Rare Earth Metals Investment - Rare Element Resources Ltd.

The recent Chinese boycott of rare earth metal export to Japan creates worries among the global economy as these metals at the bottom of the periodic table are integral parts into many of today's high tech products.  The worries was transformed into speculation of the rare earth metals stocks as investors took the opportunity the inflate the prices of the rare earth metals stocks such as the previously mentioned Molycorp.  Although China is willing to soften its cut in rare earth metal export, the fact is the country still control 95% of the global supplies rare earth metals so the recent pull back on the rare earth metals stocks may be great opportunity for investors.


There are very few public traded rare earth metals stocks available and beside Molycorp another public traded is the Canada based Rare Element Resources Ltd.(REE).  Shares of Rare Element Resources have been on a wild ride for the past 5 months as the price went from $1.15 per share in June to as high as $14 in October, making a incredible 1100% gain in just four months.  The stock has dropped back below $10 to $9.95 recently and is approaching 50 day moving average.  From the technical chart the KD lines indicate a bounce back yet if K line dropped below D line again there could be more sell-off.  So at this point it would be better to stay on the side line and wait till the dust settles.

Merger and Acquisition #14: Isilon Systems Inc.

The last and number 14 of the potential take over target for the big tech companies according to Bloomberg BusinessWeek is the $2.24 billion dollar Isilon Systems Inc.(NASDAQ:ISLN).  After HP bought money-losing rival 3Par, Isilon Systems, a Network Attached Storage systems provider, has hired bankers to get buyers interest in the company.  Besides HP, other company that could find Isilon Systems a nice fit are Dell and Oracle.


However the buyer turned out to be EMC, a virtual infrastructure software provider.  On November 15, EMC announced a $33.85 per share take-over of Isilon and the deal is expected to be completed by the end of the year.  So unless the other big tech can come up with a better offer, they'll have to hunt else where.  So the BusinessWeek prediction is a little off here yet after all, a merger and acquisition still took place.

Merger and Acquisition #13: Check Point Software Technologies Ltd.

The 13th potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is Check Point Software Technologies Ltd (NASDAQ:CHKP), an Israel based security solution provider.  The security company tried to purchase Sourcefire(NASDAQ:FIRE) in 2005 but failed due to Us.S objection.  So if HP and Dell, two possible buyers for Check Point, try to buy the security company there could be possible opposition from Israel government. 



Shares of Check Point Software Technologies have rose almost 140% for the past two year from $18 per share from $18 in December 2008 to $43.5 in November 2010.  The company has been getting consecutive revenue and profit increase for the past three years. With $9 billion in market cap,  Check Point Software may not be an easy target to swallow especially with the political challenge from government of Israel.  

Merger & Acquisition #12: Dot Hill Systems Corp

The twelfth potential take over target for the big tech companies according to Bloomberg BusinessWeek is the $100 million microcap Dot Hill Systems Corp(NASDAQ:HILL).  Despite being a money loser, the company is in the hot cloud computing and virtualization market.  The company is trying to stay profittable by laying off 10% of the workforce.  The company fits big techs such as Dell and HP. 


Dot Hill Systems is still a penny stock with current stock price at $1.82 and relatively low daily trading volumn.  The company is still losing money and the revenue stay relatively the same for the past few years.  However with such low market cap,Dot Hill Systems is an easy take-over once the big tech can recognize the potential of the company.

Merger and Acquisition #11: Mellanox Technologies Ltd

The eleventh potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is Mellanox Technologies Ltd (Nasdaq:MLNX), a 848 million network chip maker.  Oracle has been using the company's product and with Larry Ellison expressing interesting in buying a chip maker  Mellanox Technologies could be a great fit. The recent strategic investment by Oracle to Mellanox makes the buyout a greater possibility.


Shares of Mellanox Technologies reached its low of the year in mid August trading less than $15 per share.  Since then the stock has been rose back to the previous high in July and is currently trading near $25 per share.  The company's revenue continue to rise year after year although the profit dropped for three straight years.  With the recent strong quarterly report and Oracle's investment the stock should continue to attract investors.

Merger and Acquisition #10: Teradata Corporation

The tenth potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the $6.8 billion Teradata Corporation (NYSE:TDC).  The technology company provide data mining solution to help enterprises retrieve meaningful information from data.  HP ex-CEO Mark Hurd tried to take over the company and failed yet there is still chance that HP or Dell could buy Teradata.  


