24/7 Wall St.

Gap Restructuring Mostly Applauded (GPS)

There were some interesting and somewhat expected comments out of the new CEO of Gap Inc. (NYSE: GPS), Glenn Murphy.  He was speaking today at the Piper Jaffray 28th Annual Consumer Conference.

Murphy noted that after visiting many stores (450 to 500) that the company plans to downsize some of its stores, and other stores would be closed, remodeled, or downsized over the course of 2009 and beyond.  What is going to be an interesting play is that Murphy noted some of the kid's and baby chains would be consolidated into the adult's Gap stores in order to lower net rental costs.  The company also plans to focus on the 6,000 to 10,000 square foot range, with the larger flagship stores remaining in major metro or high traffic areas.  The company also plans to focus on the size of its OLD NAVY store brand.

Another key move will be a demand-driven inventory system starting this year to better monitor and stock its top selling items. 

Traders like what they have heard so far.  Shares are up over 5% at $17.90 on about 7 million shares.  The only caveat here to consider is that this does very little for calendar 2008 and Murphy's plan is probably two or three years behind what deposed CEO Pressler should have been installing.

There was no hint at all that OLD NAVY would be spun-off into its own company.  Pitty.  We see that strategy as one of the best solutions for the company to reinvigorate itself and to give itself a makeover that shareholders would able to realize value.

Jon C. Ogg
June 10, 2008

The 24/7 Wall St. Bankruptcy Odds Watch (AMR)(UAUA)(NWA)(GHS)(DAL)(LHS)(LEH)(CAL)(WB)(F)(MNI)(AIG)

There are the 24/7 Wall St. odds that several companies will have to file for Chapter 11 between now and the end of the year. These will become a permanent part of the website and the list will be updated once a week.

AMR  (AMR)             1 in 2          Lee Enterprises  (LEE)     1 in 15      Ford (F)              1 in 35
UAL  (UAUA)            1 in 4          Lehman  (LEH)                 1 in 25      McClatchy (MNI) 1 in 35
Northwest (NWA)      1 in 5          Continental  (CAL)            1 in 25      AIG (AIG)            1 in 35
Gatehouse  (GHS)     1 in 5          Wachovia  (WB)               1 in 25
Delta  (DAL)              1 in 10        General Motors  (GM)       1 in 30

Capital Senior Living Farther On Strategic Review (CSU)

Capital Senior Living Corp. (NYSE:CSU) has announced that a Special Committee of its Board of Directors has engaged Banc of America Securities, part of Bank of America (NYSE: BAC), as its financial advisor.    B of A will assist in actively exploring and considering what it calls "a range of strategic alternatives" as it is prominent in both healthcare and real estate.

Capital Senior is among the larger operators of senior living communities in the U.S. and it is one we have referred to as one of the "entrance stages" or even the "training wheels" stage of the senior care field.  That pertains to the stage of the industry it serves as the majority part of its business rather than an emerging stage company.

The company formed a Special Committee back in March and this one has been thought of as a potential takeout candidate or merger candidate as a result.  The company even states its goal is to maximize shareholder value and it believes it is well-positioned to benefit from attractive demographics and strong industry fundamentals.

We just featured Capital Senior Living two weeks ago in our weekly "10 STOCKS UNDER $10" newsletter as "one we think you can hang out in for a couple weeks since we are nearly 60-days into its review of whether or  not it can be bought.  But after the next week or two if no word has come, then take you gain or your loss and we'll look elsewhere." 

Shares had closed at $8.36 before that and ran up to $8.95 before todays $8.39 close.  Shares are up about 2.5% in after-hours trading at $8.60.  With a $223 million market cap, even a credit crunch and even tighter credit standards allow this one to fall into the "easy realm" of acquisitions for any larger group.  Th real trick will be in making it more profitable.

You can join our open email distribution list to hear about other stories on mergers, reorganizations, IPO's, secondary offerings, and other key special situations.

Jon C. Ogg
May 29, 2008

Jon Ogg produces and edits the SPECIAL SITUATIONS newsletter; he does not own securities in the companies he covers.

UTStarcom Miraculously Pins The Tail on the Donkey (UTSI)

If there has ever been a battered and tattered tech stock, UTStarcom Inc. is the epitome of that.  Almost miraculously, the company has raised guidance and shares are soaring. 

The company has put guidance for first quarter revenues in the range of $580 million to $590 million.  This compares to initial guidance of $500 million to $520 million.  The company also hiked up gross margins to be in the range of 15% to 16%, above the prior guidance of approximately 13%.

UTStarcom says this is due to better than expected performance from its personal communications unit and from its core business units.

One thing that is up though is operating expenses, which are now at $120 to $125 million instead of $115 to $120 million (due to unanticipated professional services expenses).

Revenue in the first quarter of 2007 was $475.9 million, and operating expenses in the first quarter of 2007 were $127.5 million.

We featured this at the start of the year as a "turnaround that hadn't turned around" yet.  Maybe this is the start.

Shares of UTSI closed up 0.9% at $3.36 today, but shares are up 19% at $4.00 in after-hours trading.  The 52-week trading range is $2.23 to $7.47. This was above $10.00 less than 18 months ago, and this above $30 and even $40 back in late 2003 and briefly in 2004 before its problems kicked in.

Jon C. Ogg
May 6, 2008

Post-Bankruptcy, Federal Mogul Heads For NASDAQ (FEMO, FDML)

Federal-Mogul Corporation (OTCBB: FEMO) has recently exited from bankruptcy, and has traded OTC on the Bulletin Board since.  Today, the company has announced that it will leave the OTC market and head over to the NASDAQ Global Market on April 23, 2008.  Its new proposed stock ticker symbol will be "FDML."

Federal-Mogul also recently announced that it will report its first quarter 2008 results on April 22, 2008.

Since emerging from bankruptcy, this has traded in a range from 418.00 to $27.00, and shares closed yesterday at $19.40.  Because of acquisitions made, this company ended up with something to the tune of more than 350,000 asbestos claims.  As a reminder, Carl Icahn owns (as of last look) most of the post-bankruptcy company because of his funding that helped pay asbestos claims.

The company manufactures and distributes parts, components, and systems in the automotive, small engine, heavy-duty, marine, railroad, aerospace, and industrial markets.

You can join our open email distribution list to hear about reorganizations, special financings, secondary offerings, IPO's, M&A, and more previews for other special situations in various stages.

Jon C. Ogg
April 10, 2008

Jon Ogg produces the Special Situation Investing Newsletter.  He can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

What If Wall Street's Heaviest Hitters Are Wrong?

"So, we beat on, boats against the future, born back ceaselessly into the past"--F Scott Fitzgerald, "The Great Gatsby"

John Thain, former co-president of Goldman Sachs (GS) and CEO of The New York Stock Exchange (NYX) says that his new firm, Merrill Lynch (MER), will not have to raise more capital. His Ouija board told him it was so. John Mack, former CEO of almost every investment bank in the world and now head of Morgan Stanley (MS) says that he sees the light at the end of the mortgage crisis tunnel. Several institutions tried to vote Mack out as chairman of MS because of all the write-offs that the brokerage took recently. Most of the investments that caused these were made while he was captain of the ship.

People with big titles and large salaries are considered authorities on matters involving their industries, but the subprime mess shows just how wrong-headed that notion is. Two big-bank CEOs have been fired over being "right" about the economic fall-out of rising mortgage failures and the related financial sink-hole created by subprime-derivative paper. Those chiefs who were not fired have simply been taken down a few notches in the opinions of their shareholders.

