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(Best) AFL, GLF, OCN (Worst) ENER, EBS, MS from Better Trades

March 23, 2009

After a week of ups-and-downs, the markets concluded the week in the green despite continuous economic data revealing the unease of the nation. However, there were companies, throughout the trading sessions, that managed to post solid gains by the end of the week. Even with the major indices ending in the green, other companies could not rally with the markets.

Top 3 Stocks

AFL – AFLAC Inc. ($14.58 to $18.38) +26%

In a week that had several disappointing reports for AFLAC Inc. (AFL), the stock still managed to post a solid week, gaining more than 26% in the stock’s market value. AFLAC, is a general business holding company that acts as a management company, overseeing the operations of its subsidiaries by providing management services and making capital available.

The company’s primary business is supplemental health and life insurance that is marketed and administered primarily through its subsidiary, American Family Life Assurance Company of Columbus. Recently, the company was downgraded by analysts at Friedman, Billings, and Ramsey from “outperform” to “market perform.” The reasoning behind the downgrade was in regards to widening spreads on sovereign debt and other company holdings, totaling more than $1.3B.

With the downgrade, the stock’s target price range was lowered to $20 per share. However, there were positives for the company as well. To show their shareholders that those in charge of the company were not taking excessive advantage of the company in this dire economic environment, the Chairman and CEO elected to forgo his 2008 bonus of $2.8M, while the president and CFO of the company took a 35% bonus cut as well.

Monday’s session brought much of the same results that the previous week did in trading. By the close of the markets, shares of AFL were up 18% on the day, adding $3.31, to end the day at $21.69 per share. Over the past year, shares of AFLAC have traded in a range between $10.83 and $68.81 per share.

GLF – Gulfmark Offshore Inc. ($18.75 to $22.85) +22%

Another company recording substantial gains throughout the past week was Gulfmark Offshore Inc. (GLF), which provides offshore marine services primarily to companies involved in offshore exploration and production of oil and natural gas. The company provides vessel transport drilling materials, supplies and personnel to offshore facilities, as well as the moving and positioning of drilling structures.

As the only pertinent information released about the company last week, Gulfmark announced the election of Brian Ford to serve on the company’s board of directors, serving on the Audit Committee.

Ford, who currently serves on the board of directors at Drexel University, is a graduate of Rutgers University and is a retired partner of Ernst & Young LLP. Ford was the co-author of Ernst & Young’s Business Plan Guide.

By the close of the trading week, shares of GLF were up more than 22% in total, on purely speculative trading. With no major news to speak of, Gulfmark’s stock jumped from just under $19 a share, to nearly $23 a share. The start of the new week saw the same as the previous week, as GLF shares added nearly 9% Monday, or $2.03, to end the session at $24.88 per share. Within the last 52-week, shares of GLF have traded between $15.79 and $70.98 per share.

OCN – Ocwen Financial Corp. ($9.32 to $11.30) +21%

One of the final companies that managed to increase their market share significantly over the past week was Ocwen Financial Corp. (OCN), which is a financial service holding company engaged in asset acquisition and resolution, residential finance, commercial finance, investment management and hotel operations. Ocwen Financial specializes primarily in the acquisition and resolution of non-performing or underperforming loans.

Durng the previous week, and in fact over the past two weeks, shares of OCN have been advancing higher on a torrent pace. After closing the session on March 10 at $8.37 per share, the stock has closed at yearly highs everyday since then. From that day, the stock has increased 35%, with the past week posting a gain of more than 21%.

At the end of the week, the company’s stock was upgraded to a “buy” rating by Zacks analysts from a “hold.” By the end of 2008, OCN had modified nearly 61,000 loans, in order to help prevent foreclosure. In the first two months of the year, the company had nearly 15,000 loans which they had modified with charges and upfront fees of $1,000 each.

Based on the company’s 4Q earnings report in 2008, the company increased their expected earnings per share to $0.85 for 2009, and increased their 2010 projections to $1.19 per share. By the close of Monday’s trading session, shares of OCN advanced once again, setting a new 52-week high at $11.81 per share, adding $0.51, or 4.5%.

