Comverse Technology - Takeover on the horizon? "The Greatest Stock Story Never Told"

In my early days as a stockbroker, I worked for a small investment banking firm who participated in underwriting small speculative growth companies that mainly traded as pink sheet stocks. Nine out of ten companies in this arena never make it, but i was fortunate enough to embrace one that was my greatest lesson in what can happen if you buy a stock for the long term.

I also learned what can happen if you don't stay with your beliefs and bail on a stock too early resulting in years of kicking myself and muttering of what I should have, could have, would have done.

The company I am referring to is my first stock pick from 1989, Comverse Technology (CMVT -OTC).

This company's storyline sounds like the trailer for the movie Gladiator where Commodus says to Maximus,

"The general who became a slave. The slave who became a gladiator. The gladiator who defied an emperor. Striking story!"

Comverse's storyline goes like this,
"The company who began as a penny stock. The penny stock that graduated to a Nasdaq listing. The Nasdaq stock who became an SP-500 component. The SP-500 component that fell from grace back to the pink sheets. Striking story!"

Unless you were a shareholder these last few years.

Even more intriguing was last year's worldwide manhunt for Kobi Alexander, Comverse's CEO for many years, who stepped down last year as a result of an improper options back dating probe that began and is still ongoing. Mr. Alexander made a lot of money for shareholders but apparently "greed" took over and he made a fortune by backdating options at low prices illegally. This was so unnecessary since he was doing what we as average investors expect a chief executive to do and that is increase shareholder value. For this he should be remembered as the model for success building a company from obscurity to an institutional darling, but for some reason he chose the path to riches by cheating rather than staying the course and continuing to build a telecom technology powerhouse.

I was buying this stock for clients at $.18c per share in the latter part of 1989. Yes, I was recommending a speculative penny stock in my early days while building a client base. Why? Because the company at the time represented what every investor looks for when they research a company before investing in it. The company was on the technological forefront developing telecommunication systems that provided messaging services and voicemail solutions. They were signing up customers left and right and these customers were major telephone giants throughout the world. Their telecom systems were purchased by governments. The company was building a foundation for remarkable growth. Growth that took this stock from $.18c a share to north of $100 per share over a 10 year time frame.

Unfortunately, I went from the penny stock firm to Lehman Brothers and began buying stocks that were more mainstream and were household names for the average investor. I stopped buying Comverse, and in fact sold what I had for clients in early 1991 and what a mistake that was. If I had held the shares for my first few clients in the early days, I would have been a multi millionaire by now with probably the greatest stock story anybody could tell. But I bailed early and watched the company woo Wall St. and begin it's meteoric ride to SP-500 status. What a lesson, the $100 million dollar lesson considering how much stock I had for clients ($10,000 turned into $8 million in about 10 years and I had about $100,000 worth of the stock total for clients). But a lesson I hope all my readers will learn about long term investing.

Today the stock trades on the pink sheets at around $16 per share and Wall St. is buzzing about a possible breakup of the company's divisions which analysts say is the best strategy that will represent good value to investors. There were even rumors of a takeover from Oracle that surfaced in September. Just in the last few months the company has announced several new telecom contracts and new product announcements that revived my memories of this active pace of new client deals 20 years ago. They still to this day provide major carriers like AT&T, Verizon and Sprint with their messaging technologies and continue to be a leader in this area supplying companies in as much as 130 different countries. Even the new Apple IPhone success has implications for Comverse.

This is not a typical Pink Sheet penny stock fundamentally with $1.43 Billion of cash on the balance sheet ($11.50 per share) and revenues north of $1 Billion. Institutions still own almost 20% and there are price targets by some analysts in the mid-twenties. So buying the stock at $16 seems like a good bargain just as it was 20 years ago at $18c.

Investors should be aware that the company still has delayed their audited financials which has been the main cause of the Nasdaq delisting, but I am anticipating they may be coming out of this two year scandal by early next year and new organizational changes will probably accelerate this process. Any potential takeover players may be waiting for these events to come to closure and the bad boys of the stock option scandal are now separated from the company. Earlier this year Comverse Technology also named a new chief executive. Former AT&T Wireless executive Andre Dahan who agreed to take the CEO job on April 30.

