Abbott Laboratories (NYSE:ABT) reported in an 8K filing with the SEC that their Q3 results are inline with estimates while guiding within analyst estimates. The company also announced a $2.5 billion share buyback program. According to the press release, "The purchases may be made from time to time as market conditions warrant and subject to regulatory considerations. The timing and amounts of any purchases will be determined by the company's management. The share repurchase authorization has no time limit and may be discontinued at any time." This news comes as the company's stock is struggling to make progress beyond its $40-50 range that it has been locked into since mid-2003. The buyback would represent 3.4% of the company's current market cap.

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Move Inc. (NDAQ:MOVE) is owner of Move.com and a series of other web portals designed to connecting real estate buyers and sellers, including Realtor.com - the official NAR (National Association of Realtors) portal. The stock, which was up to around $7 per share earlier in the year, is now on the rise again. So, is it a good time to buy? Let's take a look...

When looking at the macro picture surrounding the company, it is not difficult to see that there is trouble in the housing market. Rising interest rates make it more expensive to own a house because of the higher financing costs. More expensive loans end up pricing people out of the market, which reduces housing demand. The reduction in demand causes the price of houses to decrease, which is what we are currently seeing in many housing markets. The reduction in both demand and price are not good for realtors, as they must face both reduced demand for housing and a reduced commission (due to lower selling price). These two factors may decrease the deal flow seen at web portals like Move.com.

Since they operate an Internet portal as their primary business, we can partially qualify this thesis using Amazon's Alexa. This Alexa report shows the downward trend of traffic going to their main portal, Move.com. This reduction from a high of around 15 - 18 million visitors per day down to 8 - 10 million visitors per day is quite significant, and is likely at least partially attributable to the economic environment (since sales and marketing expenses were up during the same period).

There are also problems with the company itself - most notably, the fact that they don't make money (on a GAAP basis). According to their own 10K filing with the SEC:

"We have incurred net losses every year since 1993, except for modest net income in 2005, including net losses of $7.9 million and $47.1 million, for the years ended December 31, 2004 and 2003, respectively. As of June 30, 2006, we have incurred a modest net loss and have an accumulated deficit of approximately $2.0 billion ... certain business model changes that will require considerable investment with no assurances that our future financial performance will be enhanced by these new initiatives."

The most troubling issue is the fact that during the United States' largest real estate boom, the company was not only unable to turn a profit, but actually accumulated a $2 billion deficit! And now after the boom is (arguably) over, the company still retains an enterprise value (EV) of over $640 million. Even if the company is a clear market leader with an increasing share of the online real estate listings market (which is debatable), the company still faces both macro-economic and internal issues that it needs to resolve before becoming profitable. The company could also face antitrust issues relating to their exclusive relationship with NAR, assuming that the online real estate listings market continues to grow as fast as it is (expected to double by 2010). Finally, the company is in the process of changing its web portals, and the success of this depends largely on how well customers accept these new online destinations. Overall, it would be best to hold off on any investment in MOVE until the company achieves profitability and is able to demonstrate that it can drive traffic to its new portals.

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Star Scientific Inc. (NDAQ:STSI) announced after-hours in an 8K filing with the SEC on Monday that it had received a letter from Judge Marvin J. Garbis of the U.S. District Court of Maryland regarding its longstanding patent infringement lawsuit with R.J. Reynolds Tobacco Company. The letter noted:

"I have Mr. McMillan’s letter of September 5, 2006 and understand all parties' interest in moving the case to final resolution. I shall try to issue decisions on the pending matters within a month."

What is this patent lawsuit about? According to their latest 10K filing with the SEC:

"In May 2001, Star filed a patent infringement action against RJR in the United States District Court for Maryland, Southern Division to enforce Star’s rights under U.S. Patent No. 6,202,649 (‘649 Patent), which claims a process for substantially preventing the formation of TSNAs in tobacco. On July 30, 2002, the Company filed a second patent infringement lawsuit against RJR in the same Court based on a new patent issued by the U.S. Patent and Trademark Office on July 30, 2002 (Patent No. 6,425,401). The new patent is a continuation of the ‘649 Patent, and on August 27, 2002 the two suits were consolidated."

The company also stated that it would immediately appeal if it did not win the case. Although the results of the case have yet to be unveiled, we do know there will likely be significant volatility in the wake of the decision - this makes STSI an interesting potential options volatility play. Either way, this stock is definitely worth watching, as this event is very material to the company's future.

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Adams Express Company (NYSE:ADX) took some heat today from shareholders after the release of its proxy filing on September 6th. Karpus Management filed a 13D with the company containing a letter to the Board, which read:

"We have read your recently released preliminary proxy materials and are writing to you to express our dissatisfaction with the inherent shareholder disregard expressed in the materials.

In fact, while reading the preliminary materials, we found many instances where the proposed changes are argued to benefit the company's discretion in the long-run but find absolutely no compelling reason why it would be in shareholders' best interests to relinquish the key accountability measures listed in the proxy materials.

What's more, we can find no indication why it is that the Board is calling this special meeting altogether because in our belief it would have been more efficient and cost effective to have shareholders vote on these issues at the same time that they voted on the routine annual meeting matters back in March.

As an agent of the shareholders, the Board should be reminded that it is afforded the task of monitoring the activities of a Company's officers and/or managers and the overall performance of a Company so that it can enhance shareholder value. Given the circumstances before us, the Board appears to be failing in this task and also seems to forget about its duties to shareholders altogether."

The company is seeking to ammend its company charter in two ways:

• By requiring a larger 2/3 vote in order to convert the company from a closed-end mutual fund to an open-end fund. The difference is that closed-end funds are valued based on the demand for shares of their investment fund while open-end funds are valued based upon the NAV (net asset value) of the stocks that they hold. So, why is there anger over this by shareholders? Well, typically closed-end funds trade at a discount to their NAV (for a variety of reasons), so any conversion to an open-end structure would unlock this value for shareholders.
• By removing the rights of shareholders to ammend the company bylaws. Although the company notes that this technique has never been used on Adams Express, and is only used on rare occasions in the general market (when these provisions exist), it is a tool that activist shareholders could use to advance their own goals.
  

Clearly, it appears as if the company is worried about activist shareholders coming in and converting the fund from a close-end fund to an open-end fund to unlock shareholder value. This stock is worth keeping an eye on because if these provisions do not pass, that opens the door to potential activist shareholders to come in and try to unlock the stock's NAV value.

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Bloomberg reported this morning that RCN Corp (NDAQ:RCNI) may be considering a possible sale of the company, after it retained Blackstone Group LP as an advisor to the company. The company - which only recently emerged from bankruptcy - moved up 7% on the news. But is there any substance to this deal? If so, how much would the deal be worth?

When many people consider buyout situations, the first thing they look at is the Enterprise Value (EV), which takes into account the company's market cap, debt, minority interest, preferred shares, and cash. This tends to give a more accurate estimate as to the worth of a company because it takes into account both debt and cash - which would have to be acquired with the company. RCN has an EV of $1.07 billion or approximately $28.80 per share, a premium to even today's price. The company also sold some of its assets in the past (seen in this 8K), where its customers were valued at $2,500 each. Using this valuation, we can estimate that their customer base alone (418,000 as of April) is worth about $1.04 billion. Considering the company only has around $205 million in debt, $98 million in cash, plus the potential for a premium, makes the company look attractive as an asset buyout play.

Whether or not the deal will go through depends on a number of factors; however, it is definitely a strong possibility. Any actions taken by the Board to steer the company in this direction can be found in future SEC filings - most likely 8K filings. This stock is definitely a good one to keep an eye on as these events continue to unfold!

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