Stock Investment Blog|Journal of Stock Investments|Portfolio

DOW JONES NEWSWIRES

Stock-index futures point toward a sharply lower opening for Wall Street Tuesday,
with a steep fall in Europe and continuing worries about rising oil prices
expected to start the third quarter on a negative note.

Dow Jones Industrial futures were off 111 points to 11228.

S&P 500 futures were down 13 points to 1268. Nasdaq 100 futures fell 28 points to
1817.

European shares were under pressure Tuesday, with banks tumbling amid worries
about, among other things, further losses tied to the subprime-mortgage crisis.

The pan-European Stoxx Europe 600 index was off 2%.

In company news, Belgian brewing group InBev on Tuesday took a step closer to a
hostile bid for Anheuser-Busch (BUD).

InBev said it was still committed to its $46 billion offer for the St. Louis
brewer, arguing that a takeover would give shareholders a safer option than its
U.S. rival’s restructuring plans.

Nymex crude-oil futures for August delivery were up $1.87 to $141.87. Oil had
surged to a record $143.67 on Monday, and a march above the $140 level last week
put heavy pressure on stocks last week.

U.S. stocks saw a mixed session Tuesday, but posted steep losses for the second
quarter.

The Dow Jones Industrial Average gained 3.5 points, or 0.03%, to finish at 11,350
Tuesday. That left the blue-chip index just short of official bear-market
territory.

The Dow has declined 19.8% from its Oct. 9 high of 14,165. It would need a 20%
decline to be in bear-market market territory.

The Dow lost 10.2% in June, 7.4% in the second quarter and 14.4% year to date.

Tuesday’s U.S. calendar features the release of the June manufacturing index from
the Institute of Supply Management at 10 a.m. Eastern. Expectations are that the
index declined to 48.5% from a reading of 49.6% in May.

A reading below 50% indicates more firms think business is getting worse rather
than improving.

The dollar was down 0.5% against the Japanese currency to 105.48 yen, while the
euro was up 0.2% against the greenback to $1.5777.

Gold futures were up $3.40 to $931.70 an ounce. Both the dollar/yen cross and
gold are seen at times as measures of risk appetite and fear.

The Nikkei 225 ended 0.1% lower Tuesday, its ninth consecutive daily decline.

Stocks poised to be active Tuesday include:

CIT To Sell Remaining Home-Lending Businesses For $1.8B

Struggling lender CIT Group Inc. (CIT) reached separate agreements to sell its
home-lending business and manufactured-housing portfolio for $1.8 billion as the
company continues to shed assets for cash-raising purposes. Shares increased 10%
to $7.52 in premarket trading.

Fortune Brands Cuts Forecast, Shares Down

Fortune Brands Inc. (FO) cut its earnings outlook amid a weaker-than-expected May
and a slew of negative economic news - including weakening U.S. consumer
sentiment and the still-declining housing market. Shares fell 3% to $60.50 in
premarket trading.

Lehman Brothers Up; Co Started At Overweight By Morgan Stanley

Lehman Brothers Holdings Inc. (LEH) tacked on 1.5% to $20 after Morgan Stanley
initiated coverage of the company with an overweight rating. “We think near-term
risk of incremental write-downs is balanced by solid liquidity and capital
footing,” analysts at Morgan Stanley said. Lehman shares dropped 11% to their
lowest level since 2000 Monday on yet another swirl of speculation that the Wall
Street firm is in trouble and may have to sell itself at a bargain-basement
price.

UBS To Change 4 Board Members

UBS AG (UBS) Tuesday ushered in major board changes to deflate criticism from
shareholders over the clubby nature of its ranks, but its shares slumped to
10-year lows over growing concern that the bank may be forced to cough up
confidential data on wealthy clients. Shares are indicated lower.

Quantum Fuel Posts Narrower 4Q Loss

Shares of Quantum Fuel Systems Technologies Worldwide Inc. (QTWW) declined 4.2%
to $2.95 after hours even as fiscal fourth-quarter net loss narrowed, as the
company saw big gains in its product sales and contract revenue.

VF Corp. Lifts Outlook

VF Corp. (VFC) shares jumped 4.2% to $74.20 in late trading after the apparel
company boosted its second-quarter earnings outlook. The company now says
earnings could exceed their previous per-share forecast of 80 cents by 10-12%.
Shares remain unchanged premarket.

Analyst sees Merrill, Morgan facing big headwinds

By Riley McDermid, MarketWatch

Last Update: 6/30/2008 4:58:00 PM

NEW YORK (MarketWatch) — Wall Street’s bearish drumbeat goes on.

In the latest episode, Ladenburg Thalmann & Co. cut estimates for Merrill Lynch &
Co. Inc. and Morgan Stanley on Monday, joining a chorus of analysts predicting
the two besieged banks will face serious headwinds in coming quarters.

The lower estimates and revised earnings projections sent shares of Merrill (MER)
down 3% and Morgan (MS) ended 1.7% lower, as another day of a volatile trading
slammed most financial stocks.

For its part, Merrill (MER) will have to raise equity in the third quarter and
could be forced to unload 20% of its stake in financial news provider Bloomberg,
Dick Bove, an analyst at Ladenburg Thalmann, predicted.

