Best Buy Co. (NYSE: BBY) is the 800-pound gorilla of electronics retailers with a market capitalization of nearly $20 billion and a stellar record of revenue and earnings growth – but today its CEO admitted that it is not immune to a weak economy.

Brad Anderson, Best Buy's CEO and Vice Charmian, said in a statement that, “Soft domestic customer traffic in January, coupled with our near-term outlook, now indicate that our fourth-quarter revenue will fall short of our planned targets.”

The effect of lower fourth-quarter revenue projected into this year means that Best Buy is expecting 2008 earnings of only about $3.05 per share compared to previous guidance of $3.10-$3.20 per share.

Given an undeniably weak economy led by a dangerous housing market situation, lower guidance and weaker sales are no surprise, but Best Buy's response certainly is: the company plans on continuing to expand its U.S. retail space by 10% this year. There is certainly logic to this contrarian move in the spirit of Warren Buffett's advice “Be greedy when others are scared,” and Best Buy thinks it can leverage its strong brand and recently updated store format into new customers and sales even in a poor economy by cannibalizing business from competitors like Circuit City Stores Inc. (NYSE: CC). But, though Best Buy is certainly in a better position than Circuit City, taking sales from rivals only works to buoy growth if the total number of sales in the sector don't shrink too much – if the sales pie gets small enough it doesn't matter how many pieces you get, growth is still in trouble.

More than counting on a superior business, Best Buy executives have said they remain “upbeat about the long-term outlook,” but is this optimism justified? Interim Chief Financial Officer of the company, Jim Muehlbauer, admits that “The macroeconomic environment grew more challenging after the holidays [leading to] our post-holding results [not being] what we originally expected.” What should confuse investors is what makes CEO Anderson or CFO Muehlbauer think the “macroeconomic environment” is going to turnaround any time soon. As a commentator for the WSJ noted, foreclosed homes don't need home theaters with $2,000 flat-screen TVs.

A discussion of the company's prospects wouldn't be complete without mentioning the 800-pound gorilla of all retailers – Wal-Mart Stores Inc. (NYSE: WMT). Wal-Mart continues to expand its electronic offerings while stealing market share from specialty retailers across all sectors. With Best Buy under assault from not only the U.S. economy but the biggest corporate driver of the economy, now might not be the time to be greedy.

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Mediware Information Systems (NDAQ: MEDW) is under pressure to put itself up for sale by a major shareholder. Cannell Capital, which owns a 12.9 percent stake in the firm, sent a letter to the board of directors illustrating just how cheap MEDW was on both an absolute and relative basis. The activist hedge fund encouraged Mediware to interview an agent to solicit a transaction that could result in an auction or merger in order to produce the highest economic benefit to shareholders. So, is this a company worth buying?

Cannell believes that there is a massive valuation disparity between Mediware and its peers. In particular, the hedge fund showed that the company’s EV/LTM EBITDA was a mere 3.2x compared to peer levels of between 16x and 18x. Similarly, its EV/LTM Sales was just 0.7x compared to peer levels of between 2.1x and 2.6x. It is also useful to note that Mediware’s market capitalization stands at just $50 million, which means that a substantial portion of the company’s income is devoted to simply paying the costs of remaining public.

So, what does all of this mean? Well, Mediware would make for a cheap acquisition that could become even cheaper if the suitor accounts for savings in administrative costs associated with being a public company. With the company’s shares well off of their $10.44 highs, shareholders are more likely than ever to support such a transaction. Mediware also has many potential strategic suitors, including Cerner Corp. (NDAQ: CERN), Eclipsys Corp. (NDAQ: ECLP), and Global Med Technologies Inc. (GLOB).

In the end, Mediware is a great candidate for this type of transaction given its valuation disparity and potential synergies. Whether or not management decides to pursue such a transaction remains to be seen, but this is definitely a stock worth watching over the next few months!

