Farming may not seem like the hottest industry on Wall Street, but Monsanto Company (NYSE: MON) shareholders would disagree. The global provider of agricultural products raised its outlook for the third time in three months on stronger demand for seeds. The company's stock has more than double during the past year as a result while it is now looking for ways to spend its extra cash.

Farmers are paying top dollar these days for genetically modified corn, soybeans and cotton seeds as a result of a bullish commodities market boosted by a rapidly declining U.S. dollar and stronger ethanol demand. In fact, business is so good that Monsanto announced that it would reach its long-term margin target of 52 to 54 percent this year- a full two years ahead of schedule.

These events prompted Monsanto to also raise its EPS guidance for the fiscal year to $3.15-$3.25 from $2.70-$2.80. The company is due to report its fiscal second quarter results on April 2nd, which are expected to be seasonally strong as farmers in the Northern hemisphere begin planting. Free cash flow also reached a new record of $1.4 billion, which means shareholders are likely to begin the common "use it or lose it" campaign.

Monsanto foresaw this rhetoric, however, and said it will look for ways to invest in acquisitions that further growth, projects that support the current business's growth and dividend, and share repurchase programs that return value to shareholders. Many believe that these future acquisitions may take place in quickly growing markets in India and China as an increasing acceptance of genetically modified seeds would mean more demand.

In the end, the demand for seeds will likely continue as long as the demand for corn and soybeans remains strong. Given the weakness in the U.S. dollar combined with continued demand for ethanol, this is a definite possibility and shares of MON should continue to see upside. The real question is then: Will the company use the excess cash to the benefit of shareholders or squander it on poor acquisitions?

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Market research firm Gartner Inc. reduced its 2008 forecast for personal computer shipments and warned that the estimate could drop further if the economy takes another turn for the worst. The firm now sees growth of 10.9%, or 293 million shipments, versus its forecast late last year of an 11.6% increase. Moreover, the firm warned that those numbers could drop to the single digits. This is bad news for pure-play PC manufacturers along with their component providers.

Gartner sees a healthy PC market right now, but several challenges in the near future. A deepening U.S. recession, the rising possibility of a slowdown in China's economy following the Beijing Olympics and higher oil prices could all put a damper on PC shipments this year. However, the firm also noted that PC sales should be boosted late this year through 2010 thanks to a desktop replacement cycle. Garnter predicted that strength in the emerging markets - which accounted for 60% of global growth in the fourth quarter - would also play a critical role.

This is bad news for pure-play PC-makers like Dell Inc. (NDAQ: DELL) that have already been having a bad year. The PC manufacturer has seen its domestic sales drop off a cliff and has been reliant on strong international growth and cost-cutting to drive revenues and improve its profitability. A slower domestic situation will only require additional international growth while cost-cutting can only be a temporary solution to a long-term problem. The reality is that PC sales are declining while the real money-maker - laptops - are quickly falling in price.

Struggling chip-makers like Advanced Micro Devices (NDAQ: AMD) may also find themselves in trouble. The company relied heavily on new product shipments to break-even last quarter and any slowdown could quickly send them back into the red despite plans to return to profitability by the end of 2008. Luckily they still have a chance at it if the replacement cycle begins as strongly as expected at the end of the year, as they are one of only two major chip manufacturers for PCs and laptops.

The reduced forecast could also affect many other companies to a lesser extent. PC manufacturers like Hewlett-Packard (NYSE: HPQ), Apple Inc. (NDAQ: AAPL), and International Business Machines (NYSE: IBM) may also feel some heat, but their diversified product lines should bar any major losses sustained. In the end, the PC business was thought to be relatively recession-proof, but these new predictions could change the story.

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At least one Coinstar, Inc. (NDAQ: CSTR) shareholder sick of being nickel and dimed has pushed the company to make several key changes. The Shamrock Activist Value Fund, which owns a 13.4% stake, demanded the board of directors be reformed and the poison pill be canceled. The move is seen by many as a precursor designed to make future actions to unlock shareholder value much easier.

Many investors are speculating that Shamrock, owned by Roy Disney and entertainment lawyer Stanley Gold, may be interested in eventually pushing the company to evaluate strategic alternatives. Some are expecting a rough 2008 after a plan was announced to remove cranes, bulkheads and kids' rides at Wal-Mart Stores (NYSE: WMT) and other retailers and install more Coinstar Redbox DVD kiosks and coin counting machines in a move that will lower revenues while increasing investment costs.

