro catalysts that can drivethe entire market. "It also tells me there's just not that much new money in the market that can move thewhole group, and it's just money moving from one stock to another," says Robert Wilson, SusquehannaFinancial Group's chief option strategist. "It's plain and simple: We're now in a stockpicker's market." ---KOPIN TAN covers the options markets for Dow Jones Newswires. E-mail: [email protected] --- ForBarron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . Copyright 2004 Dow Jones. All rights reserved. Document OSTDJ00020050205e125000pf




DJ Barron's(2/7) Steady As Gold: Xau's Implied Volatility Lowest In Four Years

DJ Barron's(2/7) Steady As Gold: Xau's Implied Volatility Lowest In Four Years 745 words5 February 200515:05OsterDowJones Commodity WireOSTDJEnglishCopyright 2005, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. Feb 05, 2005 (ODC via COMTEX) -- DJ Barron's(2/7) Steady As Gold: Xau's Implied Volatility Lowest In Four Years (From BARRON'S) By Kopin Tan Charles dickens summed up two familiar notions when he wrote the phrase "as good as gold":The metal is both a coveted asset and a yardstick for measuring value. But can options on a gold index helpmeasure future economic risk? The Philadelphia Gold & Silver Index, or XAU, is a benchmark of 12 stocks,with Newmont Mining, Barrick Gold and AngloGold Ashanti accounting for 55% of its weight. Options on thisindex trade actively among institutional investors, many ofwhom bid up XAU options when they expect goldstocks to become more vola-tile -- typically in times of economic duress. The next few months apparentlyisn't one of those times. The XAU's implied volatility -- as seen through the prism of three-month optionprices -- last week declined to its lowest level in at least four years. The index itself has fallen 17% since lateNovember, and could fluctuate further, given uncertainty about the dollar, ballooning trade deficits and thepace of economic growth. But none of these seem to worry option traders, as projected XAU volatilitysubsides. "It indicates that the market is extremely comfortable with the overall level of macro risks," says Ryan Renicker, a Credit Suisse First Boston derivatives strategist. Strictly speaking, declining impliedvolatility in the XAU merely points to diminished expectations of index movement. But XAU options havecome to be seen as a barometer of economic fear. Implied XAU volatility spiked after the Sept. 11 terroristattacks, even though gold prices didn't jump or fluctuate as much. It surged during the accounting scandalsand stock selloff of the 2002 summer, and, more recently but less dramatically, last May as traders frettedabout aggressive rate hikes and the fluttering dollar. The current ebb in implied XAU volatility doesn'tsurprise some commodity traders. Gold prices have fallen from a 16-year high just above $457 an ounce inearly December to about $417 Thursday. While such declines might normally trouble the market and driveup implied volatility, many seem to believe the metal won't slip much further, given existing fiscal andcurrency concerns. Misguided or not, that conviction helps stabilize gold-mining stocks, since the two oftentrade in tandem. At a mining conference last week, Newmont's president, Pierre Lassonde, said that 2005could be "a bit of a quiet year" for gold, and that the dollar could bounce after last year's slide. But he saidgold could soar in the future, if rising oil costs and mounting budget deficits take their toll on the economy --as they did in the 1970s. For those who believe the market has underestimated the proximity and extent ofeconomic risks, the lull in XAU implied volatility is a chance to buy options to brace for a rockier road ahead,Renicker says. Advanced traders might buy cheap XAU options while selling in recently volatile sectors likeinsurance, auto components, drugs and tobacco. Meanwhile, there are other gold-sector securities like theIAU, or iShares Comex Gold Trust, or the GLD, or streetTracks Gold Trust. But neither has listed options.Away from gold, there were other signs of dulling economic fears. Implied correlation -- the projectedtendency of stocks to trade en masse in one giant cluster -- also is breaking down, as even stocks within asector move divergently. For Example? Ebay was drubbed after issuing a drab outlook that left its peersunscathed. And Wednesday, a strong earnings report lifted Google while Amazon.com slipped (before itreported earnings). The waning correlation indicates that traders see fewer macro catalysts that can drivethe entire market. "It also tells me there's just not that much new money in the market that can move thewhole group, and it's just money moving from one stock to another," says Robert Wilson, SusquehannaFinancial Group's chief option strategist. "It's plain and simple: We're now in a stockpicker's market." ---KOPIN TAN covers the options markets for Dow Jones Newswires. E-mail: [email protected] --- ---For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . Copyright 2004 Dow Jones. All rights reserved. Document OSTDJ00020050205e125000p7




Options --- The Striking Price -- Buck Up, Stock Owners: A strategy for retaking lost ground

MARKET WEEKOptions --- The Striking Price -- Buck Up, Stock Owners: A strategy for retaking lost ground By Kopin Tan822 words31 January 2005Barron'sBMW14English(c) 2005 Dow Jones & Company, Inc. Hey, stock owners: has January got you down? With the Dow Jones Industrial Average and Standard andPoor's 500 each off 3% for the month, the Russell 2000 down 6% and the Nasdaq 100 off 7%, you mightwant to try an option-repair strategy that (pardon the football lingo) could help you halve the distance to thegoal line. Specifics vary, but the holder of a slumping stock essentially buys one call option while selling two further out-of-the-money calls. The sell-two-to-buy-one approach allows the stockholder to mount a trade with little or noout-of-pocket cost, and this standby is popular because it lowers the break-even point of a losing stockinvestment. After that, every one-dollar rally that the underlying stock achieves theoretically earns two for the investor --one from the stock he already owns, and one from the appreciating long call he holds. The example Ryan Beck option strategist Elliot Spar cites involves IAC/Interactive Corp., the e-commerceholding company whose businesses include Expedia, TicketMaster and Match.com. IACI shares haveslipped 16% this month, and are trading near 23. A worried but still-hopeful stockholder might buy July 22.50calls -- which were trading late Thursday at about $2.80 -- while selling twice the number of July 25 calls thatwere trading at $1.50, for a small net credit. "The strategy works best for volatile stocks, where the sale of out-of-the-money options generates enoughpremium to pay for the in-the-money option," Spar says. While holding two short calls can be dicey if thestock were to spike suddenly, the risk here is capped -- one by the long call and the other by the stockalready owned. The catch? Potential gains also are capped in a stock rally, since the investor surrenders all upside beyondthe strike price of the short calls. That's why the trade works best for bruised stocks that still have in them asmall bounce, but perhaps not a big jump. And if option prices are any indication, traders don't expect many stocks and indexes to make big jumps upor down in the coming weeks. That's despite a calendar crowded with potential market-moving catalysts: anOPEC meeting in Vienna and elections in Iraq on Sunday; a Federal Reserve meeting this week on short-term interest rates; and earning reports from the likes of Amazon.com and Google. The 30-day volatility forecast as measured by the VIX, or Chicago Board Options Exchange Volatility Index,eased this week. So did the VXN, the volatility forecast for the technology sector. "We've gone through a big part of this earnings cycle, and many people figured the worst surprises alreadyare out there," says Jeff Shaw, head trader at the option specialist and market-making firm Timber Hill.Measures of anticipated volatility have been in a broad retreat for more than a year, with the VIX generallymaking lower highs and lower lows. So while traders point out how volatility has become historicallysubdued, and how cheap options have become, "until we get a breakout, traders will continue to pushvolatility lower." For average stock investors, strategists continue to recommend plays that seek to take advantage of cheapoptions -- like replacing some shares with cheap long-term calls to reduce the risk of a profitable stockholding while continuing to position for a potential rally. And "if you are afraid to stick a toe in the water, Isuggest you buy your favorite stock with a slightly out-of-the-money protective put," Spar says. "That puts afloor under the stock, and gives you pre-determined downside risk." One area where there's been option-buying is oil and energy, ahead of the OPEC meeting and amid theusual whining about winter temperatures and heating-oil supplies. While oil prices have risen about 19%


over the past month, implied volatility of the OIH, or Oil Service Holdrs Trust, has eased slightly. "However, the outlook for crude oil and its impact on oil-related stocks remains unclear," notes Credit SuisseFirst Boston strategist Ryan Renicker. Scouring for oil-related stocks for which the market is pricing in lowrisk expectations, Renicker identified a list including Schlumberger, Smith International, Cooper Cameron,BJ Services, Baker Hughes and Transocean. Because option prices for these appear cheap or reasonable,investors might buy puts, calls or combinations to position for stock movement -- or a rise in premiums,should volatility eventually go up. --- KOPIN TAN covers the options markets for Dow Jones Newswires E-mail [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html . 5032 Document B000000020050129e11v0000d




Trading Is Mixed Amid Doubt, As Metals, Mines Get Defensive

Options ReportTrading Is Mixed Amid Doubt, As Metals, Mines Get Defensive By Kopin Tan Dow Jones Newswires485 words19 October 2004The Wall Street JournalJC6English(Copyright (c) 2004, Dow Jones & Company, Inc.) NEW YORK -- Options trading was mixed, with bulls heartened by stocks' resilience in the face of high oilprices, while skeptics guarded against a feared pullback. Trading was defensive on metal and mining stocks amid continued concerns about a slowdown in globalindustrial production. Credit Suisse First Boston, for instance, downgraded the North American steel sector and U.S. Steel Corp.,noting that steel production and imports have caught up with domestic demand growth and citing signs thatChinese demand for steel is slowing. Meanwhile, the sector become more volatile recently, and optionpremiums have risen as traders anticipated more price fluctuations. "This high level of implied volatility -- coupled with the likelihood that [U.S. Steel's] stock price potential islikely to be capped to the upside during the next 12 months -- presents investors an opportunity," CSFBoption strategist Ryan Renicker wrote in a note yesterday. Bearish investors who see limited stock upsidemight sell calls to harvest rich premiums, he suggested. This obliges them to sell shares if the stock rallies. For example, U.S. Steel's January 40 calls were trading at about $1.40, about 4% of the current stock price,and a seller of these calls begins to lose money if the stock trades above $41.40 before mid-January, Mr.Renicker pointed out. Yesterday, the shares declined 99 cents to $34.73. Its January 40 calls traded 2,404 contracts, and fell 35cents to $1.35 at the Chicago Board Options Exchange. Shares of Alcan Inc., the Canadian aluminum company, closed down 33 cents to $47.05, and an investorbought December puts -- likely to limit downside stock risk over the next two months. Alcan's December 45puts traded 5,235 contracts, compared with 722 previously outstanding, and were at $1.10 at the AmericanStock Exchange. Trading was less jittery in the technology sector, as the Nasdaq indexes led stocks' advance. The Nasdaq100 Tracking Stock, or QQQ, rose 51 cents to $36.14. Its November 36 calls traded 64,363 contracts, androse 20 cents to 95 cents at the International Securities Exchange. The November 36 puts traded 39,502contracts, and fell 35 cents to 75 cents at the Amex. The short-term volatility forecast relaxed slightly as the CBOE volatility index, or VIX, fell 0.33 to 14.71. At the CBOE's index-option trading pit, an institutional investor bought about 6,000 November 540 calls onthe Standard &Poor's 100-stock index, which could pay off if stocks surge over the next month. The indexclosed up 0.64% to 535.18. These November 540 calls gained 60 cents to $5.70 as 6,915 contracts traded,compared with 6,853 previously outstanding. License this article from Dow Jones Reprint Service Document J000000020041019e0aj0000n



DJ WSJ(10/19) Options Report: Metals, Mines Get Defensive

DJ WSJ(10/19) Options Report: Metals, Mines Get Defensive 493 words18 October 200416:04OsterDowJones Commodity WireOSTDJEnglishCopyright 2004, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. Oct 18, 2004 (ODC via COMTEX) -- (From THE WALL STREET JOURNAL) By Kopin Tan Dow Jones Newswires NEW YORK -- Options trading was mixed, with bulls heartened by stocks' resiliencein the face of high oil prices, while skeptics guarded against a feared pullback. Trading was defensive onmetal and mining stocks amid continued concerns about a slowdown in global industrial production. CreditSuisse First Boston, for instance, downgraded the North American steel sector and U.S. Steel Corp., notingthat steel production and imports have caught up with domestic demand growth and citing signs thatChinese demand for steel is slowing. Meanwhile, the sector become more volatile recently, and optionpremiums have risen as traders anticipated more price fluctuations. "This high level of implied volatility --coupled with the likelihood that [U.S. Steel's] stock price potential is likely to be capped to the upside duringthe next 12 months -- presents investors an opportunity," CSFB option strategist Ryan Renicker wrote in anote yesterday. Bearish investors who see limited stock upside might sell calls to harvest rich premiums, hesuggested. This obliges them to sell shares if the stock rallies. For example, U.S. Steel's January 40 callswere trading at about $1.40, about 4% of the current stock price, and a seller of these calls begins to losemoney if the stock trades above $41.40 before mid-January, Mr. Renicker pointed out. Yesterday, the sharesdeclined 99 cents to $34.73. Its January 40 calls traded 2,404 contracts, and fell 35 cents to $1.35 at theChicago Board Options Exchange. Shares of Alcan Inc., the Canadian aluminum company, closed down 33cents to $47.05, and an investor bought December puts -- likely to limit downside stock risk over the next twomonths. Alcan's December 45 puts traded 5,235 contracts, compared with 722 previously outstanding, andwere at $1.10 at the American Stock Exchange. Trading was less jittery in the technology sector, as theNasdaq indexes led stocks' advance. The Nasdaq 100 Tracking Stock, or QQQ, rose 51 cents to $36.14. ItsNovember 36 calls traded 64,363 contracts, and rose 20 cents to 95 cents at the International SecuritiesExchange. The November 36 puts traded 39,502 contracts, and fell 35 cents to 75 cents at the Amex. Theshort-term volatility forecast relaxed slightly as the CBOE volatility index, or VIX, fell 0.33 to 14.71. At theCBOE's index-option trading pit, an institutional investor bought about 6,000 November 540 calls on theStandard & Poor's 100-stock index, which could pay off if stocks surge over the next month. The indexclosed up 0.64% to 535.18. These November 540 calls gained 60 cents to $5.70 as 6,915 contracts traded,compared with 6,853 previously outstanding. Copyright 2004 Dow Jones. All rights reserved. Document OSTDJ00020041018e0ai007bx