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Daniel Loeb’s Third Point is one of the most successful activist hedge funds on Wall Street with an annualized return right around 22%. Recently, the hedge fund reported its holdings in its mandatory Schedule 13F filing with the Securities and Exchange Commission. The regulatory filing showed a series of interesting bets that are definitely worth exploring given the funds impressive track record. So, without further ado, let’s take a look at Daniel Loeb’s major holdings!

MasterCard Incorporated (NYSE: MA) is one of the fund’s largest holdings with a stock position valued at around $322.8 million and $11.5 million worth of call options. MasterCard was somewhat beaten up after many speculated that a slowdown in U.S. consumer spending would hurt the firm’s earnings. However, the stock has shown great resilience and recently announced record profits yet again. Since the firm doesn’t issue cards itself - only collects transaction fees - it is also not exposed to any direct credit risks. This misconception may be artificially keeping the stock down, which could make it a compelling stock pick.

Cypress Semiconductor Corporation (NYSE: CY) was another major element of Daniel Loeb’s portfolio. The semiconductor has been beaten down so far this year amid concerns about its earnings as well as its potential acquisition of Simtek Corporation - which will lead to less cash and more debt. The activist investor has been attempting to unlock value in the company for some time after arguing that its implied value of the business is understated by at least 50 percent early last year. In particular, the hedge fund wanted the company to explore ways of divesting its Sunpower (NDAQ: SPWR) stake as soon as possible. Since this was before the drop in 2008, we can expect the firm to be only further undervalued now.

Third Point is also bearish on several stocks including Arthrocare Corp. (NDAQ: ARTC), Neustar Inc. (NYSE: NSR), and United Therapeutics Corporation (NDAQ: UTHR). Loeb also holds a $13.2 million position in the Proshares UltraShort QQQ ETF indicating that he continues to be bearish on the overall economy. Finally, the activist also managed to successfully exit his stake in BEA Systems, Inc. (NDAQ: BEAS) after Oracle Corporation (NDAQ: ORCL) agreed to purchase the company for $7.85 billion. All in all, Daniel Loeb’s Third Point continues to see great successes and his holdings are definitely worth watching!

Investors can view the rest of Daniel Loeb’s holdings in his Schedule 13F filing with the SEC. Investors can also track Daniel Loeb’s future stock holdings and setup free alerts when he trades at SECFilings.com!

Warren Buffett’s Berkshire Hathaway (NYSE: BRK) revealed its holdings for the quarter ended December 31st in its required Schedule 13F filing with the SEC. The billionaire investor revealed two new stakes and several raised stakes, sending shares in those companies higher on the day. Buffett has built up the best track record on Wall Street and has consistently beat the market over the past decades (excluding losses incurred during his minor foray into currency trading). This has made Buffett (rightly) one of the most watched investors on the street.

Kraft Foods Inc. (NYSE: KFT), the Altria Group, Inc. (NYSE: MO) spin-off, was Buffett’s largest new position. News of his investment sent shares more than 5.6 percent higher in early trading as the legendary investor bought up 132,393,800 shares of the firm - making him the company’s largest shareholder with an 8.5 percent stake. Kraft has long been seen as a value play since its spin-off from Altria; in fact, spin-offs in general tend to outperform the market during their first few years as an independent company. Simply put, Altria shareholders who received shares in the spin-off may have sold without justification while management is typically well-incentivized to succeed. Combined, these factors make KFT a stock that is definitely worth watching over the next few years!

GlaxoSmithKline plc (NYSE: GSK) was another one of Buffett’s new positions. Like Kraft Foods, news of his investment sent shares higher by nearly two percent on the day as the investor bought up 1,510,500 ADR shares in the pharmaceutical giant. Shares in the company have dropped 11.5 percent since it announced a profit warning back in early January while the stock has been trading down since early last year. Despite Glaxo’s poor 2008 outlook, the company does hold a solid drug portfolio and the stock appears to be trading at cheap levels. Combined, these factors make GSK a stock that is definitely worth tracking over the long-term!

