Transcript: Friday, February 20, 2015

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

its Eurozone creditors agree on a four-month extension of that country`s
bailout. And that sends the Dow and S&P 500 to all-time closing highs.

Tech talk. As the NASDAQ takes one step closer to 5,000, our market
monitor has a list of technology stocks to put on your buy list.

And the hunt for yields. Companies are hiking dividends like mad this
year. Why? The four top stock to consider if you want income now.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
February 20.

Good evening, everyone, and welcome. I`m Tyler Mathisen. Sue Herera
has the evening off.

Well, what a finish to the week for stocks. The Dow Jones Industrial
Average and the S&P 500 close at records. And the NASDAQ is now within 2
percentage points of one. Why? Well, simple, today, because Greece, after
weeks of posturing and brings man ship on both sides, reached a temporary
debt deal with its Eurozone creditors and that`s where we begin tonight.

Now, those creditors will extend Greece`s loan agreement for four
months. That`s less than the six months Greece had asked for but Greece
still has lots of work to do. By Monday, the indebted country has to
submit details of the financial measure it plans to take, the agreement
came down to the wire. Its rescue deal was set to expire at the end of the
month, at which point it would have soon run out of money.

Michelle Caruso-Cabrera has more on the agreement. She`s been
following the story for weeks and it is really the agreement that investors
have been waiting for.

What`s in it? How good a deal is it for both sides?

they finally got a deal, but it was only after the Greek government caved
in on nearly all of their demands. They said they would never be monitored
by their European partners in a program. Guess what? They`re going to be
monitored by the European partners in a program.

Despite all that, the Greek finance minister tried to put a very
positive spin on it today.


days when a list of reforms that Greek society treated as a foreign body
was imposed, but not implemented because it was a foreign body. As of
today, we`re beginning to be coauthors of our destiny, coauthors of the
reforms that we want to implement, which we are going to dictate, which we
will discuss with our partners.


CARUSO-CABRERA: Those list of reforms that said have to be submitted
by Monday.

Here`s the key question: the reforms that this government has wanted
to do, they`re socialist reforms. They`re not the reforms that the rest of
Europe wanted. So, that`s the first test. Will they pass on Monday?

MATHISEN: That sounded like a lot of brave talk putting a face for a
domestic Greek audience on this deal.

CARUSO-CABRERA: That`s for sure what`s going to happen. You`ll hear
a lot set in Greece that`s going to try to spin this into something
positive. But ultimately, they`re going to have to stick to a lot of
things that they didn`t want to.

If they do, it`s important they get 10 billion euros roughly sitting
there that should have been theirs in the past if only they had stuck to
previous reform commitments.

MATHISEN: Ten billion is a lot of money —


MATHISEN: — but in the context of a whole country with $200-plus-
billion worth of debt, it`s a drop in the bucket. Is it enough?

CARUSO-CABRERA: Probably not. There`s already talk in Europe once
this program ends, they`re probably going to have to come together and
figure out if they have to give Greece more money, because the one thing
Greece got today was a little bit of leniency on how much of a budget
surplus they have to have.

The reason they were told to have a huge budget surplus is because
they have to pay back their debt. So, if you tell them, OK, your budget
surplus can be smaller, well, that means they`re not paying back their
debt. So, somebody is going to have to fill that gap.

MATHISEN: Very quickly. Are we going to be back here in four months?

CARUSO-CABRERA: Yes, for sure.

MATHISEN: That`s a short answer.

Michelle, have a great weekend — Michelle Caruso-Cabrera.

Well, stocks took off once the agreement between Greece and its
creditor was announced, the deal reduces market uncertainty and it
eliminates for now the risk of Greece leaving the Eurozone, for now.

By the close, the blue chip Dow index was up 154 points to finish at
all time closing high. It`s first of 2015. That number, 18,140. The
NASDAQ gained 31, its eighth consecutive session higher and that is its
highest level in 15 years. And the S&P 500 rose nearly 13 points, also an
all-time closing high. For the week, all three major indexes up, the
NASDAQ gaining nearly 1.5 percent.

Well, after a bumpy start to the year, February has turned out to be a
good month for stocks. A record setter, in fact. But not just for the
major averages. A closer look at market data reveals that February is on
track to be a record-setting month for companies raising dividends.

So far, 144 companies in the Russell 1000 have boosted dividends in
the past 30 days. Here to explain why and to give us his favorite stocks
for income right now is Charlie Bobrinskoy, vice chairman and head of
investment strategies at Ariel.

Charlie, welcome back. Good to have you.