DJ Options Report: Trading Defensive in Industrials, Metals

DJ Options Report: Trading Defensive in Industrials, Metals By Kopin Tan743 words18 October 200416:04OsterDowJones Commodity WireOSTDJEnglishCopyright 2004, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. NEW YORK, Oct 18, 2004 (ODC via COMTEX) -- Of DOW JONES NEWSWIRES Option trading was mixed and non-committal, with bulls heartened by stocks' resilience in the face of high oilprices, while skeptics continued to guard against a feared pullback. Trading was cautious among industrialstocks after 3M Co. reported earnings that were shy of expectations - its first shortfall in eight quarters.Options on 3M traded actively as its stock was downgraded by at least one analyst. Options on UnitedTechnologies were active as well. United Technologies will report earnings Wednesday. The diversifiedmanufacturing and aerospace company's stock has pulled back 5.3% since Oct. 1 and it was off $1.82 to$89.85 Monday afternoon. Its November 85 puts traded 1,924 contracts, compared with 4,142 previouslyoutstanding, and gained 15 cents to 75 cents at the Pacific Exchange. Option trading was defensive onmetal and mining stocks amid continued concerns about a slowdown in global industrial production. CreditSuisse First Boston, for instance, downgraded the North American steel sector and U.S. Steel Corp., notinghow steel production and imports have caught up with domestic demand growth and signs that Chinesedemand for steel is slowing. Meanwhile, these concerns have made metal stocks more volatile recently, anddriven up option premiums in anticipation of more price fluctuations. "This high level of implied volatility,coupled with the likelihood that [US Steel's] stock price potential is likely to be capped to the upside duringthe next 12 months, presents investors an opportunity," noted CSFB option strategist Ryan Renicker.Bearish investors who see limited upside to the stock might sell calls to harvest option premium, hesuggested in a note Monday. This obliges them to sell shares if the stock rallies beyond a certain price. Forexample, the January 40 calls were trading at about $1.40, about 4% of the current stock price, and a sellerof these calls begin to lose money if the stock trades above $41.40 before mid-January, Renicker pointedout. U.S. Steel declined $1.16 to $34.56 Monday. Its January 40 calls traded 2,368 contracts, compared with23,278 outstanding contracts, and fell 35 cents to $1.35 at the Chicago Board Options Exchange. Alcan Inc.,the Canadian aluminum company, eased 35 cents to $47.03, and an investor bought a number of Decemberputs - likely to limit downside stock risk over the next two months. Alcan's December 45 puts traded 5,235contracts, compared with 722 previously outstanding, and were at $1.10 at the American Stock Exchange.Trading was far less jittery in the technology sector as the Nasdaq indexes climbed Monday. Options tradedheavily on stocks like International Business Machines and Texas Instruments, both scheduled to reportearnings late Monday afternoon, as well as exchange-traded funds tied to the sector. The Nasdaq 100Tracking Stock, or QQQ, rose 40 cents to $36.03. Its November 36 calls traded 57,917 contracts, and rose15 cents to 90 cents at the International Securities Exchange. The November 36 puts traded 36,275contracts, and fell 25 cents to 85 cents at the Amex. IBM shares were up 81 cents to $85.66. Analystsexpect the company to meet expectations when it reports earnings later Monday, although there has beenrecent concern about a slowing of its services business. IBM's November 85 calls traded 5,142 contracts,compared with 9,503 already outstanding, and rose 30 cents to $2.30 at the ISE. The November 85 putstraded 7,422 contracts, compared with 13,496 already outstanding, and fell 40 cents to $1.70 at the ISE. Theshort-term volatility forecast relaxed slightly as the CBOE volatility index, or VIX, fell 0.17 to 14.87. At theCBOE's index-option trading pit, an institutional investor made an apparently bullish bet on stocks. With theStandard & Poor's 100-stock index up 0.58% to 534.90, an investor had bought about 6,000 November 540calls that will benefit if the 100-stock benchmark were to surge before mid-November. These November 540calls gained 40 cents to $5.50 as 6,666 contracts traded, compared with 6,853 previously outstanding. - Kopin Tan, Dow Jones Newswires; 201-938-2202 [email protected] Copyright 2004 Dow Jones. All rights reserved. Document OSTDJ00020041018e0ai0060x


Options Report: Trading Defensive in Industrials, Metals

Options Report: Trading Defensive in Industrials, Metals By Kopin TanOf DOW JONES NEWSWIRES736 words18 October 200415:35Dow Jones News ServiceDJEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Option trading was mixed and non-committal, with bulls heartened by stocks'resilience in the face of high oil prices, while skeptics continued to guard against a feared pullback. Trading was cautious among industrial stocks after 3M Co. reported earnings that were shy of expectations -its first shortfall in eight quarters. Options on 3M traded actively as its stock was downgraded by at least oneanalyst. Options on United Technologies were active as well. United Technologies will report earnings Wednesday. The diversified manufacturing and aerospacecompany's stock has pulled back 5.3% since Oct. 1 and it was off $1.82 to $89.85 Monday afternoon. ItsNovember 85 puts traded 1,924 contracts, compared with 4,142 previously outstanding, and gained 15 centsto 75 cents at the Pacific Exchange. Option trading was defensive on metal and mining stocks amid continued concerns about a slowdown inglobal industrial production. Credit Suisse First Boston, for instance, downgraded the North American steel sector and U.S. Steel Corp.,noting how steel production and imports have caught up with domestic demand growth and signs thatChinese demand for steel is slowing. Meanwhile, these concerns have made metal stocks more volatilerecently, and driven up option premiums in anticipation of more price fluctuations. "This high level of implied volatility, coupled with the likelihood that [US Steel's] stock price potential is likelyto be capped to the upside during the next 12 months, presents investors an opportunity," noted CSFBoption strategist Ryan Renicker. Bearish investors who see limited upside to the stock might sell calls toharvest option premium, he suggested in a note Monday. This obliges them to sell shares if the stock ralliesbeyond a certain price. For example, the January 40 calls were trading at about $1.40, about 4% of the current stock price, and aseller of these calls begin to lose money if the stock trades above $41.40 before mid-January, Renickerpointed out. U.S. Steel declined $1.16 to $34.56 Monday. Its January 40 calls traded 2,368 contracts, compared with23,278 outstanding contracts, and fell 35 cents to $1.35 at the Chicago Board Options Exchange. Alcan Inc., the Canadian aluminum company, eased 35 cents to $47.03, and an investor bought a number ofDecember puts - likely to limit downside stock risk over the next two months. Alcan's December 45 putstraded 5,235 contracts, compared with 722 previously outstanding, and were at $1.10 at the American StockExchange. Trading was far less jittery in the technology sector as the Nasdaq indexes climbed Monday. Options tradedheavily on stocks like International Business Machines and Texas Instruments, both scheduled to reportearnings late Monday afternoon, as well as exchange-traded funds tied to the sector. The Nasdaq 100 Tracking Stock, or QQQ, rose 40 cents to $36.03. Its November 36 calls traded 57,917contracts, and rose 15 cents to 90 cents at the International Securities Exchange. The November 36 putstraded 36,275 contracts, and fell 25 cents to 85 cents at the Amex. IBM shares were up 81 cents to $85.66. Analysts expect the company to meet expectations when it reportsearnings later Monday, although there has been recent concern about a slowing of its services business. IBM's November 85 calls traded 5,142 contracts, compared with 9,503 already outstanding, and rose 30cents to $2.30 at the ISE. The November 85 puts traded 7,422 contracts, compared with 13,496 already


outstanding, and fell 40 cents to $1.70 at the ISE. The short-term volatility forecast relaxed slightly as the CBOE volatility index, or VIX, fell 0.17 to 14.87. At the CBOE's index-option trading pit, an institutional investor made an apparently bullish bet on stocks.With the Standard & Poor's 100-stock index up 0.58% to 534.90, an investor had bought about 6,000November 540 calls that will benefit if the 100-stock benchmark were to surge before mid-November. TheseNovember 540 calls gained 40 cents to $5.50 as 6,666 contracts traded, compared with 6,853 previouslyoutstanding.

- Kopin Tan, Dow Jones Newswires; 201-938-2202 [email protected]

[ 10-18-04 1535ET ]

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Options --- The Striking Price -- Adding Some Fizz: Options can boost returns on Coke and Pepsi

MARKET WEEKOptions --- The Striking Price -- Adding Some Fizz: Options can boost returns on Coke and Pepsi By Kopin Tan832 words11 October 2004Barron'sBMW12English(c) 2004 Dow Jones & Company, Inc. For some soda drinkers, the Pepsi-or-Coke question can be as divisive as the choice between Letterman orLeno, Yankees or Mets, Britney or Christina. But some stock investors see Pepsi and Coke in anincreasingly similar light: as potential bargains whose appeal can be enhanced by option trades. Coca-Cola has declined 21% this year after disappointing investors with sluggish growth, too much turnoverin the executive suite and not enough in the stores (see "A New Formula for Coke," Oct. 4). At a recent40.22, shares were near an 18-month low. While stock investors pondered the share price, Goldman Sachs' option strategists last week tagged Cokeas a prime put-selling candidate. The call seems prompted less by conclusions about put prices -- one canquite easily argue that Coke's option premiums look pricey, or not -- than by fundamental opinions about thestock. Chief among these is a sense that much of Coke's dismal news may already be public. Just asimportant -- and just as vexing for impatient stock buyers -- is the nagging concern that any turnaround willtake time, and Coke shares could stay flat until then. "Selling puts allows investors to monetize this risk and collect premium," wrote Goldman's Maria Grant andJason Cuttler. For example, long-dated puts that expire January 2006 with a $40 strike were trading Fridaynear $3.20 -- the premium put sellers can collect for committing to buy shares. If Coke stays above 40 overthe next 15 months, the sold puts expire worthless. If Coke falls below 40 and stock is assigned to the putseller, the premium earned helps lowers the stock purchase price to 36.80, which is an eight-year low forCoke shares. Clearly, put selling works best for those prepared to buy shares near current market prices, butwho won't lose sleep if they don't end up owning shares. By contrast, PepsiCo shares are up 5% this year. But the more diversified beverage-and-snack giant hasslipped 12% from a late-June peak amid worries about weakening demand and now trades around 49,nearly 21 times 2004 earnings. Andrew Conway, Credit Suisse First Boston's beverage analyst, is among those who think PepsiCo sharesunder 50 represents "compelling value." He has a 12-month price target of 63 for PepsiCo, which hebelieves can outdo its peers over the next year as a best-in-class performer among global consumer-staplescompanies. But the option market doesn't yet see what Conway sees. According to CSFB derivatives strategist Ryan Renicker, PepsiCo options are pricing in a slim 12% chance that the stock will reach or exceed 63 in a year."This low expectation offers investors an opportunity to obtain relatively cheap bullish exposure," Renickersays. Because call buyers benefit if shares rally, but do not risk more than the premium paid, call buyingworks best for the hopeful but uncommitted. For instance, PepsiCo's January 2006 calls with a $50 strikeprice were trading near $3.50. A buyer of these calls could make money if Pepsi rises above 53.50; a run to63 could produce big gains. Away from the world of soda pop and into drugs, Elan is among those that have enjoyed a happier 2004 runthan Coke or Pepsi. The Dublin drugmaker began the year at 6.89 and now trades near 22. The lift comescourtesy of Antegren, a multiple-sclerosis treatment Elan developed with Biogen Idec that analysts say couldbecome a blockbuster; it awaits regulatory approval in the U.S. and Europe. While traders expect an FDA nod late November, option premiums remain elevated, partly because thecompanies haven't reported results from ongoing trials. An approval could ostensibly drive shares higher,although implied volatility could wane as the uncertainty passes, says Robert Wilson, SusquehannaFinancial Group's option strategist. Anything less than a full approval could hurt shares. Bracing for the event, Wilson came up with ideas that range from basic to complex. Because Elan shares


have already run up in anticipation, investors who see limited upside might sell calls to finance putpurchases. The more adventurous might stagger the expirations -- selling October and April calls and buyingJanuary puts, since Wilson believes January options look reasonable, while those for October and April lookrich. The adventurous and sophisticated might sell October and April puts while buying twice the number ofJanuary puts -- all at the same strike price. Here, the bet is on a move in volatility, not stock; the hope is forElan shares to stay staid until October options expire, leaving a combination that can benefit if volatility wereto drop sharply after that. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html. 5032 Document B000000020041009e0ab00004



DJ Barron's(10/11) The Striking Price: Adding Some Fizz: Options Can Boost Returns On Coke And Pepsi

DJ Barron's(10/11) The Striking Price: Adding Some Fizz: Options Can Boost Returns On Coke AndPepsi 868 words9 October 200416:04OsterDowJones Commodity WireOSTDJEnglishCopyright 2004, Comtex News Network. All Rights Reserved. Standard Attribution Statement: NewsProvided by COMTEX. Oct 09, 2004 (ODC via COMTEX) -- DJ Barron's(10/11) The Striking Price: Adding Some Fizz: Options Can Boost Returns On Coke And Pepsi (From BARRON'S) By Kopin Tan For some soda drinkers, the Pepsi-or-Coke question can be as divisive as the choice betweenLetterman or Leno, Yankees or Mets, Britney or Christina. But some stock investors see Pepsi and Coke inan increasingly similar light: as potential bargains whose appeal can be enhanced by option trades. Coca-Cola has declined 21% this year after disappointing investors with sluggish growth, too much turnover in theexecutive suite and not enough in the stores (see "A New Formula for Coke," Oct. 4). At a recent 40.22,shares were near an 18-month low. While stock investors pondered the share price, Goldman Sachs' optionstrategists last week tagged Coke as a prime put-selling candidate. The call seems prompted less byconclusions about put prices -- one can quite easily argue that Coke's option premiums look pricey, or not --than by fundamental opinions about the stock. Chief among these is a sense that much of Coke's dismalnews may already be public. Just as important -- and just as vexing for impatient stock buyers -- is thenagging concern that any turnaround will take time, and Coke shares could stay flat until then. "Selling putsallows investors to monetize this risk and collect premium," wrote Goldman's Maria Grant and Jason Cuttler.For example, long-dated puts that expire January 2006 with a $40 strike were trading Friday near $3.20 --the premium put sellers can collect for committing to buy shares. If Coke stays above 40 over the next 15months, the sold puts expire worthless. If Coke falls below 40 and stock is assigned to the put seller, thepremium earned helps lowers the stock purchase price to 36.80, which is an eight-year low for Coke shares.Clearly, put selling works best for those prepared to buy shares near current market prices, but who won'tlose sleep if they don't end up owning shares. By contrast, PepsiCo shares are up 5% this year. But themore diversified beverage-and-snack giant has slipped 12% from a late-June peak amid worries aboutweakening demand and now trades around 49, nearly 21 times 2004 earnings. Andrew Conway, CreditSuisse First Boston's beverage analyst, is among those who think PepsiCo shares under 50 represents"compelling value." He has a 12-month price target of 63 for PepsiCo, which he believes can outdo its peersover the next year as a best-in-class performer among global consumer-staples companies. But the optionmarket doesn't yet see what Conway sees. According to CSFB derivatives strategist Ryan Renicker,PepsiCo options are pricing in a slim 12% chance that the stock will reach or exceed 63 in a year. "This lowexpectation offers investors an opportunity to obtain relatively cheap bullish exposure," Renicker says.Because call buyers benefit if shares rally, but do not risk more than the premium paid, call buying worksbest for the hopeful but uncommitted. For instance, PepsiCo's January 2006 calls with a $50 strike pricewere trading near $3.50. A buyer of these calls could make money if Pepsi rises above 53.50; a run to 63could produce big gains. Away from the world of soda pop and into drugs, Elan is among those that haveenjoyed a happier 2004 run than Coke or Pepsi. The Dublin drugmaker began the year at 6.89 and nowtrades near 22. The lift comes courtesy of Antegren, a multiple-sclerosis treatment Elan developed withBiogen Idec that analysts say could become a blockbuster; it awaits regulatory approval in the U.S. andEurope. While traders expect an FDA nod late November, option premiums remain elevated, partly becausethe companies haven't reported results from ongoing trials. An approval could ostensibly drive shares higher,although implied volatility could wane as the uncertainty passes, says Robert Wilson, SusquehannaFinancial Group's option strategist. Anything less than a full approval could hurt shares. Bracing for theevent, Wilson came up with ideas that range from basic to complex. Because Elan shares have already runup in anticipation, investors who see limited upside might sell calls to finance put purchases. The moreadventurous might stagger the expirations -- selling October and April calls and buying January puts, sinceWilson believes January options look reasonable, while those for October and April look rich. Theadventurous and sophisticated might sell October and April puts while buying twice the number of Januaryputs -- all at the same strike price. Here, the bet is on a move in volatility, not stock; the hope is for Elanshares to stay staid until October options expire, leaving a combination that can benefit if volatility were todrop sharply after that. --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquireonline at http://www.barronsmag.com/subscription/subscription.html.