The famous investor also raised his stakes in several companies, sending them higher on the day. including:

• Burlington Northern Santa Fe Corp. (NYSE: BNI)
• CarMax Inc. (NYSE: KMX)
• Johnson & Johnson (NYSE: JNJ)
• US Bancorp (NYSE: USB)
• Wells Fargo & Company (NYSE: WFC)
• Sanofi-Aventis (NYSE: SNY)

In the end, Warren Buffett is widely considered to be one of the best investors on Wall Street, which earned him the nickname “Oracle of Omaha”. As a result, the Schedule 13F filings that reveal his holdings are ones that are definitely worth watching each quarter. You can track these filings for free and setup e-mail alerts at SECFilings.com and you can view the rest of his holdings by checking out the Schedule 13F filing!

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Grand Toys International Limited (NDAQ: GRIN) shares more than tripled today after the company agreed to purchase frisbee-maker Wham-O for $35 million. The toy-maker will pay a cash consideration of $35 million, adjusted for the liabilities of Whom-O, and 100 percent of the shares of its wholly-owned subsidiaries Hua Yang Holdings and Kord Holdings. Grand Toys also said that it would divest the low margin, non-core Hua Yang and Kord manufacturing businesses in order to fully focus on developing the Wham-O brand.

The news comes after a plethora of problems for Grand Toys, who has been struggling with both its own businesses as well as retaining its Nasdaq listing. Shareholders are hoping that the acquisition will help revitalize the company with names like Frisbee, Slip ‘n Slide, Hula Hoop, Morey, Boogie boards, Snow Boogie,and BZ Pro Boards. Grand Toys plans to obtain substantial growth by targeting international markets and driving synergies with its International Playthings subsidiary in the United States.

“The new Board of Directors of Grand Toys, which was assembled in mid-2007, has been focusing on developing a new direction and strategy for Grand Toys to give the company a platform for growth” comments David Howell, CFO of Grand Toys. “We believe the acquisition of Wham-O represents a transformational opportunity for Grand Toys and it will become the key asset around which we will build our business. In addition, the divestiture of the low margin, non- core Hua Yang and Kord manufacturing businesses frees up significant working capital for the company and allows us to reduce substantially our bank debt, creating a much healthier balance sheet.”

So, what does this all mean for shareholders? Well, Grand Toys has decided to take on some additional debt and divest its past businesses in an effort to acquire brands that truly have substantial value as they are recognized worldwide. Investors are hoping that this will be enough to turn the company around and drive higher profits and revenues. Combined, these factors make GRIN a stock worth watching!

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Institutional investors are required to disclose their significant holdings to the Securities and Exchange Commission through a Form 13F filing. One investor that filed today was billionaire activist investor Carl Icahn and his fund Icahn Capital LP’s activity for the period ended December 31, 2007. Although the investor has experienced issues with some of his holdings, he is still a large player in the market that is definitely worth watching given his spectacular annualized returns. So, without further adu, here are his major holdings:

1. Anadarko Petroleum (NYSE: APC) $970.6 million
2. BEA Systems (NDAQ: BEAS) $654.176 million
3. Biogen Idec (NDAQ: BIIB) $469.973 million
4. CSX Corp.(NYSE: CSX) $128.422 million
5. Lear Corp. (NYSE: LEA) $265.424 million
6. Macy’s (NYSE: M) $133.61 million
7. Motorola Inc. (NYSE: MOT) $969.881 million
8. J.C. Penney (NYSE: JCP) $183.274 million
9. Regeneron Pharma (NDAQ: REGN) $60.586 million
10. Temple Inland (NYSE: TIN) $71.9 million
11. Time Warner Cable (NYSE: TWC) $130 million
12. Time Warner Inc. (NYSE: TWX) $213.526 million
13. Unum Group (NYSE: UNM) $95.65 million
14. Williams Cos. Inc. (NYSE: WMB) $173.2 million

Investors can track Carl Icahn’s portfolio via the Schedule 13F filings; activist communications through Schedule 13D filings; and buying and selling through Form 4 filings. These are all filings that can be tracked through SECFilings.com and are definitely worth watching closely!