Why are so many companies raising dividends right now?

people can`t get yields anywhere else, with government bond, interest rates
at 2 percent and CDs at zero, people are trying to find yields somewhere.
And so, corporations are giving people what they want, which is yield.

MATHISEN: Are they also acting perhaps, say, their balance sheets are
in better shape, they`re making nice profits, but also, are some of them
trying to forestall the possibility that corporate activists would come in
and say, hey, you need to return more capital investors, if you give them a
dividend, you can`t accuse them of not returning capital?

BOBRINSKOY: Yes, that`s a common refrain of activists. You`re
absolutely right. That people have been too conservative with the
shareholders` money. When you own stock in a company, that cash that
they`re building is your money, and a lot of activists think demands have
been hoarding that money sometimes making poor acquisitions with that
money. So, that`s a common play book.

MATHISEN: Let`s move to some of the areas that you think are really
good income plays for equity investors. And I want to start with a couple
of your stocks. One of them is IBM.

BOBRINSKOY: Right. So IBM, if you noticed, Warren Buffett just filed
what he`d been buying and he bought a lot more IBM. IBM hasn`t been
growing at the rate we would like but it`s now has a very attractive
dividend yield. They`re in the forefront of big data with their Watson
computers, so we think they`re very well positioned. This stock is
extremely cheap, at less than 11 times earnings. It`s a great value
investment that is paying a very high dividend.

MATHISEN: But let`s talk a little bit about that. Sometimes, the
yield goes up because the stock price is coming down. And that`s what`s
been happening —

BOBRINSKOY: That`s right.

MATHISEN: — to IBM. So, is there —

BOBRINSKOY: That`s what people call an accidental high yielder.
That`s right.

MATHISEN: That`s right. And so, what happens then is that your 2
percent yield or 3 percent, or whatever it is, it becomes a 3 percent or 4
percent yield, is wiped out by the loss in capital.

How do I — how do I choose wisely to avoid those?

BOBRINSKOY: Well, you try to buy stocks that aren`t going to go down
by 20 percent.

Look, IBM has been a wonderful stock for the last ten years. It was
at $70 seven years ago and it went all the way to 200. $It did very well.
It clearly hit a bit of a bump as they did not make earnings expectations
that management had indicated. Thought they`d be making $20 a share,
they`re going to make more like $17.

So, clearly, it has hit a bump. The stocks come down making the
dividend yield go up. Right now, it`s trading at about 11 times earnings,
even if it wasn`t paying a great dividend, we`d be recommending the stock.

MATHISEN: And Mr. Buffett is right there with you, Charlie.

BOBRINSKOY: Absolutely.

MATHISEN: Quick thoughts on other dividend picks — Stanley Black &
Decker (NYSE:SWK), Western Union (NYSE:WU) and Lockheed.

BOBRINSKOY: So, Stanley Black & Decker (NYSE:SWK) is a play
investment in the housing industry which is still stubbornly about a
million homes a year. We should be at one point 1.5 million. That`s the
historic rate we`ve been at for 30 or 40 years and we haven`t gotten back
to that rate yet but now at a point where buying a home is more attractive
than renting, and so Stanley, which makes a lot of tools, tool sales go up.
They sell to individual homeowners and to construction workers. So we
think Stanley stock is still relatively cheap doing well and has a great
dividend yield.

MATHISEN: And Western Union (NYSE:WU), of course, people think, oh,
it`s a telegraph company. It`s not that. It`s a payments company.

BOBRINSKOY: It`s a payments company, across border payments company.
And the people who are sending money back home to their relatives Mexico,
people going to Russia and sending money back to the Philippines. There is
more traffic cash going across borders than any other time. That`s a
growth business. And Western Union (NYSE:WU) stock has been recovering.
It`s had a very nice run here but it`s still now has an attractive dividend
yield at about 3 percent.

MATHISEN: And quickly on Lockheed?

BOBRINSKOY: Lockheed is building the F-35 fighter jet that all the
major branches of the armed services are going to use. It really is very
easy to predict their profits over the next 5 or 6 years, again, trading at
a very reasonable price. We`d be recommending it without the great
dividend yield, but it has a spectacular dividend yield, particularly —

MATHISEN: So, IBM, Stanley Black & Decker (NYSE:SWK), Western Union
(NYSE:WU), and Lockheed.

Charlie Bobrinskoy with Ariel — thanks very much.

Well, oil prices —

BOBRINSKOY: Thanks for having me.

MATHISEN: You bet.