While Wall St. is beginning to profess a measure of optimism about the end of this year and 2009, nothing less that the International Monetary Fund says the credit crisis may only be in its early stages.

According to the FT "The financial sector faces potential losses of almost $1,000bn as a result of the credit crisis, the International Monetary Fund said, warning of further losses and writedowns on prime mortgages, commercial real estate, leveraged loans and consumer finance." For those who have been drinking, the thought is sobering.

If the IMF is even partially right, several things are likely to happen. Mortgage defaults will rise, most likely because more people are out of work and the value of their homes is less than the value of their mortgages. Large write-downs at banks and brokerage firms will continue well into this year. These companies will be forced to go into the market for additional capital. The troubles in the economy will make that money exceedingly expensive. Stockholders in the corporations will face dilution and falling share prices. It has only just happened in the new financing of Washington Mutual (WM), a take-under deal if there ever was one.

The odds of pension devaluations may be the most serious issue. Many of the pools hold subprime paper and millions of retiring workers rely on them  for their livings once they reach the golden years. The prospects of a significant number of people being thrown to the wolves late in life is both tragic and and unappealing.

It is in the best interests of Wall St.'s elite to talk up the possibilities of the future. But, that future may look very little different from the last several months.

Douglas A. McIntyre

Dell Slashes & Burns, Right In Its Back Yard (DELL, AMAT)

Dell Inc. (NASDAQ: DELL) has announced additional actions in its previous restructuring in its attempt to smooth its operating model, rationalize its operations and improve profitability and cash flow.  In short, costs are coming down and many high-paid Austin workers are going to be out on the street.

Michael Dell has called this a $3 billion annualized savings opportunity over the next three years to drive both productivity and efficiency.  The actions will occur during Fiscal 2009 and beyond and are meant to accelerate growth in five focus areas: global consumer, enterprise, notebooks, small and medium enterprise and emerging countries, while improving profitability and cash returns.

Dell is based in Round Rock, Texas, what is now just thought of as another Austin suburb.  If you can believe it, Dell will close its desktop manufacturing facility in Austin, Texas.   The company also reaffirmed its previously announced plans to reduce global employee headcount by at least 8,800 and related operating expense.  In the last nine months of fiscal 2008, it reduced headcount by 3,200, excluding acquisitions.

Further cost cuts are coming, including design, manufacturing & logistics, materials, and operating expenses and benefits are expected to be realized in the second half of this fiscal year.   Those stock options haven't been millionaire-makers for quite some time anyway.

It is also reviewing its current financial services ownership structure and is undertaking a strategic assessment of ownership alternatives for that part of the business. That primarily focuses on the U.S. consumer & small/medium business revolving credit financing receivables and operations, but may also include commercial leasing; although it notes that it is possible this will result in no change to the structure it expects to complete in Q3 of the current fiscal year.

Taking a closure maneuver of this size and magnitude is often met with public criticism.  Making those drastic cuts in your home town is a total slash and burn operation.  This almost sounds a lot like practicing live fire plane drops of Daisy Cutters, in your own back yard.

Austin housing probably just got cheaper.  Applied Materials (NASDAQ: AMAT) probably gets its pick of the working litter now. 

Jon C. Ogg
March 31, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Citi Restructures Itself, Well Sort Of (C)

Citigroup Inc. (NYSE: C) is making some organizational changes today.  The troubled financial and banking supermarket has announced a reorganization of Citi's structure with what it hopes to achieve greater client focus, connectivity, and clear accountability.

Citi has established more of a regional structure to bring decision-making closer to clients, and leaders of the geographic regions will have the authority to make decisions at the local level.  Each geographic region will have a single chief executive officer who reports to CEO Vikram Pandit.

 

Teresa A. “Terri” Dial has also been appointed as CEO of Citi Consumer Banking in North America and named Global Head of Consumer Strategy, reporting directly to Citi Chief Executive Officer Vikram Pandit.  This will help to effect a split of the card unit from its banking operations.

Could a regional break-up come instead of a unit break-up?  Highly unlikely.  Could this lead to a separate card business down the road?  Possibly.

Shares of Citi closed at $20.83 Friday and pre-market indications aren't giving this any great marks nor any poor ones so far.  Shares are indicted flat, although that may change as we get within two-hours of the market open. 

Jon C. Ogg
March 31, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

It's Time For Micron To Consider More Options (MU)

As Micron Technology Inc. (NYSE: MU) has briefly breached its 52-week low again today, this company needs some serious pressure put on it.  The DRAM giant briefly saw its share price hit $5.43 today, and that was under its $5.47 lows over the last year.  The only good news is that shares have recovered slightly back above the 52-week low.

What is interesting here is that this turnaround just won't turn.  A bear market and tech spending slowdown is something that many CEO's cannot get around that easily.  But for the last eight or nine months this went from being merely a range-bound stock to a poor performer.  Part of the issue here is the space. 

How would you like to be a DRAM maker or even a Flash maker right now.  This is a commodity stock now, with the only difference being that DRAM prices never trend upwards and stay that way.  There are just too many manufacturers in the space.  Here were two analyst takes on Micron back when the stock was more than $1.00 higher just last month.

We have called this a turnaround that just wouldn't turn around before, and their situation is going from bad to worse to dismal.  If memory serves correctly, it was looking for a long-term plan in the turnaround.  Micron needs to look at its financial books, start comparing its assets and liabilities, and start looking at its share price and market cap.  If it is thinking about trying to do any more acquisitions, it should think again.

If the company waits for the long-term plans to come into play it may burn through too much cash and put itself at further risk on an ongoing basis.  It sure looks like it's time to do a one-time dividend this year while taxes are low, review some of those units that could be sold off, and maybe even start trying to find buyers for some plants and land.  We have seen rumors and reports on this before, but they may have been based on hope more than on meat.  That isn't going to do anything for shareholders who are long and wrong from $10.00 or $15.00, but it may at least stabilize this DRAM version of the Bataan Death March.

Unless these DRAM firms and Flash memory firms figure out a way to stabilize chip prices then it's a wonder why anyone would want to stay in that business or get into that business.

Jon C. Ogg
March 26, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

MoneyGram Recapitalizes.. What's Left? (MGI, GS)

MoneyGram International, Inc. (NYSE: MGI) has completed its recapitalization that was led by affiliates of Thomas H. Lee Partners and Goldman Sachs (NYSE: GS).  Here is a breakdown of how the financing pact looked:

EQUITY (convertible): Affiliates of both Thomas H Lee and Goldman Sachs purchased $760 million of Series B and Series B-1 Preferred Stock, which are convertible into 79% of the common equity of the MoneyGram at an initial conversion price of $2.50 per share.

DEBT & CREDIT: Affiliates of Goldman Sachs have placed $500 million into the company as debt financing.  Lastly, it secured an additional $250 million in senior debt financing.  Following the completion of this transaction, MoneyGram will have $100 million of revolving credit available under a previously existing $350 million credit agreement, which was modified to provide for an extended term.

The company is going to use its relationship and contract extensions with Wal-Mart and ACE Cash Express as part of its basis.  It also noted that money transfers are a source of growth and it now claims some 150,000 agent locations in its 180 country network.

