AGIX Files for Chapter 11

For those of you still holding onto AtheroGenics (AGIX), the research-based pharmaceutical company with two clinical-stage drug development programs (according to Zacks senior drug industry analyst Jason Napodano, CFA, who published a report on AGIX last week), the company has just announced today it has filed for Chapter 11 bankruptcy.

The question now seems to be who, if anyone, will pick up the pieces of the late-phase candidates AGIX had been developing.? But for anyone shocked by today's announcement, they shouldn't be. From the same AGIX report: "The company recently released phase III data on lead compound AGI-1067 that did not meet the primary end point."

And this: "In September 2008 AtheroGenics announced it will not repay the its 4.5% Convertible Notes due September 2, 2008, nor will it make its scheduled interest payment on the 2008 Notes or the 4.5% Convertible Notes due March 1, 2011."

Scientific Games a Smart Play

Scientific Games (SGMS) has a leading position in several markets, including the instant ticket and online lottery markets. In addition, Scientific Games continues to win significant contracts in both the instant ticket and online lottery markets from both domestic and international lottery authorities.

Also, the company has made several acquisitions that have accelerated top-line growth. Ron Perelman, a world-renowned private investor, owns 28.1% of the company's stock. The Buy rating is maintained.

Scientific Games is currently selling at 20.6 times trailing 12 month earnings. Over the last few years, the stock has traded in a wide P/E range of 16 to 38. The stock traded with a significant P/E premium as a result of the company's leading market position. The six-month target price of $33.50 is based on a 30 P/E multiple on 12-month trailing earnings.

Sohu.com a Buy to $65

Sohu.com, Inc. (SOHU), is a leading online brand in China. Services provided by the company include news, search, e-mail, games and wireless messaging. The company offers services through one of the most comprehensive matrices of Chinese language web properties and proprietary search engines.

Although Sohu faces fierce competition from different fields including brand advertising, online games, wireless value-added services, and search, the company manages to be a main player in almost each field. Sohu has a well-known brand and rich website resources to leverage the great opportunities for online business in China.

Internet penetration is accelerating (in China), which is very positive for Sohu. Overall, we think the current stock price is undervalued. Therefore, we are maintaining a Buy rating on SOHU shares. Due to the current market malaise we are reducing our target price to $65.

Barclays Plc Kept a Hold

We are maintaining our Hold on Barclays PLC (BCS). The company will report its third quarter trading update on November 17.

We are reducing our EPADS estimates to $3.80 from $4.00 for 2008 and to $4.20 from $4.50 for 2009, mainly due to recent appreciation of the $ against other currencies.