Coinstar, however, anticipates that the long-run implications of the Wal-Mart deal are worth it. The company projects that the projects could contribute between $165 and $195 million per year with EBITDA of between $36 and $45 million by mid-2009. This compares to a loss of entertainment dollars amounting to only $65 to $75 million in revenues and $15 to $20 million in EBITDA, which means that the company expects to realize incremental EBITDA gains of between $20 and $25 million when all is said and done.

While the Wal-Mart deal may be holding shares back these days, there are several potential areas in which value could be unlocked. Coinstar's $70 million majority ownership stake in their DVD rental kiosk business Redbox is one such area. The business will do revenues of between $250 and $270 million with an EBITDA of between $20 and $30 million in 2008. Even better, its EBITDA margins will approach 20% thanks to route density and economies of scale beginning at the end of 2009.

Coinstar could also try and divest its struggling entertainment business in order to focus more on its core money exchange businesses. The entertainment businesses have been losing steam while the DVD rental businesses could be easily divested to strategic buyers like Blockbuster (NYSE: BBI) and Netflix (NDAQ: NFLX) for a healthy premium. The move would free up cash that could then be used to establish a dividend or repurchase shares in order to unlock value for shareholders.

One final thing worth noting is Coinstar's cyclicality with the economy. This was brought up during the company's last conference call that showed there is a weak correlation between company and economic performance. The reason is because Coinstar's machines are used for relatively small transactions instead of big ticket items. This is also good news for investors since it makes this stock a relatively recession-proof one.

In the end, this is a stock that could benefit from some shareholder activism and Shamrock's attempt to remove key provisions could be the first step. Luckily for shareholders, the company is also doing well as a conglomerate so there is nothing to lose. Any activist move could substantially increase the share price, but a standalone company is also not such a bad proposition. Combined, these factors make CSTR a stock worth watching!

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Sirius Satellite Radio (NASDAQ: SIRI) received Justice Department approval yesterday for its $4.59 billion purchase of rival XM Satellite Radio (NASDAQ: XMSR). The controversial decision to give antitrust clearance to the deal was based on rapidly expanding technological options for audio media such as mobile phones and internet radio.

Justice Department antitrust chief Thomas Barnett said in a conference call with reporters that, "Competition in the marketplace generally protects consumers and I have no reason to believe that this won't happen here."

This is obviously good news for investors in both companies, though the deal still requires FCC approval. The Federal Communications Commission may prove an even more difficult audience for Sirius CEO Mel Karmazin who lobbied the Justice Department intensely for the deal. The FCC is seen as more susceptible to the outrage of groups like the National Association of Broadcasters that views this purchase as creating a monopoly.

The FCC currently has a policy based on a 1997 decision that prevents the combination of the two satellite radio companies. At this point, rumors from inside the FCC say that no decision has been made but that the Justice Department conclusion makes it more difficult for the FCC to flatly block it.

Though FCC approval is far from a given, the real question for investors remains - is there real upside in the combination of Sirius and XM? Here's what the Justice Department had to say in their statement allowing the deal:

"Because XM and Sirius would no longer compete with one another in the retail channel following the merger, the Division examined what alternatives, if any, were available to consumers interested in purchasing satellite radio service, and specifically whether the relevant market was limited to the two satellite radio providers, such that their combination would create a monopoly. The parties contended that they compete with a variety of other sources of audio entertainment, including traditional AM/FM radio, HD Radio, MP3 players (e.g., iPods®), and audio offerings delivered through wireless telephones. Those options, used individually or in combination, offer many consumers attributes of satellite radio service that they may find attractive. The parties further contended that these audio entertainment alternatives were sufficient to prevent the merged company from profitably raising prices to consumers in the retail channel – for example, through less discounting of equipment prices, increased subscription prices, or reductions in the quality of equipment or service."

The statement also say there are "substantial" cost savings to be had, but overall tone speaks to the reality that satellite radio seems almost like old media in the face of iPods and streaming, high quality internet radio. Sirius and XM possibly warrant investment with total approval now more likely, but the companies certainly don't warrant unbridled enthusiasm.

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Tiffany & Co. (NYSE: TIF) shares rose sharply today after its profits slipped but still topped estimates. The diamond retailer also issued a bullish outlook, saying that it expects "robust" growth in the non-U.S. markets that should drive earnings 10.5% higher than previously expected. However, it still expects a slight decline in U.S. same-store sales as the poor economic climate shows no signs of letting up.

The share price has been so volatile because many investors expected luxury retailers to take a hit amid weak U.S. consumer spending. Many like Tiffany's quickly expanded during the last decade into non-metropolitan markets that are now suffering with weaker consumer spending. However, strong international spending has driven results and led to a substantial increase in earnings that caught many off-guard.

