Today's 3 Stock Picks: AAPL, CHK, HIG

Investors bit into shares of Apple (AAPL) Monday on reports that Wal-Mart Stores (WMT) will become the second mass retailer after electronics chain Best Buy (BBY) to sell the popular iPhone.

Juicing the news was a Friday report from Kaufman Brothers analyst Shaw Wu that said "we believe a $99 Apple cell phone is inevitable." The 8GB models to be sold at Wal-Mart will retail for $197, according to published reports, but Wu suggests that a low-end product would round out the iPhone line.

Wal-Mart and Apple representatives declined to comment.

Despite the current stiff price tag for an iPhone, Wu points out that the retailer and service carriers will likely be willing to subsidize a lower hardware price because of iPhone's ability to drive higher average revenue per user with $30-$45 data plans in addition to voice plans.

"The math works — it's just a question of whether they want to do it now," Wu says. "The iPod used to be a $400 device. Now they have models for as little as $50."

A quick read on Black Friday shopping results by Thomas Weisel Partners analyst Doug Reid boosted his confidence in Apple's market-share gains in personal computers, smartphones and music players, despite the grim economic backdrop.

He said Dec. 1 that Apple's retail same-store sales were flat to slightly up, better than Best Buy figures. Wu says it's not just the prospect of cheap, cool phones moving the stock on Monday. "We think it's one of the better names to own in a tough time," Wu says. "When the market turns positive, this will benefit from that a great deal."

Bottom Line: Buy
Apple's got the market share that sets it apart from its rival, even when people aren't spending a whole lot of money. When the economy improves, that will be amplified to shareholders' benefit.

Chesapeake Energy (CHK) rebounded from Friday's five-year low after it backed off plans to raise another $1.8 billion through a secondary stock offering.

On a Monday conference call, CEO Aubrey McClendon followed up a weekend announcement halving plans for a 50-million-share offering recently filed with the SEC. He said the company would "live within our means" and curb an aggressive plan to expand drilling for natural gas.

Shares dropped 44% from Nov. 27 through Friday's close as investors worried about the dilutive effect of new shares.

McClendon said Chesapeake has about $1.5 billion in cash and will build up its currency holdings by as much as $4 billion. It plans to end the year with about $2.5 billion in cash, and sought to allay fears that it lacked sufficient liquidity. He said the company would cut back capital spending so that it didn't have to sell off parts of its business.

"We have created more value in the past few months than any other company in the industry, yet our external value has plummeted by taking all possible liquidity concerns," he said. "By today's announcement we believe the focus in analyzing our company can return to what are the cash flows and profits we can generate and the asset values that we control."

The strategic shift was applauded on the Street.

"We believe CHK is finally adjusting to the new reality after seeing its shares tumble [about] 45% in the wake of plans to raise equity to continue with an overly aggressive drilling/acquisition program," Jefferies & Co. analyst Biju Perincheril wrote Monday. "A new plan limits spending to internally generated cash flow — a welcome change in the right direction."

Bottom Line: Buy
Management owned up to a mistake, and investors who can handle more modest growth could call this a bargain, despite plenty of upcoming volatility.

Shares of Hartford Financial Services Group (HIG), which doubled in value on Friday, continued to climb Monday after the insurer reassured investors that it now has a bigger cushion for any dips the market may take.

Hartford CEO Ramani Ayer spoke to an investor conference Friday and said the company was in better shape than the market believed, regardless of possible benefits from any federal rescue funds.

"We believe that asset prices that are reflected in today's pricing are far, far below what we believe is the intrinsic economic value of these portfolios," he said. "And so, I believe that there is great spring-back value in the asset portfolio of The Hartford that is not even recognized by investors as they consider the value of the company."

It will cut holdings in some of its hardest-hit investment areas and will reinsure part of its business, as well as boost prices on variable annuity features that guarantee a minimum death benefit or minimum withdrawal amounts, he said.

That's good news, but Jeffrey Schuman, an analyst at Keefe Bruyette & Woods, said investors shouldn't yet jump for joy, and that the company is far too mired in the worst of the financial crisis to be seen as truly recovered. That sentiment may explain why Hartford gave back most of the additional gains it booked at Monday's open.

"While the market naturally responded with relief to the notion of better life capital, the sudden and dramatic change in management's capital estimate also deepens our discomfort that variable annuity risks are too complex, too mysterious, too opaque, and too fluid for investors to embrace," he wrote.

John Nadel, at Sterne Agee & Leach, added his own skepticism in a Tuesday note.

"While HIG could continue to work from here on the long side, we remain on the sidelines, at least until we can gain further clarification from follow-ups with management," he said. "No doubt the bar was very low going into HIG's investor day, and the news was incrementally positive, but worthy of a doubling of the stock? Our view, at least for now, is there was not nearly enough detail to get to that level of conviction."

Bottom Line: Hold
Shareholders are still well underwater here even with the bump. There could be more upside if the feds step in further, and more downside if company assertions don't pan out. This is the kind of headline news bump that points up volatility, rather than fundamental improvements.