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Minyanville's Before The Bell: SAP,GS, Futures Point Lower


Goldman and SAP making moves, but futures point lower

Morning Perspective: Case of the M&A Monday's

SAP (SAP) fell almost 7% in overseas trading after the world's largest maker of business-management software announced its acquisition of Business Objects (BOBJ) would reduce earnings. SAP's acquisition, which marks a dramatic turnaround in its growth strategy, is expected to add to profit in 2009. SAP will finance the transaction with available cash and borrowings. (From Bloomberg) For more on this sector, read Professor Katz's Breaking Down The Tech Sector.

The Bull Pen: SAP's largest acquisition in its 35-year history marks a new turnaround for the industry. If you believe the move is positive, SAP should benefit along with other plays which include ORCL, MSFT, and LWSN. Buy the calls only if you have a specific time frame in mind and you are properly schooled in the risks of derivatives.

The Bear Cave: The acquisition price marks a 20% premium over Friday's closing price of $50.27. Analysts believe SAP is overpaying. If you're in that camp, shorting SAP with a buy-stop over $60 (the recent high and defined risk) may be your play.

A Move By Goldman

Goldman Sachs (GS) is launching a $500 mln private equity fund to buy stakes in hedge funds. The new fund will be based in London and will be from both outside investors as wells Goldman's own cash. (From WSJ) The Financial Times already reports the new fund will acquire a 10% stake in Winton Captial Management, a $10 bln London hedge fund. Read Professor Shedlock's Problems For Banks, Problems For You?

The Bull Pen: The all-time high for Goldman Sachs is $234 and a trade through that level will trigger technical buying. Other plays include MS, BSC, MER, and LEH.

The Bear Cave: If you continue to be bearish on the financials, simply avoid them as Professor Depew mentioned they continue to underperform the S&P. Continue to watch the levels of BKX and XBD and, as Goldman Sachs has already rallied 38% since August, that same level ($234) can be used as defined risk on the short side. Professor Cooper spoke of this in It Happened Tweny Years Ago.

A Quick Check Overseas

China is back with a vengeance after a week long holiday. The Shanghai Composite added +2.53%. Taiwan's TAIEX added +1.04%. Read Toddo's Random Thoughts From Friday for Taiwan. Hong Kong's Hang Seng lost -0.22% and India's Sensex lost -1.59%. Japan's Nikkei was closed.

A Look At Commodities

Crude oil is trading lower by -$0.53 to $80.69 and gold is also lower by -$5.70 to $741.50. Professor Lewis continues to be bullish on gold and recommended a junior gold play in Mindefinders (MFN). Read his article What Will Gold Do Next?

On The Radar

Today is Columbus Day. It's a light day on the radar with the bond markets closed as well. Yum! Brands (YUM) will report after the bell and Alcoa (AA) kicks off earnings season tomorrow. Click here for the full trading radar and get up-to-speed with Professor Tuttle's Week In Review.

Hope y'all had a great weekend. Good luck and happy trading!
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No positions in stocks mentioned.

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