The rise also spurred a rise in other luxury retailers including Zale Corp. (NYSE: ZLC), Blue Nile Inc. (NDAQ: NILE), and Harry Winston Diamond Corp. (NYSE: HWD). Many investors are now bullish on these companies, but it is worth noting that many of them have a lot more U.S. exposure than Tiffany's that has been able to rely on robust international growth to curb losses from lower U.S. consumer spending.

The reality is that Tiffany's saw 40 percent of its sales come from foreign markets with a 20 percent increase in sales volume from abroad, which is substantially higher international exposure than other luxury retailers that could still be hit hard from a U.S. slowdown. This international exposure has been the hallmark of companies that have been able to weather the storm so far this year.

In the end, Tiffany's is definitely still seeing a slowdown in the U.S., but is being helped by strong demand internationally. Investors should look to invest in companies with similar exposure in order to recession-proof their portfolio and prevent any significant losses from a slowdown in the United States.

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Capital Senior Living Corporation (NYSE: CSU) may sound like a boring business but not for shareholders! The company's shares moved sharply higher today after the company announced that it has appointed two new board members and agreed to explore a possible sale. The news comes amid substantial pressure from several activist shareholders that saw unrealized value in the country's largest operator of senior living communities.

The dissident shareholders behind the push included Boston Avenue Management (7.3% owners), West Creek Capital (6.4% owners), and Matthes Capital Management (1.7% owners). New directors from the latter two hedge funds will serve on a committee to explore strategic alternatives, including whether or not to sell Capital Senior Living. Whether or not a sale will actually happen remains to be seen, but the number of activist shareholders and board seats tilts the odds more than usual.

Capital Senior Living also swung to a profit last year after posting a loss in 2006, which substantially improves its marketing in the event of a sale. Additionally, the company's focus on providing significant income and asset growth, strengthening the balance sheet, and improving the comapny's profitability were all realized during its latest earnings announcement.

Revenues, EBITDA, and net income all significantly increased as margins expanded through higher rents and solid expense control. Monthly rental income increased by 4.4% while the average occupancy rate stood at around 90% with management fees around 48%. Additionally, the company expanded its capacity through new developments, consolidations, and in-home services.

Management expects these trends to continue as the company continues to prosper despite a poor economy. Long-term, the baby-boomer population will continue to age and be placed into senior living communities such as these. The company is well positioned as one of the leading operators in the nation and will likely to continue to benefit through these trends despite the tough economic environment.

In the end, the activists believe the stock is undervalued and are seeking to unlock value through a sale process. Meanwhile, the company continues to perform extremely well having swung to a profit and improved in almost every important measure of success. Combined, these factors can only spell good news for shareholders who stand to benefit long-term from the company's success or short-term from the activists' success.

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Borders Group (NYSE: BGP) shares soared over seven percent today after Bill Ackman's Pershing Square announced a financing agreement along with an offer to purchase the company's international businesses. However, is the high-interest financing and low-ball offer really something shareholders should be applauding or just an attempt by the activist to get a good business on the cheap?

Borders Group has been running into problems with a dangerous combination of high debt and low margins in an economy that has little to offer in terms of additional financing. This prompted the bookseller to announce an effort to explore strategic alternatives last week that eventually led to this financial commitment and offer to purchase from one of the most successful activist funds in the world.

Pershing Square's Schedule 13D/A filing offers some key details regarding the proposed deal. The first detail worth noting is the high 12.5% interest rate to be charged on the $42.5 million loan along with the fact that the international businesses are being used as collateral. Many analysts believe that the high interest rate may actually work against any buyout as the buyer would be forced to pay it off.

The $125 million buyout price for the international business may also seem low considering the majority of the company's growth is in these markets. Luckily, it is structured as a backstop purchase so the company is not obligated to sell. More, the company itself admitted this during in their latest press release and maintained that they would only use it as leverage in future negotiations.

Finally, Borders also granted Pershing Square 14.7 million warrants to purchase common stock at $7.00 per share for 7.5 years in exchange for setting up the financing. These warrants represent just under 20 percent of the full-diluted shares of the company on a pro forma basis. While the warrants are above the market price, it may cap the upside over the long-term given the dilutive effects.

In the end, Pershing Square may have bailed out the company for the time being but it certainly came at a price. The activist hedge fund is getting a 12.5% return on a debt investment secured by a purchase that it was already intent on receiving. The same debt will give it an immediate discount to any acquisition of the international businesses and an upper hand with any competition.

