Countrywide Financial (NYSE:CFC) shares spiked over 10 percent today after dropping substantially over the last few days on bankruptcy concerns. The bounce has been widely attributed to recently commentary that the mortgage lender may be too large to go bankrupt in the same way that Long-Term Capital Management was too large to go bankrupt – there’s too much at stake.

Countrywide recently announced that foreclosures and late payments on mortgages in December rose to their highest levels in five years, spelling out even more problems for the troubled mortgage lender. The huge number of bad loans alarmed many mortgage analysts, one of which said “the extent of the deterioration is a surprise”. Currently, Countrywide has a portfolio of around $1.5 trillion in loans that could prove to cause a crisis on Wall Street if the firm went belly-up.

So, could Countrywide go bankrupt? Well, Guy Cecala of Inside Mortgage Finance was quoted on PBS’ Nightly Business Report yesterday as saying that lawmakers would most likely lean towards propping up Countrywide and readying it for a merger rather than see it fall into bankruptcy. Indeed, any failure on the part of Countrywide would cause widespread problems throughout the mortgage industry. Loans would be significantly more difficult to obtain while liquidity in the marketplace would be impaired.

In the end, Countrywide is clearly in trouble right now. Foreclosures and rising defaults are dealing a double blow to the company as the firm is not only suffering losses on the loans themselves but also its mortgage securities are becoming increasingly difficult to sell due to their substantial drop in value. Whether or not the government will allow Countrywide to go bankrupt remains to be seen, but if they do, there will be huge problems in the United States housing market and economy.

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The Goodyear Company (NYSE:GT) appears to be a compelling value play for at least two hedge funds that has quickly amassed a sizable stake in the tire and rubber company. TPG-Axon Capital quickly acquired shares to become the company’s second largest shareholder in about one quarter. Meanwhile, Eton Park Capital Management – the company’s largest shareholder – added 11.3 million shares to their stake. Investors may want to pay attention because both of these hedge funds are value funds!

TPG-Axon and Eton Park are both strong value funds and Goodyear fits perfectly into their portfolios. The company has strong financials and management along with good cash-flow generation. Meanwhile, the company’s cost reduction program may have been the catalyst needed to make it a compelling buy right now. Goodyear currently sits very near its 52-week low despite reporting strong third quarter earnings in October. The stock has fallen over 22% in the last three months based simply on economic fears and a decline in the U.S. Tire Index.

The purchase by TPG-Axon is a very positive sign for Goodyear shareholders. The company may be trading near its 52-week low, but the current valuation is likely unjustified and simply due to larger economic returns that are being blown out of proportion. The involvement of these two hedge funds could give investors the confidence they need to re-enter this stock and help it return to its true valuation. Combined, these factors make GT a stock worth watching closely over the next few months!

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Logitech International (NDAQ:LOGI) shares jumped over seven percent in early trading amid speculation that Microsoft Corporation (NDAQ:MSFT) may be interested in taking over the company. The rumors stemmed from the fact that the software giant boosted its stake in the hardware company by 12 percent in recent weeks. Sources close to the situation say that a takeover bid could approach 48 Franks – or a 38 percent premium to yesterday’s closing price.

Many analysts have been predicting a move by software giants to diversify into hardware through mergers and acquisitions. An acquisition of Logitech by Microsoft would turn the software giant into not only one of the largest software companies in the world, but also the largest peripherals manufacturer in the world. A company that is already ubiquitous with personal computing software also has a lot of leverage that it could use to push hardware products as it has already done with its own lines.

Logitech’s co-founder and largest shareholder, Daniel Borel, declined to comment on Microsoft rumors but said he had no reason to sell his stake. He only owns some 6 percent, however, so he will neither enable nor prevent a sale of the company. Interestingly, he also hinted that Logitech may be a great acquisition by saying it was a company in great shape, growing nicely, with a strong vision for the future.

In the end, this is all great news for Logitech shareholders. A boost in the company’s market capitalization may now help it make some of its own acquisitions “for free” if it is able to hold onto the gains. Otherwise, an acquisition by Microsoft at a 38 percent premium would also be welcomed by shareholders who have been sitting on modest gains in the past. Combined, these factors make LOGI a stock worth watching!

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