Weighing The Week Ahead: Springtime Optimism?
- Last week saw reduced volatility.
- There is a possible seasonal inflection point - looking beyond weather effects.
- Trading outlook is neutral.
- Investors have opportunities in several sectors.
- For economic insight, you might look to economists.
Thomson Reuters: Big Without 'Scale,' But The Times Are Changing
- Thomson Reuters is fully priced in context of recent results.
- Yet it is in a turnaround -- the logic of which is very compelling.
- In the context of a turnaround, Thomson Reuters is pretty attractive. It is worth watching. The corporation has been buying back stock at prices higher than today.
ACCO Brands: Value Trap In A Tight Spot
- ACCO Brands is the world's largest manufacturer and marketer of branded office and school supplies, including staplers, notepads, and binders.
- On initial screen, ACCO Brands appears cheap with a P/E of 8.9x and P/B of 1.0x.
- Value-destructive M&A, a weak position within the industry value chain, and declining demand for office supplies due to technological change makes ACCO Brands unattractive.
- Computed intrinsic value of $4.00 implies the stock is overvalued by 50.2% vs. current price of $6.01.
- No evidence of compelling catalysts or strategic value to improve profitability.
Lands' End: Spin-Off Situation With 60%-90% Upside
- Lands' End's recent listing and subsequent price drop seem to indicate a classical spin-off special situation that should generate excess profits for investors.
- The company's online/catalog business produces stable FCF yield of 13% on current market cap. Increase in debt load will not affect results materially.
- Relative to peers, Lands' End appears to have a potential upside of 60%-90%.
- Catalysts include reduction in after spin-off selling, potential reinstatement of dividends and increased awareness of the company among investors.
Why The NeuStar Bears May Be Proven Wrong
- NeuStar became a deep value with a catalyst story.
- Huge short interest (23% of shares out) may trigger a substantial short covering rally.
- Catalyst imminent on May 6th with an asymmetric risk/reward very skewed to the upside.
Whiting Petroleum Working On The Second Act
- Whiting has established a sizable acreage in the Williston/Bakken, and continues to have years of attractive drilling prospects.
- Whiting's Redtail prospect in the Niobrara will likely be the next major source of production growth.
- The Street seems to be worried about the "maturity" of Whiting's asset base, but the valuation looks too low today.
Dividend Growth Investment Or Compounding Machine? Brenntag Could Be Both
- Brenntag is the global market leader, and enjoys strong competitive advantages.
- The company will likely continue to grow organically and through acquisitions, further increasing its profitability.
- Being highly diversified among industries and geographies makes the company largely independent from the volatility of any single specific market segment or region.
- With little net debt, a dividend well covered by earnings and excellent growth prospects, the company is worth being considered by dividend growth investors as well.
Why I'm Buying Aviat Networks Hand Over Fist
- Net cash represents nearly 70% of market capitalization.
- Currently trades for just 7% of revenue (EV/Revenue basis).
- Trades 30% below tangible book value.
- Management forecasting a return to profitability during second half of calendar 2014.
- Bullish long-term outlook in a growing industry.
Health Insurance Innovations: Positive Outcome Looks More Likely In This Binary Stock
- Health Insurance Innovations is still a good investment for investors willing to stomach risk and volatility.
- Revenues are ramping and meaningful profits should materialize this year and double next year.
- The stock looks like a binary play - in five years it will probably have been either massively profitable for investors or a complete flop.
- Earnings releases and management commentary are supportive of the positive outcome.
Cincinnati Bell Turns A Corner
- Cincinnati Bell recently agreed to sell its legacy wireless business to Verizon for $210 million.
- The company holds a 69% interest in CyrusOne with a stated goal of liquidating the investment over the next several years.
- Asset sales will help Cincinnati Bell delever itself, and focus on its higher growth Fioptics segment.
These Numbers Show That Box CEO Aaron Levie Is A Genius
- Most investors don't understand the subscription-based, recurring revenue business model of software-as-a-service (SaaS) companies.
- Annual Recurring Revenue (ARR) is a key metric for subscription businesses and a critical indicator of a company's health, but accounting rules don't recognize it.