Options Report: Trading Guarded, Some See Capped Upside

Options Report: Trading Guarded, Some See Capped Upside By Kopin TanOf DOW JONES NEWSWIRES694 words27 September 200415:33Dow Jones News ServiceDJEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Rising oil prices continued to worry investors, some of whom turned to the optionmarket to hedge their stock holdings. Concerned that climbing energy costs will stunt growth in corporate profits, some investors looked foropportunities to sell call options - essentially agreeing to give up stock gains in exchange for earning optionpremiums. Research in Motion rose 67 cents to $75.24 and is trading near a 52-week high set last week. Meanwhile,investors bracing for stock price movement also have generally bid up short-term options ahead of itsearnings report Thursday. The maker of Blackberry and other handheld devices has rallied 41% since Aug. 12, so some investors whosee limited upside potential sought to capitalize on the increased option premiums by selling calls. TheOctober 80 calls were trading Monday afternoon at about $2 as 2,778 contracts changed hands acrossvarious exchanges, compared with 8,309 contracts previously outstanding. Some investors, for instance, sold out-of-the-money November 95 calls, which obliges them to sell shares ifResearch in Motion rallies above $95 before mid-November. But to play it safe, they bought November 100calls to cap potential risk. The November 95 calls traded 1,335 contracts, compared with 660 outstandingcontracts, and fell 5 cents to 85 cents at the International Securities Exchange. The November 100 callstraded 1,242 contracts, compared with 289 outstanding contracts, and were at 55 cents. Martha Stewart Living Omnimedia also drew some call sellers as the stock fell more than 10% Monday, withsome investors asking whether the stock had run up too far too fast. Before Monday's session, the stock hadrallied more than 50% since Sept. 15 on Stewart's decision to begin serving her prison sentence sooner, andon news of a reality TV show she was developing with Mark Burnett. Meanwhile, implied volatility of the options also rose amid the stock price volatility. On Monday, CreditSuisse First Boston strategist Ryan Renicker pointed out how far the stock had run up recently and thepremiums of the options, and suggested that investors who see limited stock upside consider selling calls. The stock was off $1.80, or 10.6%, to $15.27 Monday. Its November 17.50 calls, for example, traded 2,526contracts, compared with 3,068 outstanding contracts, and fell $1 to 65 cents at the ISE. Trading in the overall market stayed cautious. The short-term volatility forecast, the Chicago Board OptionsExchange volatility index, or VIX, rose 0.48 to 14.76. At the electronic International Securities Exchange, thenumber of new calls investors bought relative to new puts dipped to 1.22 - below the 10-day average of 1.34and near the lower end of its 2004 range. Puts on Cablevision Systems traded actively after the company said late Friday that three executives hadresigned amid a continuing regulatory investigation of its accounting practices. CVC shares slid $1.24, or5.9%, to $19.63 on heavy stock-trading volume, while implied volatility of its options crept up above recenthistorical levels - an indication traders were bidding up options in anticipation of further stock pricemovement. CVC's October 20 puts traded 3,783 contracts,compared with 1,889 that were outstanding, and increased 65cents to $1.05 at the International Securities Exchange. The November 20 puts traded 886 contracts,compared with 454 outstanding contracts, and gained 45 cents to $1.30 at the ISE. Calls on home builders traded fairly actively, likely as some traders covered short positions, after theCommerce Department said new single-family home sales grew in August at the fastest clip since December


2000. KB Home, for instance, climbed to a 52-week high and rose $2.43 to $85.95 Monday afternoon. Its October80 calls traded 5,123 contracts, compared with 8,750 outstanding contracts, and gained $2 to $6.90 at theCBOE.

- Kopin Tan, Dow Jones Newswires; 201-938-2202; [email protected]

[ 09-27-04 1533ET ]

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Options --- The Striking Price -- Surviving a Thin Harvest: Premium seekers might pluck Apple, or Kodak

MARKET WEEKOptions --- The Striking Price -- Surviving a Thin Harvest: Premium seekers might pluck Apple, orKodak By Kopin Tan831 words27 September 2004Barron'sBMW13English(c) 2004 Dow Jones & Company, Inc. October gets no respect. Because monthly options expire after the third Friday each month, the 15th is theearliest possible day for an "Expiration Friday." This year's October option expiration happens to fall on the15th. More important, only about a quarter of Standard & Poor's 500 companies are expected to reportearnings before October puts and calls lapse. So option buyers positioning for stock-price movement are looking to November options to get more bang fortheir buck. And the election, another likely catalyst, takes place before November expiration. "Despite thecatalysts positioned between October and November expirations," note Goldman Sachs' option strategists,"November option prices are only modestly more expensive than October" for many options pegged to broad-market indexes and sectors. Not that implied volatility of November options aren't higher than October's, but the upward slope is generallyin line with recent term structure. The option market continues to forecast a calm stock market in the nearterm but expects things could get choppier later. The Chicago Board Options Exchange volatility index, orVIX, crept up 1.8% to 14.28 last week, as rising oil prices and concerns about profit growth sent stockslower. But this 30-day volatility forecast remains near its decade low. In contrast, futures on the VIXcontinues to anticipate future risk, and indicate that traders believe VIX could reach 15.6 by mid-October,16.9 by mid-November, before exceeding 18 by February. Last week, the option buying was especially noticeable in sectors including oil and technology. With many oilproducers and oil-service companies outperforming the broad market and trading at year highs -- thePhiladelphia Oil Service Index, for example, is up nearly 29% this year; concerns about peaking oil drovesome investors to buy options to hedge their stock risk. Among tech stocks, the selective option buying may be prompted by worries that any earnings weakness willbe severely punished by crestfallen investors. Neil Silverman, a managing member of Triple J Trading, sayshe would install puts or put spreads on Internet-related stocks like eBay, Google, Amazon.com and Yahoo!.Each has run up markedly over the past month, and Silverman attributes the spirited rally to aggressivestock buying by momentum traders and large mutual funds anxious to show a quarterly profit. "These stockswill probably continue to stay strong until Sept. 30, when the quarter ends," he says. But these stocks couldcorrect once buying interest wanes. Meanwhile, with the stock indexes trading in a narrow range but option premiums on certain stocks pickingup as earnings season approaches, some traders are scouring for option-selling ideas. Several strategists zoomed in on Eastman Kodak as a call-selling candidate. In an upbeat presentation toinvestors midweek, the company reaffirmed its recent restructuring and said the decline in its traditionalbusiness is offset by its burgeoning digital operation. While Kodak raised its sales forecast for filmless digitalproducts over the next few years, analysts question if Kodak can make its digital enterprise as profitable asits traditional film and camera businesses. Another challenge? The 7% to 8% annual revenue growth targetfor the 2003 to 2007 period. Kodak shares have rallied 29% since July 20. Even before the investor meeting, Goldman strategist MariaGrant had pointed out how implied volatility of one-month options were trading near year highs amid recentuncertainty over Kodak's outlook. Credit Suisse First Boston strategist Ryan Renicker noted how Kodakalready trades above the firm's 12-month price target of $28. Both see limited upside for Kodak shares, andnoted how investors have bid up out-of-the-money puts -- likely to protect stock gains. The upshot?Stockholders who think Kodak is peaking might sell calls to harvest option premiums while setting prices atwhich they are willing to sell stock. With Kodak shares at 32.05, Renicker suggests January 32.50 callstrading near $2 -- roughly 6.2% of the stock price.


Another Renicker pick is Apple Computer, which has rallied 75% this year and is now trading at 42 times2005 earnings and 58 times that for the current year. "The outlook for Apple shares has become moreuncertain as they soared during the year," driving implied volatility above levels realized by the stock, hepoints out. Despite the strong product lineup, investors who see limited upside potential might sell at-the-money January 37.50 calls. These were trading at about $3.70, roughly 9.9% of the stock price, and thetrade begins to lose money only if Apple rallies above 41.20. --- KOPIN TAN covers the options markets for Dow Jones Newswires. --- E-mail: [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html. 5032 Document B000000020040925e09r0000y



Warnings Can Be Opportunities

Options ReportWarnings Can Be Opportunities By Kopin Tan Dow Jones Newswires274 words23 September 2004The Wall Street JournalJC4English(Copyright (c) 2004, Dow Jones & Company, Inc.) NEW YORK -- Sometimes, companies' profit warnings can create opportunities for option-market investors. That is what Credit Suisse First Boston derivative strategist Ryan Renicker saw in, for instance, UTStarcomInc. The communications-equipment company on Monday slashed its third-quarter earnings forecast,sending down its stock by nearly 10% while driving up implied volatility of its options. CSFB was among the firms to downgrade the stock the next day, citing diminished catalysts for share pricegrowth over the next six to 12 months. To Mr. Renicker, the combination of limited stock upside and elevated option premiums presents a chancefor investors to sell call options. Call sellers earn premiums upfront but are committed to sell shares if theyrally beyond certain targets. In a research note, Mr. Renicker pointed out how the out-of-the-money January 15 calls were trading atabout $1.40, so the option premium represents nearly 10% of the stock price. UTStarcom shares rose ninecents to $14.05 in Nasdaq Stock Market trading. A seller of Jan. 15 calls essentially makes money if thestock stays below $16.40 before the sold options expire in mid-January. Meanwhile, concerns about slowing profit growth spurred cautious options trading yesterday after weakearnings reports from companies such as Morgan Stanley and Wendy's International Inc. Surging oil pricesadded to jitters and got a rise out of the recently subdued risk forecast. The Chicago Board OptionsExchange volatility index, or VIX, jumped 1.08, or 7.9%, to 14.74. License this article from Dow Jones Reprint Service Document J000000020040923e09n0000r



Options Report: Profit Warnings Spur Trades; VIX Rises

Options Report: Profit Warnings Spur Trades; VIX Rises By Kopin TanOf DOW JONES NEWSWIRES605 words22 September 200415:31Dow Jones News ServiceDJEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--Sometimes, a company's profit warning can create an opportunity for optionmarket investors. That's what Credit Suisse First Boston derivative strategist Ryan Renicker saw in UTStarcom Inc. Thecommunications equipment company on Monday slashed its third-quarter earnings forecast, sending itsstock down nearly 10% while driving up implied volatility of its options. CSFB was among the firms to downgrade the stock the next day, citing diminished catalysts for share pricegrowth over the next six to 12 months. To Renicker, the combination of limited stock upside and elevated option premiums represents a chance forinvestors to sell call options against their shares. Call sellers earn premiums upfront but agree to cap stockgains since they have committed to sell shares beyond certain price targets. In a research note Wednesday, Renicker suggests, for instance, selling out-of-the-money January 15 calls.With these calls trading Wednesday at about $1.45, the call seller essentially will begin to lose money only ifUTStarcom rallies above $16.40 before the sold options expire mid-January. UTStarcom shares were up 12cents to $14.08 Wednesday afternoon. Meanwhile, concerns about slowing profit growth spurred cautious option trading Wednesday, afterlackluster earnings reports from the likes of Morgan Stanley and Wendy's International. Surging oil pricesadded to the unease and managed to get a rise out of the recently-subdued risk forecast. The Chicago Board Options Exchange volatility index, or VIX, has been hovering near its lowest level in nineyears, but on Wednesday gained 0.94 or 6.9% to 14.60. Defensive puts traded briskly in sectors from financial to technology, as some investors bought downsideinsurance to protect recent stock gains. Amazon.com shares slipped $1.87 to $41.43. The online retailer's October 42.50 puts traded 8,323contracts, compared with 9,712 previously outstanding, and gained 80 cents to $2.15 at the InternationalSecurities Exchange. Citigroup fell $1.19 to $44.46 Wednesday afternoon and is off 5.3% so far this week. Its October 47.50 putstraded 4,044 contracts, compared with 9,670 previously outstanding, and gained 95 cents to $2.95. Cisco Systems shares fell 74 cents to $18.91. Its October 20 calls traded 27,301 contracts, compared with86,678 outstanding contracts, and fell 15 cents to 20 cents at the CBOE. Puts on medical-device makers trading fairly actively even as these stocks crept higher. Although the marketseems to expect a positive Medicare decision late Wednesday that can broaden reimbursement forimplantable cardiovascular defibrillators, some option investors likely were playing it safe and buying putprotection lest the decision proved less bullish than hoped. Medtronic, for example, was up 25 cents to $50.51 and is approaching a 52-week high set in February. ItsOctober 50 puts gained 5 cents to 70 cents as 1,231 contracts traded at the ISE, compared with 1,748outstanding contracts. Options on Fannie Mae traded heavily Wednesday, with option buyers generally bracing for the stock priceto remain volatile. Fannie Mae disclosed that the Securities and Exchange Commission has launched an


informal inquiry into its accounting practices. The stock tumbled $5.04, or 6.7%, to $70.61. The October 70 puts, for instance, traded 8,991 contracts,compared with 7,628 previously outstanding, and gained $1.40 to $1.75 at the ISE.

- Kopin Tan, Dow Jones Newswires; 201-938-2202 [email protected]

[ 09-22-04 1531ET ]

70699 Document DJ00000020040922e09m000dx


Traders Focus More on the Risks Of Specific Stocks Than on Indexes

Options ReportTraders Focus More on the Risks Of Specific Stocks Than on Indexes By Kopin Tan Dow Jones Newswires468 words20 September 2004The Wall Street JournalJC2English(Copyright (c) 2004, Dow Jones & Company, Inc.) NEW YORK -- Options traders will be paying more attention this fall to the market of stocks than to the stockmarket. As brokerage houses prepare this week to jolt the market from its earnings-free slumber, short-term optionsprices on the major stock indexes continue to hover near their lows for the year -- an indication traders don'texpect the stock gauges to move much during the next few weeks. In comparison, options on individual stocks and sectors are attracting more attention -- as recent profitwarnings have traders focusing more on stock-specific risks than broad-market perils. In fact, option prices show that implied correlation -- the projected tendency of stocks to move up or down inone tight pack -- has declined markedly. Greg Robin, Rochdale Securities' chief option strategist, noted "extremely low levels of implied correlationamong components" of the Standard &Poor's 500-stock index, the Dow Diamonds, and the Nasdaq-100Index Tracking Stock. "All three are at 52-week lows," Mr. Robin noted. In the Nasdaq-100 stock, or QQQ, implied correlation is at the lowest in more than three years, according to Ryan Renicker, a Credit Suisse First Boston derivatives strategist. QQQ options also appear reasonablypriced, with the options implying a level of volatility in line with recent historical levels. "This is an opportune time to hedge technology positions by buying cheap put options on the QQQ, versusselling" expensive puts on certain individual stocks, Mr. Renicker wrote in a research note Friday.Conversely, bulls may buy inexpensive QQQ calls to position for a rally, versus selling more expensive callson component stocks. The QQQ tracking stock has rallied 9% since Aug. 12 and on Friday closed up 11 cents at $35.43. TheOctober 35 calls traded 31,796 contracts, and rose five cents to $1 at the International Securities Exchange.The October 35 puts traded 52,091 contracts, and eased five cents to 55 cents at the Chicago BoardOptions Exchange. Another company traders focused on was General Electric, whose stock pushed toward its highest level inmore than two years. Among other things, a Prudential Equity note listed some factors it believes couldsupport above-average growth, including an accelerating recovery of GE's long-cycle businesses andexpanding sales of transportation, energy and infrastructure to emerging markets. GE shares rose 69 cents to $34.22. The October 35 calls traded 12,438 contracts, compared with 11,375previously outstanding, and rose 15 cents to 25 cents at the CBOE. The CBOE volatility index, or VIX, slipped 0.36 to 14.03 as September options traded their final session. License this article from Dow Jones Reprint Service Document J000000020040920e09k00009



Options --- The Striking Price -- Calls of the Mild: Options stay in the summer doldrums

MARKET WEEKOptions --- The Striking Price -- Calls of the Mild: Options stay in the summer doldrums By Kopin Tan857 words20 September 2004Barron'sBMW12English(c) 2004 Dow Jones & Company, Inc. Back from summer vacations, option traders can be forgiven for thinking time has stood still. The calendarsays it's September, but it feels an awful lot like August: Stocks twitch within a small range. Risk perceptionwilts. Traders wait for the market to stir from its torpor. What are the odds this fall will live up to its billing as a volatile season? Not very high, according to the optionmarket. There may be uncertainty over the bitter election and oil prices.Companies may have startedwarning investors to expect slower profit growth (Thomson First Call tracked 1.9 negative pre-announcements for every positive one so far this quarter, compared to 1.4 during the first quarter and 0.9over the second). But short-term options on nearly every major stock index are trading at or near decadelows -- a sign few expect stock indexes to move much over the next one or two months. As last week started, the Chicago Board Options Exchange volatility index, or VIX, had declined in 18 out of21 sessions to reach an 8 1/2-year low. Profit warnings from Coca-Cola and Nortel Networks as the weekwore on barely roused this 30-day volatility forecast. The mellow VIX isn't wholly unfathomable. With the Standard & Poor's 500 trading in a narrow range allyear, realized volatility has subsided to its lowest level in years, and index option buyers have often seentheir assets waste away. "Option premiums are so low you know you should buy, but everyone seems afraidto these days," says one Chicago index option trader. Nor is all this as flagrantly complacent as bears insist. A differential continues to exist between out-of-the-money puts and comparable calls -- a sign of firm demand for portfolio insurance. Kyle Rosen, president of Rosen Capital Management, says implied volatility of S&P calls are now extremelycheap. "Many people have been selling calls even when they aren't getting much premiums, because theyare anxious for some returns in the flat market," he says. "This has created an unbelievable tacticalopportunity." With the S&P 500 rallying nearly 6.2% since Aug. 12, skeptical investors might sell stock and hold cashwhile buying S&P calls that expire in three-to-six months. "You maintain most of the potential upsideexposure but cut your money at risk by as much as 80%," Rosen says. Meanwhile, the volatility forecast isn't the only thing on the wane. Traders noticed last week how impliedcorrelation -- the tendency for stocks to move in one tight cluster -- has declined to year lows for indexes likethe S&P 500, Nasdaq 100 and the Dow Jones Industrial Average. Maybe it's the rash of profit warnings fromindividual companies, or the immobility of the stock indexes in the face of it all. But option prices indicate thattraders have become more worried about stock-specific risks than broad-market threats. In fact, implied correlation of the Nasdaq 100 Index has slumped to a three-year low, says Credit Suisse FirstBoston strategist Ryan Renicker. Implied volatility of the Nasdaq 100 Tracking Stock, or QQQ, options alsois in line with realized volatility, which makes QQQ options seem cheap compared with options onconstituent stocks. Maria Grant and Jason Cuttler, Goldman Sachs' option strategists, also noted how option prices seemparticularly depressed in the tech sector. Implied volatility of three-month QQQ options are priced near theyear's low. "This creates opportunities to buy options to either set up for a fourth-quarter rally or hedgeahead of a potentially volatile earnings season," they write. In particular, they suggest buying two- or three-month options, since only a quarter of the Nasdaq 100 (in terms of market cap) will report earnings beforeOctober options expire. Individual tech stocks whose three-month options appear cheap include Oracle,Texas Instruments, Applied Materials, IBM and Microsoft.


