Yes, it looks like option traders are betting on a jump in EMC shares during the next two weeks. Aggressive call-buyers traded over 113,000 of the $15-stirke calls, three times the open interest, pushing the contract up 72 cents or up 380%.

The contracts closed at 89 cents, meaning the EMC shares would need to surpass $15.89 for the call buyers to be profitable. One can only hypothesize the motivation, but the WSJ’s Tennile Tracy quoted rumors that Cisco Systems might make an offer for EMC, or that EMC possibly will divests its 85% stake in VMWare.

EMC’s Chairman and CEO Joe Tucci did not deny this proposition in EMC’s Q2 earnings call saying “I kind of know a lot more of what’s going on than anybody else and we will do the right thing for the shareholder when and if the time is right.”

Additionally, the opportunity to announce this divestiture may come at be Pacific Crest Securities technology conference on August 4.

Tags: buyout, EMC, Equities, Spin-off

If you own any healthcare stocks, especially HMOs, you have felt the unease of investors this year. In an election year, especially one in which universal healthcare has been a key position; these stocks have taken a tumble. Because of this idealism, some healthcare names have seen their share prices beaten down to historic levels, catching the attention of value investors’. I illuminate why this is the buying opportunity of the decade.

Universal Healthcare

Health industry executives and investors have few reasons to worry about the so called health care reforms or a universal system proposed by Democratic presidential nominee Barack Obama. While Obama is endorsing a universal coverage system, it is unlikely that he will be able to convince a 49-49 political party deadlock in the Senate and the small 236-199 democratically led House to endorse such a plan.

In fact, democratic Senator Jay Rockefeller recently commented on the proposed healthcare reforms when he said “We all know there is not enough money to do all this stuff.”

History has revealed that wide comprehensive changes are hardly ever accomplished in Washington. This is particularly true when an issue as complex as social security, Medicare, healthcare, energy, and immigration. These have been hot button issues in presidential elections for years and while there has been progress, total reform has been futile. Using history as a guide seems to indicate the current pessimism on Wall Street regarding the healthcare industry, may prove to be overdone, especially with its strong fundamentals.

Strong Industry Fundamentals

Even amid fears of healthcare reforms and economic malaise the sector’s fundamentals are continuing to show resilience. More recently:

o U.S. consumer spending on medical care goods has started to move higher

o Consumer spending on health insurance as a percentage of total spending typically increases as retail sales growth falls, which has been a good sign for the managed health care group.

o Growth in real personal spending on prescription drugs has turned up

o The last time retail sales growth slowed substantially, the medical equipment industry performed relatively well

o Net profit margins in the pharmaceutical space appear to be moving higher

Balance sheets in the health care sector remain flush with cash, boosting the possibility of an increase in share enhancing stock buybacks and increased dividend payments

Recent Performance

The overall healthcare sector has bucked this trend in recent months as investors have sought safely in its stable earnings and attractive valuations. Healthcare’s momentum has been increasing more recently and is the only S&P sector showing a positive return in the last one and three months.

With overblown fears of a nationalized universal healthcare system, strong industry fundamentals, and healthcare’s recent tick upward now may be the time to buy healthcare names uniquely positioned to outperform in the coming years. I have selected three of my favorite and will follow this post up with details on all.

Tags: Healthcare

Many of us including myself have decided to raise cash during these volatile markets. I have put together a few pointers for the best cash management:

• Spread your money around
  • It’s safe to put up to $100,000 in a single FDIC-insured bank account. To protect yourself, spread your cash around several institutions, not all of which need be banks. Many people learned his the hard way from the collapse of IndyMac.

• Use short term CDs
  • Keep CD maturities short so you can roll it over at a better rate, when the Federal Reserve raises short term interest rates. These rates are likely to start heading higher by year’s end as the Fed is now becoming increasingly concerned about rising inflation and the falling dollar.

• Use an online bank as these FDIC insured accounts still pay above average CD and saving’s rates.

Using these tips I have searched for the best yielding short term CDs and saving’s rates, which are shown below.

 Remember that in the short term, cash can indeed be king. But in the long term, cash is almost sure to lose purchasing power because of inflation.

Tags: Cash, Yield

As a shareholder of Enterprise Products, I can’t say that I was excited by the stock’s reaction to is earnings release last week, but after looking beyond the surface EPD presents a compelling buying opportunity for the medium-long term investor seeking a safe yield.

Earnings
For the second quarter, Enterprise Products earned 52 cents per share, compared with or 26 cents per share, in the year-ago quarter. The results beat Wall Street expectations by 16 cent. This large earnings surprise comes after an 18 cent earnings surprise in their first quarter. If these results were not astounding enough, EPD produced the results while its Independence Hub was impaired for 66 days during the quarter.

Distributions
Additionally, earlier this month EPD raised their cash distribution to shareholders by 1.5% over the first quarter 2008. Its increased distribution brings EPD shares payout to $2.06/unit annualized and is currently yielding 7.1%.

EPD’s total liquidity equaled $1.3 billion, which should give confidence to further distribution increases. EPD’s ability to tap multiple sources of capital (retained distributable cash flow, equity capital, debt capital raising and potential asset sales) should rest any concerns of a decrease in its distribution, which has not happened since going public in 1998.

Outlook
Going forward, EPD should have no difficulty maintaining its strong momentum as it has three large organic growth projects scheduled for completion in the second half of 2008, which will boost growth into 2009. These projects are outlined below.

• Meeker natural gas processing facility - Will double processing capacity to 1.5 Bcf/d and increase NGL extraction capability to 70,000 barrels per day
• Sherman extension to the Texas intrastate natural gas pipeline
• Exxon central treating facility - Will ship up to 1.1 Bcf/d of natural gas from the Barnett Shale region.

Valuation
Current 12-month analyst price targets for EPD average $35.00, which can be derived trough a basic Discounted Dividend Model. Using its current distributions and conservative forward estimates, a $35.00 price target is more than reasonable.

With its current shares trading at $28.95 this price would reflect a 27% 12 month return.

Summary
With two quarters of spectacular growth and increasing prospects for continued operational success, one would expect EPD’s stock to have increased drastically on this release. This is incorrect – EPD was down 11 cents on the day of its earnings release, giving medium-long term investors a compelling entry point.

Tags: Dividends, EPD, Equities, MLPs, Oil, Yield

At 20.08 million barrels per day, total U.S. demand for crude oil is the lowest in five years. Also, the decline in gasoline demand over the past two quarters was the first significant decline in 17 years. It is clear that demand for energy is declining in the United States. This demand decline will not stop in the United States.

Currently the International Monetary Fund is predicting 3.73% global growth in 2008. This is 50 bps lower than in their forecast in January and 125 bps lower than the 4.94% growth witnessed in 2007. Given the slowing growth around the globe we are going to likely see demand for energy related commodities slow, which gives greater recognition to a longer term commodity slump.

Combine this evidence with historical sector return fluctuations; it becomes clear that the current commodity bull market may be ending. Historically, the sectors which led the market higher in the last bull market are not the sectors to lead the market higher in the next. The graph below shows two bull markets, one ended in 2001 and the other ended in 2008. Notice the sector which led the first bull market, technology, still had yet to return its losses in the most recent bull market. In fact, a completely different sector led the next bull market, energy.

So my advice to fellow investors is to sell your energy related positions. No matter how well they have performed over the past 5 years, history is proof that it can not continue forever.

Tags: Oil