DryShips Inc. (NDAQ: DRYS) had a spectacular run last year when shipping prices soared for dry bulk shipments. Many investors now believe that the market may see another steep run-up as dry bulk shipping prices have again begun to rise while recent earnings from the sector clearly outperformed. Moreover, consolidation within the sector has helped to drive up the prices of all the players in the market. DryShips is one of the cheapest stocks in the sector that holds great promise - is now a time to buy?

The dry bulk shipping industry’s earnings is dependent on a combination of its spot rates and long-term leases. Spot rates spiked last year when they rose from $80,000 to around $190,000 on soaring demand. The demand leveled off along with the rest of the market, however, during the end of last year and beginning of this year. Now, prices appear to be on the rebound as rates have reached $120,000 so far this year (view chart). This is great news for bulk dry shippers like DryShips who have large fleets of vessels.

DryShips is expecting to earn $9.55 per share in 2007, which means that it is trading at just 8.1x earnings while many other companies in its industry are trading closer to 20x earnings. Even better, the company’s forecasted $18.18 per share earnings in 2008 mean that it is trading at just 4.2x forward earnings for this year! DryShips stock has risen around 35% since January of this year while it has only revised its estimates upwards. The company remains one of the cheapest stocks in the industry despite its recent moves upward.

There is also a catalyst at work within the industry. Greek brybulk shipper Excel Maritime Carries, Ltd. (EXM) announced its plan to buy Quintana Maritime Limited (QMAR) in January, which fueled M&A rumors across the industry. The chairman and controlling shareholder of Excel also predicted further consolidation looming in the sector as valuations remain low and future expectations remain high. DryShips remains one of the largest, but cheapest, companies in the industry meaning that it could become a target for a merger. Again, this is good news for the company that could be the catalyst needed to jump its share price.

In the end, the dry bulk shipping industry slowed down after its spectacular rise in 2007, but many of the fundamental factors behind the rise are still in place. Emerging markets and China are still growing while the economies outside of the U.S. appear to be making headway. DryShips remains one of the best performing and cheapest stocks in the industry that may be worth a second look. Combined, these factors make DRYS a stock worth watching over the next few months!

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MBIA Inc. (NYSE: MBI) is now appealing to lawmakers to stop the decline in its stock price. The troubled bond insurer submitted written testimony for a subcommittee of the U.S. House Committee on Financial Services arguing that lawmakers should step in to curb the “unscrupulous and dangerous market manipulation of short-sellers”. MBIA specifically mentioned Bill Ackman’s Pershing Square Capital Management hedge fund, which has not only been the most vocal short-seller in the market but also increasing its short position every week. Are short-sellers to blame or are they the ones who have been right all along?

Bill Ackman has been bearish on MBIA for around five years, warning investors back in the 90s that the company’s collateralized debt obligations (CDOs) may put its Triple-A rating at risk. The activist hedge fund also brought up several “questionable transactions” that involved insuring a loss after the loss and then collecting on the insurance. Ackman even decided to write a 60-page paper entitled “Is MBIA Triple A?” in December 2002 shortly before these problems began. Now, after the CDOs have collapsed, and the company paid a fine for those questionable transactions, the stock is down more than 80 percent and all they can do is complain to regulators.

Bill Ackman estimates that the bond insurer faces more than $11 billion of potential losses, which would make it nearly impossible to avoid bankruptcy if it does not find a substantial amount of outside capital. However, MBIA argued in this letter to regulators that the model and data used in this analysis was flawed. In particular, Ackman used a random assortment of 1,267 securities to estimate losses while MBIA used a loan-by-loan analysis to make their estimates. Ackman also took a particular interest in the holding companies, reasoning that if the bond insurers’ holding companies were deprived of cash flow, their ratings would fall, and their operating units’ ratings would fall as well. The company complained that this meant he had no real interest in “saving bond insurers” as he once said.

