French bank Societe Generale (EPA: GLE) is not having an especially good day. First, the French police raided its headquarters as part of the continuing investigation of rogue trader Jerome Kerviel - specifically, the police were looking into another SocGen employee who had extensive contact with Kerviel though the exact details of the raid have not been released yet.

Meanwhile, in the U.S. shareholder Phillip Barkett brought a lawsuit against the company on the grounds that it misled investors about its subprime loans as well as didn't take proper precautions against the actions of Kerviel. The Missouri resident who brought the suit owned American Depository Receipts of SocGen and allegedly lost $3,100.

The lawsuit, filed in U.S. District Court in Manhattan seeks to represent all purchasers of SocGen ADRs and all U.S. buyers of the bank's shares on any exchange between Aug. 1, 2005, and Jan. 23, 2008. It states that "[SocGen] thus gave investors no warning about the size of [its] losses," and "SocGen had a 'culture of risk' in which risky trading was tacitly permitted."

These allegations all stem from the shocking $7.5 billion in losses that SocGen, France's second largest bank, announced in January. Amazingly, the bank claims that these trades were carried out without its knowledge by 31 year-old Kerviel who was only a junior trader. These problems have only been exacerbated by recent general problems in the world capital markets which caused SocGen to take further losses in February.

SocGen shares are actually up because today's news, compared to that of the last two months, isn't particularly bad for the company - though shares are still trading more than 50% off their 52 week high.

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Washington Mutual, Inc. (NYSE: WM) shares rose today on speculation that Warren Buffett and Goldman Sachs (NYSE: GS) may be preparing to invest in the company. Shares jumped nearly 20 percent yesterday and continued their rise today after falling to a 12-year low earlier in the week. Many investors believe that the cash-rich Buffett may be looking to buy up some cheap financials at these levels and WaMu is definitely on sale! So, is WM a stock worth watching?

Washington Mutual reported its first loss since 1997 in the fourth quarter after itw as forced to write-down the value of its home mortgage unit by $1.6 billion and set aside $1.5 billion to cover bad loans. The bank also said that it would have to put aside $1.8 billion to $2 billion in loss provisions for the first quarter. Meanwhile, WaMu’s credit rating was lower to BBB from BBB+, bringing it just two steps above junk bond status.

Many analysts and investors are concerned about the company’s large exposure to high-risk markets and loan types that are performing poorly. These loans include home-equity lines of credit that have recently begun to see problems in California and other states hit heavily by the mortgage crisis. However, the Central Banks’ recent plan to inject liquidity in these markets combined with efforts to make mortgages more affordable could end up saving them from much of these losses.

Some are speculating that Warren Buffett has already begun building a stake in the company and plans to eventually merge it with his other large holding - Wells Fargo (NYSE: WFC). The idea may seem nothing more than a dream to some, but any such move could result in substantial value being unlocked for shareholders. WaMu shareholders would receive an ample buyout premium while Wells Fargo would get a cheap acquisition in today’s markets. Clearly, if the economy turns, this could become a great deal.

In the end, this is nothing more than a far-fetched rumor, but it is one that is definitely worth watching. Warren Buffett is one of the most popular investors, so his secrets get out more often than others. Whether or not there is any merit to these rumors remains to be seen, but investors should carefully watch for any Schedule 13D or Schedule 13G filings made by the great investor in WaMu!

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Google Inc.’s (NDAQ: GOOG) may have forked over 20 times DoubleClick’s estimated revenues of $150 million, but the acquisition now looks like it could pay off handsomely. The search giant wrapped up the $3.1 billion deal yesterday after it received approval from regulators in the European Union (see story). Many believe that Google will be able to leverage its existing businesses to make this acquisition a huge success. So, is Google a buy now?

Google has always focused on textual advertising as it can be easily quantifiable in terms of sales and is easily integrated into its search engine. However, there is also something to be said for the so-called “display advertising” business that seeks to promote brands more than just generate sales. This is where DoubleClick steps in as it has relationships with virutally every major online publisher and more htan half of the online ad agencies.

The display advertising industry itself is worth around the same as the textual advertising business. The three major players, including Yahoo! (NDAQ: YHOO), Microsoft’s (NDAQ: MSFT) MSN, and Time Warner’s (NYSE: TWX) AOL, brought in over $10 billion in such advertising in 2007. Meanwhile, banners will account for more than 40% of the $19.5 billion expected to go to online advertising this year. All of this compares to a mere $5 billion in revenues from Google from its textual advertising business, in which it is the largest player.

