Halters Agree to SEC’S Cease and Desist

Posted by Bill Alpert

A stock transfer agent operated by the Halter family – well known Dallas promoters of reverse-merged China stocks –agreed Thursday to an administrative cease and desist order by the Securities and Exchange Commission.

Barron’s has written about Tim Halter and Halter Financial, whose Halter USX China index is used as the benchmark for hundreds of US-listed China shares (see “China Funds’ Shell Game,” Oct. 30, 2006 and “Beware This Chinese Export,” Aug. 28, 2010).

It turns out that Tim Halter’s 75-year old father and 49-year-old brother – respectively, Kevin Halter and Kevin Halter, Jr. – ran Stock Transfer Corp., providing services for many China companies funded by Halter Financial. In 2007 and 2008, according to yesterday’s SEC order (PDF), the Halter père allegedly misappropriated about $2.7 million entrusted to the transfer agent by more than a dozen corporate clients. When SEC examiners asked about some suspicious-looking fund transfers, the father confessed to son Kevin Jr. – who fired his dad and demanded the money back.

The money was repaid and clients made whole, says the SEC.  Nevertheless, the Commission sanctioned Kevin, Jr. for inadequately safeguarding client funds held by the transfer firm, handing down a three-month suspension from any supervisory activities. The Halters’ transfer firm got dinged with a $10,000 penalty.

Some well-known companies that patronized both Halter Financial and the family transfer agency include:

Zhongpin (HOGS)

Wonder Auto Technology (WATG)

THT Heat Transfer Technology (THTI)

Shengdatech (SDTH)

China Ritar Power (CRTP)

China Nutrifruit Group (CNGL)

China Gengsheng Minerals (CHGS)

Asia Green Agriculture (AGAC)

American Lorain (ALN)

Stocks End Lower, But Still Hang onto Week’s Gains

Posted by Teresa Rivas

Stocks were broadly lower today, as the price of oil once again weighed on investors’ minds.

By the end of the trading day, stocks recovered from the worst of the day’s sell off, but still closed in the red. The Dow Jones Industrial Average (DJIA) ended down 0.7%, as did the S&P 500 (SPX). The Nasdaq (COMP) fell 0.5%

The day’s losses erased some of yesterday’s large gains; a lackluster jobs report, combined with ongoing violence in Libya conspired to keep Thursday’s momentum from extending to another day.

However, stocks clung to positive territory for the week as, with the Dow rising 0.33%, the S&P 500 up 0.1% and the Nasdaq Composite adding 0.13%.

St. Joe Names Berkowitz Chairman

Posted by Teresa Rivas

The St. Joe Co. (JOE) has named Bruce Berkowitz chairman of the board, the latest news in the tumultuous fight for power of the Florida real estate firm, CNBC is reporting.

The move caps a long struggle between St. Joe and Berkowitz, president and portfolio manager of the Fairholme Fund, the company’s largest shareholder. Berkowitz had agitated for the replacement of St. Joe’s current board, at one point withdrawing his name for consideration.

The company also named Charlie Fernandez, Fairholme Capital Management’s president, vice chairman of the board.

This blog has covered the ongoing saga of St. Joe. Read more coverage:

St. Joe Pushes Q4 Earnings Back to March 1.

JOE Jumps 14%: Retains Morgan Stanley To Explore Options.

The St. Joe Saga Continues: Will Berkowitz or Einhorn Win?

The stock rose 76 cents, or 2.9%, to close at $27.42. After hours, shares fell 7 cents.

MSG Tumbles on Mixed Quarter, Rennovation Estimates

Posted by Teresa Rivas

Shares of Madison Square Garden (MSG) were down nearly 5% before the week’s trading came to a close. The company reported a 40% increase in profits that beat on EPS, but investors were spooked by  lower-than-anticipated revenue and the costs of the renovations of its namesake arena.

MSG posted a fourth-quarter profit of $32.7 million, or 42 cents a share, up from32 cents a share in the year-earlier period. Revenue rose 5% to $432.7 million. Analysts had forecast a profit of 43 cents a share on revenue of $435 million.