Bove estimated Merrill would sell its holdings in Bloomberg for $1 billion, which
would solve any current capital issues, and would not issue equity.

“This would bring in cash but also it would allow the company to value the
remaining position in Bloomberg at $4 billion and solve the near-term capital
issue,” Bove wrote in a research note.

Speculation about Merrill’s possible sale of Bloomberg was reignited last week
after other analysts said the bank may need to raise new capital. See related
coverage.
Click for Detail

Bove lowered his 2008 estimate for Merrill to a loss of $1.64 a share from a
estimate of a profit of $1.37 a share, and he cut his price target to $30 from
$39.

“My estimate is that the firm could show a net negative revenue number of $2.5
billion in its principal transaction line or a figure consistent with the
first-quarter result,” Bove said.

On Friday, Lehman Bros. analyst Roger Freeman raised his estimate for Merrill’s
write-downs by $3 billion to $5.4 billion and predicted a second-quarter loss of
$2.78 a share, compared to a previously estimated loss of 64 cents a share.

Goldman Sachs Group Inc., too, revised its estimates for Merrill, issuing a note
that predicted second-quarter write-downs of $4.2 billion for the bank and
lowering its per-share earnings estimate to a loss of $2 from a prior estimate of
a profit of 25 cents.

As for Morgan (MS), Ladenburg cut its 2008 and 2009 profit estimates for the firm
on worries that management turmoil and a dip in equity markets will affect the
bank’s bottom line.

Bove trimmed his 2008 profit estimate for the bank to $4.34 a share from $4.80 a
share, and for 2009 to $5.14 a share from $5.64 a share.

Ladenburg said that continued turmoil in the equity markets has been troubling to
Morgan Stanley, which is already struggling to convince investors it has sound
risk management procedures in place.

“June, the first month of the third fiscal quarter (ends in August), was not a
good one. The equity markets plunged,” Bove said. “Plus, the company has been in
the midst of management turmoil in the past 12 months as it comes to grip with
the issues in its risk management business.”

Concerns about the value of many of Morgan’s assets have troubled much of Wall
Street over recent weeks.

The bank faced renewed scrutiny after Moody’s Investors Service placed Morgan
Stanley’s Aa3 long-term ratings on review for a possible downgrade and indicated
that it is likely to cut the investment bank’s debt to A1.

NEW YORK (MarketWatch) - Ladenburg Thalmann on Monday said Merrill Lynch & Co.
Inc. will have to raise equity in the third quarter and could be forced to unload
20% of its stake in Bloomberg, analyst Dick Bove predicted. Bove estimated
Merrill would sell its holdings in Bloomberg for $1 billion, which would solve
any current capital issues, and would not issue equity. “My estimate is that the
firm could show a net negative revenue number of $2.5 billion in its principal
transaction line or a figure consistent with the first-quarter result,” Bove
said. Bove lowered his 2008 estimate for Merrill to a loss of $1.64 a share from
a previous per-share estimate of a profit of $1.37 and cut his price target to
$30 from $39.

NEW YORK (MarketWatch) — Ladenburg Thalmann on Monday cut its 2008 and 2009
profit estimates for Morgan Stanley on worries that management turmoil and a dip
in equity markets will affect the bank’s bottom line. Analyst Dick Bove trimmed
his 2008 estimate for the bank to $4.34 a share from $4.80 a share, and for 2009
to $5.14 a share from $5.64 a share. Bove added that he believed that if former
Morgan chief executive Phil Purcell were still in charge, the bank would be in
better shape. “It is quite possible that had Mr. Purcell remained in charge,
Morgan Stanley would not have suffered a disastrous loss in the fourth quarter
last year; its earnings would be much higher at present; and the firm would be in
very strong position relative to its industry and not looking at a possible
rating cut by Moody’s,” Bove wrote in a research note.

My understanding from the call:

- though no exciting numbers released (maybe some in subsequent session by CFO), CEO hinted he has seen exciting results. Word “Excitement” had been repeated many times.
- CEO said progress in line with last guidance so far, very comfortable with it. Though not too exciting to us (without hearing raised guidance) but could understand this company mgt tends to be conservative.
- Will keep their strategy and focus on domestic mkt because it has huge growth opportunities yet to exploit before going outside China in big step.
- Said they have very good existing business model, 90% market share, contract renewal rate 99% - consider very good news
- Successful sales team restructuring, has seen “exciting” result so far. Sales teams are motivated and also benefit with regard to commission. Every now and then CEO received phone call from sales on beating targets.
- Drop some business lines (including known push SMS advertising) that are not or generating low profit. Make sense.
- CEO emphasized improved professionalism, profitability and integration (team & product)

- Some strategy bits during Q&A:
— Hinted M&A may slow down and will only buy new business if it can integrate well with core business
— willing to sacrifice short term margin to gain market share (to create barrier to new entrants), but he assured growth in absolute dollars term
— currently giving quite some attention and doing research on WAP and Internet business, in search of best direction/strategy

- CEO summarized by asking all to be confident with their:
—– BUSINESS MODEL
—– PRODUCTS
—– PROFITABILITY

Mentioned Daniel (CFO) will go through some (positive) numbers of interest to the audience, hope this subsequent session by Daniel will very much impress the analysts.

Wish all luck with FMCN stock price from this point onward