Valero Energy: Still Not Stopped By Cheap Oil
- VLO has beaten EPS estimates for 12 quarters, often by wide margins.
- VLO valuation is now closer to, but still below both comparable peers.
- Lower multiples are not justified, and peers may be undervalued too.
Micron: Q2 And The Road Ahead
- Q2 earnings are modeled and will be disappointing.
- Downside risks abound over the course of the next four months but calendar second half will be very positive.
- Micron remains an excellent intermediate to long-term investment.
Freeport-McMoRan: Be Bullish, Not Absurd
- Over the weekend, I read a piece on FCX that created irrelevant comparisons.
- The piece also slammed contributors on Seeking Alpha, which prompted me to respond.
- Freeport-McMoRan is in my portfolio, but I don’t kid myself about the value.
- Liquidity issues shouldn’t be destroying the company, but they are substantially more significant now than before.
- By comparing FCX to mining companies, an unfair comparison is made that ignores the difference in the sales composition of each company.
Twitter: Sisyphus And The Periscope Pull Forward
- TWTR has been pushing a boulder of doubt and industry skepticism up the valuation hill only to see it trickle down from the heights achieved.
- I believe TWTR's Periscope acquisition materially changes the narrative at the company and will drive future year estimates much higher.
- This should allow TWTR's projected near, mid, and long-term multiples to come in-line with peers much sooner than currently modeled.
- With the market historically willing to pay ~24 months forward growth for shares I believe this will move TWTR shares higher on all durations.
- I'm looking to get levered long TWTR on this company altering announcement.
Facebook F8 Wrap-Up: Bullish On Messenger And Oculus
- Remain bullish on FB post-F8 conference.
- FBM remains the frontrunner for FB's mobile communication push.
- Expect Oculus shipment in 2H15. Strong content pipeline in 2016.
New Apple TV? Ask Why, Not When
- Following Apple's promise of new products and the HBO Now announcement, there have been an increasing number of predictions for new Apple TV hardware.
- After studying Apple's product history and digital video trends, there are few reasons for new Apple TV hardware anytime soon. Lack of new hardware should not matter to investors.
- The growth of Ultra HD content and DRM will necessitate new hardware. There are also opportunities for a new model or a completely new product.
Busting The Myth Of Grid Parity: The Residential Solar PPA/Lease Death Spiral
- The grid parity talk coming from the solar industry and analyst community is especially misguided in the context of residential solar.
- We do not believe residential PPA/lease instruments will reach grid parity well into the next decade.
- The talk about a utility death spiral is misguided - what is about to die is the lease/PPA business model.
Landauer - New Competitive Product Threatens Core Business
- LDR's Radiation Measurement business drives nearly all of LDR's profits and faces a new competitive threat that could erase more than 50% of EBITDA.
- We believe Instadose 2, developed by LDR's primary competitor, privately-held Mirion, is ramping up commercial production and will beat Verifii to the market by at least 1 year.
- LDR hopes to launch Verifii (similar to Instadose 2) in calendar 2016. We are skeptical LDR hits their timeline and think late 2017/2018 is more likely.
- At a recent industry conference, Mirion noted a waiting list of nearly 195,000 units of Instadose 2 badges (~10% of the market), many of which are currently LDR customers.
- LDR trades at 10.7x FY15 EBITDA with 3x leverage. We think the stock is worth $5 to $25 and that investors are unaware of the threat posed by Instadose 2.
Why I Think Melcor Development Is A Buy
- Melcor Development is a real estate development company operating primarily in Alberta.
- Past results indicate to me that the company is well managed.
- My guess is the depressed share price is due to predictions of a rough property market in Alberta due to depressed oil and gas prices.
- My estimate is that shares have about 40% of upside potential from current levels. As such, I have bought an initial position.
U.S. Shale Trends Indicated By Production Prowess Of Pioneer And RSP Permian
- Pioneer Natural Resources depicts an industry-leading efficiency drive in shale manufacturing.
- Its unique Permian position makes it a benchmark for Permian-based U.S. production.
- The increases in oil recoveries per well offer insight into why U.S. production continues to grow in spite of reduced rigs counts and capital spending by producing firms.
- Not all firms have Pioneer and RSP Permian-specific attributes, but production inferences industry-wide can be gleaned.
