Zale Corporation (NYSE: ZLC) board members and management may be in for a shake up after former SEC chairman and activist investor Richard Breeden upped his stake in the company and announced his intent to make some changes at the jeweler. Many shareholders are hoping that the activist can help unlock value in a stock that has dropped from a high of $30 per share earlier this year to its current $14 per share.

“We believe that there are major opportunities for Zale to strengthen its profitability and its market value. We are excited to join with the board and the Zale management team in pursuing those opportunities with vigor and immediacy,” said Mr. Breeden in a statement.

Richard Breeden, who now owns more than 18% of Zale, also announced that he would take two seats on the board with a third one going towards an independent director. The move comes as Zale shares continue to fall after an ill-fated decision to convert Zale stores to upscale locations, which alienated many of its customers and suppliers.

Zale recently announced that it has approved several changes, including the sale of its high-end Baily Banks & Biddle stores and the closure of 60 underperforming stores in the next 90 days. Other believes that the company may be considering strategic alternatives such as a sale but it could be a far-fetched conclusion. Now, with Breeden’s involvement, these rumors have begun to surface yet again.

Overall, it remains unclear what Breeden’s plans for the company are, but we do know that he is an experienced activist investor that is more than capable of unlocking value in his investments. With an open management and board, along with two board seats, it will be interesting to see what actions he takes. Combined, these factors make ZLC a stock worth watching!

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Hewlett-Packard Company (NYSE: HPQ) shares are up marginally after Gartner and IDC released preliminary results for the fourth quarter showing HP and Dell Computers (NYSE: DELL) tied for the top market share. The computer manufacturer showed an overall growth of 14% with net revenues of $104.3 billion in fiscal 2007 with a large portion of its revenues coming from overseas. This has many investors and analysts believing that HP could be a recession-proof technology play.

HP has been very strong globally despite a slowing U.S. economy with 67% of its total revenues coming from outside the U.S. In the fourth quarter, the company saw Asia-Pacific revenues increase by 20%, EMEA by 19%, and Americas by 10%. Meanwhile, BRIC countries grew 37% year-over-year in the fourth quarter and accounted for 9% of total revenue.

The strongest revenues were seen in its personal systems group followed by its imaging and printing group and enterprise storage and services group. Meanwhile, the fastest growing group continues to be its software group, which saw growth of 74%; however, it only accounts for around 2% of total revenues. And HP’s service revenues came in second by growing around 12% to $2.3 billion.

CEO Mike Hurd is largely to credit for this huge turnaround for HP after cutting around 15,000 jobs and expanding into India and China. The strategy is expected to pay huge dividends this year as the U.S. economy is expected to grow just 1.9% versus 2.2% last year, according to the World Bank. Meanwhile, China is expecting to grow 10.8% and India is expected to grow around 8.4%.

Currently, HP’s stock is trading at around $44 per share with a market cap of around $112 billion. The drop in the stock is mostly due to macro-economic issues in the United States. This may be a great long-term buy-and-hold opportunity for value investors looking to take a position in a recession-proof company. In the end, HPQ is definitely a stock worth watching!

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Nintendo Co., Ltd’s (OTC: NTDOY) Wii consistently outperformed other major consoles in 2007 and is expected to do the same this year. The console-maker expects to sell more Wiis this year than it did in 2007 and has raised its production twice to 1.8 million units a month – still not enough to satisfy demand as they continue to sell out soon after hitting store shelves. Shareholders remain bullish on Nintendo stock, which has nearly doubled over the past year.

Video games remain the one bright spot in an otherwise rough retail sector. The success of Nintendo’s Wii along with Microsoft’s (NDAQ: MSFT) “Halo 3” title led to more video games being sold in 2007 than any other year, with sales hitting $17.94 billion. This number is up 43% from $12.53 billion in 2006. And December – the most disappointing month for traditional retail – saw sales up 28% year-over-year. It appears that video games sold well despite consumers cutting back on spending in other areas.

Nintendo’s most successful product last year was the Nintendo DS, which was the year’s best selling gaming system with over 8.5 million units sold. The Wii managed to sell 6.3 million units despite being in short supply all year. Interestingly, Nintendo has decided to hold the production on the Wii at 1.8 million units a month despite selling out nearly every run. Whether this is a good move or a bad one remains to b e seen.