Meanwhile, the earnings season kicks off with brokerages like Bear Stearns, Morgan Stanley, LehmanBrothers and Goldman Sachs reporting this week. Implied volatilities of their short-term options aren'thistorically high but crept up several percentage points last week. But some analysts see a quiet earnings cycle with little fanfare. The third quarter is often sluggish for WallStreet, but this August was particularly brutal as trading volume and volatility shriveled. With some brokeragestocks up as much as 10% in the past month,Grant and Cuttler, for example, suggest that investors who seelimited further upside might sell calls against shares. In particular, one-month options on Lehman and MerrillLynch were implying a level of volatility about five percentage points above that which these stocks haverecently realized. --- KOPIN TAN covers the options markets for Dow Jones Newswires. --- E-mail: [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html. 5032 Document B000000020040918e09k0000o



Options Report: Traders Turn To Stock-Specific Risks

Options Report: Traders Turn To Stock-Specific Risks By Kopin TanOf DOW JONES NEWSWIRES615 words17 September 200415:31Dow Jones News ServiceDJEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--This fall, option traders may pay more attention to the market of stocks than to thestock market. As brokerage firms kick off the quarterly earnings season next week, short-term option prices on the majorstock indexes continue to hover near year lows - an indication traders do not expect the stock gauges tomove much over the next few weeks. In comparison, options on individual stocks and sectors are attracting more attention - a sign the recent profitwarnings has shifted traders' focus to stock-specific risks from broad-market perils. In fact, implied correlation - the projected tendency of stocks to move up or down in one tight pack - hasdeclined markedly over the past few weeks. Greg Robin, Rochdale Securities' chief option strategist, noted "extremely low levels of implied correlationamong components" of the Standard & Poor's 500 Index, the Dow Diamonds, and the Nasdaq 100 TrackingStock. "All three are at 52-week lows," he noted. In the Nasdaq 100 Tracking Stock, or QQQ, implied correlation is at the lowest in more than three years,according to Ryan Renicker, a Credit Suisse First Boston derivatives strategist. QQQ options also appearreasonably priced, with the options implying a level of volatility in line with recent historical levels. "This is an opportune time to hedge technology positions by buying cheap put options on the QQQ, versusselling" more expensive puts on certain individual stocks, Renicker writes in a research note Friday.Conversely, bulls may consider buying cheap QQQ calls to position for a rally, versus selling moreexpensive calls on individual stocks. The QQQ tracking stock has rallied 9.2% since Aug. 12 and was up 16 cents to $35.48 Friday afternoon.The October 35 calls traded 24,291 contracts, compared with 88,237 outstanding contracts, and gained 5cents to $1 at the International Securities Exchange. The October 35 puts traded 45,037 contracts,compared with 105,143 outstanding contracts, and eased 5 cents to 55 cents at the Chicago Board OptionsExchange. Another stock to catch traders' attention Friday was General Electric, whose stock pushed toward its highestlevel in more than two years. An optimistic note from Prudential Equity listed some factors it believes couldsupport above-average growth, including an accelerating recovery of GE's long-cycle businesses andexpanding sales of transportation, energy and infrastructure to emerging markets. GE shares rose 66 cents to $34.18. The October 35 calls traded 11,030 contracts, compared with 11,375previously outstanding, and gained 10 cents to 20 cents at the CBOE. Options on brokerage firms also traded actively with several scheduled to report earnings next week.Brokerage stocks have been strong over the past month, but some analysts are forecasting muted earningsreports after the summer's quiet trading and low volatility spell. Goldman Sachs was off 79 cents to $92.37. Its October 90 puts traded 3,824 contracts, compared with11,824 outstanding contracts, and gained 35 cents to $1.55 at the ISE. The October 95 calls traded 2,786contracts, compared with 21,792 outstanding contracts, and fell 35 cents to $1.15 at the ISE. Lehman Brothers slipped $1.12 to $76.53. Its October 75 puts traded 1,997 contracts, compared with 7,994outstanding contracts, and gained 35 cents to $1.35 at the ISE.


The CBOE volatility index, or VIX, slipped 0.40 to 13.99 as September options traded their final session. -By Kopin Tan, Dow Jones Newswires; 201-938-2202; [email protected] [ 09-17-04 1531ET ] 70699 Document DJ00000020040917e09h000co


Options Report: Traders Turn To Stock-Specific Risks

Options Report: Traders Turn To Stock-Specific Risks By Kopin TanOf DOW JONES NEWSWIRES614 words17 September 200415:33Dow Jones International NewsDJIEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--This fall, option traders may pay more attention to the market of stocks than to thestock market. As brokerage firms kick off the quarterly earnings season next week, short-term option prices on the majorstock indexes continue to hover near year lows - an indication traders do not expect the stock gauges tomove much over the next few weeks. In comparison, options on individual stocks and sectors are attracting more attention - a sign the recent profitwarnings has shifted traders' focus to stock-specific risks from broad-market perils. In fact, implied correlation - the projected tendency of stocks to move up or down in one tight pack - hasdeclined markedly over the past few weeks. Greg Robin, Rochdale Securities' chief option strategist, noted "extremely low levels of implied correlationamong components" of the Standard & Poor's 500 Index, the Dow Diamonds, and the Nasdaq 100 TrackingStock. "All three are at 52-week lows," he noted. In the Nasdaq 100 Tracking Stock, or QQQ, implied correlation is at the lowest in more than three years,according to Ryan Renicker, a Credit Suisse First Boston derivatives strategist. QQQ options also appearreasonably priced, with the options implying a level of volatility in line with recent historical levels. "This is an opportune time to hedge technology positions by buying cheap put options on the QQQ, versusselling" more expensive puts on certain individual stocks, Renicker writes in a research note Friday.Conversely, bulls may consider buying cheap QQQ calls to position for a rally, versus selling moreexpensive calls on individual stocks. The QQQ tracking stock has rallied 9.2% since Aug. 12 and was up 16 cents to $35.48 Friday afternoon.The October 35 calls traded 24,291 contracts, compared with 88,237 outstanding contracts, and gained 5cents to $1 at the International Securities Exchange. The October 35 puts traded 45,037 contracts,compared with 105,143 outstanding contracts, and eased 5 cents to 55 cents at the Chicago Board OptionsExchange. Another stock to catch traders' attention Friday was General Electric, whose stock pushed toward its highestlevel in more than two years. An optimistic note from Prudential Equity listed some factors it believes couldsupport above-average growth, including an accelerating recovery of GE's long-cycle businesses andexpanding sales of transportation, energy and infrastructure to emerging markets. GE shares rose 66 cents to $34.18. The October 35 calls traded 11,030 contracts, compared with 11,375previously outstanding, and gained 10 cents to 20 cents at the CBOE. Options on brokerage firms also traded actively with several scheduled to report earnings next week.Brokerage stocks have been strong over the past month, but some analysts are forecasting muted earningsreports after the summer's quiet trading and low volatility spell. Goldman Sachs was off 79 cents to $92.37. Its October 90 puts traded 3,824 contracts, compared with11,824 outstanding contracts, and gained 35 cents to $1.55 at the ISE. The October 95 calls traded 2,786contracts, compared with 21,792 outstanding contracts, and fell 35 cents to $1.15 at the ISE. Lehman Brothers slipped $1.12 to $76.53. Its October 75 puts traded 1,997 contracts, compared with 7,994outstanding contracts, and gained 35 cents to $1.35 at the ISE.


The CBOE volatility index, or VIX, slipped 0.40 to 13.99 as September options traded their final session. -By Kopin Tan, Dow Jones Newswires; 201-938-2202; [email protected] [ 17-09-04 1933GMT ] Document DJI0000020040917e09h000ss


Options --- The Striking Price -- Oil Ennui: Crude prices soar, but oil stock options trade fitfully

MARKET WEEKOptions --- The Striking Price -- Oil Ennui: Crude prices soar, but oil stock options trade fitfully By Kopin Tan824 words23 August 2004Barron'sBMW11English(c) 2004 Dow Jones & Company, Inc. Soaring oil prices have hogged newspaper headlines, and worried everyone from car drivers to stock-marketinvestors. But the angst doesn't seem to have spilled into the option market. Crude futures pushed $50 a barrel Friday, lifting many oil stocks toward 52-week highs. But options tied to oilstocks traded lackadaisically. The sector's implied volatility has risen over the past two months, so theoptions aren't cheap. But it still seems oddly muted, compared with highs over the past five years and to thespeculative frenzy in the crude market. "A lot of the anxiety you see reflected in crude futures you just don'tsee in oil-related options," says Mercury Trading option strategist Paul Foster. The ennui is understandable. Large companies like ExxonMobil and ChevronTexaco are diversified, andsome traders simply don't think wild crude swings will send ripples through oil-related stocks. But with oilprices likely to remain unstable, strategists are advising oil-stock investors to hedge their exposure withoptions. With the American Stock Exchange Oil & Gas Index up 34% in the past 12 months, thoseconcerned that a retracement of petro prices might pressure oil stocks should consider buying suitable puts.The term structures of many oil-stock options are fairly flat, which means longer-dated options that affordmore extended downside insurance aren't much pricier than short-dated ones. Ryan Renicker, a Credit Suisse First Boston strategist, compared stock price movement of 41 large-capcompanies with oil price changes to sieve out the large decliners. He found 13 oil-related stocks that lookmore vulnerable to an ebb in oil prices, including Grant Prideco, Noble, and Nabors Industries. At least fourstocks on the list had options that seem cheap: Noble, Smith International, Weatherford International andCooper Cameron. According to Renicker, premiums of these options appear reasonable, compared with historical levels andwith their peers. And according to a CSFB tool that Renicker calls the "long-term cheapness index," the oddsare good -- 62% to 84% -- that these four stocks could become more volatile than the option prices areimplying. Meanwhile, pricing oil options will seem as elementary as high-school algebra when traders tackle the moreabstract task of pricing Google options. It's a challenge that comes after a recent rule change lets exchangeslist options on hot new stocks a week after their debut, instead of having to wait months. With Googleoptions due to begin trading Friday, traders are asking one intriguing question: Just how do we price them? Option prices depend on several variables, including the underlying security's anticipated volatility. Googleshares are less than one week old. Yet from this young and flimsy history, option traders must project anentire future of stock-trading patterns and estimate how volatile the shares might be in coming weeks andmonths. "You're almost figuring out how to price something that's never traded before," says Jeff Shaw,head trader at option specialist Timber Hill. As with a hunt for organ donors, traders will look to the next of kin, and many regard Yahoo! as the closestcousin. Both run Internet-search engines and have similar market values. Still, Google isn't Yahoo!, orAmazon.com or eBay, and this approach is about as reliable as diagnosing a patient using another patient'smedical chart. Implied volatility of Google options is expected to start high, since option sellers will want to be well paid fortaking on risk in the face of such uncertainty. Google had priced 19.6 million shares at 85 apiece, and thestock rose 18% to 100.33 on Day One. "The fact that it's a $100 stock also makes it trickier," Timber Hill'sShaw says. An out-of-the-money put has a high strike price of $95, compared to a similar put for a $25 stock."This puts a lot more dollars at risk for market makers who are short the option," he says. Adding to potential volatility is Google's short lockup periods. More than 91 million shares can be sold in the


market anywhere between 15 to 150 days after the IPO, during a stretch in which many companies arenormally restricted from selling stock. "Much of the stock is also in the hands of relatively few executives, so it can be hard to borrow shares,"Shaw says. That can make it trickier for market makers to short stock to manage their own shifting exposure.The options' prices probably will reflect these higher hedging costs. --- KOPIN TAN covers the options markets for Dow Jones Newswires. E-mail: [email protected] --- For Barron's subscription information call 1-888-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/subscription/subscription.html. 5032 Document B000000020040821e08n00010



As Dow Industrials Change, A Surprise Might Ensue --- Shares Dumped From Key Index Today Stand Chance to Outpace Their Replacements, Trend...

Heard on the StreetAs Dow Industrials Change, A Surprise Might Ensue --- Shares Dumped From Key Index Today StandChance to Outpace Their Replacements, Trend Shows By E.S. Browning1,183 words8 April 2004The Wall Street JournalJC1English(Copyright (c) 2004, Dow Jones & Company, Inc.) THE DOW JONES Industrial Average undergoes its second major facelift in more than four years today, andthe change is leaving some investors and analysts with a knotty problem. Beginning with today's trading, three new stocks -- insurance giant American International Group, drugmaker Pfizer and telephone-service provider Verizon Communications -- join the 30-stock Dow industrials.They replace long-distance telephone company AT&T, photography concern Eastman Kodak and papermaker International Paper. The coming changes were announced last week. The problem: Which stocks to own for the future -- the bright new arrivals or the tired old stocks that aredeparting? Betting on the new stocks would have been the wrong way to go the last time the Dow was revised, inNovember 1999. The four stocks that joined the blue-chip average held up for only about four months afterthey entered. Then, they flopped and, as a group, were eventually overtaken by the stocks they hadreplaced, according to calculations by Dow Jones Indexes, an operating group within Dow Jones &Co.,publisher of The Wall Street Journal. The group calculates and licenses the industrial average, and Journaleditors pick the stocks. Some contrarian investors think such price movements could happen again. "When stocks are removed it can be the low point and that can set them up to rebound," says CharlesCarlson, a money manager and writer in Hammond, Ind. He publishes a newsletter called Dow TheoryForecasts and this year brought out a book called "Winning With the Dow's Losers," arguing that the worst-performing Dow stocks each year are likely to do the best in following years. "My sense is that you probably are going to see Eastman Kodak and AT&T do pretty well this year after theyget past this little quagmire," Mr. Carlson says. It is certainly true that the four stocks brought into the Dowindustrials in 1999, Home Depot, Intel, Microsoft and SBC Communications, all have fallen sharply --anywhere from 25% to 50% -- since then. And it isn't the onetime highfliers Intel and Microsoft that havedone the worst. Telephone-service provider SBC, which has suffered from the intense competition andoverinvestment in the telecommunications business, has fallen the most in price. The four stocks that were dropped from the index in 1999 have done better. Two have posted actual pricegains since they left the industrial average: Sears Roebuck, which has risen about 50%, and Dow Chemical,which is up a few percentage points. Dow Chemical wasn't in the Dow industrials itself but acquired formerDow component Union Carbide. Two of the former Dow members are down: ChevronTexaco (successor to former Dow componentChevron), which has fallen only slightly, and Goodyear Tire &Rubber, which has tumbled nearly 80% inprice. Some analysts view the weakness of the stocks that joined the Dow in 1999 as an aberration, a product ofthe overheated market of that era. An analysis of stocks that entered and left the Dow in years before 1999indicates that the new stocks generally have done better than those they replaced, says stock-tradingstrategist Ryan Renicker at brokerage firm Credit Suisse First Boston in New York. "When companies areadded to indexes, such as the Dow, they are considered to be firms that are market leaders within theirrespective sectors," Mr. Renicker says. "This is likely one of the key factors that drives these stocks'subsequent outperformance following their addition." Wal-Mart Stores and Citigroup, industry leaders that joined the Dow in 1997, have done better than


