Equity Research and Investment Analysis

Cramer interviewed the CEO of OptionXpress (OXPS) David Fisher on Tuesday night after his firm reported earnings per share of 28 cents; 2 cents better than consensus estimates. They discussed options trading which is not a usual topic of conversation on Mad Money mainly because much of Cramer's audience does not fully understand options which can be dangerous if misused. The biggest takeaway was that investors are trading options with more frequency than ever before. OptionsXpress has the online platform best able to take advantage of the increased activity with options trades that make up 59% of its volume.

Cramer makes some interesting points about recent trends in trading volume. There is no doubt that the online brokerages, which are heavily influenced by retail investors, are seeing increased business from investors hoping to ride the market’s rally. Also, Knight Capital (NITE) is showing impressive market share gains, especially compared to a year ago. However, the improved fundamentals for NITE have been recognized by the market and have resulted in substantial outperformance.

Two outstanding Op-Eds appeared today, and although they cover very different topics, they are both worthy of attention. Warren Buffett challenges congress to stand ready to fight the challenges of inflation in the years ahead. Meanwhile, Charles Schwab is a lone brokerage standing up to the accusations of aggressive AG Andrew Cuomo.

New York AG Andrew Cuomo's crusade against brokers and investment banks who peddled Auction Rate Securities has hit a road block with Charles Schwab (SCHW). While most banks who have been targeted by the investigation have been anxious to settle and make this problem go away, Schwab is holding their ground.

An overview of the changes to our newsletter and the announcement that coverage for all 100 equities covered on our Ockham Research web site will be avialable to the public for free. Please visit www.ockhamresearch.com to view these research reports.

Genworth has seen significant appreciation well in advance of the fundamentals justifying such gains. Analysts are expecting fiscal 2010 earnings of $1.10 which would make the valuation look attractive, but that seems to expect quite a bit out of Genworth’s other units if the mortgage unit will see its peak losses in that year. As capital markets have healed this year, GNW has raised capital through asset sales, a debt offering, and a secondary offering of stock in order to provide a cushion for any future losses.

There is significantly less risk in this bank than probably any other major bank, and their CEO believes that the conventional wisdom regarding New York City is probably too bearish. With a multiple below 13x and a dividend yield around 4.5%, we firmly believe this investment will start to attract some attention as quality becomes more of a premium.

Cramer talked about enormous upside on this deal with Colonial, as their mortgage unit, which had come under DoJ investigation, posses no liability to BB&T. The offering went on sale Tuesday, and so far in morning trading the stock is up more than 2 percent. Clearly, BB&T is having no trouble raising money in the open market.

Clearly, the relaxation of mark to market has served the purpose of giving banks a breather from book value destroying write-downs. However, as Weil exposed, book value is really simply accounting fiction. Many of the credit issues that caused this mess are still yet to be worked out, and at Ockham we remain very wary of bank stocks.

As today's earnings release demonstrates, credit concerns still necessitate fortification of their balance sheet. We will continue advising investors to steer clear of Deutsche Bank for the time being because the recent economic improvements are still vulnerable and the actions of the company do not inspire a lot of confidence in the immediate future.

There were a couple of very interesting pieces of news from the this morning that I believe are important. One, a study by the WSJ, has shown that banks thus far are lending less than before they received the TARP funding. The second comes from a newsletter from John Mauldin that warns of the possibility of more TARP programs headed our way.