In the end, Bill Ackman has been proven right so far while MBIA has repeatedly had to restate losses. As a result, many investors are beginning to trust the former more so than the latter. It will be interesting to see if the company receives any support from regulators or other parties to bail them out or meets the fate the Ackman has been predicting all of these years - bankruptcy. For now, it appears that it is on that track until it can actually report a decline in the amount of losses that it is posting from bad CDOs and mortgages. Regardless, this is a stock that is definitely worth watching over the next few months!

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ValueClick, Inc. (NDAQ: VCLK) shares rose 4 percent during today’s session and jumped an additional 6 percent after hours after the company announced both mixed earnings and the fact that it settled a probe launched by the Federal Trade Commission (FTC). Despite the poor economic sentiment in the United States, the company seems to believe that its future remains bright. Shareholders are hoping that these events will help clear clouds over the company’s head and pave the way for a long-awaited rise in share price. So, is it time to buy?

ValueClick announced revenues of $183.1 million on an adjusted-EBITDA of $45.6 million, which exceeded previously issued guidance and increased 14 percent from the fourth quarter of 2006. Meanwhile, diluted net income per share came in at $0.18, which was at the high end of the previously issued guidance range. The company’s balance sheet also looks healthy with $287.5 million in cash, cash equivalents and marketable securities with no long-term debt. Even better, the company currently has $50.6 million of authorization remaining on its stock repurchase program.

ValueClick also announced that it paid $2.9 million to settle the FTC lawsuit that alleged the firm used deceptive marketing practices that violated the CAN-SPAM Act and FTC Act. This development eliminate the cloud that has been hanging over the company’s head for some time and led to an improvement in its marketing practices. The online marketing firm believes that this development will also help set the guidelines for the lead generation industry as a whole and will establish a new set of best-practices.

In the end, this is all good news for ValueClick and its shareholders. The company’s revenue mix remains favorable and its operating margins appear to have finally bottomed for the time being. However, investors should be careful to buy this company for the long-term as the sector in general continues to suffer from increased competition that is pressuring margins despite an increasing move to the Internet for marketing expenditures. Combined, these factors definitely make VCLK a stock worth watching!

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Vonage Holdings Corp. (NYSE: VG) shares rose over five percent today as its losses narrowed and subscribers rose. Unfortunately, the top-line numbers do not accurately reflect what is really going on in the company. A closer investigation reveals that the company has several internal trends that make their earnings unsustainable over the long-term if it can’t get its act together. So, what are these trends and what does it mean for Vonage going forward?

Vonage reported earnings that were lower than analysts expected, but greater than what the street predicted, sending shares higher in today’s session before dropping after hours. The net loss for this quarter came in at $11.1 million from $117 million a year earlier. Meanwhile, subscriber additions came in at 56,000 which is down from 166,000 last year. The company may have lowered its losses, but only because it reduced its marketing expenditures. Unfortunately, the company’s revenue per line declined while its marketing costs increased. Clearly, this is an unsustainable trend that must be reversed before this company can be a viable investment.

Vonage also has $253 in convertible debt that can be put back onto the company in December of 2008. This is money that the company cannot afford to pay at current rates, and they are in discussions to refinance the debt to make it more manageable. Vonage said that it believed that the situation will be resolved, but there are no assurances. As a result, it will likely receive a “going concern” letter from its auditor soon that may send shares lower. And to make matters even worse, the company announced that it would restate its second and third quarter results to correct its reported non-cash compensation expense, which it believes is off-base.

In the end, these are major concerns that Vonage must address in order to avoid some major problems and perhaps even bankruptcy. Additionally, there are some near-term announcements that could drop the stock substantially if they indeed surface. Combined, these factors make VG a good short target and definitely a stock that non-speculators should stay away from until the picture clears up!

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