Bethlehem Steel and Woolworth, which departed that year. But the issue, the contrarians say, isn't justwhether a company is coming or going, it is the reason that it is arriving or leaving. If a company is enteringthe average at the top of its game, as apparently was the case with most of the 1999 additions, it may find itdifficult for the stock to keep putting in the gains that brought it to investors' attention. And if it is leaving because of financial trouble, as was the case with Bethlehem Steel, Woolworth and, to alesser degree, Goodyear, then the stock may have trouble rebounding. But companies that are facing less-severe problems may be able to recover strongly, at least for a while -- asdid Sears. "Eastman Kodak and AT&T have just been having trouble getting out of their own way. Are they going tocome back? I think they will," says Neil Hennessy, who oversees $1.35 billion in the Hennessy Funds, basedin Novato, Calif., where he manages money using a contrarian theory that recommends owning the "Dogs ofthe Dow." Those are the stocks with the highest dividend yields in the index -- often stocks that havedeclined in the previous year, making their yields (dividend divided by stock price) higher. The "Dogs of the Dow" strategy and Mr. Carlson's technique of picking the worst-performing Dow stocks areversions of an investment style called "value investing," which seeks stocks that are cheap by someobjective measure. In contrast, a strategy of investing in companies with seemingly bright futures would beconsidered "growth" investing. Paul Hickey, a stock analyst at Birinyi Associates in Westport, Conn., has looked at the performance ofstocks that enter and leave the Standard &Poor's 500-stock index, and he has found a similar trend. Stocksthat leave the S&P 500 tend to do better than those that enter, over various time periods. Investing in stocks that leave the S&P 500 can be risky, however. Stocks that leave that index often do sodue to a severe financial problem, as was the case with Enron and HealthSouth. If the stock continues totrade, it can be volatile and dangerous. Mr. Carlson suggests that investors could divide the stocks thatleave the Dow into two groups -- those facing financial crisis, and those that simply are in a downturn. If youavoid companies such as Woolworth and Bethlehem Steel, he argues, you can profit by buying the apparentlosers. For example, he notes, the two worst-performing stocks in the Dow in 2000 were AT&T and Microsoft. Butboth were among the index's best stocks in 2001. The best performer in 2002 was Eastman Kodak, whichwas the worst performer in 2003, and which he thinks will rise again. International Paper rose 23% in price last year, slightly less than the overall 25% gain for the Dow, makingInternational Paper an average performer -- neither a leader nor a laggard. Investors who, like Mr. Renicker,believe that history favors industry leaders, will put their money on AIG, Pfizer and Verizon. The contrarians,such as Mr. Carlson, look at the same history and back AT&T and Kodak. License this article from Dow Jones Reprint Service Document J000000020040408e0480003h



IPO Outlook: Market Finds Itself A Victim Of Success

IPO Outlook: Market Finds Itself A Victim Of Success By Raymond HennesseyOf DOW JONES NEWSWIRES1,010 words29 March 200408:15Dow Jones News ServiceDJEnglish(c) 2004 Dow Jones & Company, Inc. NEW YORK (Dow Jones)--The resurgence in the new-issues market may bear some of the blame for therecent slump in the broader indexes. As the stock market has rebounded over the past 12 months, so has the number of companies sellingshares in initial public offerings and secondary stock sales. While that's cheered both the issuers waiting to sell shares and the Wall Street underwriters eager togenerate fees from leading such sales, the growth in the volume of share offerings has a price tag: Historysuggests that periods of growth in share sales leads to poor performance in the broader stock market. Over the past seven years, the broader market, as measured by the S&P 500 index, has slipped on average1.05% in the three-month period following a one-month increase in equity offerings, according to recentresearch from Credit Suisse Group's (CSR) Credit Suisse First Boston. The inverse is true as well. The market is generally up 4.64% in the three-month period following a one-month decline in total share offerings, according to the data. The data suggest that "there is definitely a liquidity effect," said Ryan Renicker, an equity trading strategistat Credit Suisse in New York. "When there's a glut of supply, it's difficult for the market to absorb." But the data also hints that underwriters are good at timing deals, since many of the offerings are priced at ornear market tops, Renicker said. This shows up in a breakdown of sectors. While the overall market may fall after a period of heavy new stockissuance, individual sectors with a good number of IPOs or secondaries tend to outperform the broadermarket, according to Renicker's research. For instance, four sectors with notable increases in equityissuance from January to February of this year - utilities, financial services, consumer staples and energy -all outperformed the rest of the market this month as the broader averages fell, he said. By contrast, sectors like consumer discretionary and health care, which saw a decrease in equity issuance,underperformed the market. Investors looking for signs of a pickup in the broader market might be cheered by the recent weakness inIPOs. Last week was a tough one for companies trying to go public, judging by several companies that wereforced to cut their IPO prices to get their offerings completed. On Friday, drug developer Anadys Pharmaceuticals Inc. (ANDS) finally made its market debut, more than aweek after it was forced to delay its offering amid weak demand. Earlier last week, Anadys, based in SanDiego, cut price estimates on the offering of 6.25 million shares to between $7 and $8, from earlier estimatesof $11 to $13 a share. In the end, it priced the offering, led by Societe Generale's SG Cowen Securities and Piper Jaffray Cos.(PJC), at the low end of that revised range, and the shares closed Friday on the Nasdaq Stock Market with anegligible gain at $7.06 a share. It was the second-straight session that a company had to price its offering far below views. On Thursday,chip-equipment company Ultra Clean Holdings Inc. (UCTT), which makes systems that deploy gases thatare used in the semiconductor-manufacturing process, closed 7% above its $7 offering price when it beganinitial trading. But getting public required a steep discount. Ultra Clean, based in Menlo Park, Calif., hadbeen marketing 9.1 million shares at $10 to $12 a share, but had to cut terms to an offering of six millionshares sold at just $7.50.


Even that wasn't enough. It ended up selling its shares below that lowered price point. Credit Suisse andJ.P. Morgan Chase & Co. (JPM) led Ultra Clean's IPO. Even companies pricing within expectations are doing so at the low end. On Friday, Hornbeck OffshoreServices Inc. (HOS), Mandeville, La., which owns oil-supply vessels, tug boats and oil barges, closed on theNew York Stock Exchange at $13.25, slightly above the $13 offering price set on its IPO of six millionshares. The pricing, led by Goldman Sachs Group Inc. (GS) and Jefferies Group Inc. (JEF), was at thebottom of estimates of $13 to $15 a share. But the recent weakness hasn't stopped companies from filing to go public. So far in March, there have been44 IPO filings with the SEC, according to Thomson Financial. That makes this month the busiest month forfilings since September 2000. Elsewhere in the IPO market: * Another company is trying its hand with the Income Depositary Security, the stock-bond hybrid developedby Canadian Imperial Bank of Commerce's (BCM) CIBC World Markets. On Thursday, FairPointCommunications Inc., a rural telephone company based in Charlotte, N.C., filed to raise up to $750 millionthrough CIBC, Citigroup Inc. (C) and Deutsche Bank AG (DB). It will join Volume Services Holdings Inc.(CVP), which sold IDSs last year, and America Seafoods Corp., which will go public in the second quarter.Another company, B&G Foods Holdings Corp., is going public with a similar instrument. * After the IPO market collapsed, dozens of companies dropped the ".com" from the end of their names.Now, the suffix may be in vogue again. In the second quarter, software company salesforce.com Inc. isexpected to come to market through Morgan Stanley. Last week, Shopping.com Ltd., an online comparison-shopping company based in Brisbane, Calif., filed to raise up to $75 million through Goldman Sachs andCredit Suisse. Shopping.com was among the dot-coms that failed to go public during the bust. At the time, ithad a different name: Dealtime.com Ltd. (Ray Hennessey, a news editor at Dow Jones, covers the IPO and private equity markets.) By Raymond Hennessey, Dow Jones Newswires; 201-938-5354; [email protected] [ 03-29-04 0815ET ] 70696 Document DJ00000020040329e03t0003w


IPO Outlook: Hefty Price Tag May Accompany Growth in IPOs --- Increase in Share Offerings Might Contribute to Dips In Overall Stock Market

IPO Outlook:Deals &Deal MakersIPO Outlook: Hefty Price Tag May Accompany Growth in IPOs --- Increase in Share Offerings MightContribute to Dips In Overall Stock Market By Raymond Hennessey Dow Jones Newswires956 words29 March 2004The Wall Street JournalJC6English(Copyright (c) 2004, Dow Jones & Company, Inc.) NEW YORK -- The resurgence in the new-issues market may bear some of the blame for the recent slump inthe overall stock market. As stocks have rebounded over the past year, so has the number of companies selling shares in initial publicofferings and secondary stock sales. Yet, while that's cheered both the issuers waiting to sell shares and the Wall Street underwriters eager togenerate fees from leading such sales, the growth in the volume of share offerings has a price tag: Historysuggests that periods of growth in share sales lead to poor performance in the broader stock market. Over the past seven years, the broader market, as measured by the S&P 500-stock index, has slipped onaverage 1.05% in the three-month period following a one-month increase in stock offerings, according torecent research from Credit Suisse Group's Credit Suisse First Boston. The inverse is true as well. The market is generally up 4.64% in the three-month period following a one-month decline in total share offerings, according to the data. The data suggest that "there is definitely a liquidity effect," said Ryan Renicker, an equity-trading strategistat CSFB. "When there's a glut of supply, it's difficult for the market to absorb." The data also hint, though, that underwriters are good at timing deals, since many of the offerings are pricedat or near market tops, Mr. Renicker said. This shows up in a breakdown of sectors. Four sectors with notable increases in stock issuance fromJanuary to February of this year -- utilities, financial services, consumer staples and energy -- alloutperformed the rest of the market this month, as the broader averages fell, he said. By contrast, sectors like consumer discretionary and health care, which saw a decrease in stock issuance,underperformed the market. Investors looking for signs of a pickup in the broader market might be cheered by the recent weakness inIPOs. Last week was a tough one for companies trying to go public, judging from several companies thatwere forced to cut their IPO prices to get their offerings completed. On Friday, drug developer Anadys Pharmaceuticals Inc. finally made its market debut, more than a weekafter it was forced to delay its offering amid weak demand. Earlier last week, Anadys, based in San Diego,cut price estimates on the offering of 6.25 million shares to between $7 and $8, from earlier estimates of $11to $13 a share. In the end, it priced the offering, led by Societe Generale's SG Cowen Securities and Piper Jaffray Cos., atthe low end of that revised range, and the shares closed Friday on the Nasdaq Stock Market with anegligible gain at $7.06 a share. It was the second-straight session that a company had to price its offering far below views. On Thursday,chip-equipment company Ultra Clean Holdings Inc., which makes systems that deploy gases that are used inthe semiconductor-manufacturing process, closed 7% above its $7 offering price when it began initialtrading. But getting public required a steep discount. Ultra Clean, based in Menlo Park, Calif., had beenmarketing 9.1 million shares at $10 to $12 a share, but had to cut terms to an offering of six million sharessold at just $7.50.


Even then, that wasn't enough. It ended up selling its shares below that lowered price point. CSFB and J.P.Morgan Chase &Co. led Ultra Clean's IPO. Even companies pricing within expectations are doing so at the low end. On Friday, Hornbeck OffshoreServices Inc., a Mandeville, La., company that owns oil-supply vessels, tug boats and oil barges, closed onthe New York Stock Exchange at $13.25, slightly above the $13 offering price set on its IPO of six millionshares. The pricing, led by Goldman Sachs Group Inc. and Jefferies Group Inc., was at the bottom ofestimates of $13 to $15 a share. The recent weakness hasn't stopped companies from filing to go public. So far in March, there have been 44IPO filings with the Securities and Exchange Commission, according to Thomson Financial. That makes thismonth the busiest month for filings since September 2000. Elsewhere in the IPO market: Another company is trying its hand with the Income Depositary Security, the stock-bond hybrid developed byCanadian Imperial Bank of Commerce's CIBC World Markets. On Thursday, FairPoint Communications Inc.,a rural telephone company based in Charlotte, N.C., filed to raise as much as $750 million through CIBC,Citigroup Inc. and Deutsche Bank AG. It will join Volume Services Holdings Inc., which sold IDSs last year,and America Seafoods Corp., which plans to go public in the second quarter. Another company, B&G FoodsHoldings Corp., is going public with a similar instrument. After the IPO market collapsed, dozens of companies dropped the ".com" from the end of their names. Now,though, the suffix may once again be in vogue. In the second quarter, software company salesforce.com Inc.is expected to come to market through Morgan Stanley. Last week, Shopping.com Ltd., an onlinecomparison-shopping company based in Brisbane, Calif., filed to raise as much as $75 million throughGoldman Sachs and CSFB. Shopping.com was among the dot-coms that failed to go public during the bust.At the time, it had a different name: Dealtime.com Ltd. License this article from Dow Jones Reprint Service Document J000000020040329e03t0000b



Ahead of the Tape

Ahead of the TapeAhead of the Tape By Jesse Eisinger426 words25 July 2003The Wall Street JournalJC1English(Copyright (c) 2003, Dow Jones & Company, Inc.) [Today's Market Forecast] Sale-ing Away Companies are making money in the second quarter and beating estimates. But it still appears that much ofthe gains are coming from cost cutting, rather than revenue growth. For the bulls, talk of the second quarter is history. In fact, it's a good thing that companies are making moneywith little top-line growth. That just shows what operating leverage they will have when the economy goesballistic. But here are the data so far for the few nostalgics and archivists still out there. Jerry Czarzasty of Reuters Research looked at 254 companies of the S&P 500 that have reported second-quarter earnings so far. He extrapolated from them what the growth rate for revenue will be once all 500companies have reported and came up with 3.3%. That compares with a revenue increase in the first quarterfor the S&P 500 companies of 2.9%. Still, hardly the stuff of legend. And the weaker dollar has boosted thetop line in the first half, meaning there is little in the way of rising demand. At least the companies are beating revenue expectations, just as they are topping earnings forecasts. The254 beat by an average of 2.7%, with 61% of them beating the top-line estimates and only 15% missing. Drilling down into the data, Mr. Czarzasty found that the sector with the most revenue, accounting for almosta quarter of the total, is the services sector, which includes retail. This group has beaten the analyst revenueestimates by far less than the average: 0.2%. Technology companies, among the best performing stocks,have only beaten the top-line estimates by 1.5%. Out of 10 sectors, health care is by far seeing the largest revenue increases, up 18.1%, according to CreditSuisse's Ryan Renicker, who looked at 160 companies with quarters ending June 30. Informationtechnology companies are seeing revenue rise a lower-than-average 3.1%. Mr. Renicker decided to look at profitability of his sample, preferring to look at return on equity, a measuredirectly relevant to shareholders. He found that only two out of 10 industry groups he follows have hadincreases in ROE this quarter from last year. Earnings might be looking rosy, but returns are faltering. --- Send comments to [email protected] and check Mondays for some letters at WSJ.com/Tape License this article from Dow Jones Reprint Service Document j000000020030725dz7p0002k



