Reynolds American Emitting Warm Fuzzy Glow

Source from:  Minyanville 01/10/2011

Englishmen of a certain age will well remember those iconic ads for Panama Cigars, the only such product "with six appeal." The sixth biggest donor to House Speaker John Boehner just happens to be cigarette stock Reynolds American (RAI), a fact that must be making both happy this afternoon as the equity is up sharply at a two-year high on his first full day on the job. (On this, as with much else, Boehner and Barack Obama don't see eye to eye, the president apparently not needing a New Year's resolution to quit smoking.) Shares in the Winston-Salem firm founded in 1875 ended up more than 3% on an otherwise dreary day to take its place among the top 20 S&P 500 performers after an analyst upgrade. UBS researcher Nik Modi raised his rating this morning on this seller of brands including Camel, Capri, Pall Mall, and Winston, in addition to assorted smokeless tobacco and snuff. Modi rates it the top pick in a strong sector, one that remains undervalued in his estimation. He added on CNBC's Fast Money this afternoon that investors may be increasingly inclined to rotate out of rival Lorillard (LO) and into Reynolds, which is expected to announce some 250 million in stock buybacks for the June quarter. This contrasts favorably with industry titan Altria (MO), whose hands are tied on this score for essentially another year due to deal-related debt. Reynolds' dividend, already yielding about 5.75%, is also forecast to increase in a further catalyst. Risks remain abundant, to say nothing of the more moral among us who have inherent issues with investing in "sin stocks." Litigation problems, back on the front burner recently with last month's Surgeon General report and FDA mandated reviews of new tobacco products, are a perennial bugbear. And addictive or not, some 63% of the company's sales come from the premium category so increased excise levies are always a threat in this still sluggish economy. For now however, the stock is smoking. Please see This Just In: Smoking Harmful, Investors Light Up as Cigarette Makers Move Higher, and Long Term Investor? Now's the Time to Consider High Dividend Paying Stocks. Shares in Hong Kong-based computer maker Lenovo Group Limited, whose ADRs trade here under ticker symbol LNVGY, are up after ISI Group named it one of its top stock picks for 2011. While less well known to US investors than the other names it selected -- a list of the usual suspects including Apple (AAPL) -- Lenovo is an Asian tech powerhouse whose annual revenue exceeds $13 billion. Its cutthroat competition with Acer of Taiwan makes the rivalry between Steve Jobs and Bill Gates look like a vicar's tea party by comparison, and is as much about history as technology. (Something to do with 1949, Chairman Mao's Little Red Book, and a mutual loathing by both countries.) Lenovo remains top dog in China, whose government is to all intents its biggest shareholder via a stake in Legend Holdings. Indeed, its 2005 purchase of International Business Machines' (IBM) personal computer division was in retrospect an early example of cross-border corporate muscle flexing by Beijing. Lenovo is a leader in both netbooks and the take-two-tablets-and-call-me-in-the-morning ethos, which is all the rage at the moment. COO Rory Read has high hopes for a Lepad device he labels a portable "third screen" bridging laptops and smartphones. Net income in the most recent quarter increased 44% from year-ago levels while shipments gained 39%. Undeniably impressive, although industry heavyweights including Hewlett-Packard (HPQ) lie in wait. Also check out HP, Lenovo, Toshiba Lines Focus on Low Cost, Mobility. Doctors are indispensable dispensers of sage advice about hand washing. Having for years faithfully followed a physician's guidance to carefully calibrate this activity with two verses of Happy Birthday, I can confirm it infallibly keeps colds at bay. However, I'm surely not alone in hand-wringing over their handwriting, which in many cases is not merely bad but positively lethal. (To be fair, deciphering impenetrable scrawls is a tricky business that once proved beyond even the country's current cult stock -- see Overhyped Products: Apple Newton.) Thankfully, Allscripts Healthcare Solutions (MDRX), a Healthcare IT management company operating out of Illinois, provides easy-to-read electronic prescriptions, along with automated patient records and various physician software solutions. Shares ended solidly higher today on the back of a Buy-from-Hold upgrade at Deutsche Bank. The stock, although up from only $8 two years ago, has essentially been dead money for the past 12 months due to merger doldrums while it was absorbing a $1.3 billion acquisition of Eclipsys. The Congressional health-care overhaul allows for $36.5 billion for electronic medical records, which should be a big benefit to this 25-year-old outfit as hospitals look to rid themselves of prolific piles of paperwork. The company also has ample cash on hand. Risks include Cerner Corporation (CERN) taking market share, and potential push-back arising from privacy concerns as confidential patient information increasingly goes electronic. Turn to Five Candidates for a Dell Takeover for more. TD Ameritrade (AMTD) closed more than 3% higher after analysts at Raymond James raised their recommendation on the online broker to Outperform from Market Perform ahead of its fiscal first-quarter earnings on Tuesday, January 18. The Omaha outfit, having been run until recently by respected CEO Joe Moglia who has since left for the call of football, will hope the sharp increase is not a head fake. (This as onetime Internet analyst Anthony Noto went in the opposite direction, recently rejoining Goldman Sachs (GS) from the NFL.) TD Ameritrade can trace its origins to 1971, the same year Nasdaq began similarly opening up electronic stock trading to the masses. It emerged from the 2008 economic bloodbath relatively unscathed compared to other Internet stockbrokers having wisely given the subprime mortgage mess a body swerve. The firm also boasts a solid balance sheet with ample amounts of high-quality receivables. However, retail investors have yet to fully reengage in the stock market with their pre-recession vigor, contributing to a 7.5% slide in net annualized revenue in its most recent quarter, one reason why shares have performed fitfully for the past 12 months. Enditem