Whatever the end result will be, I am going to make a bold prediction that the company will be bought out next year and buying the stock at these levels could reward investors handsomely. I never made a buyout prediction before so it seems even more appropriate to make one on the greatest stock story in my investment history. I have high hopes that the company can put the past behind and move forward at doing what they do best, providing integrated software, systems, and related services for multimedia communication and information processing applications.

Could this be the beginning of a new era for Comverse? Time will tell, but considering my history with the company, I am going to give them the benefit of the doubt. Certainly, playing the stock on the market's recent weakness and a possible year end tech rally makes timing this stock now a prudent strategy.

I do not own the stock as of this post but will be adding it on the next down day for the stock market. I dont own a multi-million dollar voice messaging system.

What is in Santa Claus' stock portfolio this year? Nintendo and Apple probably

The Holiday season looks like it might be rough for retailers given that the average American family will probably be spending a week's paycheck for gas just to get to Wallmart. So what will Santa Claus be busy lugging on his carbon emission free sled? One of the CNET editor's top holiday gift picks, the Nintendo Wii.

The first thing that all investors should consider before buying stock in Nintendo (OTC:NTDOY), Japan's interactive game manufacturer, is that it trades as an ADR and is quoted as a pink sheet over the counter stock. Unlike other pink sheet stocks this stock is much more stable than the average penny stock. Another thing that investors should take notice of is that through all the market turmoil in the last year, this stock has more than doubled. Starting at about $32 per share at the beginning of 2007, it has risen to as high as $78 and has like many other stocks dropped almost 20 percent in the last couple of weeks with the market correction. Unlike some toy manufacturers whose stocks have suffered losses this year due to product recalls as a result of well publicized Chinese lead paint stories, Nintendo's got game, literally.

This meteoric performance for Nintendo stock began with the launch of their Wii product and sales have been booming as evidenced by retailer reports of shortages of the game console. Sound like an Apple story? Sure does, and speaking of Apple expect them to struggle keeping products on the shelf as gadget hungry consumers gobble of their technological marvels after the Thanksgiving weekend also.

These market corrections are a trader's paradise and an investor's opportunity. Just when it seems like there is nothing but bad news and extended bearishness, the market surprises and comes roaring back. I have seen this happen many times in the past and the end of year seasonal upside phenomenon will probably not disappoint again.

This market will probably stabilize over the course of the next couple of weeks paving the way for a Santa Claus rally at the end of the year. Of course if the average investor or the market gets naughty, then they both can expect to get Iceland's early versions of Santa Claus and a big fat potato to claim as your year end gift deduction or tax loss, whatever the case may be.

I have increased holdings over the last few days with the correction and have reduced my short positions. I currently have a position in Apple but not in Nintendo as of this post. If the market has more weakness over the next couple of days, I will be adding to my select retail positions as well as initiating a position in Nintendo.

I do not own the Nintendo Wii.

Sun Microsystems Inc, a cheap tech stock who lives up to its name with ambitious eco-initiatives

Sun Microsystems, Inc. (JAVA), whose stock price has been beaten down in recent years, may have found some answers to turn the tide. The company has recently been concentrating on taking the lead in many eco-friendly initiatives related to IT infrastructure and have themselves shown dramatic reductions in their own energy use.

The company provides network computing infrastructure product and service solutions worldwide which are used in many industries including, technical/scientific, business, engineering, telecommunications, financial services, manufacturing, retail, government, life sciences, media and entertainment, transportation, energy/utilities, and healthcare.

Recent developments include a new state of the art data center, new energy efficient server products, and a newly formed organization dedicated to environmental conscientiousness. Such initiatives recently earned them a $1 million incentive payment from local utility Silicon Valley Power. Wall Street is starting to take notice of how their green strategy can give them the edge on their competition

The stock traded as high as the mid-60s seven years ago and considering their new products and plans to offer solutions to help solve the problem of IT energy demands, I love the idea of buying it here under $6.00 per share.

I do not own the stock as of this post but considering Tech's history of 4th quarter performance, I will take a position once the market settles down from its recent volatility.

Why following an NFL team's success may be good for your portfolio

Suggestions of "Best NFL team ever" have been the buzz words in recent weeks and the past few years while describing the New England Patriots NFL franchise. Currently undefeated at 7-0 and past success in 3 Superbowls suggest that team owner Robert Kraft knows how to be a leader.