Microsoft's Bulletin: Software giant's move sets traders scrambling

The Striking Price MARKET WEEK -- Options Microsoft's Bulletin: Software giant's move sets traders scrambling By Kopin Tan817 words14 July 2003Barron'sBMW9English (Copyright (c) 2003, Dow Jones & Company, Inc.) The e-mails poured in. Phones rang across Wall Street's option-trading desks. Investors wanted to know:Should they sell long-dated options on big technology stocks and, if so, which ones? Here's what all the hubbub was about: Microsoft last week announced it will no longer issue stock options toemployees. To wind down its vast options program, employees will be allowed to sell existing options --many so out of the money they aren't worth much -- to J.P. Morgan in an arranged deal. Although theemployee options aren't the kind traded in the listed market, the release of so much optionality -- thesoftware giant had 1.6 billion employee options outstanding as of June 2002 -- could indirectly but inevitablysmother prices of Microsoft's long-dated listed options, not to mention the indexes in which it is a heftycomponent. "Even though J.P. Morgan will be buying the options, the firm has to hedge their own exposure somehow,somewhere," says Sean Bonner, who co-manages the Philadelphia-based volatility arbitrage fund calledZero Beta Fund. "The thinking is this could turn into a volatility dump, which could mean pressure on the[long-dated options]." Even before Microsoft's announcement, some traders had already noticed earnestselling of Microsoft's long-dated options, and their implied volatilities slipped; they dropped another one-to-three percentage points after the announcement but have held steady since. The buzz went beyond Microsoft as traders wondered who's next. "What Microsoft has done is set animportant precedent for companies with a lot of cash and a lot of underwater options" that may want tomonetize those options to retain and reward employees, says Daryl Nanes, a principal at Nanes DelormeCapital Management in New York. Adding more pressure are the anticipated changes in accounting rulesthat could soon require companies to treat employee options as expenses as early as next year. So traders scoured for companies with large employee stock-option plans, such as Cisco Systems, Intel,Citigroup, Pfizer, Dell, IBM, General Electric. They cross-checked for stock prices that had sunk far belowtheir peaks. They compiled a roster of companies that account for employee options as expenses or wereprepared to do so, and which may now try to trim or remove that expense. The idea was to look forcompanies with large concentrations of underwater options that might take the plunge behind Microsoft. Notsurprisingly, their lists are crowded with large tech stocks. For instance, strategist Ryan Renicker of Credit Suisse First Boston screened for stocks with materialexposure to expensing stock options, and whose two-year options show implied volatilities relativelyunchanged after the Microsoft announcement. Investors looking to sell options and who believe premiumscould come under pressure might pick among his list of some 13 stocks, including Network Appliance,Raytheon, Allied Waste and Mercury Interactive. But if option investors were thinking ahead, few rushed into action just yet. For one thing, Microsoft'sarrangement with J.P. Morgan is still subject to regulatory approval (even though it's unlikely the two wouldmake a big, splashy announcement without first testing the Washington waters). More importantly, manydetails of the pact remain unknown, all of which can affect how many Microsoft options are sold and theimpact on the listed market. And with long-term implied volatility in Microsoft and in many large tech stocksnear their lowest in recent years, "I don't know if I want to be too short volatility at these levels," Bonner says. Simon Yates, CSFB's head of derivatives trading, also warns about overreacting to any anticipated volatilitycrush. It isn't clear how many employees will jump to sell, even though Microsoft has said it expects most ofthe outstanding options will be sold. A lot depends on the prices J.P. Morgan offers, the strike prices andexpiration dates. "If there's a number of years left on the option, and you aren't getting a lot for it, someemployees might just hold onto them as lottery tickets" and hope for a stock surge, one strategist says. "Microsoft has shown the ability in the past to absorb a large amount of optionality -- for example, when the


company sold puts on its own stock. The recent decline in long-dated volatility on heavy volumes also couldmean a good percentage of the ultimate impact may already be factored in." Yates says. In fact, he adds,"Any big moves down in volatility, in Microsoft or tech stocks, might be a buying opportunity." --- KOPIN TAN covers the options markets for Dow Jones Newswires. --- For Barron's subscription information call 1-800-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/reader.html. Document b000000020030712dz7e0000s

http://www.barronsmag.com/reader.html


Cruising in Convertibles: For many, they're the vehicle of choice

The Striking Price MARKET WEEK -- Options Cruising in Convertibles: For many, they're the vehicle of choice By Kopin Tan827 words7 July 2003Barron'sBMW10English (Copyright (c) 2003, Dow Jones & Company, Inc.) This summer, some option traders are thinking about convertibles, and not just the ones on the road. Blamethe muffled state of option premiums on stocks' robust rally, or the summer, or lowered risk perception aftera tense year of accounting scandals and the war with Iraq. But another less obvious factor is the rash ofrecent convertible bond offerings, which has siphoned away some option-market volatility. "The convertible issuance in the first half of the year has released a significant amount of `vega' into theequity derivatives market, which in turn has spilled over into the listed options market," said Jason Cuevas,head of trading at KBC Financial Products, referring to the sensitivity of listed option value to changes involatility. Just how big is the convertible boom? With interest rates low and investors' appetite rabid, many companieshave flocked to convertibles to raise capital -- and the 155 deals so far this year have racked up $57.6 billion,according to ConvertBond.com, a unit of Morgan Stanley. This haul has already surpassed 2002's total, andlast quarter was the busiest ever. In contrast, initial public offerings have raised just $2.8 billion in 12 dealsthis year, as companies remain reluctant to sell stock publicly, given current prices and indifferent demand. Because they are fixed-income instruments that can be converted into stock at certain prices, convertiblesare considered to contain both a bond element and an embedded call option. So investors who buy theseconvertibles, many of them hedge funds and a growing number of retail customers, often sell stock to hedgetheir bond risk. At the same time, to counter their exposure to the option or volatility component, manyinvestors will also sell calls against the convertibles. Like the writing of covered calls against stocks, thispads the yield on these convertibles by a few percentage points. And because convertibles typically maturein five or more years after issuance, while even the longest-dated listed options will expire after two or threeyears, some investors will sell long-term calls against their convertibles repeatedly. The result? The implied volatility of their options often takes a hit. On the day last month when GeneralMotors announced a $3.5 billion convertible bond offering, the implied volatility of the auto maker's long-dated options opened two percentage points lower and finished the day another notch down. The effect istough to quantify, and much depends on the terms of the convertible offering, but traders say they've noticedvolatility compression of varying degrees with recent convertible offerings of companies from ComputerAssociates to Halliburton. "It definitely puts pressure on long-term volatility, although it is just one factor [in] why long-dated volatility isdepressed," says Paul Haber, portfolio manager of Kramer Capital Management in New York. This may bewelcome news for those browsing for longer-term calls, and certainly is a factor for investors looking to buyor sell volatility, traders say. Not all convertible buyers will take to the market to sell calls. But even those who don't will have to find waysto hedge their exposure to "gamma," or the rate of change of option sensitivity. "And the more convertibledeals there are out there, the more gamma hedging there is, [which] will have the effect of dampeningvolatility," Haber adds. The recent trend of cash-rich companies declaring or increasing dividends can also be tricky for convertibleinvestors, KBC's Cuevas adds. "The embedded call position in the convertible will decrease in value in theevent of dividend issuance or increase." So some convertible arbitrage players buy puts to hedge their credit risk. In fact, by buying downside putsand selling long-dated calls with the same expiration and strikes, investors can possibly set up a"conversion," an arbitrage play that combines a long put, a short call and underlying security and which locksin a net profit at no directional risk. Many convertible bond traders are starting to put on these positionsagainst their convertible holdings in names where they expect dividend announcements or increases.


-- Examples? Amgen, a widely held stock that has issued convertible securities, pays no dividend, but itscash stash was more than $4.6 billion at the end of last year. In a research note last month, Ryan Renicker,a Credit Suisse First Boston strategist, also screened for companies with an above-average likelihood ofraising dividend payments; his list of 33 names includes a stock that has convertibles, State Street Corp., aswell as others, like Mattel, Procter & Gamble, and Intel. --- KOPIN TAN covers the options markets for Dow Jones Newswires. E-mail: [email protected] --- For Barron's subscription information call 1-800-BARRONS ext. 685 or inquire online at http://www.barronsmag.com/reader.html. Document b000000020030705dz7700009



Retailing, Software Poised For M&A Activity -CSFB Study

Retailing, Software Poised For M&A Activity -CSFB Study By Amy Braunschweiger306 words13 May 200315:58Dow Jones News ServiceDJEnglish (Copyright (c) 2003, Dow Jones & Company, Inc.) Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The time is ripe for a pick-up in mergers and acquisitions as companies lackinginternal growth prospects look for ways to boost earnings, a new study by Credit Suisse First Boston says. The study, released Tuesday, indicates that conditions are "particularly conducive to M&A activity" inretailing and software and services industries. CSFB analyst Ryan Renicker authored the report, entitled "Curing Growing Pains With M&A." In it, heconcluded that the economic conditions that have made it difficult for companies to achieve adequateinternal growth during the past couple of years are unlikely to subside. Thus, companies that want to show Wall Street earnings growth will likely turn to M&A, non-core assetdivestitures, spin-offs and restructurings as profit catalysts. But the study found that the highly competitiveretail and software and services sectors appear best poised for consolidation. "Both of these industries are considered to have relatively competitive market structures," Renicker said. In the retailing industry, some of the companies likely to be on the hunt for takeovers include Ebay Inc.(EBAY), Christopher & Banks Corp. (CBK) and Bed Bath & Beyond Inc. (BBBY). Some of the takeovertargets include Linens 'N Things Inc. (LIN), Haverty Furniture (HVT) and Nordstrom Inc. (JWN.) In software and services, Microsoft Corp. (MSFT), Citrix Systems Inc. (CTXS) are among CSFB's list oflikely acquirers. BMC Software Inc. (BMC), Mentor Graphics Corp. (MENT) and Legato Systems Inc. (LGTO)are among the potential targets. The study based its findings on a variety of measures, including relative stock values, probability of financialdifficulty or strength, and profit margins. -By Amy Braunschweiger; Dow Jones Newswires; 201-938-2205, [email protected] Document dj00000020030513dz5d002dm


Ahead of the Tape

Ahead of the TapeAhead of the Tape By Jesse Eisinger441 words28 April 2003The Wall Street JournalJC1English(Copyright (c) 2003, Dow Jones & Company, Inc.) [Today's Market Forecast] Riding the Dollar The recent trading pattern for earnings has been broken this quarter. This time, there hasn't been the selloffwe've seen for the past several quarters. One reason is earnings are significantly better than expected and revenue seems to be solid. Earnings areup 11.7% for the first quarter for the 329 companies in the S&P 500 that have reported, better than the 8.5%predicted on April 1, according to Thomson First Call. But there's a nagging question: How much is due to the weak dollar? As the dollar weakens, U.S. companies receive more dollars per unit sold when they translate sales fromforeign currencies. A lower dollar is good if it makes U.S. companies more competitive, spurring foreigners tobuy more American stuff. But if they are buying the same amount of stuff and it only appears as more dollarson income statements, then it's just a one-time boost that has nothing to do with management. Which sectors get the most bang from a weak buck? Tech, the once-and-future darling of the stock world, isa major beneficiary. There isn't solid analysis about what the true currency impact on the first-quarter results has been, since theSEC quarterly filings aren't out. But Credit Suisse First Boston's Ryan Nolan Renicker, a Texan whose sayshis parents claim they weren't naming him after the fastball hurler, did an analysis on companies that filedSEC quarterly numbers for periods ending Feb. 28. That gave him a look at two of the three months of thefirst quarter. The sample comprised 17 companies, including Oracle, Morgan Stanley, FedEx and GeneralMills. The results: Foreign-currency gains accounted for roughly 8.5% of the "typical" large-cap stock's net income,according to Mr. Renicker's analysis. During that period -- December through February -- the dollardepreciated against the euro by about 8.4%. A year earlier, foreign-currency losses took away roughly 5.8%of the "typical" large-cap stock's net income. During that period, the dollar appreciated against the euro byabout 3.7%. These companies beat earnings by an average of about 10.8% this year. Last year, they beat by about6.7%. It's a nice improvement, but it looks like the extra height comes from standing on the dollar. --- Send comments to [email protected] and check today for selected letters at wsj.com/tape. License this article from Dow Jones Reprint Service Document j000000020030428dz4s00003



Building Your Portfolio

Business Building Your Portfolio Kathleen Hays1,163 words20 August 200217:00CNNfn: Markets ImpactCPIDEnglish (c) Copyright Federal Document Clearing House. All Rights Reserved. KATHLEEN HAYS, CNNfn ANCHOR, MONEY & MARKETS: In today`s Building Your Portfolio, you mightwant to get out a paper and pen here because we`ve got something that`s a little bit complicated but veryimportant: gauging a company`s financial health. Back in 1968 Edward Altman, a well-known bankruptcyexpert, developed something call the z-score. This quantifies a company`s probability of entering bankruptcy.Now Credit Suisse First Boston has put together a list of companies ranked by z-scores. Ryan Renicker isan equity derivatives strategist at Credit Suisse First Boston and joins us from his New York office with more.Brian, thank you for joining us. RYAN RENICKER, CREDIT SUISSE FIRST BOSTON: Thank you. Nice to be here. HAYS: So what is a z-score? RENICKER: Essentially a z-score is an indicator that measures a firm`s probability of entering bankruptcy.Its key components measure a firm`s earning power, liquidity, revenue generating capacity and debt load. HAYS: So do I want a high or z-score or a low z-score? RENICKER: Well, a high z-score indicates that a low probability of bankruptcy will occur and low z-scoreindicates high bankruptcy probability. HAYS: OK. Now you have given us, based on your z-scores, some companies that have low z-scores, inother words, high probability of bankruptcy. RENICKER: Right. HAYS: Or some, what, high... RENICKER: High-z score companies. HAYS: Who are they? RENICKER: Essentially what we did, is we screened the S&P 500 and we came up with three baskets.Basket A had high z-scores, B had middle z-scores and C has low z-scores. Examples of companies withlow z-scores include AOL Time Warner (URL: http://www.aol.com/) , and Qwest Communications (URL: http://www.qwest.net/) . And a sample of companies with high z-scores included Procter & Gamble (URL: http://www.pg.com/) and IBM (URL: http://www.ibm.com/) . HAYS: OK. Well, let`s walk through, because I assume if I`m not a client of Credit Suisse First Boston, Idon`t have access to your z-score rankings? RENICKER: That`s correct. HAYS: So maybe we can give our viewers some idea of some of the things they could look at by getting thecompany`s financial statement and pulling out just some pretty major numbers, right? and doing a couplecalculations? RENICKER: Right. It`s essentially a pretty easy process. All the viewer would have to do is go to theSEC`s Web site www.sec.gov, and pull up a company`s most recent annual filing, which is called the 10K,the form 10K, and then with this filing they can go into the financial statements, the balance sheet and theincome statement and they can calculate various ratios.

http://www.aol.com/

http://www.qwest.net/

http://www.pg.com/

http://www.ibm.com/

http://www.sec.gov/


HAYS: OK. Well, let`s start with the debt low, because I think anybody who is alive but business orindividual can understand - that feeling of debt load not being such a great thing if it`s too heavy. RENICKER: Right. If it`s too heavy, you`re absolutely right. The heart of the debt load, essentially thelower the z-score would be. The debt load is calculated as the market capitalization of the company dividedby the total debt of the company. So the higher the value is, then the better the company is. The better thecompany is, the more likely the company`s going to be able to pay off its debts. HAYS: OK. So if I have a large market cap and a low debt, that`s probably the best thing, low market cap,high debt would be. And that`s the kind of thing we saw the telecoms falling into for example right? RENICKER: Correct, correct. HAYS: Market cap fell but they ended up with the same debt and so they got in worse and worse shape. RENICKER: They got in more trouble and they could not raise the capital to have that extra cushionavailable for their total assets. HAYS: OK. And let`s look at, we should measure profitability, that seems to make sense, too. RENICKER: Another interesting ratio, would just be a measure of profitability, commonly called return onassets, which is essentially operating income which is income before interest and taxes divided by the totalassets of a firm. The higher this number is, then the more likely it will be that the company has the ability topay its debts when they come due. HAYS: Right. OK. That makes sense. OK. Great. Now let`s look at -we can calculate asset utilization.That sounds a little more complicated. RENICKER: It sounds a little complicated, but actually the concept`s quite simple. Asset utilization is justanother term form asset efficiency. And this ratio is simply the most recent fiscal year`s sales divided by thetotal assets of the firm. So a high value means that for every - for a given dollar of assets, they can generatemore dollars worth of sales. So a high value would be good and a low value would be bad for this. HAYS: OK. And the final thing is something you can get just many different places is a company`s creditrating. RENICKER: Correct. Actually what the credit agencies do, S&P, Moody`s and Fitch, to name a few, is theytry to combine these quantitative scores or quantitative measures and qualitative aspects of variousindustries and sectors to attain a debt rating for a particular company given its industry and given its outlook. HAYS: OK. Well, Ryan, thank you so much for helping us take a look at something that I think is often verydaunting to people. But I think you really helped break it down. RENICKER: Thank you. HAYS: Ryan Renicker, thanks again. RENICKER: Thank you. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 888-CNNFN-01 OR USE OUR SECUREONLINE ORDER FORM LOCATED AT WWW.FDCH.COM Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS RESERVED. Preparedby FDCH-eMedia (Federal Document Clearing House, Inc. -eMediaMillWorks, Inc.) No license is granted tothe user of this material other than for research. User may not reproduce or redistribute the material exceptfor user`s personal or internal use and, in such case, only one copy may be printed, nor shall user use anymaterial for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.`scopyright or other proprietary rights or interests in the material; provided, however, that members of thenews media may redistribute limited portions (less than 250 words) of this material without a specific licensefrom CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder ofsuch material. This is not a legal transcript for purposes of litigation. Document cpid000020020821dy8k0005n