Meanwhile, the two largest players in the industry continued to slide. Microsoft’s Xbox 360 sold only 4.6 million units in 2007 with the help of their blockbuster title “Halo 3”. Meanwhile, PlayStation lagged behind the rest by failing to break even a million sales despite its blockbuster franchise hit “Guitar Hero”. Sony recently announced a cheaper line of consoles in order to help them better compete in the market against the Xbox.

Overall, the video game industry appears to be immune to any slowdown in consumer spending. Right now, hardware sales are growing faster than software, but all companies in the sector are worth watching. Nintendo remains a pure-play that is experiencing the greatest success, so may definitely be worth a second look!

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Tiffany & Co. (NYSE: TIF) shares may be well off or their 52-week highs but that isn’t discouraging one large activist investor from building up a sizable stake and banking on a turnaround. Shares in the jeweler rose almost 3 percent today after Nelson Peltz’s Trian Fund Management raised its stake in Tiffany from 5.54% to 7.9%. Shareholders are hoping that the activist investor can take action to help the company turn itself around and restore confidence.

Nelson Peltz is well known for his involvement in companies like Wendy’s International (NYSE: WEN) and H.J. Heinz (NYSE: HNZ), which rose 38% and 22% respectively since his involvement. In both instances, he took actions designed to unlock value by shedding certain business units and improving operating efficiency. Many are hoping that the activist can do the same for Tiffany’s, which has been struggling in a tough retail environment with sinking margins.

Tiffany’s recently announced overseas sales that were more robust than domestic sales with an 18% increase in net income in Europe and a 30% increase in Asian-Pacific countries. However, these numbers failed to impress the market who were looking for something more – shares plunged from around $40 per share to below $34 per share earlier this week.

In the end, Tiffany’s is a stock that is clearly in need of some help. Nelson Peltz is well known for taking action to unlock hidden value within companies and many shareholders are hoping that he will do the same for this company and help shareholders turn around their investments in the company. Combined, these factors make TIF a stock worth watching!

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ISIS Pharmaceuticals (NDAQ: ISIS) has the attention of analysts but is having trouble attracting a good valuation from investors. Jefferies Research reiterated their $30 price target for the pharmaceutical company, saying a number of near-term catalysts should drive share appreciation. Meanwhile, the company’s chief executive came out early this week saying that the street was grossly undervaluing the Genzyme Corporation (NDAQ: GENZ) deal they recently inked on Monday. So, do shareholders have it wrong?

There are several catalysts that could set ISIS shares soaring. Recently, the company has been exploring strategic alternatives for its Ibis Biosciences division and some believe that a partnership with a substantial upfront payment, spin-off, or sale could materialize sooner than the street expects. This could prove to be a windfall for the company’s shareholders if it went through at attractive pricing.

ISIS is also expecting to commence its Mipomersen P3 heterozygous FH (HeFH) trials shortly. Analysts believe that one of the key points with the FDA centers around finalizing the most appropriate definition of a HeFH patient. Meanwhile, physicians have reported expressed a large degree of comfort with all the mipomersen data presented so far in the process. Consequently, there are no major road-blocks seen the P3 trails in the broader FH population. Obviously, news of this could send shares much higher.

Finally, ISIS’ recent deal with Genzyme only managed to return about 16% now since the announcement despite an early pop in the share price. The deal to license ISIS’ experimental cholesterol fighter could result in more than $1.5 billion in milestone payments and a 50% share of profits from the medicine. Considering that ISIS’ market capitalization stands right around $1.5 billion alone, this could definitely prove to be a windfall if everything goes as planned.

In the end, there are many things that could jump ISIS’ share price over the short and medium terms. However, as with most pharmaceutical companies, there is no guarantee that anything happens. Often times, you just have to play the odds. If nothing else, this is an interesting stock that is definitely worth watching over the next few weeks and months!

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Retailers have taken a beating recently with weak consumer spending amid tough competition. Many names like Target Corporation (NYSE: TGT) and Sears Holding Corporation (NYSE: SHLD) are generating substantial losses for otherwise great investors. So, are these simply bad apples in their portfolios or should we expect to see a turnaround in the retail sector over the next few years.