The million dollar question is: How much can Google grow DoubleClick’s business? Many believe the answer to that question is “substantially” given the fact that the search giant already has both a platform and relationships with thousands of publishers and advertisers. The value then becomes very clear: If Google can take a mere 10% market share, it could mean new revenues of well over a billion dollars. Additionally, these revenues would be on a high profit margin, so they would impact the bottom line.

Many investors are hoping that this is the case, since Google’s textual advertising business has been waning lately. The acquisition also gives Google more exposure to different publisher and advertiser demands, meaning that it could convert itself to a one-stop shop for online advertising and squeeze others out of the space. In the end, these factors make GOOG a stock worth watching closely over the next year as investors get a glimpse of just how valuable this acquisition really was!

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Vaalco Energy Inc. (NYSE: EGY) shares were revitalized today after the company’s largest shareholder demanded a sale in a Schedule 13D filing with the SEC. The news comes after shares in the company fell around 30% in 2007 compared to a 45% rise in its peer group during the same period. Meanwhile, the company’s expenditures on failed drilling projects in the North Sea has pushed its valuation down far below where it should stand. So, will this new call to action be heard by management?

Nanes Delorme Partners, which owns an 8% stake, sent a letter to Vaalco’s board expressing its belief that the company is undervalued and suggesting that the best way to unlock value would be to immediately evaluate a range of strategic alternatives. Those familiar with activist investors know that “strategic alternatives” generally just means one alternative - a sale of the company. Such a move could unlock substantial value for shareholders.

Nanes Delorme estimates that the net asset value of Vaalco lies around $420 million, which equates to about $7.12 per share. This represents a substantial 46% premium to its closing price on Tuesday. The activist hedge fund also conveyed the fact that the company had rebuffed private inquiries regarding a potential acquisition several times at substantial premiums to the current share price. This means that there is clearly interest in the company.

As always, there is a reason for this undervaluation that should not be dismissed. Management has been spending cash acquiring and drilling minor North Sea interests that have been total exploration failtures. Recently, this included a $12 million drilling hole that has yielded no oil. These and similar projects have resulted in a substantial cash drain that could continue to destroy value unless someone stops it. Shareholders are now hoping that Nanes Delorme is that someone.

In the end, this is all great news for Vaalco shareholders. Nanes Delorme is committed to unlocking value for all and even went so far as to say that it could bid for the entire company if it felt its concerns were unheard. And why not? If there is already other interest, it could be flipped for a quick profit! Regardless, this is a situation that is definitely worth watching over the next few months!

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Time Warner Inc. (NYSE: TWX) appears to finally be tuning into the idea of a spin off of its cable division. The media company has been conducting a formal review of how to divest its 84% stake in Time Warner Cable (NYSE: TWC), but depressed cable valuations have somewhat limited its options. Interestingly, the proposed spin off was designed more to increase Time Warner Cable’s strategic options than a way to unlock value for shareholders. So, is this a stock worth adding to your portfolio?

Chief executive Jeff Bewkes signaled yesterday that a split between Time Warner and Time Warner Cable may be beneficial for both companies. The executive believes that a separation of the two may spur merger and acquisition interest in the cable company with the parent’s large stake absent in any transaction. Bewkes also commented, wisely, that it doesn’t matter what size Time Warners conglomorate is but rather whether the return on capital is higher.

Spin-offs themselves are also worth watching because they create opportunity through inherent neglect. Studies have shown that spin-offs tend to significantly outperform the S&P 500 in the first two years by as much as 31% in one study. It is worth noting, however, that the optimal time to buy a spin-off is seen as six months after it takes place. Price performance suggests that this is typically an optimal period to buy to realize the maximum price appreciation over the next 12 to 18 months.

Time Warner Cable is the second largest cable operator in the United States behind Comcast Corporation (NYSE: CMCSA), serving around 14.6 million customers in 33 states. The division also delivers high speed internet services to over 7.4 million residential customers and a growing number of businesses and digital phone services to approximately 2.6 million customers. The cable division is also widely accredited for leading the industry in deploying Video on Demand via subscriptions.

So, will a spin off unlock value for shareholders? The spin off will leave Time Warner Cable much cheaper and more readily available for acquisition while a the spin off may also result in substantial value inherently being unlocked. In the end, these factors make CMCSA a stock worth watching!