Shares of Teradata Corporation have been doing well for the past two years rising from $12 in November of 2008 to $41 per share in November 2010 gaining 240% in just two years.  The most recent quarterly report show strong third quarter result and promising outlook so this should definitely get the attention of the potential buyers.

Merger and Acquisition #9: Tibco Software Inc.

The sixth potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the Palo Alto, CA based Tibco Software Inc. (Nasdaq:TIBX).  Tibco Software provides Service-Oriented Architecture (SOA) and Business Process Management (BPM) solution to help enterprises integrates back-office programs on different platforms together.  The solution that the company provides fit with IBM, Oracle and HP who are looking to expand enterprise software solutions. 


Shares of Tibco Software have quadrupled for less than 2 years and is trading around 52 weeks high of $19.7 per share with P/E of 46.59 and market cap of $3.3 billion.  The company's solution is at the forefront of today's complex enterprises and should continue to see growth.  The technical chart shows very strong bullish trend with both 50 day and 200 day moving average going up.  The stock did bounce back up after dropping to 50 day MA which shows support at that point.  With KD coming back up again there could be another run coming.

Merger and Acquisition #8: Sourcefire Inc

The eighth potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the comparably cheaper Sourcefire Inc. (Nasdaq:FIRE) with market cap of 750 million.  Sourcefire is a open source cyber-security solution provider with clients from most Fortune 100 companies.  Its software and hardware cyber-security solution would fit with Oracle, IBM and HP. 


Shares of Sourcefire Inc. gained almost 500% from $5.5 in January 2009 to $32.7 in October 2010 and dropped back to $27 recently due to weak 4Q guidance.  The technical chart shows weakness with 20 day moving average dropped below 50 day moving average.  The insider transactions is also bearish with continuous selling trend.  As stock drops and the company gets cheaper hopefully it would create interest among the big tech buyers.

Cancer Drug Maker - Exelixis Inc

Despite years of research and millions and billions of investment, cancer is still one of the deadliest disease of the world.  And because it takes years to bring a cancer drug from discovery to market as it has to go through various stages of clinical trials and FDA (Food and Drug Administration) reviews, any positive progress during drug development always lift stock price of cancer drug maker.  


Therefore after reporting positive clinical trial data from patients receiving treatment for ovarian cancer and prostate cancer, shares of Exelixis Inc (EXEL) surged 32% to $6.23 per share.  The San Francisco based Exelixis develops compounds to fight various form of cancer including Brain, Breast, Endometrial, Ovarian, Gastric, Liver, Lung, Pancreatic, Prostate, Skinand Thyroid Cancer.  With such broad coverage, the company is on the forefront of cancer treatment drug development.  The multiple insider shares purchase since August were also great indication that positive things were about to happen to the drug maker.  In addition the company's financial situation continues to improve with increasing revenue and decreasing net loss.  This is definitely a stock worth looking at.

Merger and Acquisition #7: Citrix Systems Inc.

The seventh potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the $11.9 billion dollar cloud computing software company Citrix Systems Inc. (Nasdaq:CTXS).  Citrix Systems Inc. is the pioneer in cloud computing software and is attracting big techs such as Cisco, HP, IBM and Microsoft.  Source says Microsoft is very interested in acquiring Citrix and might counter any rival's offer. 


Shares of Citrix Systems have tripled from early 2009 and is now trading around multi-year hight of $63.41 per share.  The software maker just reported stronger than expected 3Q earning and is also expecting a better than expected 4Q.  This is a solid company that should definitely attracts many bids.

Merger and Acquisition #6: BMC Software Inc.

The sixth potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the Houston, TX based BMC Software Inc. (Nasdaq:BMC).  BMC Software provides data center operators with virtual dashboard to coordinate all the machinery and applications data center oversees.  Since HP and IBM already provide similar products it is up to Dell, Cisco or Oracle to buy the $7.8 billion company in order to enter into the market. 


Since hitting the low of $20 in late 2008, shares of BMC Software have since doubled to recent high of $46 per share.  The company has solid financials with consistent net income and strong cash position.  The technical chart shows weakness as the stock has dropped below 20 day moving average and it going toward the 50 day moving average of $42 per share.  The recent market pull back could push the stock price down further yet may also provide better opportunity for take over.