Target has quickly become one of the most compelling stories on Wall Street today. The retailer saw its stock drop nearly half from it’s 52-week high of $70 per share. Billionaire William Ackman felt this drop in his own portfolio of leveraged Target stock. The activist investor, known for his 20%+ annual returns, took a huge hit on the stock (but was still able to return a rumored 23% last year). However, the activist hasn’t been selling. In fact, he recently increased his economic ownership to over 10% and is considering a new fund exclusively to invest in Target.

Bill Ackman believes that Target stock is worth $120 a share over the next three years. The value – in his eyes – is hidden within the company’s real estate and consumer credit divisions – both hindered by the current crisis. He argued that the company should complete a previously announced $10 billion share buyback, sell its $8 billion in credit card loans, and extract cash through its sizable real estate holdings. In fact, the activist estimates Target’s real estate worth as $42 billion – the same as its market cap!

Eddie Lampert is another well-known activist investor that took a large position in Sears before the consumer credit and subprime crisis hit the street. Like Ackman, Lampert saw his Sears investment nearly cut in half and there is no indication that the pain is over. However, this situation is a little different in that Lampert is actually CEO of Sears. The activist took over after pushing for the merger with Kmart that pushed shares above the $100 level for the first time.

Initially, Lampert planned to milk the retailers’ cash flows in order to fund other investments – similar to the his idol did with Berkshire Hathaway in the early days. However, plans are now changing as the retailer has failed to produce rising same-store sales for several months. Now, the plan may be to leverage its portfolio of valuable brands and real estate and break up the company to unlock value. Many argue that a spin-off of Kenmore or Craftsman could generate extra cash that could be used to fund more profitable acquisitions. Meanwhile, real estate assets could also be leveraged but this may not be the best time to do it.

In the end, these are two of Wall Street’s best investors that have found themselves stuck in losing stocks. The lesson is that intrinsic value is not always equal to market value; the market can undervalue a company long enough for its intrinsic value to fall. Declining consumer spending, consumer credit and real estate prices may put a wrench in these strategies. However, both are interesting stocks that are worth watching in case the activists are able to successfully effect change!

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Life Partners Holdings, Inc. (NDAQ: LPHI) may not be at the top of the list of some socially-conscious investors but it is definitely at the top for investors looking for a safe, high-growth investment. Life Partners is the premier player in what is known as the life settlement industry – an industry that buys life insurance policies for a fraction of face value and collects when the policy owner expires. It turns out that this is an enormously profitable business with net income increasing 515% and total business volume increasing 257% during the company’s most recent financial results.

Many companies in the financial sector have been troubled by their exposure to various types of debt. The rising cost of debt combined with the problems associated with securitized debt has been the trademark of this most recent downfall. However, life settlements offer an alternative investment that involves no debt and guaranteed income – after all, everyone dies at some point. Life Partners bundles and securitizes these life insurance policies and sells the package to institutions that are – now more than ever – looking for a safe investment shielded from the debt and credit markets.

So, why are the company’s shares so beaten down? Well, first of all some investors are uncomfortable with the fact that the majority of the company’s clients come from three referring brokers. Secondly, there is some pending litigation in Virginia that is in appeals court that could cause problems. Thirdly, many analysts and investors are accustomed to strong earnings announcements, so when things slow down, it could send the stock falling.

Trading with a P/E of just 14.8x earnings, many investors believe that this stock may be close to its bottom (since most of the above has been priced into the stock). Meanwhile, the company has instituted a million share buyback program under the belief that the company is substantially undervalued. So, what does this all mean in the end? Well, there are a lot of questions remaining, but this is definitely company worth watching going forward!

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IncrediMail Ltd. (NDAQ: MAIL) shares are trading up today but still off on the month after Google (NDAQ: GOOG) decided to boot the company from its AdSense program. Last Friday, the e-mail provider said it received notice from web search company stating that it decided to stop an advertising partnership between the two firms, which sent shares down more than 45 percent to a new 52-week low. Since then, shares have recovered somewhat but many are still unsure of what will happen now.

IncrediMail, which develops software to customize e-mails, relies on Google for over a substantial portion of its annual revenues. The company is now trying to clarify matters with the search giant and exploring alternative relationships with Google and other vendors. Interestingly, programs like Yahoo! Publisher and similar programs from Microsoft’s MSN can offer similar rates and would likely be willing to take the place of Google as an advertiser on their website. This means that the drop we have seen may be overdone since this issue would only be temporary.