However, CEO Hank Ratner said it would be “imprudent” to forecast the total cost of the  renovation of Madison Square Garden, and currently the company is budgeting for more than $977 million. Previously, MSG had said it expected the total to fall between $775 million and $850 million.

J.P Morgan analyst Vasily Karasyov noted that the company’s networks remained strong, but that softness in the entertainment division weighed on earnings. He maintained his Neutral rating on the stock following the report, but increased his price target to $26.50″ to reflect recent multiple expansion in the group.”

Monster Worldwide Tumbles on Downgrade

Posted by Teresa Rivas

Shares of Monster Worldwide (MWW) were falling Friday, after an uninspiring jobs report, on an analyst downgrade.

William Blair analyst Timothy McHugh lowered his rating on the stock from Outperform to Market Perform, as he is concerned that the shares will be range bound, despite their longer term potential.

McHugh wrote in a research note that the company is losing market share to LinkedIn and more niche career sites, so a robust recovery in the job market will be necessary to support growth.

“A significant slowdown in the Monster Employment Index (with which the company has historically been highly correlated) during the last few months makes us less confident in the pace of revenue growth and margin expansion at Monster,” he said. “Continued pressure on the U.S. federal government budget (which accounts for about 15% of the U.S. careers segment and a meaningful part of the Internet advertising segment) also remains a risk…The prospect for weak MEI data during the next few months and the back-half weighting to management’s revenue and bookings guidance causes us to worry that the stock will remain rangebound for a while.”

Still McHugh noted that the stock is relatively cheap, by historical standards, “and the potential upside in the stock is still extremely large if the company can grow at a healthy clip and expand operating margins to the mid-20% range.” Yet he thinks this unlikely, given Monster’s “sloppy” earnings last quarter, along with worries about the MEI data and government hiring.

Recently the stock was off 6.5%, after falling more than 8% earlier in the day.

EADS Won’t Dispute Pentagon Contract

Posted by Teresa Rivas

The U.S. division of European Aeronautic Defence & Space Co. said today that it would not dispute the Pentagon’s award of a contract worth more than $30 billion to Boeing (BA) for aerial refueling tankers.

“We put our best effort into this,” said Sean O’Keefe, chief executive of EADS North America at a news conference. “In our view, the Department of Defense had altered its requirement from being a modernization to one that merely required the replacement of the existing KC-135 aircraft.” He noted that ultimately Boeing had been able to offer the lower price; the government listed its desire to keep costs under control in its decision.

Just after the decision last week, EADS Chief Executive Officer Louis Gallois said  he was “disappointed and perplexed” by the decision to award the contract to Boeing, which many said made it appear that the U.S. defense market, the world’s largest, was unofficially closed to foreign bidders. A number of U.S. governors from states where EADS had proposed to build factories to process the orders also sent letters to President Obama, questioning the wisdom of the decision.

As the Wall Street Journal reported, EADS had the right to appeal the decision under Pentagon procurement rules after the third attempt to award the contract over the past decade saw the U.S. group triumph for the second time. Both companies had previous awards ruled invalid because of problems with the bidding process.

Boeing shares had gained on its win. In trading Friday afternoon the stock was down 89 cents, or 1.3%, to $70.82, amid the general market sell off.

 

Update: Stocks Tumble On Oil’s Rise

Posted by Teresa Rivas

While stocks opened lower this morning on light volume, they quickly took a nosedive, so that by afternoon trading, the Dow Jones Industrial Average (DJIA) was off more than 171 points, reversing much of yesterday’s heady gains.

The S&P 500 and the Nasdaq were also down by more than 1%. The VIX is now up just under 10%.

Despite a largely in-line jobs report, oil was the most likely culprit. Crude futures for April delivery topped $104 a barrel this afternoon, and is on track to post a weekly gain of 6%, again on Libya concerns. However, positive economic data out of the U.S. have also contributed, as it is the world’s largest consumer of oil.

Recently, oil was as high as $104.18. Most analysts are now saying that the violence in Libya–and the threat it may spread elsewhere–will provide a floor for oil for the near future, keeping prices high.