We first started reviewing this stock for our Special Situation newsletter at the end of 2007 when there were still some bottom-fishing deals being announced, but we couldn't see the end of the malaise in sight for this company.  After a huge drop in January we again reviewed this one and still couldn't see this one living without a total bail-out.  Now that this deal has closed, we will put this under a closer review for Special Situation to see if there is any value after this afternoon's rapid rise.  You can also join our open email distribution list to see previews for topics involving M&A, reorganizations, break-ups, back door plays into IPO's, and more.

Shares closed up literally 30% today at $2.33.  But its 52-week trading range is $1.55 to $30.67, so it isn't exactly an "immediate turnaround and make whole" situation.  We'll be keeping our eyes on this one and its related securities.

Jon C. Ogg
March 25, 20008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

MMI Pushes Another (UIS, BCO)

Shares of Unisys Corp. (NYSE: UIS) are trading up 8% today after capitulating to activist investor MMI Investments, LLP, which is one of the largest shareholders of Unisys.  Unisys has delayed its annual meeting to July 24 to allow it more time to "explore certain portfolio rationalization and other actions that may enhance shareholder value" with its investment banker Bear Stearns.

If this sounds familiar at 247WallSt.com, it is because this was listed as one of "turnarounds that hasn't turned around" recently.  In the we noted: "When you backdate the news and look at the history of the company you'd think that the turn may have already started.  But shares are barely above 52-week lows and are barely off of multi-year lows too."

MMI was one of the reasons we named Brinks (NYSE: BCO) to our Special Situations newsletter, and is also part of the reason we have not wanted to close out that position to lock in would-be profits.   You can look at their last proxy filing to see how involved MMI can get.

MMI sent a shareholder letter in early January to urge its review of alternatives, and part of that encouragement included its government services business.  We are not actually under the belief that a mega-premium buyout is in the cards for Unisys.  We are not overly encouraged by an already-leveraged balance sheet that is too heavy in goodwill and intangible assets.  But we do believe that the company can continue to make cuts as needed and can streamline certain operations that are not contributing to the bottom line.  The company is still underperforming compared to analyst estimates, but it has at least come back to 'quarterly profitability' and that is at least a start.

Those of you who trade turnarounds will want to keep this one on your watch lists.  It may be a long slow road, but it looks like the car is at least out of the shop even if it isn't on the road yet.

Jon C. Ogg
February 19, 2008

Warren Buffett Ready To Save Muni Bond Insurance (BRK-A, ABK, MBI, SCA)

Warren Buffett of Berkshire Hathaway (NYSE: BRK-A, BRK-B) just appeared on CNBC with his plan to save the bond insurance business in the U.S. for municipal bond issuers.  He noted that last week he sent an offer to the top three bond insurers with a plan to acquire the outstanding municipal bond insurance operations of each.  His offer was roughly 1.5-times the remaining premiums left on the life of each insurance contract.

While we did not get a list of these, the two obvious ones are MBIA inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).  Presumably the third one would be FGIC, or likely it could be Security Capital Assurance Ltd. (NYSE: SCA).  Most shares are higher after Buffett came on CNBC with his plan:
SCA +9% at $2.24; MBI +3% at $14.00; ABK +4.5% at $10.96.

• We previous noted, "Would Buffett Save The Insurers?"
• Berkshire Hathaway shares are also up about 3% since we noted that "The Barron's Sell-Off Could Be Your Gain"

Mr. Buffett did note that this was initially a $5 Billion proposition and that he would keep all earnings inside the entities for a period of 10-years.  He also noted that one rebuffed his offer and two he has not heard back from.

What is important here is that this will at least take care of the municipal bond side even if those other bond insurance operations in mortgages, CDO's, and CLO's were to fail.  But Buffett is drawing his line in the sand on what risks he will take and which he will not take.  These plans would not include insuring mortgages, CDO's and CLO's.  That is why the bond insurers are not jumping at this offer.  They'd be giving away their top operations to feed their leeches.

He even made a note about how his new municipal bond insurance unit received a 2% premium merely to reinsure a muni that had already been insured so it could maintain its triple-A rating even if the bond insurer failed.  No wonder he's willing to step up.  If you have a few billion dollars lying around and have a solid insurance holding company operations this sounds like a layup when you consider the fact that it takes the worst scenarios to cause municipal defaults.   

Perhaps the most important issue at hand is that this will at least put a floor on the blood-letting that has been seen in the municipal bond arena.  It won't help the mortgage and CDO insurance operations, although there is an obvious tertiary benefit in that this at least in theory saves part of those businesses.

Jon C. Ogg
February 12, 2008

Motorola (MOT) Looks For The Exit Door

Motorola's (NYSE: MOT) shares were halted. Then the company announced what many on Wall St. had expected. Its board will look at whether not the company should exit the cell phone business. The firm's share of global handset sales has dropped from about 22% to 12% in two years. Rivals Nokia (NYSE: NOK), Samsung, and Sony Ericsson have systematically stripped MOT of its customers.

Samsung and Sony Ericsson would be likely buyers.

Earlier in the month, 24/7 Wall St. noted that Motorola might not make it through the year intact. Now it looks like that prediction may come true soon.

In its announcement, the company said it is exploring the structural and strategic realignment of its businesses to better equip its Mobile Devices business to recapture global market leadership and to enhance shareholder value. The company's alternatives may include the separation of Mobile Devices from its other businesses in order to permit each business to grow and better serve its customers.

In other words, the board and management admitted defeat.

Douglas A. McIntyre

Some of the other companies we have noted, with full explanations in the link, are Sears Holdings (NASDAQ: SHLD), Citigroup, (NYSE: C), Yahoo! (NASDAQ: YHOO), Advanced Micro Devices (NYSE: AMD), Ford (NYSE: F), Sprint Nextel (NYSE: S), and Qwest Communications (NYSE: Q).

Brinks: The Sweet Spot In A Rough Patch (BCO)

Shares of Brinks Co. (NYSE: BCO) are up significantly after today earnings report.  We have been behind Brinks for several months now, and it is still an active stock on our Special Situation subscriber letter.  This has approached our own $70 price target before the market malaise took it lower.  It actually never even did hit our downside panic levels, but we have a hedged scenario anyhow.

This morning Brinks managed to beat earnings quite handily.  Brinks posted earnings at $1.16 EPS, well above the $0.74 estimate from First Call; revenues were up more than 18% to $882.8 million, yet First Call only had estimates at $819.5 million.

Furthermore the company put 2008 goals for organic growth of high-single digits for revenues with operating profit margins at or above 8%.  Not only that, but Brinks is looking further out to 2010 with a goal of sustaining that rate of revenue growth and boosting its operating margins to 10%.

Our Special Situation thrust here was only partially based upon improving results, although we did expect a turn there again.  We have been tracking increased activist investor activity and after we reviewed the books, the business stance, its minor units that could be parceled out, and other factors, we determined that this stock could reach roughly $70.00.  Our entry area was in the mid-$50's in September 2007, and we didn't want to note the profits by taking them too soon in the mid-$60's by early November.

As always, we laid out an options trade that allowed for hedging the transaction to minimize risk.  This is crucial for many turnarounds and for many businesses that have special situations they are working through.  In short, it's important to have protection when management may intentionally or inadvertently take actions that result in negative shareholder value.

Jon C. Ogg
January 31, 2008

Stocks & Trends For Bear Market & Recession Investors

2008 is turning out to be a wacky year.  If you are new to trading and investing this is far from the norm.  Statistics vary depending on what day of the week it is but this is the worst January start to a year for most of us.  The DJIA is down some 7.9% in 2007 after a December-end close of 13,264.82; and it is down some 14.5% from the 14,280.00 highs of October 2007. The NASDAQ has fared even worse with a 12.2% drop since December-end close of2,652.28; and it is down 18.7% from the highs of 2,861.51 on October 31, 2007.

