|
Hotline Sample Report
This report is a sample for information purposes only. These recommendations are closed.
Contact our research department for access to current reports. research@wstreet.com
2/16/2010 1:38:17 PM Eastern Time
Wisdom of Crowds
By Charles Payne, CEO & Principal Analyst
Maybe we should call this the "Bayh/Hoenig Rally" as both have echoed what so many people believe to be important truths about the situation in the country. Evan Bayh blasted the current political atmosphere in Washington where Democrats were to spend every nickel that America doesn't have and the Republicans want to talk the talk but not walk the walk. In many ways Evan Bayh not running for reelection is more stinging than the Scott Brown victory. He lambasted the system and the pettiness, and said that he could do more for the nation by starting a business. Just consider there are only 100 U.S. Senate positions, they are prestigious and powerful, but not when there is a void of leadership. Right now, there is a void so large as to resemble a cosmic formation.
Kansas City Fed President Thomas Hoenig says that the U.S. must take "difficult" steps to reduce spending and increase revenue so the Federal Reserve isn't pressured to fund the "unsustainable" federal debt. He goes onto say that fiscal policy poses a threat to the Fed's ability to keep prices stable and maximize long-term growth. I'm not sure if this latest salvo of commonsense will resonate or not but it comes as the Fed is ready to end the emergency bank lending through the discount window.
In the stock market they say that it's time to get out when individual investors are getting in because when it comes to the wisdom of Main Street people are too slavish to emotions. There is much truth to that, but when it comes to commonsense Main Street is often the canary in the coal mine. People get this so much more than politicians and their masters. That's great news.
Long Idea: Cree Inc. (CREE) @ $62.49
Click here to view the trading alerts that followed this recommendation
| Entry Price |
Entry Limit |
Stop Loss |
Trading Target |
Target |
Long-term Target |
Options |
| $62.49 |
see comments |
$57.00 |
$75.00 |
N/A |
N/A |
N/A |
| Type |
Option Symbol |
Entry Price |
Strike Price |
Expiration Date |
| Call |
CQR100619C00 |
$7.80 |
$60.00 |
6/18/2010 |
BACKGROUND: Cree, Inc. develops and manufactures light emitting diode (LED) products, silicon carbide (SiC) and gallium nitride (GaN) material products, and power and radio frequency (RF) products. Its LED products include LED chips used in various applications, including video screens, gaming displays, function indicator lights, and automotive backlighting; LED components; and LED lighting products. The company's SiC and GaN materials comprise SiC and GaN wafers, which are used in manufacturing LEDs, RF and microwave devices, and power devices, as well as in research and development. Its power and RF products include power switching devices made from SiC, including 600 and 1,200-volt Schottky diode products that are used in power factor correction circuits for power supplies in computer servers and other applications, such as solar inverters; and RF microwave devices made from SiC or GaN, which include 10-watt and 60-watt SiC transistors, and metal-semiconductor field effect transistor products, as well as GaN high electron mobility transistors and monolithic microwave integrated circuits for broadband amplifiers or for WiMAX applications. Cree, Inc. primarily operates in Hong Kong, China, the United States, Korea, Europe, Japan, Malaysia, and Taiwan. The company was founded in 1987 and is based in Durham, North Carolina.
SKINNY: We have been "playing" this stock for a decade now and have watched the growing pains, specifically the stupid shenanigans between the founders that at a time have been anything but brotherly love. The company is on a roll now having beaten the Street's earnings estimates in the last two quarters, with results more than 30% better than consensus. Right now, analysts are playing catch up; FY10 consensus is $1.56 per share from $1.17 per share three-months earlier, and FY11 is $1.97 per share from $1.42 per share. We think that the actual number will be well above $2.20 per share, and such growth will command higher valuation metrics including a 30.0 times PE multiple. Technically, the stock has room to form a double-top at $64.00, and through there we see the share price climbing to $75.00. We still believe the company will ultimately be acquired, and could command a significantly higher premium. We are going to use $57.00 as a mental stop loss.
| Analyst Coverage |
| Merriman Downgraded to Neutral |
UBS Reiterated to Neutral |
Brigantine Downgraded to Sell |
| |
|
|
|
