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Tyco's Buy of Brink's May Secure Its Future


The company could be a big winner in the next several years.

My oldest had a birthday party for her friends at my house this past Saturday night. All and all, the kids were good. But Sunday morning after everyone left, it looked like the first Marine division had marched through my living room. I'm still beat from the get together, but the good news is, it's a short week!

Asian stocks were a bit of a mixed bag overnight. The Hang Seng closed up 1.02% but the Nikkei was down 0.83%. However, European stocks were in negative territory early this morning. And here in the US, we're currently trading higher.

Here's what I'm seeing this fine Tuesday morning:

Tyco (TYC):
It looks like the company wants to give the dividend a little goose. More specifically, reports are that its board is looking to jack up the dividend a respectable 5%.

My take:

Neither the company nor its stock get anywhere near the love and respect they should from analysts or investors. And yes, that's despite the fact that it's trading near it's 52-week high. Not only is its dividend tasty, but it also trades at around 15.1 times this year's estimate, which seems pretty good, given the growth that's expected from the Street this year to next. At present, the estimate for this year is $2.49, and for next year it's $2.96.

2. I'm hoping that the news this morning about its plan to scoop up Brinks may help draw attention to what could be a big winner in the next several years.

It looks like Bill Ackman is bellying up.

The well-known activist investor has reportedly scooped up an approximately 2% stake in the food giant, and frankly I think it's a positive. My hunch is that Ackman/Pershing Square will really hold management's feet to the fire and make sure they're doing their best to improve shareholder value over time. He also has the ability to draw press attention, which can sure be a motivator of management. In the past, Ackman has played in some other big sandboxes including: Target (TGT), McDonald's (MCD), and Wendy's (WEN).

Incidentally, the latest reports indicate that Kraft and Cadbury (CBY) may actually wed after all. At the crack of dawn this morning, AP reported that: "Kraft Foods Inc. says the board of Cadbury PLC has accepted and recommended to shareholders an improved takeover offer worth $18.9 billion."

As I've said previously, I think having Cadbury in its toolbox could really be a big positive from a cost-savings and product-offering standpoint.

McDonald's (MCD):
Justin Sharon points out this morning in Upgrades & Downgrades: McDonald's Bulks Up that Credit Suisse upped Ronald and his buddies to Outperform.

My two cents on the Golden Arches:

1. I see the lull the stock has been experiencing in the low $60s as an opportunity.

2. Remember that consumers across the US are still watching their money and therefore the "Dollar Menu" remains a great opportunity for families looking to eat out without spending big coin.

3. I could certainly see this stock in the $70s if it manages to meet the 2010 estimate of $4.41.

4. As an aside, have you seen some of the new store layouts? I don't know how pleasing they are to the eye, but they seem squeaky clean. I think a good deal of mothers and fathers of kids who touch everything agree it makes a big difference.

5. Make no mistake, this is still the ultimate play in fast food for the long-haul. Although I like Yum's (YUM) chances to grow abroad in the years to come, too.

Ciena (CIEN):
Credit Suisse upped it to Outperform.

I'm not too excited about it, as I point out in Say "See You Later" to Ciena in early December. Since that time, the stock is up a smidge, but nothing to write home about.

I find it hard to contemplate climbing aboard this bandwagon with the loss it's expected to put up this year and the meager profits it's expected to throw on the scoreboard next year.

Have a great day!
No positions in stocks mentioned.

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