Worst 3 Stocks

ENER – Energy Conversion Devices Inc. ($19.12 to $13.23) -31%

Although the week was a positive one throughout the major indices, there were stocks that could not rally with the markets by the end of the trading sessions. Leading the way in percentage losses was Energy Conversion Devices Inc. (ENER), which is a leader in the synthesis of new materials and the development of advanced production technology and innovative products, providing new and enabling technologies for use in the fields of alternative energy and information technologies.

The weekly decline in the company’s stock performance was a direct result from the company’s withdrawal of their upcoming 3Q guidance and fiscal 2009 projections. Last Monday, ENER stated that due to the slowing of “demand-driven” production and the impact of the global economy that the previously stated predictions were no longer in effect.

From its close last Monday of $18.43, the stock plunged nearly 25%, or $4.52 per share the following day on news of the company’s guidance removal. That same day, Tuesday March 17, the stock established a new 52-week low at $12.85 per share. As the trading week concluded, shares of ENER were down more than 31%, falling from just over $19 a share to slightly above $13 per share.

On a positive note, the company’s stock reversed course on Monday, posting a 7% jump in ENER’s price, adding $0.93, to end the start of the week at $14.16 per share. Over the past year, the stock has traded as high as $83.33 per share, set back in late June of 2008.

EBS – Emergent BioSolutions Inc. ($16.46 to $12.60) -23%

Following the downward trend in stock performance for the past week was Emergent BioSolutions Inc. (EBS), which is a leading biopharmaceutical company dedicated to one simple mission, to protect life. Although the company’s mission is noble, the stock is not, losing nearly a quarter of their market value in less than a week.

EBS currently develops, manufactures and commercializes vaccines and therapeutics that assist the body’s immune system to prevent or treat disease. Their products target infectious diseases and other medical conditions that have resulted in noteworthy public health needs. At this time, the company is working on a clinical trial for its Anthrax Immune Globulin, or AIG. The drug is being developed as an intravenous therapeutic treatment for patients with symptoms of the anthrax disease.

Even with the research in AIG that could revolutionize the care for anthrax, the company’s stock was hurt over the past week mainly from the exodus of investors. Since the middle of February through last week, there have been more than one-third of EBS investors taking their capital elsewhere. Another key factor to the mass exiting of investment came from the company’s recent 4Q showing of a 95% plunge in net earnings.

Emergent recently forecasted yearly revenues in the range from $225M to $240M, below analysts’ predictions of $243.7M. With the stock losing 23% for the week, shares of EBS have ranged between $7.59 and $27.00 per share over the past year. Reversing a week-long trend, EBS stock advanced by the close of Monday’s trading, gaining 6.3%, or $0.80, to close the day at $13.40 per share.

MS – Morgan Stanley ($25.43 to $20.24) -20%

Finally, one of the most recognized names in the financial world, Morgan Stanley (MS), struggled through the previous week’s trading, losing one-fifth of their market share. As a preeminent global financial services firm with leading market positions in each of its three primary businesses, securities, asset management, and credit services, Morgan Stanley combines global strength in investment banking, institutional sales and trading with strength in providing full-service and on-line brokerage services, investment and global asset management services.

Over the next several weeks, the company announced that they would authorize or repurpose shares so that MS can have enough stock to compensate employees. Morgan Stanley may need to use some of their current authorized shares for bonus payments. In a recent filing with the SEC, MS stated that compensation for the company’s 14-member Operating Committee was reduced by some 75% in 2008, while the 35-member Management Committee saw their compensation cut by 65% from their pay in 2007.

With the conclusion of last week’s trading, shares of Morgan Stanley slipped 20%, falling more than $5 a share. However, on Friday, the stock was upgraded by the research firm Argus, from a “hold” to a “buy.” In response to the recent action, shares of MS surged throughout Monday’s trading session, adding nearly 21%, or $4.19, to start the week at $24.43 per share.

Over the past year, Morgan Stanley stock has traded in a range between $6.71 and $51.80 per share. The high for the stock was reached a year ago this week, while the low was established last October.

2009 Better Trades Article

brought to you by

BRIAN MULLIN