Oil prices finished the day lower, third straight losing session.
Crude supplies continuing to mount. Rig counts declined this week making
it 11 straight weeks of decreases on that number. West Texas crude off 82
cents to $52.34. Brent, though, up a penny at $60.22.

But it was natural gas prices that saw a big jump today, up 4 percent
on below normal temperatures. How about below zero temperatures in much of
the eastern part of the country?

Well, as of this evening, there is no agreement between dock workers
and the shippers out West on those West Coast ports, despite an earlier
report to the contrary today.

Labor Secretary Tom Perez reportedly gave both sides of the deadline
today to end the month-long labor dispute or take the discussions back to
Washington, go back to the principal`s office.

But as Jane Wells reports, deal or no deal, things won`t get back to
normal anytime soon.


did continue today, but there was no deal as far as we know. Despite the
president`s all week of negotiations of Labor Secretary Tom Perez and it`s
come to this — BT&T Capital Markets claim KFC is flying chicken wings to
China, flying them, and auto makers paying to $600,000 to charter 747 to
bring in auto parts from Asia to here. Fuji Heavy Industries is paying
extra $60 million a month for air freight, again according to BB&T

But Bed, Bath, and Beyond now joining a growing line of retailers
saying sales may take a hit because of the slowdown is caused a shortage at
warehouses and stores.

Another company taking a hit: Mastercraft Furniture up in Oregon. It
manufactures upholstered furniture for Ikea, has seen delays in raw
materials and that is a problem which will continue to ripple through the
business no matter when a deal is reached.

MARTY OLSON, MASTERCRAFT PRESIDENT: We lost business starting right
in January. We ran out of raw materials and Mastercraft had to lay 180
people off for 2 1/2 weeks in January.

working probably three days a week, which has put a real crimp in the
paycheck, you know? We work paycheck to paycheck.

WELLS (on camera): If no deal by the end of business Friday, the
labor secretary has reportedly told both sides they must come to Washington
to continue talks next week. It`s not clear why they can`t talk through
the weekend though.

Also, an important element we do not know yet. Will employers, the
Pacific Maritime Association, stop all work loading and unloading ships for
another weekend because it costs extra to do so? And they say there`s no
point. That decision as far as we know has not yet been made.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells in Los Angeles.


MATHISEN: Still ahead, ever wonder how suspicious trades are
detected? We will take you inside the NASDAQ`s secret surveillance room
where no reporter has been before until now.


MATHISEN: Government will grant an extension to sign up for a health
plan under the Affordable Care Act. Less than a week after the original
enrollment deadline passed. Up to 6 million Americans are expected to face
a penalty for not having health insurance this year. This extension, which
runs until April 30th, gives those people more time to buy insurance and
avoid that penalty. Officials also said that IRS forms sent to about
800,000 tax filers contained health insurance subsidy errors.

Well, federal regulators will begin to fine Japanese airbag maker
Takata $14,000 a day for failing to fully cooperate with an investigation
into its faulty air bag inflaters. Takata has been slow to respond to
government demands for information on the air bags, which can explode with
too much force and send shrapnel flying to drivers and passengers.

The NASDAQ`s secret surveillance room, it`s where fraudulent activity
is detected. No reporter has been given access to the room until now.

Eamon Javers went inside to see how fraud is detected and what happens
once it is.


NASDAQ has never allowed cameras into its secure market watch fraud
surveillance facility before, but they opened their doors to us exclusively
today to see just how they patrol the exchange for suspicious trading.
NASDAQ says they process 4 billion messages each day at this Maryland
facility using computer algorithms that analyze 35,000 parameters in real
time, sending alerts to human analysts for review within two seconds of the
usual trades.

They`re also monitoring Twitter and real time news events, and then
running back the trading ahead of announcements to watch for patterns of
insider trading. And they say they conduct background searches into the
personal histories of executives of public companies, looking for people
with histories of fraud or impropriety.

ED KNIGHT, NASDAQ EXECUTIVE V.P.: We`re looking for abnormal
behavior, something that might indicate insider trading, something that
might indicate manipulation of the market. We investigate that. And
if we feel it needs to be further investigated, we refer to the FINRA or to
the SEC for further work.

JAVERS (on camera): Last year, NASDAQ says they spotted 766 incidents
that were so serious, they forwarded them to federal regulators for further
investigation and they say that over the past three years, 112 cases
resulted in fines and penalties. And many of those began right here in
this room.

(voice-over): For now, they can only see some trading that happens on
the other exchanges globally, the technology they say is right around the
corner that will give access past to trades in many more parts of the
financial system.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Rockville, Maryland.


MATHISEN: Well, farmers are buying less equipment and that is
weighing on John Deere and that is where we begin tonight`s “Market Focus”.

