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3.21.06
bull
Bullish:

AMGN  (AMGEN INC. ) BMY  (BRISTOL MYERS SQIBB) AT  (ALLTEL CP)
NBR  (NABORS INDS INC NEW) NR  (NEWPARK RESOURCES) WSM  (WILLIAMS SONOMA INC)
HAL  (HALLIBURTON CO) ORA  (ORMAT TECHNOLOGIES) GLW  (CORNING INC)
SLB  (SCHLUMBERGER LTD) PNRA  (PANERA BREAD COMPANY )
DYN  (DYNEGY INC HLDG CO) SBUX  (STARBUCKS CORPORATION )
 bear
Bearish:

GOOG  (GOOGLE) MSO  (MARTHA STEWART LIV) HERO  (HERCULES OFFSHORE, INC. ) PNY  (PIEDMONT NAT GAS CO)
THE  (TODCO) VPHM  (VIROPHARMA INCORPORATED ) WDC  (WESTERN DIGITAL CP)

view todays stock summaries here

Home
Opening Discussions

MCO  (MOODY'S CORP)




 You know what?  You know what you do when Congress raises our debt ceiling to $9 trillion?  The govt just keeps doing this so they can borrow more money to pay for corporate tax breaks - if we're lucky.

I think one the best ways for you to play this profligate congress and president is to buy MCO, the bond ratings business!

Our nation's ridiculously nuts about borrowing.  And they're making a fortune at Moody's, just a fortune with all this borrowing.  I need you to get involved in the unbelievable debt bonanza.

It's not just the govt that spends like a drunken sailor.  You've got businesses in the same boat.  You've got the ATT's and the Verizons.  Can they even cure themselves from debt?  They take a ton of debt down to make deals.

An all the private equity and leveraged buyout activity - that adds tons of debt into companies.  Our economy is just a big circle of people lending money to each other!

And the only way that's going to function is if you've got organizations like MCO determining the ratings of all that debt.

Is this a great business?  Let's think.  Berkshire Hathaway (Warren Buffet led) owns 16.2% of the Company.  I call that a mighty big chunk.  That's a veritable 'mon-back'.(means back up the truck and BUY - ed.)

But mco has even more important fans.  See, the bond ratings business - it's a racket!   Five co.s are considered nationally-recognized statistical rating organizations.

Those five co.s have 99% of the bond rating business.  So this is an oligopoly, right?  Well, it might be even better than that.

See, out of those five, two co.s - MCO and S&P (which belongs to one of my other favorites, McGraw Hill - MHP) control 80% of the market.  That's fabulous pin action off of bonds.  So maybe we should just think of it as a nascent duopoly?

This business is so good that the senate has been holding hearings about maybe passing some legislation to rein it in, because these hogs are making an awful lot of money.

Remember, the Republicans control the senate, so for them to even make noises about regulation, a business must have something really good going for it.

Richard Shelby (R-Al) is saying 'these entities wield extraordinary power in their role as gatekeepers to the bond markets.'

He goes on to call the bond business an 'essentially self-regulated, yet non-competitive industry, with duopoly profits.'

You need to look at what senator Shelby is saying and take it as an endorsement.  Hey man, the guy is giving you the high five buy signal!  He's giving you the blue plate special - MCO!

Enough politics.  The one thing that really makes this one for me, beyond the Buffet seal of approval, and the indignation coming out of Congress - wink, wink - is how MCO makes its money.

Get this.  When you're selling bonds, you pay MCO to rate them.  If that's not a conflict of interest, I really don't know what is.

Let's say I want to raise some cash so I sell a bunch of debt.  And I go to MCO, and I say 'guys, could I pay you a lot of money to tell other people whether or not to buy my bonds and what to pay for them?'  And you pay them, and they do it.  Somehow this actually works.

Here's the bottom line:  this MCO - this is a co. With great earnings, great growth, the buffet endorsement, and it's a totally non-competitive industry.  Why not buy MCO!


Home
Closing Discussions

ALOG  (ANALOGIC CORPORATION )


Watching NBC could make you money.  In a report for Nightly News, Lisa Myers (a big fan, big fan of Mad Money - I kid you not) exposed the TSA's poor performance for baggage screening, and how we need much better detection.

This is terrible news and we need much better detection equipment, and I think we're going to get it from ALOG.

These guys make a baggage scanning system called 'Exact' for checked baggage.


It works much better than the current stuff.  You put your bags through and every item is checked against what the machine knows about explosives and drugs and whatever else isn't supposed to be there.

Each scan lasts only six seconds, but they can scan 10 times as much data as the current systems we use.

They're also partnered with l3 (LLL). And l3 is legitimate, so they're blessing ALOG.

Ahh, but there's more to it.  ALOG isn't just a security co., in fact, it's mostly a medical co.  They make the machinery for ct scans, ultrasounds, MRI's.

Now, here's the key, but it's also the problem.  Their last qtr. Was a total blowout.  Their operating margins were unexpectedly high on this medical stuff.  And they sold about 75% more exact machines than the analysts were expecting.

They compete with OSI systems (OSIS), which we've also featured on mad money.  But there's more than enough room for two players in this game.  Hey, you know what we really have here?  We've got another great duopoly in these united states.

ALOG does pose an interesting problem as a stock.  They reported their breathtakingly good earnings on march 9th.  Since then, I've been waiting and waiting and waiting for a pullback.  We really haven't gotten much of one, and that's really a good sign for ALOG.   But, you've got to be careful here.

I would only do a little ALOG right here and right now.  And then, I would be patient.  When there's a pullback, I would back up the truck and load it with ALOG.

But, of course, you've still got to do it incrementally.  You've always need to build your positions in a stock slowly.  Particularly one that went up about 10 points in a qtr.  And, also because buying all at once is arrogant, and it loses you money.

Bottom line!:  we've got a problem.  ALOG is the solution to that Lisa Myers video tape that we watch on NBC.  This one could make you money, as long as you don't jump the gun and can wait for some real weakness, before you start loading up with ALOG.


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