- Box CEO Aaron Levie has built a growing, profitable SaaS company. He's a true genius - and this article explains why.
Coca-Cola: Downside Is Less Than 5%
- Improved volume trend should sustain strong cash generation.
- KO has sufficient capacity to support ~8% dividend growth and $1-$2B share buyback per annum.
- Dividend growth and yield ceiling should limit price downside, and $37 appears to be the bottom price.
- Current valuation is reasonable relative to S&P 500's level and only reflects less than 6% annual dividend growth rate.
SolarCity Retained Value Redux: The Utilities Strike Back
- With increased solar penetration, utilities are looking at a dramatic reduction in energy sales and the threat of having to write off the uncompetitive or underutilized assets.
- Connection charges and rate tiers are examples of the powerful option that utilities have to slow down solar penetration.
- Companies like SCTY and SUNE are likely to see significant compression in retained values as the utilities fight back.
How Far The Gold Sell-Off Could Go, And Strategies That'll Save You
- $800/oz. That's how low gold could go. No joke.
- Gold is still tremendously overvalued relative to its fundamental trend, masked by what is slowly being accepted as a bubble in 2011.
- Regardless of which direction gold goes from here, there are strategies that are vastly superior to buying and holding.
- A basic trend-following approach has generated almost double the return of gold with less volatility.
Where There's Smoke, There May Not Be Fire: E-Cigs
- It's not clear if Big Tobacco sees e-cigs as a potential profit center, putting all their marketing muscle behind the devices, or as a threat and crush the industry.
- Government and health agencies do not accept e-cigs as risk-free and stop-smoking aids. They are vulnerable to regulation, even banishment, and there are patent lawsuits pending.
- Investing in Big Tobacco stocks is not investing in e-cigs, but there are several independent companies making a lot of noise, and one preparing for an IPO.
Is There Adequate Bench Strength For Digital Realty?
- When it comes down to succession planning, it’s critical that each company has “bench strength.”.
- With no CEO, I feel kind of like the cruise ship passenger.
- The key question for me is making sure that the ship sails smoothly until the new CEO is steering the vessel.
- So I suppose I could jump off and redeploy the capital into a safer boat, one that has a captain.
Same Stuff, Different Year: Should Shareholders Stick With IBM?
- In all my articles on IBM, I have argued that new money was better off in other stocks.
- Now I examine whether existing shareholders should sell their IBM shares.
- Was this poor Q1 "the last straw?"
Ignite Restaurant Group: Hidden Value In The Company's Attractive Assets
- IRG's valuation has been weighed down by the Macaroni Grill acquisition, but the company's other assets are worth much more that the current enterprise value.
- Recent management shake-up at Macaroni Grill and management commentary leads me to believe that this segment is stabilizing.
- If we were to assign a valuation of zero to Macaroni Grill, instead of its current negative valuation, we could see IRG's stock move into the $20-25 range.
- Even if the business does not stabilize, the segment's attractive real estate portfolio allows for conversions to Brick House Taverns at a lower cost than new builds, or possible monetization.
Staples: Industry Consolidation Leading To 50% Upside
- The poor quarter was negatively skewed by difficult comps against a 53rd week, unfavorable foreign exchange rates, and 109 store closures.
- The market systematically underestimates the speed at which industry consolidation will take place between Office Depot and Office Max.
- The street under appreciates Staples market leading position, as well as its growing e-commerce business.
- Private equity is likely a potential suitor in a non-levered high free cash flow retailer with significant hidden value in its online business.
- Business trades at around 10x LTM earnings, with significant free cash flow levers starting in 2015.
VASCO Data Security To Benefit From Heartbleed Bug, Opportunity To Unlock Value Via Tender Offer/Special Dividend
- VDSI positioned to benefit from Heartbleed bug raising awareness of fixed password vulnerability.
- Wall Street expectations for FY 2014 look too low, Q1 earnings should be catalyst.
- VDSI should conduct tender offer for 10% of the shares outstanding at $8 per share and pay a one-time dividend of $1 per share.
- The economic situation in Europe is on the mend, will benefit VDSI order intake.