Merger and Acquisition #5: VMware Inc

The fifth potential take over target for the cash-rich big tech companies according to Bloomberg BusinessWeek is the Palo Alto, CA based VMware, Inc. (Nasdaq:VMW).  VMware provides virtualization software where companies can built multiple instance of virtual  servers out of a single physical server.  The company that has showen interest in buying VMware is CISCO.  Other companies that may buy VMware includes IBM and HP.  


Compare to the previous mentioned companies VMware is a bigger company to swallow with market cap of $32.63 billion.  Shares of VMware have tripled for the past 15 months and are currently trading at $78.74.  Revenue has been rising rapidly for the last 5 years and is still rising quarter after quarter this year.  The technical chart shows weakness as VMW is trading below 50 day moving average but still above 20 day moving average.

Merger and Acquisition #4: Aruba Networks, Inc.

The fourth potential take-over target for the cash-rich technology giants according to Bloomberg BusinessWeek is the Sunnyvale, CA based Aruba Networks, Inc.(Nasdaq:ARUN).  Aruba Networks provides wireless network solutions for the enterprises to allow seamless internet access throughout the company.  The company's wireless technology are great fit for HP and Cisco to strengthen their wireless product line for the enterprise clients.  


Shares of Aruba Networks have gone up about 800% for the past two years and is currently trading just a little bit below the 52 weeks high of $22.64 per share.  Revenue has been up for the past 5 years and are still on the rise quarter by quarter this year.  Looking at the technical chart, ARUN is on a very strong uptrend with 20 day MA and 50 day MA going up.  Currently ARUN has market cap of $2.2 billion and is still affordable for the tech giant.

Rare Earth Metals Investment - Molycorp Inc

Ever heard of rare earth metals?  For those just graduated from college with a Chemistry major you could probably recall those from the periodic table.  For people who didn't even take Chemistry class since high school probably not.  But for investors like us why bother? You ask.


Well first of all the rare earth metals are 15 lanthanides: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, and ytterbium at the bottom of the period table plus scandium, yttrium.  If these does not sound like English to you let's look at what these metals can do.  For instance neodymium is in your computer hard drive, DVD player, A/V equipment and military gears; europium is a crucial part of LCD TV; erbium is in fiber-optic cables.  The list of rare earth metal applications goes on and on, from as big as the hybrid-car and fighter jet to as small as iPhone and computer chips.  


So now you know how important rare earth metals are the next question is: why bother?  Although the Earth's crust is full of these metals, they are so widely dispersed so only a few places have quantity large enough to make it economically feasible to extract them.  And whoever has large supply of rare earth metals definitely has the advantage like the oil OPECs and China is the one with majority control with 97% the world's rare earth metals supplies.    Therefore the recent Chinese boycott of rare earth metal export to Japan create worries among the global economy.  Yet to investors this is great investment opportunity as like the oil price bubble years ago that drove up many oil companies stock prices, imagine what this can do to the rare earth metals stocks.  


There are only a few public traded rare earth metals stocks with only one traded on NYSE - Molycorp Inc. (MCP).  The US based company owns one of the most ready-to-extract rare earth metals mines in the western hemisphere and was trying to raise money through the IPO earlier this year to re-open the rare earth metals mine that stopped operation in the 1980's.  Those who bought the stock back than at $12 per share have so far have enjoyed a 200% gain as the stock is now near $36 per share.    Despite the 200% gain the trend is still up so while the bubble of rare earth metals is still in the making maybe we could see this pass the $50 mark easily.

Merger and Acquisition #3: Riverbed Technology

The third potential take-over target for the cash-rich technology giants according to Bloomberg BusinessWeek is the San Francisco, CA based Riverbed Technology(Nasdaq:RVBD).  Riverbed Technology provides solution for cloud computing which is a hot topic where investors are chasing after today.  The company's solution attracts technology giant such as HP and Cisco.  


Shares of Riverbed Technology have almost tripled for the past 52 weeks, rising from $10 to almost $30 recently. Net income has been rising for the past four quarters while revenue is also up for the past three quarters.  The technical trend of the stock still looks really really bullish.

