First things first. Let's reveal the winners of our year-end quiz.
We received 181 entries, including 19 that got every answer right. We picked three winners of autographed copies of Jim Cramer's RealMoney: Sane Investing in an Insane World.
And the lucky trio is ... Lynn Lyons of Laguna Beach, Calif., Andrew Knauf of Grand Rapids, Mich., and Jacob Boak of Pittsford, N.Y. Congratulations!
Thanks again to everyone for participating, and to Jim for the books.
Now, on with the show. (
To view Colin's video take of this column, please click here.
1. Flower Power
The year is young, but already the
hype is in full bloom.
Everyone's favorite Internet stock doubled in 2005, but that hardly silenced the spirited debate over the company's
eye-popping valuation. This week, a pair of Wall Street analysts -- longtime bull Safa Rashtchy of Piper Jaffray and onetime fence-sitter Robert Peck of Bear Stearns -- added to the chatter.
Rashtchy rang in the new year by
raising his price target from a modest $445 to an impressive $600. A number that big is prone to cause double takes no matter how you explain it, but at least
Rashtchy's rationale is clear.
"Google is our top large-cap stock pick for 2006 because it is singularly well positioned to benefit from the growth of online advertisement and search," Rashtchy writes. "Furthermore, Google's culture of innovation has enabled the company to go beyond online search marketing with innovative new products that have redefined the consumer Internet experience. Two of Google's newer products, Google Ad Network and Google Base, show significant promise to fuel Google's string of earnings upside surprises beyond 2006."
Peck's 38-page report takes the opposite tack, eschewing simple logic in favor of florid prose. In raising the stock to outperform from peer perform, Peck boosts his price target to $550 -- up from $360, which Google last saw around Halloween -- and sheds any semblance of modesty.
"Today we are introducing the concept of the Google Ecosystem to investors," Peck writes. Helpfully defining the ecosystem as "a community interacting as a functional unit, that grows and mutually supports the various components within it," the analyst adds, "While most people associate the ecosystem with nature, we think it also applies to business sectors and believe Google is in the midst of nurturing its own Ecosystem, much like
did in the past."
Of course, that's not all. "Google is the one-trick pony that knows other tricks its competitors have not yet seen," Peck says, adding that he now believes his previous take on the stock was "too conservative."
He doesn't seem to be in grave danger of repeating that mistake.
Dumb-o-Meter score: 93. Apparently it's only natural that Google should defy gravity.
Stern Signs 'Em Up
2. Stern Countenance
Howard Stern is enjoying 2006 too. The renowned shock jock, whose uncensored rantings will finally hit the satellite-radio airwaves Monday, celebrated this week by accepting a hunk of
The $225 million payout was triggered when Sirius beat some enrollment targets. The company said it added 2.2 million subscribers during the year and finished 2005 with 3.3 million users, well above its oft-repeated 3 million-subscriber target. Last quarter, Sirius even beat out rival XM( XMSR) in head-to-head competition, such as it is.
Yet some people were skeptical of the achievement. "I'm not surprised Sirius had little trouble hitting any subscriber numbers target given the heavy rebating activity on the hardware," RealMoney.com 's Michael Comeau wrote Thursday morning. And some observers have wondered about Sirius' car-counting methods.
Stern's stock award is part of the five-year, half-billion-dollar contract he signed in October 2004. Of course, CEO Mel Karmazin has his own contract, worth more than $1 million a year in addition to restricted stock valued above $20 million. The huge payouts help to fuel the robust cash burn often noted by bears on Sirius stock.
That doesn't faze Karmazin, though. "Satellite radio is very hot and is continuing on pace to be one of the fastest growing products in consumer electronics history," he said Thursday with typical understatement.
Another raft of hype from Sirius? What a shocker.
Dumb-o-Meter score: 90."Wonder if Stern is going to listen to the 17 analysts with buy ratings and hold his shares?" RealMoney's Will Gabrielski pondered Thursday. "I wouldn't."
3. Buck Shot
It may be based in Europe, but
( BF) knows the value of a dollar.