The tractor maker lowered its sales outlook, predicting that the
stronger dollar will hurt sales, already suffering from a slump in machine
demand. This as declines in crop prices and cuts in tax incentives make
farmers less inclined to buy new gear. Despite the warning, results did
top estimates. Shares were up a fraction to $92.43 on this up day.

Ann Incorporated., the parent of Ann Taylor, is reportedly working
with JPMorgan (NYSE:JPM) on a possible sale. But this comes after Ann said
in a regulatory filing last October that it was reviewing its strategic
options. Shares popped almost 5 percent to $36.76.

Cabot (NYSE:CBT) Oil & Gas slashed its capital budget and cut back its
production plans for the year amid tumbling energy prices. The company
also swung to a loss in the fourth quarter. Still, the stock was up more
than 1 percent to $28.06 today.

Rough day for shares of Rocket Fuel. The digital ad company`s loss
widened sharply in the fourth quarter, as costs surged. That offset higher
revenues. Shares plunged almost 27 percent to $10.82.

MATHISEN: Well, call it the new industrial revolution. Billions of
dollars being spent now on making big machines like wind turbines and oil
and gas systems smarter and more efficient. And the potential for change
is huge, not just for manufacturers but the way we work and live.

Morgan Brennan has more.


UNIDENTIFIED MALE: So go like this, pull up a menu.

It`s called the industrial internet of things or here at General Electric
(NYSE:GE) Software Center, simply the industrial Internet.

UNIDENTIFIED MALE: It`s about helping operators do what they do
already in a better way.

BRENNAN: The concept, making big machines smarter through the
adoption of software and big data analytics.

BILL RUH, GE SOFTWARE CENTER VP: In the energy space, it`s quite
clear. If I can get to total efficiency — I mean, there`s so much upside
in what they have that, you know, small gains are big numbers.

BRENNAN (on camera): Take this wind turbine. It`s equipped with
sensors connected to software that uses real time in a stored data to
generate 5 percent to 10 percent more power, which in turn for a wind farm
can boost profitability by 20 percent.

(voice-over): GE has developed an operating system called Predix that
posts dozens of applications catering to a spectrum of industries. There`s
an app that tracks oil and gas pipelines to prevent possible leaks and
projects that harness augmented reality, to make factory inspections easier
and faster — all of it with the potential to save businesses billions of
dollars in down time.

Internet of things, there are about 50 billion things that are going to
come online in the next coming years and all of those assets, all of those
machines, people interact with them in some way. So, it`s going to be

BRENNAN: Right now, the industrial Internet of things is still in
infant stages, but it notes it could reach $500 billion by 2020, with
larger global economic impact in the trillions of dollars by 2030.
Analysts say the possibilities will be endless — and not just for GE.

internet of things as a way to save their businesses from commoditization
and competition.

BRENNAN: A growing list of companies are getting involved. GE has
partnerships with AT&T (NYSE:T), Verizon (NYSE:VZ), Soft Bank, Cisco
(NASDAQ:CSCO) and Intel (NASDAQ:INTC) to name a few. But other industrial
heavyweights, including Rockwell Automation (NYSE:ROK), Emerson and
Honeywell have been dedicating resources as well.

Still, there are risks. Cyber security remains a primary issue.
Also, the not yet known effects that automation could have on the labor
market and for companies like GE, the challenge of monetization, so this
new technology doesn`t just become another cost of doing business in the
Internet age.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in San Ramon,


MATHISEN: Well, as the NASDAQ approaches 5,000, our market monitor
tonight says some of the biggest names in technology are retractive right
now. He`s Jordan Posner, senior portfolio with Matrix Asset Advisors.

Jordan, welcome. Good to have you with us.

You are a value player and people don`t typically think technology
stocks as value plays, but you go bottoms up. You look at individual
companies, their balance sheets, their income statements, and their stock
prices and you found some in technology beginning with Symantec

like Symantec (NASDAQ:SYMC). They are — have a good solid business in two
areas, IT security and also data storage, both of those businesses have
very positive fundamental growth still attached to them. The company
decided that they can actually generate some value by breaking the two
businesses into two separate companies. We think that will actually unlock
some value.

The company has actually been improving its operating performance and
that is continuing to improve going forward. Stock is relatively
inexpensive at around 13 times next year`s earnings. It pays a nice
dividend yield of about 2.3 percent, and we think that stock is probably
worth closer to $30 in the current trading price in the mid-20s.