Now a member of the board of directors at Viacom (VIA-B) since 2005, investors should pay attention to Mr. Kraft's business success over the years and what that could mean to investors by following companies that he is directly involved in. Listed by Forbes as one of the richest men in the world by building a paper and packaging goliath, Mr. Kraft proves why management and personnel choices translate to overall top and bottom line performance. Also important to note for the socially conscious investor, his paper and and packaging businesses are very much involved in the recycling arena to compliment their overall strategy.

Recent SEC filings have shown that Mr. Kraft, probably as part of his compensation package, has been building a very comfortable position for himself by exercising and acquiring options on Viacom stock over the past couple of years. Now this provides for a pretty good incentive for him to perform well while on the board and even if the stock suffers somewhat he still comes out a winner. Now while the stock has traded in a narrow range for the last couple of years ($35-$45) I like the idea of following his lead by looking at the stock at these reasonable levels below $40 per share.

If his private business and football successes are anything to go by, investors should get in the game and score a touchdown with one of the richest men in the world.

Its October 23rd and almost halfway through the NFL season and I "expect", not "hope" that the Patriots will go undefeated this year. I expect the same performance from Viacom in the next few years as media companies thrive in the current globalization environment.

I do not own Viacom as of this post, but I will be adding it to my overall investment and trading strategies. I am also a "huge" Patriots fan.

Fuel cell race heats up for for hybrid vehicles, United Technologies powers ahead

Dow Jones Industrials component and multinational conglomerate United Technologies (UTX NYSE) offers investors diversification, as well as a solid track record of growth. But for those seeking a solid green investment pick when it comes to fuel cell technology, pay close attention to what one of their units, UTC Power, has accomplished in the race to make the hybrid vehicle market a commercially accepted reality today, not in years to come.

The company has already made great strides by supplying major auto makers with fuel cell technology for their hybrid prototypes. While these models are not being mass produced just yet the company has an appealing mix of clients including BMW, a luxury automaker, Nissan and Hyundai who are two top selling behemoths and in the larger vehicle market, they currently supply fuel cell powered buses in the state of California.

Now while the hydrogen fuel cell idea has some infrastructure issues such as the scarce availability of hydrogen filling stations, the technology has advantages over other alternative energy solutions. For one, which is probably most important, is that fuel cell technology is probably the nearest term solution to providing energy production in automobiles with virtually no carbon dioxide emissions.

Also, people who are on the "ethanol" bandwagon need to be sensitive to the fact that high volume ethanol production puts upward pressure on food prices because of the amount of crops that will have to be supplied to produce the fuel. I don't believe that is worth the cost whereas fuel cell technology does not have this problem.

Beyond the exciting rapid pace of development in this arena, United Technologies recently reported third quarter earnings of $1.2 billion dollars, up 20 percent over the prior period and well ahead of Wall St. expectations. Revenues for the quarter were just over $13 billion.

Performance like this is why they are in the illustrious Dow 30 stocks. Add to that an ambitious recipe to help solve the world's power demands absent of oil and the other dirty alternatives, this company earned the right to be one of my top holdings as a real time play on green automobile technology.

The stock pulled back with the recent market sell-off two days ago, but that what makes it attractive to me at these levels. It closed yesterday at $77.43 per share.

Visit United Technologies' website for a look at the company's environmental objectives and currently deployed power project profiles.

For a list of fuel cell vehicles in production visit this link or for those who would like to see an organized list of other alternative energy investment stocks broken down by category click here.

Likelihood for a Summer rally fading on Wall Street

Market players head into this trading week shortened by the holiday, but face a heightened sense of awareness that the story for stocks is about as unsatisfying as a season ending Sopranos episode.

While it is situations like this that investors look for, to grab stocks when out of favor and at lower prices, it is very important to stay overly cautious and wait for prices to stabilize before initiating new positions. At this moment, the trend is certainly downward and low participation this week will not help the cause for bulls.

