This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Kass: Ten Things That Could Move Stocks

This column by Doug Kass was originally published on Feb. 5 at 9 a.m. EST on Street Insight. It's being republished as a bonus for and readers. For more information about subscribing to Street Insight, please click here .

Every few weeks, I recap 10 tidbits I've picked up from trading desks and other industry sources. These items have not been confirmed, but either have affected, or could affect, the stocks mentioned. The first such column , in early January, proved prescient on several fronts. Here are this week's top 10.

1. Apple's (AAPL) Steve Jobs' problems regarding option grants run much deeper than is generally assumed. I am hearing that Jobs has personally hired a high-powered law firm in his own defense, and that the odds increasingly favor action by the SEC and the U.S. attorney's office.

As well, a recent regulatory filing by Apple filled with audacious statements ("The company intends to continue full cooperation ... the resolution of these matters will be time-consuming, expensive and will distract management from the conduct of the Company's business") has incensed the two aforementioned government bodies as well as certain members of Congress. I am also hearing that Google (GOOG) CEO Eric Schmidt has already begun low-level discussions with several Apple board members regarding his role as a possible temporary replacement to Steve Jobs should the options-backdating issues intensify at legal levels.

2. Earlier this month, I heard (correctly) that the low-end cellular-phone market "has been jammed with inventory as demand erodes ... guidance will be lowered by the leading manufacturers as margins erode and average selling prices continue to fall."

Since then Motorola (MOT), Nokia (NOK) and Ericsson (ERIC) have disappointed and guided down profit forecasts. Now I am hearing that the high-end market has weakened abruptly over the last three weeks, and more estimate revisions are in the offing.

3. In January, I also had heard that Dell (DELL) would guide lower. Indeed, Dell missed, and Michael Dell has seized back operating control of the company from Kevin Rollins. I am now hearing that Dell -- in conjunction with Microsoft (MSFT) -- is working on a SideShow-enabled MP3 player that will sport media capabilities along with wireless connectivity and will offer almost unlimited types of data that the SideShow platform is capable of displaying.

4. I also am hearing that Microsoft is planning the introduction of a Zunephone by Christmas 2007. Designed to compete with the iPhone's midyear entry, the effort is being managed by J. Allard (one of the chief architects of the Xbox), who recently replaced Bryan Lee as the head of Zune's operations.

5. I continue to hear the subprime carnage is accelerating. Several of these firms are believed to be close to shutting their doors.

6. Deals I hear that are imminent include the combination of Sirius Satellite (SIRI) and XM Satellite Radio (XMSR) (Update: XM and Sirius announced Feb. 19 an intent to merge, subject to regulatory approval; Unilever (UN) and Richardson-Vicks; IBM (IBM) and SAP (SAP); and private-equity takeovers of the following:

Nabors Industries (NBR)
Novellus Systems (NVLS)
Novelis (NVL)
Bristol-Myers Squibb (BMY)
Control Data
Business Objects (BOBJ)
Nvidia (NVDA)
Triad Hospitals (TRI)
Gaylord Entertainment (GET)
Qwest Communications (Q).

7. While nary an analyst has mentioned this development, Nielsen/Net Ratings' reports for December 2006 reveal that Google's search business (+22.6% year over year) is growing more slowly than Yahoo's! (YHOO) search (+30.1%).

For the full year, Google gained 560 million users (down from 1.06 billion the year before) and Yahoo! gained about 330 million users (down from 370 million users a year earlier). Although Google's search-share approaches 51% (compared with only 23.6% for Yahoo!), I am hearing this trend has not fallen on deaf ears as Google is planning some senior management changes in February, which will surprise investors and analysts.

8. Speaking of Google, both YouTube and its parent company are now aggressively adopting strategies of paying for content (broadcasts, videos, etc.). I am hearing investors should look for alliances with consumer-created content companies (C4s) similar to the models of Threadless, Eefoof and Revver, and watch for a progressive rise in Google's cost of goods -- both absolutely and as a percentage of revenue -- in coming quarters.

9. I am hearing that, at the urging of Prince Alwaleed bin Talal ( Citigroup's (C) largest individual shareholder), former Bank of America (BAC) CFO Al de Molina has already been contacted by members of Citigroup's board of directors regarding naming him as a possible replacement to Charles Prince. At the same time, I am hearing that JPMorgan's (JPM) Jamie Dimon has informally approached Citigroup's Sallie Krawcheck for a senior position within his bank.

10. Finally, I am hearing that conversations regarding an alliance or merger between Toyota (TM) and Ford (F), though dismissed publicly, have proceeded apace in 2007.

At time of publication, Kass and/or his funds were short the SPY, although holdings can change at any time.

Doug Kass is founder and president of Seabreeze Partners Management, Inc., and the general partner and investment manager of Seabreeze Partners Short LP and Seabreeze Partners Short Offshore Fund, Ltd. Until 1996, he was senior portfolio manager at Omega Advisors, a $4 billion investment partnership. Before that he was executive senior vice president and director of institutional equities of First Albany Corporation and JW Charles/CSG. He also was a General Partner of Glickenhaus & Co., and held various positions with Putnam Management and Kidder, Peabody. Kass received his bachelor's from Alfred University, and received a master's of business administration in finance from the University of Pennsylvania's Wharton School in 1972. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box."

Kass appreciates your feedback; click here to send him an email.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs