Stocks in the News: Take Blackberry Money and Run

Posted: Sep 25, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.

Stock number one is:

BlackBerry Limited, (SYMBOL: BBRY) and the headline says:

BBRY gets Letter of Intent to Get Acquired at $9/share – Citi Research

On the heels of an earnings loss forecast, slashing a third of its workforce, and a complete change of its future business model, BlackBerry “announced it has signed a letter of intent agreement under which a consortium to be led by Fairfax Financial Holdings has offered to acquire the company subject to due diligence,” reports Citi Research.Whether Fairfax Financial is able to obtain financing remains to be seen, and it’s unlikely that other bidders will step in to buy this distressed company.

We would sell immediately and not bank on a $9 buyout.Short interest is high at about 35%. Shareholders should not mistake a brief upswing from short covering as a sign that the market likes this stock.Any potential deal could easily fall through, driving the share price lower again.

Our Ransom Note trendline says:SELL BLACKBERRY.

BBRY Chart

BBRY data by YCharts

Stock number two is:

Applied Materials Inc., (SYMBOL: AMAT) and the headline says:

Applied Materials to Merge With Tokyo Electron -- DealBook

Semiconductor giant Applied Materials plans to merge with Tokyo Electron in a stock deal expected to close in mid-to-late 2014.Applied Materials shareholders will receive one share of the new company for each share they currently own.Gary Dickerson, recently named CEO of Applied Materials, will remain in that position.

The combined company plans to repurchase $3 billion of stock in the first year, and expects earnings to grow after its first fiscal year.

The share price is up 10% since we urged investors to buy Applied Materials in mid-August, and broke through short-term upside resistance today.With a big dividend, a low PE, and aggressive future earnings growth, the stock has broad appeal to equity investors.

Our Ransom Note trendline says: BUY APPLIED MATERIALS.

Stock number three is:

National Oilwell Varco, Inc., (SYMBOL:NOV) and the headline says:

National Oilwell to spin off equipment distribution business -- Reuters

National Oilwell Varco, the largest U.S. oilfield equipment provider, plans to spin off its distribution business to shareholders in first half 2014.S&P expects the market value of the spin-off to increase, once separated from the parent company.

The company has grown rapidly, reaching $20 billion in revenue last year. Earnings are expected to fall 10% this year, then climb 17 and 15 percent in the next two years.The dividend yield is 1.32%, and the PE is 14.8.

The share price broke out of a trading range in mid-September, and is travelling toward medium-term resistance in the mid-to-upper $80’s.We would especially buy on a pullback to $76.


<NOV Chart

NOV data by YCharts