The good news is that there are many stocks and many sectors that hold up and it is becoming ever easier by the day for Joe Q. Public to learn to profit from the market slides too.  We just covered a whole spate of ETF's (OUR FULL ETF INDEX HERE) and you can see the bear market ETF's to own, and these will also be the ones that many trade during a recession.  We would caution that with many already writing about a bear market or a recession that the worst may have already been seen.  Investors who buy when everyone else feels miserable usually win in time.  247WallSt.com has come up with many lists for traders and investors for 2008.

Investors have been fond of Defensive Stocks in companies such as food, beverages, tobacco, consumer products, and the like.  We have our own index where we cover Value Stocks and trends affecting individual stocks that are geared toward value investors.  We noted "The Four Safest Stocks in the World" this last week, and we even came up with a list of value stocks from defensive stocks for the first part of 2008.

We also gave our own targets and opinions on the components of the Dogs of the Dow for 2008 to show which ones are challenged to do better and which ones may be the sleepers.  Does it make sense that Home Deport (NYSE: HD) is UP FOR 2008?  We outlined it as "Bad times at companies feel like they will last forever just like in the economy, but history dictates that they always recover.  After Q1 or Q2 this could end up being one of the surprise sleepers of 2008."

We also created a list of iconic US companies that may not exist at the end of 2008. Some may not even make it halfway through the year. Not all of these will go out of business, as some may be auctioned off in pieces and others may be bought.

Turnaround stocks (FULL INDEX HERE) are perhaps some of the best opportunities.  Whether you are in good times or bad times there are many companies that just don't make the grade and have difficulty in generating any growth or any consistent earnings.  Catching the right one will be exponentially rewarding, but because these are troubled you have to be aware that some will completely bite the dust.  We broke these up groups as well and came up with a basic industry list that has yet to turn the ship around.

First and foremost, we came up with a list of stocks that could double in 2008.  This is not a safe list for the faint of heart, because the set-up for a double is very difficult for established companies and there are usually extreme circumstances that have to be in place.  Companies like E*Trade (NASDAQ: ETFC), Palm (NASDAQ: PALM), SIRIUS Satellite radio (NASDAQ: SIRI), Level 3 Communications (NASDAQ: LVLT) and more are on this one.  FULL LIST HERE.  When we did this big list and evaluated out screening of more than 100 companies, there were actually many more stocks that also fit the bill.  Keep in mind that something bad happened along the way for these shares to have been bettered enough where the stock could double. On this other list were companies like Capstone Turbine (NASDAQ: CPST), Qwest Communications (NYSE: Q), Travelzoo (NASDAQ:TZOO) and more. FULL SECOND LIST HERE.

247WallSt.com has also noted some of Jim Cramer's 2007 calls that still show some pertinence in 2008, and many are still active calls of his.  Cramer also recently outlined many overlooked or oversold tech stocks that he thinks have an uncommon value here.

Most of these come under review regularly in our weekly subscriber letter in "10 Stocks Under $10" which is exactly what it describes: ten low-priced stocks under $10 where we make bullish or bearish analysis as to what is good or what is bad about these.  We call some candidates for exponential growth and some where we think the companies are likely doomed.  247WallSt.com even produced a list of stocks whose volatility and values could cause the shares to FALL 50%.  Some of these already have or are close to it.

Lastly, we have a list of potential management changes.  We have a list of CEO's that we have designated as CEO's WHO NEED TO GO.  This is not only over share prices, because many companies do well while their stock doesn't.  These CEO's have done heinous jobs usually with a key event or series of events under their watch that has rendered them (and their company) useless.  We even gave a handicap of what sort of rally the stock might see if these managers left.

Jon C. Ogg
January 27, 2008

Jim Cramer's Stimulus Package & Turnaround Stocks

On tonight's MAD MONEY on CNBC, Jim Cramer noted that selling stocks today isn't a good idea and that this will be good for retail stocks and others too.  You have to keep in mind the same-store-sales as the key metric, but here are his retail names he went through:

• In retail, Cramer likes Guess? (NYSE: GES), J.Crew (NYSE: JCG), Lowe's (NYSE: LOW), Liz Claiborne (NYSE: LIZ), Jones Apparel (NYSE: JNY), Costco Wholesale (NASDAQ: COST), TJX Corp. (NYS: TJX), Urban Outfitters (NASDAQ: URBN)... and he likes Darden (NYSE: DRI) in restaurants. 

Cramer actually talked positive about one homebuilder and a mortgage player:

• Toll Brothers (NYSE: TOL) will actually be a winner on the higher GSE increase in the conforming loan price cap.  In mortgages the increase in the cap will help Thornburg Mortgages (NYSE: TMA). 

He thinks that takeovers are coming, and he is under the impression that Bear Stearns (NYSE: BSC) may actually get taken over after a huge drop.  He thinks it is just too valuable to others.  Just FYI, Cramer did discuss this Bear Stearns takeover possibility on TheStreet.com earlier this morning or this afternoon.  In short, he thinks that this might merit a reason to stop being so cynical.  He wants to buy something in retail and something in banking. 

Last week Cramer went value fishing for technology companies that he thought were either overlooked during the meltdown or that had been oversold.  Here were his picks in technology:

• EMC Corp (EMC) for its intrinsic value of sub-$5.00;
• Riverbed Tech (RVBD) for network optimization and he's been on this stock before;
• ADC Telecom (ADCT) on Wednesday with a $1 down $7 up call that he's liked for some time;
• Wind River Systems (WIND) for its strong embedded systems orders ahead;
• Microsoft (MSFT) is the one he liked the most.

Jon C. Ogg
January 24, 2008

E*Trade Aims To Turn A Profit In 2008 (ETFC, AMTD, ETFC)

E*Trade (NASDAQ: ETC) has been the most battered and brutalized of the large discount brokers and online brokers out there.  It quite frankly deserved it after the company publicly understated its gross mortgage exposure by a massive amount late last summer.  When the truth came out, this one looked like it might actually be an at-risk business.  That possibility wasn't even 100% eliminated after Citadel came to its rescue.

But tonight the company posted earnings.  The company lost roughly $1.7 Billion in the Q4-2007 period, which came to a loss after charges of -$3.98 EPS.  It was already a given that last quarter was going to be a disaster. 

The company is finally coming out with its 2008 turnaround plan.

• E*Trade is targeting a $360 million reduction in expenses for 2008, and it will re-invest $85 million into its retail business growth.  E*trade also says it expects to exit 2008 with excess bank capital of close to $1 Billion.  And get this.. it expects "a return to profitability in 2008."  It also plans "to remove undue risk" from its balance sheet.

If you look at what the company is saying, it really doesn't look like the online brokerage account defections really came in a flurry that Wall Street might have guessed:

• The Company said its total retail account base grew by 290,000 or 7%, with target segment account growth up 14%. For the quarter, DARTs rose 38% over the year-ago period. Total customer cash and deposits ended the year flat at $33.6 billion, with total client assets declining 3 percent year-over-year to $190.0 Billion.

If the situation isn't as bad as many worried it might be, then you have to wonder if Mr. Moglia from TD Ameritrade (NASDAQ: AMTD) or if Mr. Schwab from Charles Schwab Corp. (NASDAQ: SCHW) will be stopping by E*Trade's offices for a visit.  This has been review in our "10 Stocks Under $10" several times, and you can bet that it will be back under review.