Economic Outlook For The Rest Of 2014: Stuck In Neutral
- Apparent increase in liquidity merely dormant bank reserves and not transmitting through into the economy. Personal saving rate remains low.
- Net wealth growing strongly but distribution and allocation not supportive of acceleration in short-term consumption expenditures. Personal income disposition reveals similar trends.
- Unemployment falling but more as a result of benefit expiry rather than increased employment. Job creation remains of low quality.
- Lending growth poor and related seemingly-positive metrics likely artificial. Mortgages and housing market weak.
- Capital expenditure sluggish and likely to remain so due to structural, not cyclical, factors.
Weight Watchers International - Is The Fat Lady Singing?
- WTW is currently valued at a 39% discount to a conservative estimate of intrinsic value for its business.
- Discount is due to 50%+ decline in share price over last 12 months, attributable to recent negative trends and business underperformance.
- Negative trends are temporary, while underperformance is attributable to operational issues which are all fixable - they are not indicative of permanent flaws in WTW's business model or prospects.
Do Mako Investors Realize Their Tenuous Security Position In Oceanica?
- Mako Resources investors appear to have few rights to Oceanica assets due to senior OMEX payable security. Mako investors need to ask serious questions.
- Did Josh Adam of Mako negotiate this transaction at arm's length with OMEX in line with his fiduciary duty?
- Josh Adam, SVP Finance, used Highly Questionable brokers to raise capital for Neptune (OMEX's other mining venture), according to recent disclosures.
- Is the vague J.P. Morgan Oceanica connection merely through a local Chase Private Client Florida branch attempting to sell unregistered securities to HNW investors?
Constructing And Designing The Stock Portfolio That's Just Right For You: Part 1
- There is a lot more to designing a successful stock portfolio than simply stock selection.
- Since there is no one-size-fits-all or perfect option applicable to everyone, a strong working knowledge of most of the major available options is indispensable.
- Peter Lynch presented six general categories of stocks that investors can choose from: Slow Growers, Stalwarts, Fast Growers, Cyclicals, Asset Plays and Turnarounds.
BofI Holding: After H&R Block Transaction, Still Overpriced At Almost 4x Book Value
- BOFI is over-earning and overpriced, and the H&R Block deal doesn't change that.
- Five other banks looked at the deal and passed or bid less than BOFI, indicating the low value of the asset.
- Prepaid-card issuing banks have much lower valuations and lower returns than BOFI does today, supporting our view that BOFI's profits are unsustainably high.
American Capital Agency's Upcoming Q1 2014 Income Statement Projection - Part 2
- I am projecting AGNC will report a net gain (loss) on sale of derivative instruments and other securities of ($400) million for the first quarter of 2014.
- I am projecting AGNC will report a management fees expense of $30 million for the first quarter of 2014.
- I am projecting AGNC will report a net income (loss) of ($412) million for the first quarter of 2014.
- I am projecting AGNC will report earnings of ($1.17) per share for the first quarter of 2014.
- Part 3 of the article will project AGNC's other comprehensive income (loss) amount and summarize the company's entire income statement.
HCP Is Climbing Back Up, Should I Get Back In The Game?
- It seems that Mr. Market may have found a bottom for HCP, and now, maybe it's time to get back in the game?
- There aren't too many REITs with that track record, especially HCP that boasts a record of 29 years of consecutive dividends paid.
- When selecting sound securities, one needs some kind of buffer to protect against market fluctuations – a margin of safety.
- Last year, we saw HCP's price rising, and as we often recognize, greed leads investors to speculate, to make substantial, high-risk bets based upon optimistic predictions.
Lifetime Brands: A Mundane Company, With Exciting Profit Potential
- Lifetime's mundane business belies its profit potential.
- The company expanded gross margins during the key holiday quarter, alongside rising revenues and EPS.
- With insiders owning 22% of outstanding shares, capital is being deployed in an accretive fashion.
- Continued moves to enlarge brand portfolio and international presence will increase Lifetime's addressable market.
Qiagen: Why I Prefer Waiting On The Sidelines
- Qiagen tries to drive revenue growth by boosting the global adoption of QIAsymphony and QuantiFeron-TB.
- It is highly unlikely that these products would drive shareholder value in terms of earnings and share price growth.