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The Boeing Company (NYSE: BA) isn’t happy about the U.S. Air Force’s recent decision to award European competitor Northrop Grumman (NYSE: NOC) with a major military contract and it is throwing a very public fit. The aerospace company called the competition for its air tanker contract “seriously flawed” and even so far as to say that the Air Force selected the “wrong airplane” for the warfighter. The move highlights the increasing concerns surrounding military contracts and could result in some widespread industry and governmental changes.

“This is an extraordinary step rarely taken by our company, and one we take very seriously. Based upon what we have seen, we continue to believe we submitted the most capable, lowest risk, lowest (cost) … airplane,” said Jim McNerney, chairman, president and chief executive officer of Chicago-based Boeing. Program manager Mark McGraw added, “Our analysis of the data presented by the Air Force shows that this competition was seriously flawed and resulted in the selection of the wrong airplane for the warfighter.”

Boeing filed a formal protest with the U.S. Government Accountability Office (GAO) regarding the airforce’s decision charging that the Air Force changed the rules for choosing the tanker during the course of the competition, which resulted in the Air Force choosing an inferior plane. Coincidentally, without the contract, Boeing may be forced to shut down its 767 line in Everett by 2012. So, while Boeing has portrayed the government as at fault, it could have other motives.

Let’s not forget when former Boeing chief financial officer Michael Sears received four months in prison for illegally negotiating a $250,000-a-year job for an Air Force contracting officer while she held sway over a potential multibillion-dollar contract sought by the aircraft manufacturer. Then again, problems are hardly limited to Boeing. Many major players in the defense industry have built strong bonds with Air Force personnel in order to sway decision-making.

The apparent corruption in government military contracting has been a much heated debate that is just starting to receive the attention that it should from lawmakers. These regulators are now looking for ways to better control the process and open it up to as many bidders as possible to get the best price possible. Whether or not these decisions will yield any real results remains to be seen, but this event certainly adds gas to the fire!

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Google Inc. (NASDAQ: GOOG) officially took over ad tracker DoubleClick Inc. today after the EU approved the $3.1 billion deal first announced almost a year ago. The EU found that the deal won't prevent competition in online advertising. Its official statement read:

“The Commission’s in-depth market investigation found that Google and DoubleClick were not exerting major competitive constraints on each other’s activities and could, therefore, not be considered as competitors at the moment.”

Google shares are up almost 5% on the news, with Google CEO and Chairman Eric Schmidt writing in his official blog that he is "pleased to share the news that we completed our acquisition of DoubleClick today. Although it's been nearly a year since we announced our intention to acquire DoubleClick last April, we are no less excited today about the benefits that the combination of our two companies will bring to the online advertising market."

United States regulators cleared it in December. Approval from the EU was the last hurdle before the deal could conclude.

The combination of the two companies led to objections from companies such as Microsoft and Yahoo, who were concerned about Google's potential control over ad prices. U.S. regulators, however, dismissed such concerns in December, and now with EU approval the real question is whether Google will indeed reap benefits from the acquisition.

Schmidt said combining with DoubleClick will allow more rapid ad advances, specifically better ad targeting. The major concern stemming from such promises is not economic but personal privacy. Ad targeting requires knowing the user, and privacy advocates are very concerned about such developments.

Setting aside such concerns, the fact is that this purchase finally gives Google a place in online display ads - which is good news for them and bad news for their competitors.

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Target Corporation (NYSE: TGT) may be a little too loose with its money after it ended the fourth quarter with $8.62 billion in outstanding loans on its consumer credit card division. The attitude of invincibility has many analysts and investors worried at a time when other credit card issuers like American Express (NYSE: AXP) are suffering from rising defaults. However, others argue that private label cards won’t follow the same trends as pure-play credit card companies. So, are these concerns legitimate or simply the product of an overzealous analyst?

Target is one of the only retailers that is actually expanding its private label credit card business during these tough economic conditions. The company’s $8.62 billion in outstanding loans is up 29% from its $6.71 billion outstanding a year earlier. Worse, Target relies heavily on the division to drive revenues with $103 million of its $128 million in earnings last year coming from credit cards. These issues have many analysts worried that the retailer has taken a far too aggressive stance during a tough economic time period.