We still expect class action lawsuits to be an issue going forward because the insiders understated the true financial exposure so bad.  But if the company can actually maintain its stance of today for the future then it's going to be quite hard to predict any outright implosion here.  This stock rose 0.5% today in normal trading to $3.48, and shares are up some 12% to $3.91 in after-hours trading.  The 52-week low is $2.08... and the high is $25.79.

Jon C. Ogg
January 24, 2008

The Large US Companies That May Disappear In 2008

Firestone. American Motors. Texaco. Pan Am. Worldcom. At one point or another these large American companies were at the top of their industries. Pan Am was the leading global airline for decades. All are gone. Some were sold off. Others went bankrupt. Who could have predicted it?

There are several iconic US companies that may well not exist at the end of 2008. Some may not even make it halfway through the year. Not all will go out of business. Some may simply be auctioned off in pieces. Others may be bought. These companies will not exist in their current forms as they are known to their shareholders and consumers now.

When a company ceases to exist as an independent entity, it is not necessarily bad for shareholders. Some may be worth more in parts. Often a bust-up or merger is what brings owners the most money.

Here are the big ones that probably won't make it.

Motorola (MOT) was the No.2 handset maker in the world a little more than two years ago. Its Razr took the wireless industry by storm. It did not follow that product up with another winner and its larger rival, Nokia (NOK) began to take up market share. Smaller competitors Samsung and Sony Ericsson came out with popular phones and Motorola was under siege. Carl Icahn took a stake and tried to get the company to improve its pay-out or sell-off some of its divisions. The board sent him away. Since then things have gotten worse. Motorola's share price was over $25 in late 2006. It is now below $13. The company has announced that it may sell or spin-off its handset business. That may be bought by Samsung. MOT's enterprise telecom and home set-top businesses could be acquired by Cisco (CSCO) or Nortel (NT). A tech-oriented private equity firm might also buy the set-top box unit.  As an independent company, MOT has no future.

Sears Holdings (SHLD) is billionaire Eddie Lampert's experiment at merging big retailers Sears and K-Mart. Unfortunately both were in bad shape at the outset. Putting them together did not help either business. The company has a 52-week high of $195 and now trades at $108. Sears has now reported a string of bad earnings. Last week reports began to appear that Lampert may spin-off the company's real estate and break the firm into several operating units, each of which would have more operating autonomy. The CEO has been pushed out in favor of a "temp". That sounds like the prelude to an auction.

Citigroup (C) is almost certainly not out of the woods. A recent report in the Financial Times said that US financial company write-offs for the entire sector could total $300 billion this year. Fortune magazine has written that Citi has another $37 billion in CDOs on its balance sheet. It also has LBO loans which it cannot syndicate because of poor credit markets. Shares of JP Morgan (JPM) and Bank of America (BAC) have recovered a good deal from their sell-offs. Citi has not. Wall St. is worried that the level of risk in owning the shares is just too great. A close look at the bank shows that it has some valuable businesses which could operate independent of the troubled part of the company. Citi's wealth management operation grew 27% last quarter. This division includes Smith Barney. The firm's international consumer revenue rose 45%. It is Citi's securities and banking operations which are dragging the company down. With a recession and more financial company write-offs coming, Citi will have to get smaller by selling one or two of its attractive businesses. The global wealth management business had $3.5 billion in revenue in Q4 and $523 million in net income. Citi's market cap is only $150 billion now. Its consumer units could be worth more than that on their own.

Ford (F) is trading about where it did when there were rumors that the company would go bankrupt. This car company has a market cap of $14 billion against annual sales of $173 billion. Ford lost another $2.8 billion in Q4 and is planning to cut another 13,000 jobs. It has a credit unit which made $775 million last year. Ford is already in the process of selling some small units including Jaguar and Rover. Volvo might be next. The company's share of the US market is down to about 15%. Even with cost cuts, its product line works against a recovery. The firm's pick-ups and SUVs have good margins, but high fuel prices have cut into sales. Ford's new fuel-efficient cars compete directly with companies that have much stronger balance sheet like Toyota (TM) and Honda (HMC). Ford is highly unlikely to stage a unit sales recovery in North America this year. If sales fall further, cuts won't make up the difference forever. The Ford family, which has de facto control of the company, will have to look at selling the car operations to a large Asian or European auto company. That would allow for a consolidation of production, product development, R&D, and marketing. Bottom line--billions of dollars in annual savings.

Yahoo! (YHOO) was not going to make it as a standalone, especially after Q4 earnings. There has been speculation that the company might be sold to Microsoft (MSFT) and the world's largest software company has made a $31 a share offer. Recent analysis from Wall St. shows that about $10 billion of the company's market cap comes from the value its stakes in Yahoo! Japan and China e-commerce company Alibaba. That leaves $27 billion at the current share price for the core portal and search business which has a revenue run rate of about $6.8 billion. Microsoft could take out 3,000 or 4,000 people and add as much as $100 million in operating income per quarter.

AMD (AMD) is the second largest provider of chips and processors for servers and PC's. Its larger rival, Intel (INTC), has over three-quarters of the market. A price war has hurt AMD's gross margins badly. The firm also bought graphic chip company ATI and now has over $5 billion in debt. Shares were over $40 less than two years ago and now trade at a little over $8. For AMD to hope to compete, it needs a larger owner with a wider global chip business and better balance sheet. Intel has close to $13 billion in cash and short-term investments and 20% operating income margins on nearly $40 billion in revenue. Where would AMD fit? Somewhere with chip R&D expertise, a broad line of semiconductors, and a mammoth global customer base. Look for Taiwan Semiconductor (TSM) or Samsung to court AMD's board.

Sprint (S) should never have merged with NexTel, but it is a little too late for that to be fixed now. It traded above $23 about a year ago and recently fell to close to $8. While AT&T (T) and Verizon (VZ) post enviable wireless numbers, Sprint struggles to keep current subscribers. Sprint is cutting bodies but Wall St. has no confidence that fewer people and these modest savings will turn around the company. Its issues of being an independent wireless company with angry customers are simply too great. SK Telecom, a big Korean operator, has already come to Sprint with a proposed investment. The board did not listen. But, the company's shares were not at $10 then. SK may well be back. The other potential buyer often mentioned is Comcast (CMCSA). After years of beating on the big US phone companies, Comcast is now up against their fiber-to-the-home broadband and TV products. And, it is losing customers to them. What Comcast does not have is wireless products to offer consumers and businesses as part of a "bundle" of services. At $6 or $7 Sprint could look very attractive.

Qwest (Q) is the last of the Baby Bells standing from the break-up of the old AT&T. It is the dominant phone company in 14 states. Its shares have fallen from a 52-week high of $10.45 to below $6. Qwest has two problems which it cannot solve. The first is that it has no real wireless operations. Cellular service is what is driving the market valuation of rivals AT&T (T) and Verizon (VZ). Qwest also does not have the balance sheet to upgrade all of its infrastructure to fiber like Verizon is doing. AT&T has started the fiber build-out process. There are rumors that it will get into the TV business by buying one of the satellite TV companies. Either way, Qwest does not have the balance sheet to run fiber across its service area. Qwest does have a very valuable customer and geographic base. Watch for Verizon to get in touch with Qwest's board. The larger company could use Qwest's customer base to push its wireless services in bundles. It could also build out fiber into Qwest's region if the return-on-investment for the current project is good.