Rediscovering Taxes: Investors feel their impact more in the face of declining returns

Fund of Information MUTUAL FUNDS Rediscovering Taxes: Investors feel their impact more in the face of declining returns By Erin E. Arvedlund2,474 words19 August 2002Barron'sBF2English (Copyright (c) 2002, Dow Jones & Company, Inc.) It sounds obvious, but the typical mutual-fund investor gives up about a quarter of his or her profit to taxes,according to a new study by fund tracker Lipper. Over the past decade, stock-fund investors in the top income-tax bracket gave up an average of 2.5% oftheir assets to income taxes each year, while bond-fund investors gave up 1.3%. Investors in the lower taxbrackets don't suffer as much, but regardless of income, most never even think about the cost. Investors could ignore tax implications in the 1990s, when funds were tallying up annual gains of 10%, 20%and more. But as returns fall to earth, projected to be in the 5%-7% range over the next few years, tax costscan significantly undercut the long-term compounding benefit that mutual-fund investors have come toexpect. Say a fund returns 7% before taxes but only 5.5% after taxes. After 20 years, a $10,000 investment wouldgrow to $29,200 -- $9,500 less than if the investor had escaped the 1.5% tax bite. To reduce the hit, investors should seek out tax-deferred vehicles such as individual retirement accountsand 401(k)s for funds that trigger large tax bills if held in ordinary taxable portfolios. These include bondfunds that pay a lot of interest, or stock funds that pay dividends and make capital gains distributions.Taxable accounts can be used for "tax-efficient" funds, those managed to minimize taxes. "Considering the substantial amount of return that tax-efficient funds can preserve, investors have thus farshown surprisingly little appetite for tax-efficient alternatives, possibly because information on tax impact hasbeen sparse," Lipper says. How do you find tax-efficient funds? One source is fund tracker Morningstar's Web site (www.morningstar.com). Look up the fund that interests you, and then in the left-hand column, press the "taxanalysis" button. You'll see how much return has been sacrificed to taxes. Several fund categories carry huge capital losses, which can be used to offset gains in an investor'sportfolio. For example, growth-stock funds investing in large U.S. companies carry losses of 23%. Lossfigures for mid-cap growth (25%), Latin American equities (23%) and telecommunications (46%) are alsohigh. Morningstar's Premium Fund Selector can also be set to seek tax-efficient funds. Not an Internet surfer?You can order the Morningstar 500 guide by calling 1-800-735-0700. Mutually Hedged Why do hedge funds keep showing up in a mutual-funds column? Because that's what the Wall Street fund-marketing machine wants to sell next. Until recently, hedge funds operated with little oversight because retail investors couldn't buy them. Now theSecurities and Exchange Commission is concerned enough about hedge-fund fraud and potential conflicts ofinterest that the agency has started an inquiry into the industry. Hedge funds can go long and short, while most mutual funds can't. And that points up the real issuetouching Americans' pocketbooks -- the failure of mutual funds to preserve capital in a bear market. In the accompanying table, check out the returns from a core equity mutual fund over a full market cycle, as

http://www.morningstar.com/


well as over bull and bear markets. Hedge funds beat the Standard & Poor's 500; the mutual fund didn't. Are long-only mutual funds able to add value in a bear market? The data suggest they don't do that, either.So mutual-fund complexes increasingly are quietly offering hedge funds to investors as well, with minimumsas low as $25,000. Among new entrants: Evergreen, a division of First Union; Ascendant, a division of Turner InvestmentPartners, and a U.S affiliate of London-based Man Group. But beware! The mutual-fund complex wants a share of this booming market mostly because they can reaplarger-than-their-normal fees. A mutual-fund firm might earn 0.2%-0.4% of assets for managing an account,but can charge 1%-2% on a hedge fund. It's also standard for hedge-fund managers to pocket 20% of theinvestment returns. Pension Funds Fed Up Signs of the times? The $27 billion Massachusetts state pension fund has reportedly dumped MFS AssetManagement, Schroder Capital Management and Turner Investment Partners as investment managersfollowing big losses -- losses that threaten political fallout because the state's treasurer, Shannon O'Brien, isrunning for governor. O'Brien's office would not confirm the firings, but it does report that the pension fund lost more than $1billion in the first half of 2002, including a $50 million loss from investments in Enron and WorldCom. Thereason given for dumping MFS and Schroder was that both advisers shifted portfolio managers too often.Turner Investment Partners was fired because the firm removed the portfolio manager, according to a reportin the Boston Globe. The firms did not respond to our requests for comment. MFS managed $570 million in small-cap equity assets, while Schroder oversaw $105 million in emerging-markets investments, according to the newspaper's report. Turner managed $110 million in fixed-incomeassets. The pension fund will retain Legg Mason as an adviser. The bear market has made pension-fund trustees more willing to sack money managers. And, observesMichael Hirsch, principal at Lynnvest, a division of Advest, funds haven't yet factored in drastically reducedexpectations for single-digit returns. Hirsch calculates that the total underfunded pension liabilities ofcorporations in the S&P 500 rose to $111 billion from $26 billion between 2000 and 2001. Trevor Harris, accounting analyst at Morgan Stanley, points out that operating income of S&P 500companies in fiscal 2001 was overstated by an average of 7.2% (up from 5.3% in fiscal 2000) as a result ofoverly optimistic return assumptions on defined-benefit retirement plans. The largest surpluses are at pension plans of GE, Verizon, SBC, Lucent Technologies and BellSouth,according to the Morgan Stanley analyst. The largest deficits are at GM, ExxonMobil, Ford, Delphi and DeltaAirlines, the report says. Moreover, if stock-market returns remain low, more companies could shift intodeficits in their pension funds. Morgan Stanley's estimates suggest GM, Delphi, US Airways, AMR andPharmacia will need to increase their pension contributions in 2002 through 2004. Templeton Exits Russia Franklin Templeton, one of the world's largest mutual fund managers, is closing down its operation inRussia. A local investment bank, United Financial Group, signed on to take over management ofTempleton's mutual fund in Russia. The Templeton Fund in Russia, with assets at around $2 million, will berenamed. Templeton will keep its offshore Templeton Russia Fund, with $100 million under management. MarkMobius, the head of Templeton Emerging Markets Fund, is reported to believe that now is not the right timefor his company to be in the Russian mutual-fund market. "It's too early for us," the Financial Times quoted Mobius as saying. "I am not saying there is no potentialand there is no question that pension funds will grow, but Russian houses are better prepared to handlethem. Our role, when Russians are ready, will be to invest globally for them." Harvey Sawikin, head of Firebird Management, a competing asset-management company, says Templetonhad run up against the hard realities of doing business in Russia. "International brand names have turnedout to be less important in Russia than having the right connections and relationships, as well as access todomestic capital markets," Sawikin observes.


Talk About Diversifying Sheldon Jacobs, editor of the widely respected No-Load Fund Investor newsletter, thinks he has a winner --and it's got nothing to do with mutual funds. Just like those crazy characters in "The Producers" who invested in a hit show, Jacobs has made aninvestment in a Broadway musical, "Hairspray." It premiered last week in New York. "Two minutes into the first song, everyone knew it was a hit," Jacobs told us. So, back to the stock market. What are Jacob's newest recommendations? He likes the Arbitrage Fund, andrecently added it to the list of funds he follows. Like the Merger Fund, the Arbitrage Fund specializes inmergers and risk arbitrage, but with only $10 million in assets, it can invest in small-cap stocks and has hadbetter performance -- up around 7% year to date. Back to the Future Those interested in the importance of credit quality should remember Edward Altman. Market veterans mayrecall that in 1968 he developed the Altman Z-Score, which quantifies a firm's probability of enteringbankruptcy. The score uses financial ratios that reflect a company's earning power, liquidity, revenue-generating capacity and debt load. In a nutshell, companies with high Z-Scores (greater than 3.00) have a low probability of insolvency; firmswith low scores (less than 1.80) have a high probability of experiencing financial distress. Credit Suisse First Boston has put together a list of Z Scores on components of S&P 500, with the idea thatmoney managers might want to underweight those companies with low Z scores and overweight those withhigh scores, given the historical tendency for low-Z-scoring companies to underperform high-Z-scoringcompanies, says Ryan Renicker of CSFB. The S&P 500 Index currently has 145 companies with Z-Scores below 1.80. Of these, 103 have scoresbelow 1.20. Those with high Z-Scores -- meaning healthy balance sheets -- include Kroger, Immunex,Lockheed-Martin and Motorola. Lowest scorers -- those with a high probability of bankruptcy, according tothe Altman model -- include AOL Time Warner, Nortel Networks, Lucent Technologies, QwestCommunications and Williams Cos. For more information on Altman's work, you can visit his Web page at New York University's Stern School ofBusiness and check out a living legend (http://pages.stern.nyu.edu/ealtman/). AOL Changing Hands The market's made up of buyers and sellers, right? Just look at Janus and Fidelity and AOL Time Warner. In the second quarter, the Denver-based mutual fund company Janus, a unit of Stilwell Financial, wasbuilding up stocks in the services sector, replacing technology as its top industry holding. Janus also cut its stake in AOL Time Warner to 141.2 million shares at the end of June, down from 155.7million at the close of March. The firm had more than 200 million shares late last year. But Fidelity's fundmanagers apparently deemed AOL undervalued. They warmed up to the company, holding about 183million shares at the end of June, compared with 155 million shares three months earlier. The two fundsponsors, which together own roughly 8% of AOL stock, made the disclosures in paperwork filed last weekwith the Securities and Exchange Commission. What else is Fidelity buying? "They're looking for bargains in drug stocks such as Schering-Plough, Johnson& Johnson and Pfizer, and financial-services firms such as AIG and Merrill Lynch, according to Jim Lowell,editor of the Fidelity Investor newsletter. Pfizer is now Fidelity's third-largest position. And the fund giant'sview on tech? "They've unloaded Intel and IBM, and added to Dell and Cisco," says Lowell. "So their net callon technology is not to buy the chips, but to buy the software." Dell replaced IBM as Fidelity's 22nd largestholding. Fidelity also trimmed holdings in some of the major oil stocks, such as ExxonMobil and added to theenergy services shares.

--- SCOREBOARD Uplifting News -- Stocks rallied as the Federal Reserve left interest rates at a

http://pages.stern.nyu.edu/ealtman/


40-year low level last week; more than 95% of equity funds were up forthe week. Domestic diversified stock funds as a group rose 2.43% in theweek ended Thursday. Mid-cap growth funds outstripped diversifiedequity funds, according to Lipper. Among the 25 largest funds,Fidelity Magellan gained 3.56%; American Growth Funds gained3.04%;PIMCO Total Return edged up 0.26%; and Janus Fund gained 3.38%. One Week Year-to-DateU.S. STOCK FUNDS 2.43 - 18.97U.S. BOND FUNDS 0.23 1.96TOP SECTOR / Gold Oriented Funds 5.71 36.29BOTTOM SECTOR/Latin American Fds - 6.28 - 23.03 THE WEEK'S TOP 10Investment Objective One Week Year-to-DateFidelity Sel Enrgy SerNatural Resources 13.85% - 0.51%Rydex Energy Svcs InvNatural Resources 13.83 - 9.91ICON EnergyNatural Resources 11.75 - 5.67ProFunds Energy InvNatural Resources 9.39 - 17.92Rydex Precious Metls InvGold Oriented 8.39 28.16Grand Prix Fund AMid Cap Growth 8.29 - 38.93Amer Cent T2030 InvTarget Maturity 8.11 17.18Rydex Retailing AdvSpecialty & Misc 7.91 - 16.04Strong Energy FundNatural Resources 7.84 - 5.91Turner Energy&P Tch IITechnology 7.64 - 22.95 THE WEEK'S BOTTOM 10iShares BrazilLatin America - 17.53% - 41.59%ProFunds UltSht OTC InvSpec Dvsfd Equity - 8.41 80.84Rydex Dynamic Vn 100 HSpec Dvsfd Equity - 8.23 83.49Fidelity Adv Lat Am BLatin America - 7.09 - 25.54Templeton Gl L Am ALatin America - 7.04 - 21.20Fidelity Latin AmericaLatin America - 7.00 - 24.81Excelsior Latin AmerLatin America - 6.50 - 22.75iShares S&P Lat Am 40Latin America - 6.31 - 24.66Firsthand Tech InnovTechnology - 6.26 - 57.99Rydex Dynamic Tm 500 HSpec Dvsfd Equity - 5.90 34.68 The Largest 10Net Assets Investment 3-Year* 1-Week YTD(billions) Objective Return Return ReturnFidelity Magellan Fund59.855 LCCE - 8.97% 3.56% - 19.20%Vanguard 500 Index Inv57.966 SPSP - 9.34 2.81 - 18.21American Funds ICA A47.170 LCVE - 1.81 2.36 - 12.20American Funds Wsh A43.940 LCVE - 1.53 2.04 - 10.79PIMCO Total Return Inst37.752 Intmd Inv Grade 9.75 0.26 5.47American Funds Gro A30.159 MCGE - 1.98 3.04 - 21.30Fidelity Contrafund28.527 MCCE - 3.35 2.44 - 5.75SPDR Trust


128.499 SPSP - 9.46 2.80 - 18.21Fidelity Gro & Inc27.908 LCCE - 5.53 2.15 - 13.37American Funds EuPc A23.812 International - 4.72 0.93 - 11.57*Annualized. Through Thursday.Source: Lipper

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Another Gunslinger Gone: John Muresianu retires as his famed Fidelity Fifty's outperformance seems most outstanding

Fund of Information MUTUAL FUNDS Another Gunslinger Gone: John Muresianu retires as his famed Fidelity Fifty's outperformanceseems most outstanding By Erin E. Arvedlund2,667 words24 June 2002Barron'sBF2English (Copyright (c) 2002, Dow Jones & Company, Inc.) One of Fidelity's star stockpickers surprised Wall Street last week by announcing his retirement from theBoston fund-giant after more than a decade. Most notably, John Muresianu ran the Fidelity Fifty stock fund from 1999 forward -- and has riddenotherwise soggy markets to great returns in recent months, primarily by buying energy and gold-miningstocks. (At the end of 2001, his Fidelity Fifty fund had roughly three-fourths of its assets invested in thosetwo sectors.) The Fidelity Fifty's year-to-date gain of 11.1% shines especially brightly at a time when the S&P 500 is in thered. This was, however, no fund for the faint of heart: Muresianu, considered a bit of a gunslinger, certainlydidn't feel bound to invest according to the standard indexes. According to a Morningstar analysis of thefund, "the risks of Muresianu's style are obvious. [Now] the fund can get pummeled if just one of its favoritesectors falls out of favor before Muresianu can flee." Furthermore, he lets his winners run, which tied thefund's fortunes to individual stocks: At the end of 2001, Newmont Mining consumed nearly 13% of assets,and four other stocks took up more than 6% each, according to Morningstar. So why is he retiring? Muresianu, 48, "has indicated to us that he is retiring to manage his own account,"Fidelity spokeswoman Anne Crowley said -- although Jim Lowell, editor of the independent Fidelity Investornewsletter, suspects he'll join a hedge fund. Fergus Shiel, who will continue to manage the $5.5 billion Fidelity Independence Fund, will take overMuresianu's role. About Face USAA Investment Management is considering getting rid of its stock-fund management business. The SanAntonio, Texas-based insurance and financial services company, which caters to U.S. military personnel andtheir dependents, may find some other firm to run its $7 billion stock fund department. USAA is conducting a review of its stock mutual-fund operations, including the possibility of dismissing itsfund managers and hiring outside sub-advisers. Rumors have abounded that Alliance Capital, Strong oreven Putnam have been or may still be in the running to win the USAA's funds business. (USAA and StrongCapital Management recently joined to offer a national 529-college savings plan.) The review involves 16 actively managed stock and "balanced" mutual funds with total assets of $7 billion,but for now doesn't include stock-index funds, fixed-income funds or money-market products. USAAInvestment Management is owned by insurance provider United Services Automobile Association, and runsa total of 39 funds with $28 billion in assets. "We want to make sure we are delivering consistently above-average performance" at appropriate costs forthe company, said Tom Honeycutt, a company spokesman. He said the company just started the review andcouldn't say how long it will take. However, USAA could announce a decision to farm out its equity-fundmanagement following a June 26 board meeting. The spokesman wouldn't comment on which fund familiesmight take over running the stock funds. Such a move could result in layoffs of the funds' portfolio managers and analysts, although USAA declinedto confirm any layoffs. "I wouldn't be surprised to see this happen, given the fact that their equity funds ingeneral have been just poor performers," said Christopher Davis, who follows USAA funds for Chicagoresearch firm Morningstar.