The Federal Reserve board last week also helped to feed the bears by leaving interest rates unchanged and issuing a statement of their inflation concerns that was about as informative as my weekly trips to the local grocery store to buy milk at $3.80 a gallon. Of course of little highlight by Bernanke and his crew is the continued housing slump and self-imposed sub-prime mortgage mess that this illustrious group created when they raised rates in the first place that killed credit-challenged home buyers in the last few years.

Since I wrote the call to add positions to short the major market averages 10 days ago, the Dow Jones Industrials has dropped roughly 250 points or almost 2% with the SP500 following suit down about 30 points. Oil prices have revisted the $70 per barrel mark, interest rates have crept even higher as evidenced by treasury yields, and downward earnings revisions for stocks have outpaced higher estimates.

So what should you do with all these negative factors?

As a day trader, I am able to take advantage of the down days just as much as i am able to benefit from the up days. My short term trading ussually revolves around volatile stocks, indexes and ETFs. However my long term investing strategies see great situations in areas that have been bucking the downtrend and I see some great opportunities this summer to buy stocks as they are falling.

The industries and stocks I like right now are agricultural products(MON), utilities(UTH), envronmental services(WMI), oil services(OIH), financial services(NYX), and some select technology plays (CSCO,AAPL,YHOO).

Since I am overall bearish in the near term and looking to hedge any long positions in my portfolio, I like the ETFs that short the major market averages(DXD,SDS,QID).

Investors hoping for a Summer rally after the holiday week when earnings season kicks off are likely to be disappointed. They are better off to wait and see what the results look like this quarter to better guage when the market will react and head to new highs. This trader doesn't see it happening till the end of the year.

Performance table of highlighted posts:

Post Date Post Item Post Price* Current Price** Return Pct.*** Time Period****
07/02/07 YHOO NA $27.13 NA NA
07/02/07 AAPL NA $122.04 NA NA
07/02/07 CSCO NA $27.85 NA NA
07/02/07 NYX NA $73.62 NA NA
06/22/07 BX ($35.98) ($29.27) 18.6% 1 Week
06/20/07 QID $45.50 $45.69 0.4% 2 Weeks
06/20/07 SDS $51.01 $52.72 3.4% 2 Weeks
06/20/07 DXD $48.82 $50.15 2.7% 2 Weeks
Combined OIH October Strangle 2.0% 3 Weeks
06/08/07 OIHVK $6.20 $3.80
06/08/07 ODLJO $8.80 $11.50
Combined OIH July Strangle 13.6% 3 Weeks
06/08/07 OIHSM $5.20 $1.10
06/08/07 OIHGL $11.00 $17.30
06/08/07 OIH $167.03 $174.73 4.6% 3 Weeks
06/06/07 FIW $21.18 $21.73 2.6% 3 Weeks
06/06/07 PHO $20.35 $20.92 2.8% 3 Weeks
06/06/07 CGW $25.68 $25.57 -0.4% 3 Weeks
05/30/07 WMI $39.27 $39.07 -0.5% 4 Weeks
04/13/07 UTH $144.21 $141.65 -1.8% 11 Weeks
04/05/07 MON $58.30 $67.58 15.9% 12 Weeks



--------------------------------------------------------------------------------
* Post Price is the price as quoted in post or the highest price on the day of post/long positions or the lowest price on the day of post/short positions. () indicates short position.
** Current prices based on the close of trading June 29th, 2007

*** Return percentages do not include dividends, fees or commissions.

**** Time period is the time since the original post, rounded off to the nearest weekly period.

Blackstone IPO surges, Wall Street tanks

Investors saw big losses in the markets today except for the privileged few who rode the Blackstone Group LP (BX) to nice gains on it's first day of trading.



Could this be a great new divergent indicator? Everytime a private equity firm sell shares to the public, investors should dump their shares? After reading some of details of this public offering, I have to question the wisdom of why I would invest in an entity where most of my money went to a select few management individuals. Is this a complete stock swindle or what? Let's see, a firm whose specialty is taking companies private, is going public and asking investors to invest in something that may or may not make money for several years to come. Excuse me for being blunt but, not with my money! In fact, I am so convinced that this deal stinks I am shorting the stock at $35.98 as I write this post.