Douglas A. McIntyre

Radio Shack: Julian Day Hardly Matters (RSH)

When it comes to second tier electronics sellers, 2007 was not the greatest year and 2008 has these all hitting 52-week lows as well.  Today shares of Radio Shack (NYSE: RSH) are getting crushed by more than 5% down to  $15.15, and the 52-week trading had been $16.03 to $35.00.  Yep $35.00.

If you will go back to summer of 2006 you will see that in the 18-months prior period that this slid from the $30's down to $15.00 and briefly under.  Then it hired turnaround expert Julian Day as Chairman & CEO and the shares barely saw a $15.00 handle on the stock after that.  He came in and worked his magic and shares were back up to $20.00 before the end of 2006.  Then shares came back down a bit but shares climbed rapidly during 2007 back up to $35.00 before selling off in the summer.

It's been an ugly situation since then.  In fact it has been so ugly that shares are back on 52-week lows and here they are challenging $15.00 yet again.  The shares are back to where they were before Day took the helm, just like he didn't matter.  We don't agree with this thesis at all, but money-flows in and out of stocks talk much louder than one opinion.

Analysts had been downgrading this stock throughout the year based upon valuations.  The last two upgrades were only covering essentially what were sell ratings: raised to Market Perform at BMO Capital Markets this morning and raised to Neutral at Banc of America on December 20.  Analyst price targets are only about $20 or slightly higher, so it appears the turnaround juice has been squeezed out of it.  At least that is what Wall Street thinks.

The stock is now cheap on a forward earnings multiple of 10 or under.  But when you see the retail picture the way we are seeing it then you have to question how much farther down the estimates will have to come.  A recession is starting to be priced into stocks, and retail and credit aren't expected to improve tomorrow.  In fact, if you look at stock charts then the market participants are acting like things are about to get much worse.

If we owned a retailer in trouble we'd love to hire Julian Day.  Wall Street isn't giving him the same vote today.

Jon C. Ogg
January 4, 2008

Turnarounds That Haven't Turned Around: UTStarcom (UTSI)

UTStarcom Inc. (NASDAQ:UTSI) is one of the former high fliers that crashed and burned, despite its US-based operations with what was huge leverage in China.  In the past it had grown and grown but then when it had massive accounting irregularities and restatements the gig was up.  For quite some time it was also unable to complete its SEC filings. That is now in the past, or so it seems, and the company is NASDAQ compliant now.  But the company's stock hasn't been able to turn around into something resembling a growth tech stock. 

The problems surfaced in 2004 and became massive in 2005.  Since the big drop in early 2005 these shares have seen $10 prints briefly but the stock was unable to hold.  At the end of 2003 this was a $40+ stock and before that had spent most of 2001 and 2002 in a $15 to $35 range.  TODAY the stock is about 10% off its 52-week lows of $2.43, but almost 75% down from the $10.32 high of the last 52-weeks.

This was a steady decliner for the first half 2007 after briefly hitting $10 and then it really hit skid row in late summer before trying to mount a recovery back to $5.00.  That also failed.  But the good news is that on a linear support line these lows here within that 10% downside from here have held over and over.  In this wacky market it is impossible to say all the bad news is priced in, but if you are a pure chartist you will see this too.

If you like to find heavy short interest stocks you need to look no further.  The bets are massive here with some 28.89 million shares short as of the last data in December.  That is over 29% of the float, although down about 2 million shares from the prior reading.

Federal Mogul Exits Chapter 11, Public Again Soon

Federal-Mogul Corp. has announced it emerged from Chapter 11 on December 27, 2007 as the effective date of its reorganization plan.  CEO Jose Maria Alapont noted beginning 2008 as being well positioned for sustainable profitable growth.

The company issued 49.9 million Class A common stock and 50.1 million Class B shares.  These Class A shares of common stock were issued to holders of the pre-bankruptcy notes and certain other unsecured claims, and Federal Mogul intends that these Class A will be listed in the near term.  The 50.1 million shares of Class B common stock were issued to the Federal-Mogul Asbestos Personal Injury Trust.

Federal Mogul also has issued 6.9 million warrants to purchase shares of its Class A Common Stock to holders of its pre-bankruptcy common stock, preferred stock and convertible junior subordinated debentures.

The company has a $3.5 Billion exit facility agreement that consists of a $540 million revolving credit facility and a $2.960 Billion term loan facility.  It intends to repay on January 3, 2008 the Tranche A term loan and the PIK notes from funds borrowed under the term loan credit facility.

You can sign-up for our free email distribution list where we preview other reorganizations, IPO's, spin-offs, turnarounds, M&A, Merger-Arbitrage and more, or you can take a trial for our Special Situation Investing Newsletter covering companies with actionable and specific hedged trading strategies in this group.

Jon C. Ogg
January 2, 2008

Why Are So Many Turnarounds Failing? (EK, PFE, RAD, TYC)

We compiled a list of many companies that just haven't been able to turn themselves around.  On some we offered a road out and on others we feel sorry for the management because getting out of the holes that the companies have dug just might not be possible.

Most of these that were covered ended up being tech stocks of some sort as many of those have remained in the gutter. But there are many major economy stocks that are underperforming against their potential.  These non-technology companies in here still have a shot at executing a turnaround, but after years of failure you can imagine an activist or worse might start rearing its head.  These are not at all the only turnarounds that could manage to turn their ships, but these are some that we covered.

Eastman Kodak (NYSE:EK) is in a pickle and frankly we are shocked that shareholders haven't revolted against Antonio Perez as CEO.  He was one our CEO's TO GO for 2007, although we didn't add him on the 2008 list.  This company has to rapidly implement its layoffs and restructuring rather than dribbling it out over a 10 year period.  They need to go back after more of the digital space.  They are trying, but nowhere near enough.

Pfizer (NYSE:PFE) has seen its share of skepticism.  It has been dead money and the new CEO is running out of "getting used to the job" time.  What is interesting is that a boost could come straight from a couple of acquisitions of companies with blockbuster drugs about to hit market.  Their drug pipeline might also not be as bad as we think. If the company gets off its duff, it could be one of the better drug companies with upside.  It was also reviewed under our 2008 Dogs of the Dow stocks.

Rite Aid (NYSE:RAD) has been another utter and complete failure of a turnaround.  This new CEO is actually very well respected and very well thought of.  She also didn't make up excuses in the last two reports as to fake reasons for a failure.  She needs to make 2008 the year of execution of a turnaround.  It is possible.  This was also Jim Cramer's #2 Speculative Stock for 2007.

Tyco International Ltd. (NYSE: TYC) is a turnaround that even though it started its turnaround has only managed a 360.  Its Tyco Electronics (NYSE: TEL) and Covidien (NYSE: COV) spin-offs have yet to rapidly reward shareholders.  The good news is that by early 2008 we will have at least two quarters of operations under the belt at each unit.  After that we expect that analysts will be able to adequately make their decisions on how to assign earnings targets.  The Tyco-stub is either one hell of a value stock, or it's just a value trap.  We'll know soon. 

These stocks may all be covered in newsletters because many now fit in the 10 STOCKS UNDER $10 newsletter category and many fall under the Special Situation Investing Newsletter category. 

On a separate note, we gave two different groups of stocks whose shares could actually double in 2008.  Our first list was of the more active names that are low-priced, and our second list was the screened group of stocks that was of known stocks that are just not quite as actively traded.  Lastly, we also gave a list of stocks that could drop another 50% in 2008 if these operators stumble or others that just don't get their you know what together.

