Welcome to the major leagues of debt. Collateralized debt obligations, almost always referred to as a CDOs, are horrendously complicated deals that often leave anyone without a MBA wondering what was put into these CDOs.

The first thing to understand about bonds, (aka debt) is that bonds are often backed by something else. Think about your home mortgage. If you don't pay your mortgage, the bank can take the house. You end up homeless, and the bank sells the house to pay off the rest of that mortgage. There is something "backing" that mortgage; something lender can fall back on, if you don't pay your bills like a good human being. That's called collateral.

CDOs are one flavor of an entire sector of investing called structured finance, and they are also backed. CDOs, in the simplest concept, are just bonds backed by something else. In most cases, a CDO is backed by a collection of various types of debt. CDOs can be home mortgages, or other types of debt like credit cards, auto loans, and personal loans. Most of these types of debt are usually considered a bit more risky and they don't have the backing that a home loan does. So, if you think it through, you can imagine that CDOs are usually considered a risky investment.

To take a step further, understand that CDOs have multiple flavors within each CDO. These flavors are called tranches. If you've taken French, you might recognize the word, it means "slice" or "portion." Each slice of that CDO you invest in is a little different and carries different amounts of risk.

You could invest in the lowest risk tranche of the CDO, which would provide you lower risk. But, you don't get a good return on that investment. Or, you can be the heroic adventurer of bonds and invest in the lowest-grade tranche of the CDO. You'll make an amazing return, but if the economy even looks at you wrong, you might lose the entire investment.

CDOs aren¿t easy, and are almost always invested in by mutual funds, insurance companies and hedge funds. As an individual investor, you will probably not come across a CDO you can participate in.

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Thursday, May 29, 2008

Zacks Analyst Blog Highlights: Inter Parfums, Gap, Quiksilver, Syngenta and Monsanto

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Comtex

CHICAGO, May 29, 2008 (BUSINESS WIRE) ----Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Inter Parfums (Nasdaq: IPAR), Gap (NYSE: GPS), Quiksilver (NYSE: ZQK), Syngenta AG (NYSE: SYT) and Monsanto (NYSE: MON).

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Here are highlights from Wednesday's Analyst Blog:

Inter Parfums Hits Price Target

Inter Parfums (Nasdaq: IPAR) growth strategy of acquiring exclusive worldwide licenses and developing new prestige fragrances under the brand names acquired from the licenses has resulted in a 20% sales growth rate. Management has aggressively pursued additional license agreements with Gap (NYSE: GPS) and Quiksilver (NYSE: ZQK) -- and has also entered the skin care category.

Earnings guidance has been increased after each of the last four quarterly earnings reports. Having attained the price target, the stock is rated a Hold.

Grow Returns with Syngenta

We remain buyers of Syngenta AG (NYSE: SYT), after the Swiss agrochemicals group's first-quarter results. We believe Syngenta is one of the safest plays in the sector, which should be reflected in higher valuations.

We are raising our target price to $65, as re-rating continues and currency effects. The depth of its product mix, robust business model, and our confidence in the management's ability to cut costs effectively, support our positive view on the stock.

One of Syngenta's key strengths is its broad base of strong, profitable products in two main divisions: crop protection and seeds. The company builds on these strengths by managing the two as independent units with strong management focus, while looking for opportunities to capture synergies across these two divisions, wherever appropriate.

Syngenta trades at 23.7x our 2008 EPS estimate. We think the discount to Monsanto (NYSE: MON) is unwarranted, even though Syngenta has lagged behind in the genetically-modified seeds segment. We believe Syngenta should trade in the 27.0x-30x range, which yields a target price of $65. The stock may be more volatile going forward, as the premium valuation is digested by investors but we believe there is room for further upside.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4580.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

SOURCE: Zacks.com

Zacks.com Mark Vickery Web Content Editor 312-265-9380
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