MATHISEN: It also — because you mentioned they`re going to split the
company into two parts, it coincides with one of your other themes, which
is sort of the appeal of internal restructurings, absent an insider. But
if you do it inside, it can achieve the same goals.

Second choice is Microsoft (NASDAQ:MSFT).

POSNER: Now, Microsoft (NASDAQ:MSFT) has been under some external
pressure from some external shareholders but also the big management change
there a year ago, Satya Nadella has really made a lot of improvement there.
Everybody knows what Microsoft (NASDAQ:MSFT) is but, don`t really realize
that the Enterprise Business, which is continuing to be very, very strong,
is really the crux of the business. And Microsoft (NASDAQ:MSFT) is
actually leading a lot of the move to the Cloud.

Again, on a valuation basis, the stock is cheap, around 14 1/2 times
next year`s earnings. It pays a nice dividend. We think the stock is
dramatically undervalued because of pause that happened in the December
quarter earnings. We think that will resume and we think the stock is
actually better valued probably at around $53 a share.

MATHISEN: All right. Let`s move on to number three which would be
Qualcomm (NASDAQ:QCOM), a dominant chip for mobile devices, which is really
the space everybody wants to be in, but over the past year, the stock is
down. Why do you like it now?

POSNER: Well, we`ve liked it for a while. Qualcomm`s had some issues
most recently with a Chinese anti-trust investigation that they settled at
a lower cost than was expected by the market, well within their ability to
pay. The company throws a tremendous amount of cash, is dominant and will
remain dominant in a very strong growth industry.

The company has, on its balance sheet today, $19 a share in cash,
which is more than a quarter of the stock`s value. It throws off the
dividend of about 2.4 percent. Trades, if you adjust for the cash at only
10 times this year`s earnings. We think the stock should trade above $90.

MATHISEN: All right. Jordan, thank you very much. Great analysis of
three very interesting companies. Jordan Posner with Matrix Asset

And coming up, the big money behind Hollywood`s biggest night.


MATHISEN: The big business of Hollywood will be on display at this
Sunday`s Academy Awards. But behind all the glitz and glamour, there`s
real money at stake.

Julia Boorstin takes a look at what an Oscar is really worth and
whether the race for that coveted statue is actually a losing business.


With best picture front runners “Boyhood” and “Birdman” grossing just $25
million and $37 million respectively, this year`s top award could have a
massive impact.

The smaller the box office performance of a nominated film, the bigger
its boost from Oscar attention. Best picture winners gross nearly $14
million more at the box office after winning than fellow nominees. That`s
according to an iBizWorld study of winners from 2009 to 2013. But even the
losers cash in, Oscar nominated films remain in theaters on average about
twice as long. And Oscar attention can boost home rentals as well.

of the online component will give some of these films that are now
available on demand a bump literally on Oscar night.

BOORSTIN (on camera): This year`s nominees are the lowest grossing
group since the academy expanded the number of films that could be
nominated for best picture to 10 back in 2009, an effort to include more
box office hits and draw more viewers to the telecast.

(voice-over): With just one film that`s been a really big hit,
“American Sniper”, this year`s Oscar telecast may suffer lower ratings than
last year, when four films topped $100 million at the U.S. box office.

DERGARABEDIAN: A lot of people are saying, well, why aren`t there
more blockbusters in the mix for best picture? And I could argue, it`s not
the box office awards. It`s supposed to be what are the best movies in
that particular year?

BOORSTIN: And two of what the Academy think are the best movies,
“Birdman” and “Grand Budapest Hotel” were produced by Fox Searchlight,
which has a total of 20 nominations, more than any other studio, making it
the best position to cash in.

The film with the least to gain from an Oscar win, Warner Brothers`
“American Sniper.” It`s grossed over $300 million in the U.S. So, an
Oscar win is unlikely to make much difference.

Those studios spend millions of dollars to campaign for the prestige
of an Oscar win. The investment doesn`t always pay off. Rather than that,
many studios would rather have the box office success of “American Sniper”
or the blockbusters that never make it to the red carpet.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


MATHISEN: And finally tonight, whether an actor takes home gold or
not, they will still feel like a winner with all the free swag they`ll get
after this Sunday`s Academy Awards. All the best and supporting actor and
actress nominees and the best director nominees will get a gift bag worth
about — get this — $160,000, double what they were valued at last year
and the giveaways will make you green with envy. Some of the free bees
include free night at a Tuscan villa, a $20,000 psychic reading and an LED
liposuction light. It is Hollywood, after all.

And that is NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mathisen.
Thanks so much for watching. Have a great weekend everybody.

We`ll see you Monday. Sue will be back then.


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