2007 had its share of great IPO's and stinky IPO's.  We showed a solid list of IPO's that performed with stellar returns that came public in 2007.  And of course there is that smelly and stinky list of IPO's that lost more than half of their value since coming public in 2007 as well.  Believe it or not, some of these could be winners if they manage to do the right thing.

We issued a GUIDELINES for turnarounds.  For starters we avoided financial stocks, lenders, housing related, autos, and most retail names because the problems there are so bad that they will get fixed when the industry pressure allows them to get fixed.  Those might continue there march south until finally too much is too much, and while we feel that may be close we aren't hanging our hat on any date yet.  It just hasn't worked.

You can join our free email distribution list for previews on other IPO's, spin-offs, reorganizations, restructurings, merger-arb, speculation, and other aspects of M&A.  Here you may get some forethoughts on developing situations before the full data is published.

Jon C. Ogg
December 29, 2007

Turnarounds That Haven't Turned Around: Tyco International (TYC, TEL, COV)

Tyco International Ltd. (NYSE: TYC) is a hard turnaround to call as one that hasn't turned around because it has already begun its long-term initiatives to enhance shareholder values.  The problem is that it has been unsuccessful so far.  The company completed the spin-off of Tyco Electronics (NYSE: TEL) and Covidien Ltd. (NYSE: COV) on July 1, 2007.  Because of these spin-offs, Tyco was a much harder stock to cover and to use valuations and historical data on.  In fact, analysts from large brokerages and bulge bracket firms have had a hard time breaking down the de-conglomerized conglomerate.  We also want to caution that many figures used actually vary from source to source and this made analysis not as straightforward here in this case.

First, let's look at the spin-off companies.  Tyco Electronics (NYSE: TEL) traded at $39.81 on a dividend adjusted basis at the end of July 2 and have fallen down to the mid to low-$30's before a recent recovery. But even north of $37.00 shares are still down.  Tyco Electronics has a equally mixed coverage spread between Buy/Hold and an average price target of roughly $41.00 from analysts.  Covidien (NYSE: COV), the medical products entity, shares traded at $43.24 on a dividend adjusted basis at the end of July 2 and have traded in mostly in a high-$30's to mid-$40's basis since.  With a $44+ handle this one still has a mixed verdict depending upon whom you ask.  Covidien has a mixed opinion from a thin group of analysts and an average price target of roughly $47.50.  It seems that offspring aren't being thought of as great growth vehicles.

But back to Tyco International Ltd. (NYSE: TYC).  Tyco International shares took a serious hit in late 1999, but they recovered sharply and hit new highs in 2001.  By early 2002 the accounting scandals and the Koz issues came full circle and shares were crushed.  On an adjusted basis the stock lost more than two-thirds of its value.  2003 to the end of 2004 were great years to own shares, but this hasn't really been the case since then.

Back before these spin-offs were completed, we noted how there appeared to be a phantom premium in Tyco shares just because of the hype around the break-up and because of the craze surrounding private equity and shareholder initiatives.  What appears to have happened is that now the street has given it a more proper valuation or at least a more realistic one, and as we noted not all bad stories have to have sad endings.

On an adjusted basis Tyco International (NYSE:TYC) shares were over $50 at the July 1 date, but they have never been back.  Shares trade around $40 now and have been as low as $38-ish over recent weeks.  If you trust the "average price targets" from analysts, that appears to be around $50.00 from a much smaller group than in prior years.

Just last week a court approved some $3.2 Billion in investor class action law suit settlements over the accounting fraud took the company down.

We do caution against using any solid earnings forecasts because many analysts have not fully adjusted their opinions to reflect the "new" Tyco in a post spin-off world.  First Call has Fiscal September-2008 EPS at $2.61 (a 15.5 forward P/E ratio) and fiscal September-2009 EPS at $3.24 (a 12.5 forward P/E ratio), although we still question some of these since the spin-offs.  If the company can achieve those estimates, then there are few who could argue against this being one of the better value plays out there.

Most of our "turnaround stocks that haven't turned around" are troubled companies in troubled predicaments that may have a very hard time making a turnaround come to fruition.  But Tyco may be one of the exceptions.  That phantom premium may be in the rear view mirror.  Its value is also now easier to see since the spin-offs have been completed and are basically two quarters on their own.  Who knows, maybe 2008 to 2009 will be Tyco's time to shine.

Jon C. Ogg
December 28, 2007

If you want to see our previews for IPO's, spin-offs, merger-arb, reorganization, and more, you can sign up for our free email distribution list.  If you want detailed information with actionable trading information along with ideas for hedging risk, you can sign-up for our Special Situation Investing Newsletter with much more detail, projections, and an expected time-line.

10 More Stocks That Could Double In 2008

It takes a lot for an active stock of an already established company to see the price of its shares double.  In fact, it usually means that a company has posted a significant recovery or that something incredible happened that wasn't factored into traditional investment models.  Stocks that double are also frequently deemed as clunkers full of problems that staged a significant recovery.  But that has also been used as a description for many key companies like Apple and many more.

We created a primary list recently (see below), but our screen of stocks that could double yielded over 50  candidates and we wanted to run some of the less active stocks in this category.  Almost all of these are still quite active, so only a few may not ring a bell.  Here is the second list of stock candidates that could double with the explanations if the stars line up right inside each company or if certain outside developments come to fruition:

• Capstone Turbine (NASDAQ: CPST); Dialysis Corp. of America (NASDAQ: DCAI); Palomar Medical Technologies Inc. (NASDAQ: PMTI); Qwest Communications International Inc. (NYSE: Q); Sanmina-SCI Corp. (NASDAQ: SANM); Smith & Wesson Holding Corp. (NASDAQ: SWHC); Travelzoo Inc. (NASDAQ: TZOO); YRC Worldwide (NASDAQ: YRCW);  Websense Inc. (NASDAQ: WBSN);  Xinhua Finance Media Ltd. (NASDAQ: XFML).

Capstone Turbine (NASDAQ: CPST) is one of those stocks which could actually make a significant comeback. This one used to trade many multiples higher.  We've covered this one in our "10 Stocks Under $10 Newsletter" for subscribers.  It was at $1.25 or $1.30 at the time and shares now sit close to $1.70.  This company is now producing revenues and its turbines are getting significant interest.  The initial re-screen on this one came to us after Lazard Capital Markets gave this a call for the stock to double to $2.50 in its alternative energy coverage.  After we dug around and reviewed all the past data and put in our own thoughts on alternative energy, we think that instead of this hitting $2.50 that it has a shot at being able to surge past that level.  This is highly dependent upon it announcing new orders, and recent customer order activity has us behind this one.

Dialysis Corp. of America (NASDAQ: DCAI) is another company that has fallen from grace. Shares were north of $30.00 back in 2005 and it's seen its share of ugliness since then.  Shares are currently close to three-year lows.  A double from today's prices would barely get it above the $14.16 52-week high.  The $78 million market cap makes this one trade close to three-times book value and under one-times 2008 revenues.  But we think that the company may actually have to go do a dilutive capital raise first so it can open more facilities.  This has severe risks tied to reimbursement rates, so any cuts in that area would drive this lower.  The problem of today's treatment is that kidney dialysis is really the only option for renal patients with kidney failure and there isn't another viable alternative widely available to the masses and widely covered by insurance.

