What should investors in the Alternative Energy sector be doing, Pearce Hammond, Director of Institutional Research, Simmons & Co. International has some ideas;

Mr. Hammond: “I think my overall advice to investors right now with this sector is number one, be cautious. This is a sec­tor that’s driven a lot on momentum and press releases, and lot of stories, and that can move the stocks every now and then, but you have to really look at the fundamentals. And so my second piece of advice is just understand companies that have a better competitive position than the others. So for example, First Solar (FSLR) has a very good competitive position in the solar business. It’s a hyper-com­petitive sector; it’s a very volatile sector. I think you’re going to have a lot less risk by going into the sector via that stock than going in with a high-cost producer. And the equity is going to be moving very much like a weather vain as to how people perceive the solar sector, but cautious in not getting carried away. There are going to be some big winners in this sector over the next five and 10 years, and maybe some of the companies aren’t even public yet, but they will be big winners. And so kind of a constant diligence or keeping up with what’s going on in the sector is helpful too. These things change a lot. “

 Make sure to follow us on TWITTER

Recession and the Government seem to be the buzz words in all healthcare affairs these days. When we spoke with Jeff Jonas of GAMCO Investors, Inc. as part of our Medical Devices Report he gave his view on both in regard to the Medical Devices Sector;

Mr. Jonas: “On the cardiovascular side, there has been pretty minimal impact from the recession because you can’t defer these procedures. If they are not an absolute emergency, they are something that needs to be done in a matter of weeks, so they re­ally can’t be deferred, and it has been a pretty minimal impact from the recession. Health care reform is kind of tough for us to comment on right now; it’s still play­ing out between Congress and the president. For the device industry, you’ve got two different things play­ing against each other. If you do cover more Americans, you should see more procedures done in slightly higher volume, although many of these car­diovascular procedures get done al­ready, even if the patient can’t pay. Then Congress is trying to get some price concessions out of the device-makers. The hospitals cut a deal to save about $150 billion over 10 years, and while they didn’t specify how much of that would come from de­vices, they would certainly expect to see some price pressure from it. Then there is this proposal from Max Bau­cus yesterday to actually implement a fee system on some of the device-makers based on their market share. That will be something that would hurt their profitability. So all in all, it could come out to be fairly neutral for the device-makers or could come out to be a slight negative in terms of price pressure. But they have ways to manage their manufacturing and SG&A costs to offset a good portion of it.”

Follow us on TWITTER for exclusive content

Gretchen Morgenson, the New York Times business reporter, wrote another spot-on story in Sunday’s Business section on the need for ending what she calls the often “cozy relationships” between corporate board members and management.  Morgenson’s story, Too Many ‘No’ Votes to be Ignored stated,

For years, shareholders have done little to voice complaints about such cozy relationships, but it seems that the financial fiasco of the last few years, and the lackadaisical performance by directors at major banks that contributed to the meltdown, is encouraging investors to become more vocal.

Signs of such a welcome development can be seen in the results of this year’s director elections at annual corporate meetings.

… Even with such thumbs-downs nearly doubling year-over-year, negative votes on directors still remain relatively small and suggest that investors have plenty of room for improvement if they want to make themselves heard.

… Investors are clearly angry with their companies, and they have their reasons. Director accountability to the shareholders they are supposed to serve has been sorely lacking for decades. Even as they rubber stamp risky corporate practices and excessive executive pay, directors continue to win re-election to their increasingly lucrative board seats.

Liberum has also been examining this issue over the last two years.  Investors often need to be vocal about how they view management and the responsibilities of board members.  Investors must also stay on top of specific board changes for they could mean a potential change in management or strategy.  To get more information on the specific statistics Morgenson referred to in her story check out the study performed by Proxy Governance, Inc. entitled SHAREHOLDER VOTES OPPOSING DIRECTOR NOMINEES SHOW SHARP INCREASE IN 2009 PROXY SEASON.

Steven C. Straus, the often time embattled CEO of LCA-Vision Inc. a provider of laser vision correction services, according to the company’s press release,

… resigned his position to lead another healthcare company outside of the ophthalmology industry. Management of daily operations will be the responsibility of Chief Operating Officer David L. Thomas and Chief Financial Officer Michael Celebrezze, jointly reporting to the board of directors through non-Executive Chairman E Anthony Woods.

Straus who has been CEO for three years has at times been under pressure from activist shareholders and subject to the weak economy.  His exit from the firm may turn out to be a blessing if the company can find its way forward and put in place a CEO that understands the business and its market.Stay tuned.

