02 April 2007

Some Company News - Part 2

NT sold more than $1 billion of convertible notes. They will use the proceeds to redeem higher yielding bonds that are scheduled to mature next year. Here's the problem: the initial conversion rate is 31.25 common shares per $1,000 principal amount of notes. Therefore, we're looking at the issuance of about 32 million common shares. There are 433.88 million shares outstanding, so the potential dilution is more than 7 percent. (It might be greater: we're not sure how the conversion rate changes over time.) Also, MarketWatch indicates that buyers of these types of notes short the stock. Careful readers of this blog might remember that we previously expressed worries about NT's debt.

PEP continues to perform well, although the stock price seems to have plateaued. Jim Cramer has rejoined the ranks of the PEP supporters. Morningstar recently elevated PEP to its pantheon of 5-star stocks, which they claim trade at a large discount to fair value. We also note that PEP ranked number 30 on BusinessWeek's BW 50 Interactive Scoreboard of companies that are "playing at the top of their game." The only worry might be the amazing appearance of Jones Soda, which seemingly came out of nowhere to snag major retailers as distributors for its beverages sweetened with sugar instead of corn syrup.

TDW closed 2006 at $48.36 per share. It ended the first quarter of 2007 at $58.58 per share. Not too bad for the one company, in our admittedly small analytical universe, that currently scores highly on our gauges. There is rarely any substantial news on this company.

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