Gasoline prices have gained 35 cents since Libyan unrest began in mid-February. Overnight, average prices in the U.S. jumped 4.4 cents, according to the American Automobile Association.

Factory Orders Jump in January

Posted by Teresa Rivas

Factory orders were up a stronger-than-expected 3.1% in January, the largest gain since  September 2006, the Commerce Department reported today.

Economists polled by MarketWatch were expecting overall new orders to rise 2%. Excluding transportation, new orders gained 0.7% December orders were also revised upward to 1.4% from 1.0% and an initially reported 0.2%. Durable goods orders for January were revised to 3.2% from 2.7%, while nondurable goods orders rose 3.1% in the month. Factory inventories rose 1.3% in January.

“In broad terms, this report tells the same story as the manufacturing ISM data namely that the recovery in manufacturing activity continued at a pretty solid pace early in the year (of course we have two months of ISM data for 2011 and those data had a stronger feel than this report),” wrote RDQ Economics’ John Ryding and Conrad DeQuadros in a research note. “While the very early returns on manufacturing inventories suggest the potential for a modest add to GDP growth from inventories, shipments are rising faster than inventories and the I-S ratio has fallen to low levels in recent months.  This suggests the potential for inventories to add more to manufacturing growth, which was also suggested by the ISM report.  (As an aside, note the 0.7% rise in manufacturing hours worked for production employees in February suggests a very strong industrial production report for the month).”

 

WSJ: Blankfein Is Prosecution Witness in Insider Trading Trial

Posted by Teresa Rivas

Goldman Sachs CEO Lloyd Blankfein has agreed to a be a witness for the prosecution in the insider trading trial against Galleon Group co-founder Raj Rajaratnam, The Wall Street Journal is reporting.

The report cites sources close to the closed talks who could not be identified by name. However, even if Blankfein has agreed, there is a chance he may not take the stand, as not all potential witnesses identified before a trial are ultimately called upon to testify.

There is a chance that the prosecution is attempting to use Blankfein as a way to link Goldman board member Rajat Gupta to Rajaratnam, as the former could have passed information from the bank’s directors and executives to the hedge fund.

Rajaratnam, a former billionaire at the center of the the largest crackdown on hedge-fund insider trading in U.S. history, has been charged with 14 counts of securities fraud and conspiracy. Nineteen of 26 other defendants caught in the probe have already pleaded guilty.

Rajaratnam’s attorney has said that the charges against his client are “have no merit.”

General counsel for Gupta has called the charges “baseless” and said in a statement that “Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder. There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo. In fact, Mr. Gupta had lost his entire $10 million investment in the GB Voyager Fund managed by Rajaratnam at the time of these events, negating any motive to deviate from a lifetime of honesty and integrity.”

Morgan Stanley Sees Card NCOs Dropping, Upgrades Capital One

Posted by Teresa Rivas

Large banks should benefit from a ‘significant’ drop off in credit card charge-off rates, according to Morgan Stanley analyst Betsy Graseck, who upped her estimates on a number of names in the sector today and boosted her rating on Capital One (COF) to Overweight.

For 2012, Graseck estimates a median credit card NCO rate of 4.5%, down from a previous 5.9%, for the six big issuers: Capital One, American Express (AXP), JPMorgan (JPM), Bank of America (BAC), Discover (DFS), and Citigroup (C).

“We expect that continued declines in DQ rates for ~3 quarters as a result of significantly tightened lending standards from 4Q07-2Q10, combined with a declining NCO/DQ ratio, will lead to a significant decline in charge-offs from current levels,” she wrote in a research note out this morning. She is raising her 2011 and 2012 earnings estimates by a median 6% to account for the expected lower charge-offs.

Graseck also upgraded Capital One to Overweight from Equal Weight on the anticipated reduction in charge-offs, with a $60 price target. “We expect COF to be a big winner as charge-offs decline substantially vs current levels and loan growth picks up in 2011-2012.”

Her other Overweight-rated names include American Express and JPMorgan.