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The Bear Stearns (NYSE: BSC) roller coaster ride took another sharp turn today after J.P. Morgan (NYSE: JPM) agreed to quintuple its offer for troubled investment bank. The move came amid widespread criticism that J.P. Morgan was getting a free ride on the backs of Bear Stearns shareholders. The new $10 per share takeover is slated to close by April 8th and now has much greater shareholder support.

The revised deal may seem generous on the part of J.P. Morgan, but it is really not that much different. The common stock component of the old deal was a mere $289 million compared to the billions in losses that it would incur during the acquisition. Moreover, the common stock buyout was to take place through a share exchange that stood to only moderately dilute JPM shareholders. The new deal simply increased this exchange rate from 0.05473 to 0.21753.

J.P. Morgan is still making bank from the Federal Reserve bailout. The investment bank is only responsible for the first billion in losses incurred while the remaining $29 billion tab is being picked up by the Federal Reserve. This means that the total acquisition price is only a billion plus share dilution - still a great deal for J.P. Morgan for an investment bank that was one of Wall Street's finest.

The revised deal is also much more likely to see the light of day. Many dissident shareholders are now satisfied while J.P. Morgan also agreed to purchase 39.5% of the company in order to ensure that it could win any proxy opposition to the deal more easily. Whether or not this deal still gives preference to J.P. Morgan is a topic that could be debated, but at least shareholders were able to get a much higher offer.

In the end, this saga has a lot of lessons and investors should take note. The first is to look at deal components when evaluating whether or not a higher offer is likely. The second is to watch what the majority shareholders are doing as they are most likely to influence a higher bid. Combined, these factors made BSC one of the most interesting stocks to watch over the past few weeks.

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CIT Group Inc. (NYSE: CIT) shares plummeted Wednesday after the firm revealed that it had borrowed $7.3 billion to repay debt, making it a potential acquisition target at these cheap levels. The firm is seen by many to have manageable liquidity in the near-term and a stable credit outlook going forward, but shares are becoming so cheap that financial institutions that want to expand their middle market presence may be interested.

The problems at CIT stem from its dangerous portfolio of securities. The firm's latest 10-Q shows holdings in student loans and other securities that are facing substantial liquidity concerns. In fact, many believe that its portfolio is far worse than that of Bear Stearns, Merrill Lynch, or other large players.

Any potential acquisition would likely not occur at a premium, but rather simply offer shareholders an emergency exit. Meanwhile, the company itself said that it would continue to actively seek additional funding sources, as well as explore and execute on the sale of non-strategic assets and/or business lines. This suggests that the company would be open to any potential acquisition offer.

In the end, there are several courses of action that CIT could end up taking. If the firm decides to stand alone, it could either raise money through bank financing or issuing equity. Obviously, both of these are bad for shareholders unless they truly help the firm turn around. However, an acquisition could offer a great way for shareholders to exit their investment in the near term and cut losses.

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Automakers have it tough these days as consumers are not only spending less money but also dealing with record oil prices. The unfortunate side effect has been slower-than-expected auto sales and a move by consumers to the less profitable fuel-efficient vehicles. The big three U.S. automakers are now preparing to confront these problems by cutting costs and taking other measures to protect themselves. The question is: Will it be enough?

General Motors Corporation (NYSE: GM) announced that it has pushed some planned capital expenses from the first quarter to later in the year in order to make sure it has enough cash in the event of a worsened downturn in the U.S. Meanwhile, Ford Motor Company (NYSE: F) executives said they were also considering further cost cutting measures to reach profitability in 2009. And finally, Chrysler said it would lower production at several plants in anticipation of weaker sales this year.

Despite the similar actions to cut costs, the automakers seem to disagree on the industry's direction. Chrysler noted that it believes the market will continue to weaken for the rest of the year while General Motors has indicated that it expects sales to rebound during the second half of the year. Howver, all of the automakers have agreed that the selling pace in the first two months of the year came in below projections.

There has also been some concern surrounding the financing subsidiaries that provide auto loans to consumers. In particular, analysts were concerned that GM's 49% ownership in GMAC require it to make further cash infusions in order to ensure liquidity. However, GM has denied that such injections are needed and that its financing wing remains in good shape.

In the end, automakers will likely face a tough rest of the year as they gear up for further cost cutting to meet their internal earnings goals. Investors may want to watch for a turnaround as a combination of that and cost cutting could result in higher-than-expected earnings and a boost in the share price. Combined, these factors make GM and F two companies worth watching!

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