Positive Midweek Updates
We're seeing positive movement in a couple of our model portfolio positions on minor news and want to provide readers with an update. Focus Media (FMCN:Nasdaq) and Akamai Technologies (AKAM:Nasdaq) are each trading higher today, up 7% and 3%, respectively. We are not taking any action in this Alert.Focus Media announced a $100 million share-repurchase plan this morning. The move is not entirely surprising, given that the company reported significant cash assets of $283 million in its most recent quarterly filing. However, management's confidence is in stark contrast to the growing short position in shares of Focus Media, which has propelled them higher today. Obviously, it's a good sign for investors that management believes it's best to put its money behind its own stock; however, such a move does not necessarily mean that all investors should add to their own positions.
At the moment, we're seeing the stocks of many financial sector companies trading at multiyear lows despite share buybacks at much higher prices. We believe that Focus Media has attractive long-term potential, but we moved the stock to a Two rating because we also believe investors should be wary about backing up the truck and adding to positions in the face of a potential slowdown in the Chinese economy. We're comfortable with our model portfolio position in this name, but will continue watching for signs that these concerns are overblown and the stock carries less risk for long-term investors.
Turning to Akamai, the company received some bullish commentary from analysts at Wedbush Morgan Securities Tuesday night. Based on their recent channel checks, the analysts believe that Akamai's second-quarter should be no worse than in line with current expectations. The firm sees growing traffic volumes and a "rational" pricing environment, which is good news for investors given that recent concerns have centered on how pricing is being affected by the competition within the content delivery network (CDN) space.
Other notable points from the Wedbush update include strength in Akamai's ecommerce business -- which should benefit from solid online retailer results -- and the continuing growth in online video. Recent data from comScore indicate that online videos grew 12% in April and accelerated to 20% in May. We continue to believe that Akamai represents a solid long-term play for investors, based on its superior position in the CDN space and growth potential.
Regards, Larsen Kusick & the TSC Breakout Stocks Team
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Recent Actions
In this challenging market, a few of our model portfolio holdings are seeing positive moves today. Also, changing the rating on another name.
10/09/08 - 01:32 PM EDTShares of this China-based model portfolio stock are falling today after an analyst downgrade. Here's our take.
10/08/08 - 12:10 PM EDTDespite the economic headwinds, we remain positive on the long-term potential for these model portfolio names.
10/07/08 - 11:40 AM EDTWeekly Roundups
Stocks will rebound eventually, but we remain patient as we believe trying to call a bottom is an exercise in futility.
10/10/08 - 05:16 PM EDTWe remain cautious in the near term, but opportunities should arise for investors over the next few months.
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