The only real concern remaining is whether the drop was the result of fraudulent activity, which would mean some of the company’s revenues came as a result of illegitimate behavior. However, the company’s co-founder spoke with a member of the media not long ago confirming that this is not a fraud-related issue and that in a few days it will all be sorted out – with or without Google. This has many people purchasing the stock ahead of an anticipated announcement that all is again well.

In the end, this is bad news for existing shareholders but a great opportunity for new investors. There are many programs like Google AdSense that pay the same or more money per click or impression, so this problem should be able to be sorted out in a timely manner. This means that the 40%+ drop last Friday was majorly overdone and this could be a great buying opportunity. Combined, these factors make MAIL a stock worth watching!

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BioSante Pharmaceuticals, Inc. (NDAQ: BPAX) insiders appeal to be bullish on the stock as it approaches its 52-week low. The biopharmaceutical company, which is developing a female sexual dysfunction drug, saw executives and directors purchase some 151,000 shares in just the last month between $3.59 and $3.98. Meanwhile, not a single insider has sold stock – even when it was trading at a 52-week high last May. So, should individual investors consider buying into this stock?

BioSante currently has a market cap of $110 million with a strong balance sheet, $30 million in cash, no debt, and a promising drug in the pipeline – LibiGel. The new drug is a low-dose testosterone in a gel formulation designed to increase sexual desire in women. A recent study conducted by the Journal of the American Medical Association found that 43% of American women (40 million or so) are estimated to experience some degree of impaired sexual function. The company believes that LibiGel will be the first FDA-approved product for FSD, with an estimated 1.4 million off-label prescriptions written during 3006. The minimum estimated US market for LibiGel is $2 to $4 billion with blockbuster sales potential.

What does the competition look like? Well, Procter & Gamble (NYSE: PG) developed their own twice-weekly testosterone skin patch in 2004, but it was rejected by the FDA and only approved for use in Europe. Since then, they have failed to launch any additional safety studies, so it appears that they will not attempt approval in the United States. Meanwhile, the FDA recently sent warning letters to compounding pharmacies that are pushing “bio-identical hormone replacement therapy” products designed to do the same thing as the testosterone gel. Moreover, BioSante’s FDA approval enables patients to get insurance to cover the drug in many cases – which means more sales.

So, where does the drug stand now? LibiGel needs just 12 months of safety data before a new drug application (NDA) will be considered by the FDA. The Phase 3 trial for the drug launched last week and is designed to demonstrate the product’s safety in low doses. The first efficacy trial is now underway and the company plans to initiate a second in early 2008. Clearly, insiders are also bullish on the prospects of this drug as they are buying up a record amount of stock. Combined, these factors make BPAX a stock worth watching!

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Kellwood Company (NYSE: KWD) shares spiked today after a private investment firm is taking its $542.3 million cash offer for the company straight to shareholders. Sun Capital Securities Group offered $21 per share for the apparel maker today, which represents a premium over the stocks $16.51 closing price on Monday. Clearly, many shareholders are bullish on the news as shares rose over 10 percent today.

Sun Capital failed in its two previous attempts to take a buyout bid to the board of directors. “We are disappointed that Kellwood’s board is unwilling to enter into a constructive dialog with us regarding what we believe is a very compelling transaction,” said Jason Bernzweig of Sun Capital.

Sun Capital, which already owns 9.9% of the Kellwood, values its direct tender offer at $762 million but noted that it hinged on Kellwood ending its $60 million debt tender offer which destroys the company’s value. Otherwise, the firm will drop its buyout price to $19.50 per share.

Sun Capital also announced that it would be nominating its own slate of directors for election to Kellwood’s board at the 2008 annual meeting if the company fails to reach an agreement soon. Indeed, this may be their only option after two failed traditional attempts and a failed tender offer placed directly to shareholders.

So, will they be successful this time by going straight to the shareholders? Well, clearly shareholders are bullish on the idea of a direct tender offer, so it will be interesting to see what kind of response rates they are able to obtain. And even if they do not succeed, they may have built up a substantial enough stake to make a real run at the board of directors. Combined, these factors make KWD a stock worth watching!

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