- The company is increasingly taking inorganic route for generating cash, which is worrisome.
- The management needs to understand that there is a fine line between responsibly growing shareholder value and doing whatever is needed for generating cash.
Hotel Industry: Competitive Factors And Discussion Of Hotel Franchisors As An Investment Opportunity
- Both hotel franchisors and franchisees experience inflation resistant growth, helping to deliver positive real returns to investors.
- Hotel franchisors exhibit strong competitive advantages and impressive returns on capital, especially amongst market leaders, making a strong case for investing in the sector.
- The hotel industry goes through regular, predictable cycles, which affects the number of guests staying at hotels, the revenue per room, and growth in the number of hotels.
- This market cycle dramatically affects the profits of hotel owners due to their high level of operating leverage, but has a diminished impact on franchisors.
- Many of the top hotel franchisors have reached lofty relative valuations, and would warrant a pullback before purchasing shares, with IHG presenting the best buying opportunity.
Immune Pharma Tackling Orphan Disease Bullous Pemphigoid
- Bertilimumab is a first-in-class fully human monoclonal antibody that is directed against eotaxin-1, a potent chemoattractant and activator of eosinophils.
- Eosinophils are implicated in the inflammatory changes seen in various inflammatory disorders such as inflammatory bowel disease (IBD), asthma, and dermatological diseases such as bullous pemphigoid (BP).
- BP is an orphan dermatological disease that affects approximately 12,000 people in the U.S. each year.
- Eotaxin-1 plays a role in the recruitment of inflammatory cells to skin lesions in patients with BP and represents a novel therapeutic target for this disease.
EMC Corp.: 20% - 25% Upside In 1 Year
- Trade: Long EMC Current price: 26.75 Expected price: 33 Upside: 23% Time: 1 year.
- Thesis: Cheap valuations, EMC on a stand-alone basis (excluding VMware) is significantly mispriced, huge cash pile, share buybacks, market leader, taking market share from competitors, sticky business, focus on innovation.
- EMC is trading at a discount even on a very conservative basis and the market is ignoring its competitive advantages including quality, breadth of offerings, strong distribution, after sales service.
Small Is Beautiful: My Favorite Bank Stock Has A Strong Quarter
- One of the country's strongest community banks, Hingham Institution for Savings showed strong growth in Q1 on several metrics.
- The stock is cheap on price:book as well as price:earnings, and has a competitive yield.
- Investors are warned that liquidity in this equity is poor.
La Quinta's IPO Should Provide An Extended Stay Of Share Price Appreciation
- Bad luck with IPO timing could price in a share price discount that would make a new position attractive.
- LQ's majority owners, Blackstone, bring an incredibly valuable active management to the company that will pay huge dividends.
- LQ's growth strategy is well planned and I expect them to execute it effectively.
Ziopharm: Attempting To Rise Again In A Crowded Space
- A year removed from a significant trial disappointment, Ziopharm is attempting to once again gain traction.
- With enough cash to carry the company through mid-2015, Ziopharm's upcoming phase two data release could be a massive boost to future prospects.
- With innovative therapeutic technology in its corner, Ziopharm's lead compound could make a noteworthy impact on considerable markets.
- After restructuring in mid-2013, Ziopharm has become leaner and meaner, putting it in a better position to achieve.
- A considerable amount of ambiguity surrounding Ziopharm's 2013 trial failure leaves many investors skeptical and suspicious.
I'm Buying W.P. Carey For The Long Haul
- S&P recently provided WPC with a strong credit rating.
- WPC increased its quarterly cash dividend to $0.895 per share, which equates to an annualized rate of $3.58.
- Carey’s 15-year track record for dividend performance “seals the deal.”.
Kodiak Oil & Gas: A New Paradigm - A Moderate-Risk Development 'Story'
- The article provides illustrative valuation analysis of Kodiak’s drilling inventory, including risks and upsides.
- The stock is priced very reasonably relative to its value potential.
- The transition into full development mode and substantially reduced operating risk should help to close the gap between the stock price and the underlying NAV.
1347 Property Insurance Holdings: An IPO Left For Dead With Upside Of 50%-100%
- National property insurers continue to reduce their exposure to Louisiana and other coastal markets.