For more:

Business Courier of Cincinnati

MSN Money

As part of our recent Investment Strategies Report, we spoke with Ralph W. Cole IV and Jason Norris of Ferguson Wellman Capital Management, Inc. who gave us an interesting insight into the firm’s process for picking and valuing potential holdings;

Mr. Cole: We use a multi factor model to pick our stocks, meaning we review 18 different variables depending on sectors and focus most of our work on valuation, which is about 70% of our model. The other 30% is what we call cata­lyst factors. Those are earnings per share factors. That model is where we shop for stocks and judge value. We have nine ana­lysts who cover the ten economic sectors. We then mirror the S&P sectors. Each one of us is given our shopping list based on that multifactor, which helps us look for ideas, rather than waiting for ideas to come to us.

Mr. Norris: As Ralph said, that multi-factor model is broken down into economic sec­tors. In some industries we break it down more into sub-sectors. For example, biotech stocks may react to different metrics than large cap pharma stocks. So we don’t want to group all of health care together. But in some sec­tors such as consumer staples it seems as if most stocks trade on similar metrics. We’ve done extensive backtesting on this and peri­odically to determine if anything needs to be tweaked. It’s worked well as Ralph said for the last 15 years.

Mr. Cole: We probably update that model every three to four years, re-backtesting, adding new factors at some points and changing the weights. With 18 variables, we change the weights based on the sector and the industry, just to make sure it’s keeping up with what’s going on in the market and what the market is rewarding as far as value or earn­ings momentum.

Follow us on TWITTER for exclusive updates about upcoming issues and breaking news

Northrop Grumman NOC (NYSE) chairman and CEO Ronald Sugar will retire January 1, 2010.  In his place the board selected president and chief operating officer Wesley G. Bush to run the defense contractor.  Sugar, who has served as the company’s CEO since 2003, has been in charge of the firm as its value has continued to increase.  Now that a new administration is in place and the U.S. economy has been under intense financial and economic pressures many defense industry firms have been working to move their operations more in line with the problems facing the United States economy.  More consolidation and cost cuts can be expected over the next number of years in the defense industry.  The selection of Wesley G. Bush allows for a smooth transition at the top of Northrop Grumman and the likelihood of a refocusing in the firm’s business strategy going forward.

For more:

Businessweek

Washington Post

WSJ

Bloomberg

Reuters

As part of our Education report we spoke with George Sakellaris of  GARP Research & Securities Co. and asked him about the regulatory issues facing the education industry

Mr. Sakellaris: “That’s the big question here. I think that’s some­thing that’s held some of the stocks in check over the past several months It’s certainly a topic that’s been batted around significantly in the investment community. It’s hard to say. Negotiated rule making ses­sions are coming up in the fall, and some new rules could emerge as early as Q1 of next year. My personal opinion is that it’s a lot of hype that may result in little change. I think the administration’s topline goal is to get more col­lege graduates. Given the capital intensity and other growth impedi­ments at traditional schools and the almost unlimited capacity potential and open enrollment policies of most for-profit educators, I think the administration will have a hard time reaching its goals with­out embracing not only community colleges, which is what they have done so far, but also some of the higher quality for-profit educators. “

David Serchuk, a reporter for Forbes, wrote a story today that examined where the jobs are and where they are not.  Serchuk also referred to recent research by Liberum in which we recently predicted executive turnover would begin to rise as the economy moves through the Fall and into the Winter months.

In our September 7 Investment Strategies Report we spoke with  Steven S. Hill – First Investors Management Company, Inc.  Mr. Hill says the Opportunity Fund is made up of mid-cap stocks. It has a growth orientation but he also invests in compelling value plays. He identifies stocks that will generate reasonable earnings growth and looks for events that will drive that earnings growth.

Mr. Hill  “We have been terrific fans of Sybase Inc (SY). They are primarily a database software provider In this environment where IT departments are curtailing spending, it’s imperative that technology vendors offer a product that is clearly the best. Prior to the economic meltdown, there were few incentives for some IT departments to pick database software based on speed and reliability. In fact, the departments might have bought software from some of Sybase’s competitors simply because they were larger and could provide bundled product discounts. But Sybase has a faster, more robust, and more reliable database product than its peers.”

The opportunities in the market are tremendous, particularly since the March corrections. There has been a significant rebound from the lows and when the economic clouds start to part, he expects some companies in this arena to come roaring back.

Make Sure to follow us on TWITTER

Coldwater Creek, Inc. CWTR (NASDAQ) the women’s retailer announced today that CEO Daniel Griesemer resigned and would be replaced immediately by chairman and co-founder Dennis Pence.  He has also resigned his board position.  Coldwater has been struggling, just as all other women’s retailers, during the current recession but has managed to control its inventory and stay within predictions by Wall Street.  It is unclear exactly what forced the change at the top of the firm.  Griesemer had been appointed CEO back in 2007.  Investors should keep a close eye on the firm to get a better picture behind the change and what might be planned for the firm going forward.

For more:

Reuters

Corporate Press Release