This event will also convince other private equity firms to go for the walk-off homerun by selling shares to "joe public", but I hope regulators and lawmakers will engage in more scrutiny to protect investors who may not understand the risks they are taking by supporting these types of firms. If my money was going to support a new promising drug, help expand an alternative energy company or finance some other worthwhile endeavor, at least there is an incentive for the company to succeed. Where are the incentives here? How many jobs will be lost in the business of buying companies and trying to turn them around?



For the most part, I am favorable towards any firm who dives into the public investment pool with grand plans to reward shareholders, but until firms like this show a track record to investors, I remain skeptical.

The Russell Index Trade

Market players will be busy today trading the stocks that will be added or deleted from the Russell Indexes. This event happens annually and investors who wish to take advantage should focus on buying the companies that are being added and shorting the stocks that are due to be deleted.



Exchange traded funds and mutual funds that track the indexes must rebalance their portfolios to match these additions and deletions so this one of the few market events that you can predict with reasonable certainty which stocks will have above average buying or selling. For a complete list of which stocks, refer to these links. (Additions, Deletions) For a complete description of the process refer to this link (Russell 3000 reconstitution).



In the past traders have taken advantage of the buy or sell imbalances near the close of the trading day that the rebalancing takes place, which takes place later today. This year will see about 277 changes to the index so there is no shortage of ideas for investors looking for new positions. Also, investors need to recognize the fact that the changes are made because the newer stocks that are added are considered to be better representations of their industry groups while the stocks that are deleted are no longer in favor as industry group representatives.



This link examines what happened in 2002 when the S&P 500 changed 9 components in it's index and the performance of those stocks around the rebalancing date. (SP500 rebalance).



Investors who are new to the game should proceed cautiously with regards to this market strategy unless they have the tools to see exactly which stocks are experiencing imbalances prior to close of the trading day. However, if an investor has a longer term objective, this event can help confirm any decisions of whether to buy, hold or sell the stocks involved.



Finally, while I was surfing the net to get information for this post, I came across David Neubert's post from 2006 in regards to this trade. (David's post)

Looking for Clean & Green? Waste Management picks up, delivers and recycles

If anyone were to ask me what company represents the fight for a greener planet, I would have to say Waste Management Inc., (WMI-NYSE), trading just below $40 per share. Since 1894 this company has been taking out the trash and have now built a respectable portfolio of solutions to profit from waste-to-energy implementation and recycling forethought.

I also have to admire any company who engages in a business that inherently gets the "dirty business" label yet takes on the challenge and corporate bravado to actively clean up the waste of the world. Considering the fact that environmental awareness, regulations and scrutiny are increasingly dominating today's headlines, I like the company's long term prospects. I like the name so much, I vote for a government department called the Waste Management Agency, whereby Uncle Sam could be his own best customer.

How green is Waste Management?

Taken from the company's Website they boast:

413 collection operations, 370 transfer stations, 283 active landfill disposal sites, 17 waste-to-energy plants, 131 recycling plants, 95 beneficial-use landfill gas projects and 6 independent power production plants. These assets enable Waste Management to offer a full range of environmental services to nearly 21 million residential, industrial, municipal and commercial customers.

We recover and process methane gas, naturally produced in landfills, into an energy source for generating power. We currently supply enough landfill gas to create more than 250 megawatts of green energy that could power about 225,000 homes or replace about 2 million barrels of oil per year.
With 495 vehicles now converted from diesel fuel to clean-burning natural gas, we operate one of the nation's largest fleets of heavy-duty trucks powered exclusively by natural gas.
We have taken a leadership role in promoting the recycling and reuse of materials that would
otherwise end up in landfills. Waste Management, combined with its wholly owned subsidiary WM Recycle America, is North America’s largest recycler. We process 5.8 million tons of commodities each year, saving approximately 41 million trees through paper recycling alone.
Through its waste-to-energy plants, WM uses solid municipal waste to generate power. This reduces the volume of the waste by 90 percent and saves space in local landfills while providing an economical alternative to the use of fossil and nuclear fuels.
WM partners with communities, government and industries to redevelop closed landfill sites into recreational and commercial facilities such as parks, athletic fields, campgrounds and golf courses.
Across North America, we work with environmental groups to set aside land to create and manage wetlands and wildlife habitats. Our landfills provide more than 16,000 acres of protected land for wildlife; 15 landfills are certified by the Wildlife Habitat Council.
WM helped found the Chicago Climate Exchange, an organization established to provide a voluntary marketplace for reducing and trading greenhouse gas emissions.

http://www.wastemanagement.com/wm/about/Overview.asp

The stock suffered dearly following an accounting scandal and management shakeup in the summer of 1999, but has since recovered to a solid track record of growth and shareholder value. The chart below represents a comparison of stock performance to the S&P 500. WMI in Magneta, S&P500 in green.