Palomar Medical Technologies Inc. (NASDAQ: PMTI) is a risky cosmetic laser maker that could roar or flop in 2008. With shares under $16.00, this stock could double and still be down more than 40% from its $55 highs seen earlier in 2007.  It and P&G (NYSE: PG) recently agreed to extend the Launch Decision of a home-use, light-based hair removal device for women until no later than February 29, 2008 in place since February 2003. Gillette had until January 7, 2008 to make the Launch Decision and it is likely that this will end exclusivity.  Lasers are a competitive business and it will have to really ramp its sales overseas for this to double again.  But if the company gets another critical supply deal and if it secures this current P&G deal in limbo, then this could become one of the explosive growth prospects again.  If not, well then this could slide further down even if many feel the worst has been priced in.

Qwest Communications International Inc. (NYSE: Q) has had a rough time since September and it has only traded above $10.00 for a very brief time period in the last 5-years.  But it recently reestablished its dividend, and the 'perceived' yield was actually higher than the dividend of land-line rivals Verizon (NYSE: VZ) and AT&T (NYSE: T).  Shares are also about 75% higher than the mid-point of its old trading range from 2003 to 2005.  It still has a $13 Billion market cap, so it will take many institutional buyers to believe in this one for it to be a double.  But the performance of its two top rivals has not been sustained as far as the stocks go.  Its lack of a wireless offering has also been thought of as a hole in the business plan and analysts would either have to raise their targets or make cuts on valuation if Qwest got back to $10.00.  Any upside would make the valuations on Qwest seem paltry.  If the company wouldn't have made its recent dividend gesture we would have passed on this one.  But that sure made us think more good news was coming because a dividend is not meant to be a one-time event for companies.

Sanmina-SCI Corp. (NASDAQ: SANM) is an EMS (electronics manufacturing services) company where tech and non-tech companies come to have it manufacture for them.  It owns factories all over the world and it has been in a turnaround for quite some time.  If the company can make that turn then for this to double after a rough week the stock would still not even be at its 52-week highs. We covered this in our "10 Stocks Under $10" and its market cap has dipped back under that $1 Billion mark.  There are some pretty big risks that it won't be able to turn around, so this one is a real coin toss.  The company has moved from being perceived as a tech-only manufacturer as it serves medical, defense & aerospace, automotive, and more.  Any major win could make this one turn or it could always become a potential acquisition from some of the other larger EMS players.

Smith & Wesson Holding Corp. (NASDAQ: SWHC) is one of the only gun plays in the entire U.S.  That is a bad spot right now as shares are down 75% from their highs.  So for this to double it would still be down 50% from its 52-week highs.  The company had already been in trouble as a stock goes, but then it failed to impress in October and then warned again for 2008 in early December.  Those each took nearly half of the value away each time.  What is interesting is that with a weak consumer and weakening economy expected in 2008, this could scare people about crime if lower-income wage jobs start to dry up.  That could make more homeowners want to buy a gun.  With a presidential election around the corner, we wouldn't be shocked to see a rush of buyers try to load up on any remote gun desires if they feared that 2009 or 2010 might bring about stronger gun controls.  That HAS happened before.  We don't know if it will come about again.  That why this is a COULD rather than a WILL.

Travelzoo Inc. (NASDAQ: TZOO) could end up being a Hail Mary pass for 2008 after posting a dismal 2007.  Shares are barely above 52-week lows and this stock would basically have to rise 200% before it took out its 52-week high of $40.68.  It only trades at about 17-times 2008 projected earnings and it is still expected to have revenue gains.  The beast of the sector is Priceline.com (NASDAQ: PCLN) and that stock has risen nearly five-fold over the last 24 months.  The company has what is deemed one of the lower-end online travel package and search features out there, but the beauty of the web is that ANY company can end up with a killer app or major consumer draw that sucks customers back to it.  That might not be the case and we think management isn't as sharp as at other online travel sites.  But one bit of good news here could make this skyrocket with a flood of day traders, and it has over 25% of its float listed as being in the short interest.  It has also been the subject of takeover rumors in the past.

YRC Worldwide (NASDAQ:YRCW) is one of our favorite trucking stocks as a go-to play in the sector. The problem is that this sector just stinks right now and it has made warning after warning besides its CEO being generally very openly cautious.  But with shares at $17.00 and a trailing P/E of under 10, any upside surprise or even any 'less bad' news might make this look like the old flying trucks commercials from the early 90's.  In fact, if YRCW stock doubled from here it would still be $13.00 short of its 52-week highs.  In January 2005 this even traded north of $60.00.  Are the rest of the bad headlines out? No.  We think times will remain tough. But at some point Wall Street realizes an overreaction and quickly fixes it.  This one may linger and may continue to slide.  So when or from level it doubles off of is anyone's guess.  If that CEO would just be upbeat on TV once rather than negative, that might send the signal to others to buy as well.  Lastly, this one could actually be a takeover candidate.

Websense Inc. (NASDAQ: WBSN) is one of the old Internet hi-flyers that got sleepy and then became a Rip Van Winkle of a sleeper. With this being back close to $16.00, a double would only take it back to its highs at the end of 2005 and start of 2006.  But the company has still managed to grow while its shares have slumbered and its $400 million market cap is not ridiculous compared to sales estimates of $226 million expected for 2007 or more than $300 million for 2008.  It trades at less than 19-times 2007 EPS and less than 15-times 2008 earnings, yet EPS growth is expected to be 25%.  The company's strength is also its weakness: it has the best enterprise-wide web filtering mechanism for enterprise Internet and Intranet access out there, but IT buyers have noted over and over how it is also quite expensive compared to second rate services. Is it fair to hint that Larry Ellison & Co. at Oracle (NASDAQ: ORCL) or that his rivals like SAP AG (NYSE:SAP) or Microsoft (NASDAQ: MSFT) might consider buying it?  Probably not.  But if a buyer stepped in they'd be getting a very valuable set of customers.  The company could always make a strategy of creating a more mainstream web filtering product that smaller organizations can afford or justify.  As web 2.0 applications are bandwidth intensive and as they become more and more prevalent, companies with bandwidth intensive businesses may also have to increase their web filtering efforts.

Xinhua Finance Media Ltd. (NASDAQ: XFML) is another stock that could garner a double if it can prove it is worthy. But we want to warn you that it could also see another 50% drop.  It was a runner up on the "Worst IPO's of 2007" this week and many investors are not convinced that all the bad stuff out there is fully reflected in today's prices.  But the Chinese financial and traditional media could end up being a major sleeper as media is still very under-penetrated in China where it is located.  Management is also fairly well heeled in the media circles in China and its media properties and ancillary services all hold significant values independently if it wanted to divest into a more focused company (unlikely to us). If Xinhua Finance Media doubled from today's prices it still would be short of that $13.00 high.  2008 is either going to be a year of forgiveness and acceptance, or it is going to hurt.  This one is risky enough that we might only want to look at long-dated (May) calls to limit any potential downside if there are more land mines in this one.

• Our previous 10 STOCKS THAT COULD DOUBLE is as follows: AMD, BSX, CHTR, ETFC, DNDN, KBH, LVLT, PALM, SIRI, VG.
• Keep in mind that many of these stocks are also risky and might not make a turnaround. We also came up with a list of stocks that COULD FALL 50% IN 2008 under the right circumstances (BIDU, BIDZ, C, CFC, F, JRC, LDK, MU, PMCS, VMW).

Jon C. Ogg
December 28, 2007

You can join our free email distribution list to get previews for other issues around IPO's, spin-offs, merger-arb, turnarounds, and more.  Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.