The Ludwigshafen, Germany-based chemicals giant grabbed headlines this week by
going public with a $4.9 billion unsolicited proposal to buy rival
. Engelhard shares soared 27% in a day, even as the Iselin, N.J., company asked shareholders to sit tight while its board mulls things over.
Up till now, BASF had been best known for its long-winded ad tagline, "We don't make the products you buy -- we make the products you buy better." But its pursuit of Engelhard may put that slogan in a different light.
According to a letter it released Tuesday, BASF first approached Engelhard in late December. BASF suggested a merger at $37 a share, seeing huge opportunities in what it called "the dynamically growing catalyst market." Engelhard agreed to meet but later backed away, BASF says.
In its letter, BASF expresses some exasperation with Engelhard Chairman Barry Perry and his board. What's particularly galling, BASF hints, is that Engelhard has turned its back on BASF's generous offer to pay for confidential information.
"We have clearly indicated to Mr. Perry that we would be prepared to raise our current offer price by as much as $1.00 per share if he agrees to meet with us and the information provided supports such an increase," BASF says. "In the absence of such additional information, we are unable to improve our original offer of $37.00 per share."
If adding a dollar is BASF's idea of making its offer better, we can't blame Engelhard for sitting this one out.
Dumb-o-Meter score: 85. With Engelhard stock fetching $38 this week, it seems like BASF is going to have to ante up the extra buck anyway.
4. Paper Tiger
Martha Stewart cut another huge deal this week.
Her Martha Stewart Living Omnimedia (MSO) media conglomerate has come under fire on Wall Street for its poor financial performance. The New York company continues to lose money and was taken to the woodshed last fall after shareholders were left holding the bag for the founder's TV ambitions.
This week, CEO Susan Lyne and her minions fashioned their bold response. On Thursday the company rolled out plans to sell Martha Stewart Crafts, giving customers "a one-stop shop for their crafting needs."
Where Wall Street wants to see revenue growth and profit gains, Martha Stewart sees a chance to sell "paper-based craft and scrapbooking merchandise," starting late this year. The company even arranged a partnership with EK Success, which Martha Stewart Living says has the "leading market position in the fast-growing $3 billion scrapbooking segment of the U.S. craft industry."
If that's not enough, Martha's Web site will offer "inventive scrapbooking content" and other stuff.
"Scrapbooking has taken hold across every demographic, and we are thrilled to be partnering with the industry leader, EK Success," said Robin Marino, president of merchandising at Martha Stewart Living Omnimedia. "MSLO has both how-to expertise and deep archives in the craft arena, and we look forward to creating inspired, high-quality products in what is clearly a growth industry."
Yes, we can't wait to frame the clippings from that next big earnings misfire.
Dumb-o-Meter score: 80. Will each scrapbook come with a handy container for storing freshly chopped cabbage?
5. Shell Game
Kulicke & Soffa
just had a strange brush with the stock market's dark side.
This week the Willow Grove, Pa., semiconductor-parts company amended its annual report for the year ended Sept. 30, 2005. It seems that in a
Securities and Exchange Commission
filing Dec. 13, Kulicke & Soffa checked off the wrong box. That doesn't seem like a big deal -- until you consider which box Kulicke mistakenly checked instead.
"The cover page of the Company's 10-K had erroneously indicated by check mark that the Company was a 'shell company' within the meaning of Rule 12b-2 of the Securities Exchange Act of 1934," the company said in a press release.
Shell companies aren't highly esteemed on Wall Street, to say the least.
Dictionary of Finance and Investment Terms defines a shell corporation as a "company that is incorporated but has no significant assets or operations. Such corporations may be formed to obtain financing prior to starting operations, in which case an investment in them is highly risky. The term is also used of corporations set up by fraudulent operators as fronts to conceal tax evasion schemes."
Of course, no one is making any of those claims against Kulicke, which duly reports that its corrected cover sheet was filed as an amendment to the 10-K Wednesday. "There were no other changes to the 10-K," Kulicke assured investors.
Well, maybe Kulicke was just thinking outside the checkbox.
Dumb-o-Meter score: 78. And people say complying with Sarbanes-Oxley is tough.
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