Many investors and analysts are concerned that the high lagged loss rate may mean that the company relaxed its underwriting standards too much as it pushed many of its private-label cardholders to Target Visa cards with much greater lines of credit. As a result, many are predicting the company’s loss rate associated with its credit card division to be in excess of 8% for the year. Meanwhile, the company’s high growth rate in the past makes it difficult to see any deterioration in credit that has already happened.

Target officials, however, dismissed these claims as simply unwarranted. Chief Financial Officer Douglas Scovanner told the Wall Street Journal that the growth in the credit card portfolio is absolutely not a function of a loosening of credit standards or a lowering of credit quality in their portfolio. The executive also noted that he expects the company report credit losses on about 7% of its loans this year, which is up from 5.9% in the last fiscal year - but hardly a catastrophe.

In the end, these concerns are certainly warranted given Target’s significantly worse creditworthiness and default rates. However, the company has already forecasted a 7% loss rate that should account for most of these expected losses. The accurate estimate remains to be seen, but this is definitely a situation worth watching given Target’s huge reliance on its credit card division for earnings growth!

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Build-A-Bear Workshop, Inc. (NYSE: BBW) shareholders may have to build their value somewhere else. The interactive entertainment retailer announced today that tightened credit markets and a weak retail environment prevented it from pursuing the strategic alternative that so many investors were expecting - a sale. Instead, the company opted to double its share repurchase program and adopt a broad range of operational initiatives according to their 8-K filing with the SEC. So, is this 15% decline justified?

Investors may be disappointed with the lack of a sale, but perhaps it is understandable given the current economic climate. Instead, the company chose to focus on improving its operation performance until things improve. Specifically, the company decided to adopt the following initiatives:

1. Focusing on existing store sales by slowing new store growth to approximately 25 stores - down from 50 stores in 2007 - and realigning store operations management by creating a new position, Managing Director - Workshop Experience, focused on continuing to energize and update the store experience.
2. Enhancing brand appeal with children and growing store sales through raising awareness of our new online “world” website, buildabearville.com.
3. Continuing the position traction experienced in the European operations during the fiscal 2007 fourth quarter through raising brand awareness, increasing average transaction value, and continuing growth of the in-store parties business.
4. Growing store sales by leveraging and expanding our loyalty club program through improved and more frequent communication to members, adding new Guests to the club, and introducing the program in United Kingdom stores.
5. Attracting new Guests through multimedia marketing initiatives, including a new TV advertising campaign that will launch in the second quarter and will leverage buildabearville.com as a new platform for communicating with Guests.
6. Expanding international franchise fee revenues with the addition of 15 to 20 new franchise stores, including a new store in the United Arab Emirates.

These initiatives are all good news as they will force the company to limit its spending while increasing its revenues. This, in turn, should expand its multiple and make any future acquisitions much more attractive to shareholders. So, while today’s news may be bad for the short-term, it is likely the best solution for the long-term. Combined, these factors make BBW a stock worth watching closely over the next year!

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Cadbury Schweppes (NYSE: CSG) finally set the date for the highly anticipated spin-off of its U.S. beverages unit in a 6-K filing with the SEC. Shares in the spin-off are to list on the New York Stock Exchange on May 7th if the measure is approved at the company’s upcoming April 11th meeting. The division - to be called Dr Pepper Snapple Group - includes Schweppes, Dr Pepper cola, Canada Dry ginger ale and fruit-flavored Snapple teas. So, should investors look to buy into this spin-off?

The Dr Pepper Snapple Group will own some of the best brands in the industry. Snapple alone has proven to be a great investment for its many holders, including Nelson Peltz who purchased it for $300 million and sold it for $1.5 billion in just three years! Last year, Cadbury received a large offer from two consortiums of investors including Blackstone, Lion Capital, Bain Capital, TGP and Thomas Lee. However, the company rejected all of these offers in favor of a spin-off.

Spin-offs themselves are worth watching because they create opportunity through inherent neglect. Studies have shown that spin-offs tend to significantly outperform the S&P 500 in the first two years by as much as 31% in one study. It is worth noting, however, that the optimal time to buy a spin-off is seen as six months after it takes place. Price performance suggests that this is typically an optimal period to buy to realize the maximum price appreciation over the next 12 to 18 months.

Cadbury has yet to approve the spin-off and provide additional financial details, but this is definitely a situation that investors should watch. There is clearly a lot of interest in the U.S. beverages division while the spin-off process itself is known for generating value for shareholders. Combined, these factors make CSG a stock worth watching over the next year or so as this spin-off comes to fruition!

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