I do not believe this is the best price to execute entries into the stock based on the chart analysis below and an uneasy feeling that stock prices are due for a breather, but over the course of the next couple of months any pullbacks will offer a chance to get in for the long term (1-3 years) where I can see this stock north of $50 per share.

For track record purposes, the recent breakout from the previous 52 week range enables me to initiate a position here for a long term buy and hold call.



For now the company pays an investor a 2.50% annual yield in dividends and trades at a discount to it's industry peers. So for investors looking to "clean up", Waste Management makes it their business.

Why is Warren Buffett buying railroad stocks?

Warren Buffett's investments are the talk of Wall St. and once again he has created a buzz.

In a recent filing with the Securities and Exchange commssion, Buffett's investing behemoth Berkshire Hathaway disclosed a major stake worth over $3 billion dollars into Burlington Northern Santa Fe company. The position represents a 10.9% stake.

Analysts on Wall St. believe the railroad stocks are at peak valuations so, What is the "Oracle of Omaha" seeing that they are not?

As Mr. Buffett is reaching his later years, his legacy will not only be his eagle eye for good value. He has set forth in motion a legacy of giving back so much of what he gained.

Last year his announcement of his intention to donate most of his stock holdings to various foundations included a $30 billion dollar gift to the Bill and Melinda Gates foundation for health and education in poor areas of the world.

This railroad investment represents, in my opinion, a firm belief that the rail industry is about to experience a revolution of it's own, and the investment required to help transform the industry into this new millenium, might require major stakes and investment into the infrastructure which only a man like Buffett is capable of, taking a lead where the government needs to follow.

I am sure that a man like Mr. Buffett would like to see in this day and age, where global warming dominates the headlines and a failing US auto industry that is incapable of reinventing themselves, calls for a new awakening and a new investment opportunity much like the days of the Vanderbilts, America's first railroad magnates, who themselves gave much of their fortune away to good causes.

I believe there will be more news in the future of Buffett's railroad investment plans. I believe that recent events like France's new bullet train that travels 350 mph inspires a man like Buffett to have the vision to see what impact today's world problems could have on a industry such as the railroads, and how the railroad industry could impact today's world problems.

For now though the simple equation is that surging transportation demands and lower oil prices in the next couple of years will reflect handsomely in these stocks.

This was a great investment on his part and investors should be "all aboard that train", so to speak.

SMI initiates coverage on Monsanto -- MON, Overall Rank -- Bullish / Investor Rank -- Buy

SMI this morning is initiating coverage on Monsanto-MON, a global leader in the agricultural products market . Trader and analyst Thomas Chenoweth is quoted as saying "Monsanto represents one of the most exciting developments in the financial markets based on the company's strategy which places them in a unique position to be a dominant product supplier encompassing the food , energy , and biotech industries . "




Tom is convinced that the company will show that bio-engineered crops could be the holy grail that revolutionizes ethanol production which will spawn a mass plantings of crops for several years to come of which the company directly benefits . Adding to that the defensive nature of providing food to the masses, Tom says, "this company can be one of the greatest growth stories of the 21st century ."

Monsanto beat analysts' forecasts yesterday by reporting higher sales and earnings for the quarter ending February 28, 2007.

Sales rose to 2.62 billion, up from 2.2 billion in the year ago period, an increase of 19%. Earnings rose to 543 million , up from 440 million , with earnings per share of 98¢ versus 80¢, up 17.5%. The company also raised guidance for the year citing strong demand for their seed products such as in Brazil , one of Monsanto's growing markets , who last year announced their nation's goal to become energy independent and have begun making large investments into their ethanol industry.

The stock yesterday rose into a new range based on the positive earnings report but we are waiting to open positions and will be soon accumulating shares during various pullbacks . Check back for updates .