One USAA staffer said: "I am shocked by the company's decision, as only a month ago managementreconfirmed their support for the business." One reason for closing down equity-investment managementmay have been that USAA had trouble bringing in new fund managers to fill key roles. Also, USAAhistorically has been an extremely cost-conscious shop, to the benefit of their customers. And the scuttlebuttwas that USAA's investment-management president, Chris Claus, wanted to hit a profits target this year, butwith weak brokerage commissions, was going to miss that mark. USAA's solution? Outsourcing. The price to outsource mutual funds has gotten a lot cheaper, in somecases, than managing internally. USAA apparently considered doing so years ago, when costs were about35 basis points. Now, to offset much lower returns in a weak stock market, many mutual-fund companies arehiring sub-advisors, who run money for as little as 15 to 18 basis points. USAA's strength was traditionally in fixed income, and value and international funds have had goodperformance. However its growth funds are in poor shape. The $900 million USAA Growth Fund, forexample, lags behind 90% of its peers in both its three- and five-year performance. The company's valuefunds have scored better: USAA Income Stock Fund, which at $1.9 billion in assets is its largest activelymanaged equity fund, ranks in the top one-third in its category for both three- and five-year periods,according to Morningstar. Russell Shuffle Is the massive amount of money chasing the Russell index reconstitution this year a sign of a growing small-cap bubble? Frank Russell Co. of Tacoma, Washington, conducts the yearly "reconstitution" of its indexesbased on stocks' May 31 market values. For the fourth straight year, the so-called "Russell Shuffle" will besignificant, affecting hundreds of companies. More than $200 billion of investor money is pegged to theRussell, estimates Dorit Zeevi-Farrington of Instinet's trading-research division. Final index membership will go into effect July 1 and remain in place for one year. And as more money piles into small-cap funds, portfolio managers have a particularly brutal job of "gaming"the indices. Why? This year's Russell reconstitution could be wild. Many stocks slated for deletion have builtup enormous short interest, says Michael Farrell, a quantitative portfolio manager for David L. Babson inBoston. Some small-cap stocks with tiny floats -- or shares available to trade -- have short interest totaling160 days' average volume, says Farrell, who runs a hedge fund as well as Babson index mutual funds. Because of that, oddly enough, the best trade might be the one you wouldn't think of. Babson's Farrell sayssmart hedge funds may be setting up to get long stocks likely to be deleted from the Russell 2000 -- ratherthan short them -- given the short covering that could result that day. "There's just a lot more money chasingthe Russell 2000 this year," he says. Another sign of a possible top for small-caps? Fund closings. Some mutual-fund experts look to fundclosings as a market call, believing that the rush of demand for the funds leads to early closings, thussignalling that the style has peaked. The latest funds to join the list are N/I Numeric Investors Micro-Cap andGabelli Small-Cap Growth and the merger-oriented Gabelli ABC, both of which will stop taking newinvestments on Oct. 1. Small-cap funds have had such a great run that contrarians might want to consider backing off from theinvestment style. "We just told our clients to reduce their allocation to small-cap stocks -- both value andgrowth -- to 4% from 17%," said Jim Dunigan, chief investment officer for PNC Advisors of Philadelphia. Large-cap stocks should make up about 85% of a client's portfolio, he recommends. "The economic pictureshows international growth, and large caps will be better-positioned for a while." Of small caps, he adds,"We're in the seventh inning." A final piece of advice to retail investors: Refrain from touching your Russell 2000-linked fund until after thereconstitution is over, as there's plenty of stock-price distortion. Pay-Day Nostalgia Morgan Stanley Investment Management has apparently lost enough money managers in the asset-management division to start showing up in the bottom line. Morgan Stanley's second-quarter results show$1.87 billion in compensation and benefits expenses -- down from $2.34 billion in the year-earlier secondquarter. Morgan Stanley has suffered through layoffs and attrition just like everyone on Wall Street. But the earningsnumbers seem to show that the firm's new pay policy is likely rubbing Morgan Stanley's asset-management


division -- now handling $400 billion -- the wrong way. While asset-management earnings in the latest quarter"were somewhat stronger than expected, with essentially flat managed-asset levels and revenuesrepresenting a pleasant surprise," writes Lehman Bros. bank analyst Mark Constant, most of the earningsupside came from lower compensation. He adds: "We remain concerned, over the longer-term, about therecent spike in employee dissension (and departures) following recent efforts to `integrate' Morgan Stanley'shistorically decentralized operations, and restructured compensation schemes." Every aspect of MorganStanley's four investment-management arms is now centralized: Morgan Stanley Asset Management, MillerAnderson Sherrard, Dean Witter Intercapital, acquired with Dean Witter, Discover in 1997, and VanKampen/American Capital Management, acquired in 1996. Morgan Stanley radically changed its compensation structure in the past year, so portfolio-managers' pay isnow based on the collective -- the performance of the parent -- and not the individual asset-managementgroups. At Miller Anderson Sherrard, for example, pay previously lined up with the group performance; MAS fixed-income managers had a great year in 2001, which wasn't reflected in their compensation. No wonder they'resaying sayonara. Less Tech=More Bucks A study out of Credit Suisse First Boston comparing ways to play technology using exchange-traded fundsturned up some surprising results. Turns out the Nasdaq 100 tracking stock, the QQQ, is no longer the techpure play. It's a more diversified exchange-traded fund -- that's had better returns than other tech-heavyETFs. CSFB analyzed the new S&P Technology Select Sector SPDR (IXT), the ever-popular QQQ, theMorgan Stanley Technology Index Fund (MTK), the iShares Dow Jones U.S. Technology Fund (IYW) (DowJones publishes Barron's), and the iShares Goldman Sachs Technology Fund (IGM). The results: If investors want to closely track technology, the IYW and MTK are better vehicles. For thosewho want more diversified exposure, the QQQ is now about 65% tech, and actually has the lowesttechnology weighting among the five ETFs in the report. The second-highest sector in the QQQ is health care, with stocks such as Amgen, ImClone Systems andImmunex. Consumer-discretionary stocks are third-heaviest weighted, about 13% of the QQQ, with stockssuch as Bed Bath & Beyond. IYW, the purest tech play, has high exposure to one stock, Microsoft. IYW's second-largest constituentstock is Intel, followed by IBM. "This is the most pure tech play out of all of them," says Ryan Renicker,equity-derivatives strategist at CSFB. "The combined weighting of the top three stocks is 37% of overallmarket-cap of the ETF," and almost all the stocks fall into the information-technology sector. CSFB found that S&P's new SPDR fund, IXT (formerly XLK) -- set to launch today -- has the largesttelecommunications weighting. Renicker judges IGM is "about 85% tech; second-highest weighting is industrials, at about 8%" includingstocks such as Sabre Holdings. In contrast, MTK is slightly more diversified. "There's less company-specificrisk," he adds. Fund Asides Once in a while, investment ideas show up from off the beaten path. Ever heard of ATF? Nope, it's notAlcohol, Tobacco & Firearms. It's the symbol for a unit investment trust holding shares of AT&T and regionalBells. The Equity Income Fund, First Exchange Series-AT&T Shares (traded on the American StockExchange) can be exchanged for shares of AT&T and those companies still left of the seven original BabyBells. The fund has been trading for about $85, well under its net asset value of $106. NCE Petrofund is another. Also listed on the AMEX, NCE Petrofund is a closed-end investment trust,essentially a REIT for oil and gas properties, structured much like El Paso Energy and Kinder MorganMaster limited partnerships. Energy-income trusts have grown, especially as they continue to spend onmergers and acquisitions, and like REITs, they pass on income to shareholders. But beware: Energy-income trusts are highly sensitive to commodity prices and interest rates. "As interestrates go up, that may make it harder for us to attract capital, because we're competing with term deposits,"said NCE's president, Jeff Errico. But NCE Petrofund's largest shareholder, as of March 31, was the $1.7 billion hedge-fund outfit DKRManagement in Stamford, Conn. Two executives from its former parent, AIG Trading (a unit of insurer American International Group)acquired DKR. AIG is the lead investor in DKR's hedge funds, which are sold under the AIG brand.


Follow the smart money, we say.

--- SCOREBOARD Bearing Down -- Amid earnings warnings, troubled telecom funds were down 17.16%.Domestic-diversified stock funds as a group retreated 0.15% in theweek ended Thursday, above the broader markets' 0.32% drop. Small-capvalue funds, however, rose 1.09%. Gold specialists gained 5.91%, andreal-estate funds rose 0.25%. Pressure from technology bellwether IBMsent science & technology funds into a tailspin, down 16.78%. Amongthe 25 largest funds, Fidelity Growth lost 1.00%. Vanguard Wellingtonwas up slightly, 0.34% for the week; Fidelity Magellan gained 0.52%. One Week Year-to-DateU.S. STOCK FUNDS - 0.15 - 10.46U.S. BOND FUNDS 0.09 2.20TOP SECTOR / Gold Oriented Funds 5.91 62.36BOTTOM SECTOR/Latin American Fds - 6.08 - 11.61 THE WEEK'S TOP 10Investment Objective One Week Year-to-DateVan Eck Intl Gold AGold Oriented 9.62% 87.48%Gabelli Gold Fund AAAGold Oriented 8.00 76.98Rydex Precious Metls InvGold Oriented 7.68 51.04US Glbl Gold SharesGold Oriented 7.36 106.21Rydex Dynamic Vn 100 HSpecialty & Misc 7.34 79.60ProFunds UltSht OTC InvSpecialty & Misc 7.29 78.19Midas FundGold Oriented 7.25 55.79INVESCO Gold InvGold Oriented 7.06 59.65Amer Cent Gl Gold InvGold Oriented 6.90 69.43Monterey OCM GoldGold Oriented 6.78 74.03 THE WEEK'S BOTTOM 10ProFunds Wireless InvTelecommunication - 15.83% - 81.81%ProFunds Semiconduct InvTechnology - 12.82 - 47.03ProFunds UltraJapan SvcJapanese - 11.53 - 4.93World Fds Thrd Ml RussiaEmerging Markets - 10.92 24.40American Heritage FundSpec Dvsfd Equity - 10.00 12.50iShares BrazilLatin America - 9.81 - 23.40ING Russia AEmerging Markets - 9.61 22.42ProFunds Telecomm InvTelecommunication - 8.86 - 51.00Fidelity Sel WirelessTelecommunication - 8.77 - 48.25Alpha Analytics DigitTechnology - 8.74 - 42.64 The Largest 10Net Assets Investment 3-Year* 1-Week YTD(billions) Objective Return Return ReturnFidelity Magellan Fund71.893 LCCE - 7.92% - 0.52% - 13.33%Vanguard 500 Index Inv69.085 SPSP - 7.96 - 0.32 - 11.84American Funds ICA A


55.215 LCVE - 0.63 - 0.56 - 5.88American Funds Wsh A50.894 LCVE - 0.46 0 - 3.48PIMCO Total Return Inst36.931 Intmd Inv Grade 8.91 0.09 4.38American Funds Gro A36.255 MCCE 0.65 - 0.97 - 13.88Fidelity Contrafund32.634 MCCE - 2.12 0.56 0.77Fidelity Gro & Inc32.163 LCCE - 4.62 0.35 - 7.73American Funds EuPc A27.967 International - 2.09 - 2.59 - 4.88*Annualized. Through Thursday.Source: Lipper

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Investors get new tool to make decisions

MONEYInvestors get new tool to make decisions 405 words17 June 2002USA TodayUSATFINALB.01English© 2002 USA Today. Provided by ProQuest Information and Learning. All Rights Reserved. After nearly three years of punishment, investors know that the money-for-nothing, everyone's-a-genius dayson Wall Street are over. Only those able to see and understand the market's climate can avoid disaster. Starting today on 8B, investors can get some help reading the market from USA TODAY's "Market trends"page. Every Monday, this innovative page will convert key market trends into a color, 3-D map complete withsophisticated screens and indicators. A few minutes studying the page can help investors see the market asclearly as the pros. Some of the breakthrough elements include: Sector watch The centerpiece of the page is a color graphic that instantly shows which industry sectors are performingbest and worst. Choosing the right sectors is more important to the performance of a portfolio than picking the correct stocks,says Michael Urias, a quantitative analyst at Morgan Stanley Dean Witter. And picking the right industries has become even more important because of global uncertainty, says RyanNolan Renicker, a quantitative strategist at Credit Suisse First Boston. The "Market trends" page makes that task easier. Color-coded bars instantly pinpoint how industries areperforming against the Standard & Poor's 500. That's critical information when choosing stocks, because sectors that have beaten or trailed in the past sixto 12 months tend to do the same over the next six to 12 months, according to Tobias Moskowitz, a financeprofessor at the University of Chicago. Market sifter Readers wondering which stocks to buy will find suggestions. Sixteen screening programs sort throughstocks and mutual funds using criteria picked by USA TODAY, with the help of Multex, a stock research firm,and fund-tracker Lipper, to make sure investments meet tough standards. Both conservative and aggressiveinvestors will find ideas that suit them, although they should always do their own research, too. Investing 101 The USA TODAY staff graphically explains a complex financial term each week. Money movements This color-coded cube pinpoints whether big companies are outperforming small ones and whether valuestocks are beating growth stocks. But which "style" a company falls into can matter more to a stock'sperformance than any specific company factors, says Credit Suisse First Boston. Using data from Wilshire Associates, Money movements helps investors decide if they're exposed to enoughstocks with the right "style." PHOTO, Color


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Letters to the Editor - All victims of tragedy

EditorialLetters to the Editor - All victims of tragedy 127 words27 July 1999The Providence JournalPROVAllB-05English© 1999 Providence Journal/Evening Bulletin. Provided by ProQuest Information and Learning. All RightsReserved. We must embrace the lives of, and mourn the passing of, all who lay victim to tragedy. True, the Kennedyfamily has endured many hardships during the past century. But let us not forget all of the others who havesuffered as well: the passengers aboard TWA Flight 800, the Bessettes, the Dodi Fayeds, the RonaldGoldmans, the Matthew Eapens and countless victims of violence each day. As Americans, we are taughtthat all men are created equal. As human beings, we should remember and celebrate the lives of those wholie dear to our hearts; however, we cannot forget to mourn, with equal magnitude, the passing of all whohave fallen victim to tragedy. RYAN NOLAN RENICKER Document prov000020010829dv7r00nfu

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