- Premiums have skyrocketed in certain states allowing Maison to cherry-pick high margin policies.
- The volatile insurance climate as it pertains to more weather losses has been overrated and biased by Katrina.
- Lower reinsurance rates should be a nice tailwind in the near-to-medium term.
Halcon Resources: Strong Read-Across From Goodrich's TMS Result
- The outstanding Blades 33H-1 well result in the TMS reported this morning by Goodrich Petroleum has a strong positive read-across to Halcon.
- Halcon's first TMS well, the Horseshoe Hill 11-22H-1, is expected next month, and another five wells are planned to be spudded by July.
- The Blades well provides a potent catalyst for Halcon's stock. Another half a dozen offset operator well results are expected within two months.
Citigroup: High-Risk, High-Reward Turnaround
- Citigroup was severely wounded by the financial crisis, and was rescued by the U.S. government.
- Much of the repair to the balance sheet is done, but the task remains incomplete. Risks remain elevated.
- But there is light at the end of the tunnel. After that, it's a matter of realizing their true earnings potential.
- The stock is attractively priced at a 17% discount to tangible book value.
Why I'm Strongly Considering A Position In Extra Space Storage
- I often voice my disfavor for analysts, authors and investors who try to pitch some confusing thesis for a stock that is predicted to achieve high returns with short-term trades.
- Some of you may remember the 1982 new wave hit song (by Thomas Dolby), She Blinded Me With Science.
- I intend to establish a position in Extra Space at $45.00, although I have no confidence when I’ll be afforded that opportunity.
Crown Holdings: Boring, Safe, And Hugely Profitable
- Crown Holdings is a high quality company operating in an industry with high barriers to entry.
- Costs in the beverage division are lowest in the industry, incremental return of 20% on past ten years of capex.
- Business is highly cash-generative, sells at significant discount to the amount of cash that will be generated over the next five years.
- Investing heavily in growth in developing markets. Acquisition of Mivisa supports these attributes.
Is Now The Time To Buy Atrion Corporation?
- Atrion Corp. has historically been an outperforming company.
- Atrion's multiple markets and product diversity provides increased stability.
- Long-term contracts have helped provide revenue consistency.
- Despite solid performance, the stock may be outpacing the company's growth.
What Next? Clues From The Futures Markets And Other Sources
- Positioning by futures market participants has correlated with peaks in asset prices in stocks, bonds and oil since the Great Recession.
- There is a consistent message suggested now by those positions across all three investment types.
- This message suggests a bond-friendly move lower in both stock and oil prices, though the stock market may be poised for a nice rebound.
Micron Technology: Convertible Disaster
- Micron's disclosure on its disastrous convertible bonds is incomplete and this limited disclosure has been tardy in being started.
- Wall St analysts are not writing about the effects of Micron's convertible bonds.
- These convertible bonds have burnt up billions of cash equity.
Weighing The Week Ahead: A Volatility Cocktail
- Potential for Exceptionally High Volatility-- lots of events in a short week with options expiration.
- Earnings could move things either way, so planning is required.
- Traders might start by being neutral, prepared for agile moves.
- Investors could be tested. They all know the theory of fading the market on interim moves, but few can execute.
- Fundamental evidence suggests that any decline will not be a crash.
Stalwart Tankers Should Delay Their IPO Indefinitely
- STST operates with massive levels of debt and leverage that make this a risky position.
- STST will need to raise debt, or dilute shareholders on a regular basis going forward.
- STST will need a flawless execution of their growth strategy and help from financing to remain solvent.
Weight Watchers - Bear Side Of The Argument
- The company seems to be in permanent decline in its offline segment, and the number of subscribers in online business have also started to drop recently.
- Due to intense competition from free aps, as well as network effects of similar type of businesses, the rebound of Weight Watchers is very unlikely.
- Management has not acted in the interest of common shareholders, are selling stock right after option conversions and have only immaterial holdings in the company.
- Weight Watchers' significant annual interest payments are likely to consume majority of the earnings in the upcoming years, and might even cause liquidity concerns.
- Currently, there does not seem to be any upside for long investors.