Merger and Acquisition #2: Brocade Communications Systems

Another potential take-over target for the cash-rich technology giants according to Bloomberg BusinessWeek is the San Jose, CA based Brocade Communications Systems (Nasdaq:BRCD).  Brocade Communications Systems focuses on data center networking solutions including hardware and software.  The company's rich product line of network gears are what IBM, Oracle, Dell and HP need in order to compete with network giant Cisco System(CSCO).  


Shares of Brocade Communications Systems is trading at $6, about 40% below its 52 weeks high with market cap of $2.72 billion.  The company's revenue and income have been steady for the past few quarters yet the annual revenue kept rising for the past few years.  However its stock price has been flat trading in single digit since 2003 and has yet to reach its triple digit stock price back in 2000 and even the double digits price in 2001 and 2002.  Getting bought out maybe the ultimate way to boost the stocks shareholder value.

Merger and Acquisition #1: F5 Networks

The big techs, HP, Oracle, IBM, Cisco Systems Inc. and Dell Inc., with a collective $100 billion in cash, are looking for potential targets to boost their influence in the technology landscape by searching for potential merger and acquisition targets in areas such as storage, software and security.  According to October's BusinessWeek, one target of interest is the Seattle based F5 Networks (FFIV).  F5 Networks's core technology allows optimization of delivery of network-based applications.  So in order for company like HP or Oracle to go against network hardware and software giant Cisco, F5 Network is a great buy.  F5 Network has market cap of $9.87 billion and both revenue and profit have been rising continuously.  Shares are currently trading around all time high of $122.82 per share and the trend is still pointing up.

Flood of M&A Ready to Happen

Banks are suffering through the weak economy caused by financial storm.  Ironically the same group of company that suffered great loss 10 years ago, the technology giants, are actually cash rich now with Cisco, Dell, HP, IBM and Oracle having 100 billion in cash combined.  So the in the October's Bloomberg BuisinessWeek it talks about a dozen or so companies that are target of take over, or so called M&A (merger and acquisition).  So in the next few blogs lets take a look at these potential targets.

A Look at Mueller Water Products

Shares of Mueller Water Products (MWA) surged 6.42% following the fourth quarter and full year 2010 results.  The result shows slightly improved financial with increasing in net sales and operation income and decreasing in net loss.  Trading at penny stock price at $3.15 with market cap of $486 million, Mueller Water Products is a company you should take a second look at. The Atlanta based company focuses on water infrastructure,  flow control and piping component system products for use in water distribution networks and water treatment facilities.  Infrastructure is a hot keyword as the government is trying to boost the economy by spending on infrastructure projects.  Water infrastructure is another sexy keyword as volatile climate and increasing scarce water source could eventually make water infrastructure a hot industry again.

Other things to see is the insider trading.  The insider transaction shows bullish sign with a huge purchase of 125,000 shares in September by Mueller Water Products's officer and another 20,000 shares purchase on August 31.  The technical chart also shows bullish sign as the stock is now trading above 50 day moving average and KD is about to go up. 

The Election is Today. Who's Your Favorite?

The answer is probably straightforward for the hardcore Republicans or Democrats.  Yet for the investor it really depends.  Generally speaking investor with major holdings on health care related shares would favor Republican as the Republican majority house and senate could overturn the earlier passed Healthcare Reform Act.  Banking stock would also benefit as Republican favor less government controls on the financial industry.


On the other hand a Democrat victory would be bad news for high-end retailers stocks due to expected higher taxes but investors betting heavily on alternative energy would sure throw a party as Democrat favors green policies.

Who's Better for the Market? Republican? Democrat? Or Gridlock

The midterm election is around the corner and investors including myself are kind of in wait and see mode as the result of election will determine which direction market will go.  Conventional wisdom says either a Republican controlled government or a Gridlock are good for the market as Republican generally geared towards more government-offhand-business policies while Gridlock - where the U.S. Senate, U.S. House of Representatives, and White House are not all controlled by the same party - is even better as the businesses will find way to grow by themselves with a stagnant government.


So what does realty tells?  According to the stats compiled by Fidelity.com in September, the average one year return for Large Cap stocks post midterm election are: 23.3% for Gridlock, 24.4% for Democratic controlled government, and 20.8% for  Republican controlled government which makes the average one year return post midterm election yields about 23.4%.  The average annual return in other years?  Still a decent 11% yet only less than half of the gain for post midterm election.  


So what does that mean for the investors?  Do not worry about the result.  Just Buy.