Sears Holdings: The End Game
- Sears Real Estate Investment Trust (REIT) as a value destroying project.
- The “fraudulent conveyance” risk.
- The impact and the limits of financial engineering.
- Advertising budget mostly affected by the most recent manifestation of Sears’ milking strategy.
John B. Sanfilippo: Severely Mispriced With Significant Near-Term Upside
- Trading at a very low multiple for a CPG with high returns, low economic sensitivity, and an attractive growth profile with limited capex needs.
- Ongoing mix shift leading to significant margin expansion and value creation.
- Recent overreaction/misunderstanding surrounding immaterial news has created a unique buying opportunity.
- Stock has +50% upside and potentially upwards of 140% in the event of a sale.
Sphere 3D: A Short So Fat, When I Yell 'Hey Kool-Aid!' It Comes Crashing Through The Wall
- Sphere 3D is a recent assembly of four money-losing companies.
- The majority of the company's valuation is linked to its "Glassware 2.0" virtualization software.
- I believe the company is setting up for disappointment with material downside in the share price possible, if not likely.
Williams Companies: Playing The Gas Infrastructure Super-Cycle
- WMB offers top-class capex pipeline to support robust dividend growth for the foreseeable future.
- Market valuations don't fully reflect the post-merger benefits of WPZ/ACMP deal.
- Little linkage of revenues to short-term energy price swings with majority contracts being fixed-fee.
- Under-appreciated value of the company's GP interest in Williams Partners.
Mattel: The Fork In The Road
- Using Jim Collins’ book How The Mighty Fall, we can see that Mattel’s decline has been a long time coming.
- This article walks readers through each step of the decline to show how they got to where they are today.
- Mattel is at a fork in the road: acknowledge it has problems and take them seriously or keep going down the path they’re on.
ACADIA Pharmaceuticals At $30: The Upside Doesn't Justify The Risk
- ACAD has declined sharply in the last couple of weeks as hopes of a buyout were replaced with the reality of another NDA delay.
- ACAD has increased nearly $2 billion in market cap since the positive FDA ruling in April 2013 while making little progress in transforming into a commercial company.
- Analysts rate ACAD a buy but their reports show very aggressive assumptions that don't lead to very high price targets.
- I believe ACAD could see $15-$20 this year if the overall biotech sector cools off.
FRP Holdings: Small-Cap Real Estate Spin-Off Valued At 35%+ Premium To Current Market Value
- Spin-off of FRP Holdings creates a repricing opportunity.
- Margin of Safety: The market incorrectly assigns a negative value to the company's developed land.
- Board and management have a long-term view and are shareholder-friendly.
How Facebook Can Use Messenger Platform To Create Billions Of Dollars
- FB unveiled Messenger Platform at its f8 conference on Wednesday.
- While most are talking about ESPN and the Weather Channel as application partners, I am more focused on the retail aspect of this new service.
- Through retail and other recently announced payment services, FB has a legitimate chance to compete against EBAY and WU long term.
- Lastly, FB is even set up nicely to compete against MA and V as a payment processor.
- The end result could be billions of dollars annually, a payments segment that's just as large as advertising for FB.
Energous: More Reasons To Be Dubious
- I did further digging on Energous.
- I ended up finding further signs to be dubious of Energous' prospects.
- I believe Energous' story was legitimate at inception, but has been hijacked to use in a stock promotion.
- This is so regardless of whether Energous' technology pans out or not.
Wayfair's Slow Growth Won't Be Able To Uphold Its Ultra High Valuation
- Given Wayfair's recent IPO, excitement has caused it to have a very high valuation which will likely correct post lock-up expiration on 3/31/15.
- Traffic analysis of Wayfair.com shows that traffic is no longer growing significantly, and might be actually declining, which suggests growth expectations will disappoint.
- Peer e-commerce firm Zulily, has been decimated after high expectations disappointed. Wayfair has a similar business model – could it become ZU’s horror film sequel?
- Right now is the opportune moment to sell or short Wayfair since it’s up 60% year to date and its lockup expiration is next week.
The Bancorp: Continuing Problems With A Discontinued Operation
- The Bancorp filed a NT 10-K recently notifying the SEC that it had failed to file its 2014 10-K within the allowed 75 days.
- We believe that the reason for this failure has been a reconsideration of the markdown of the loan portfolio associated with its discontinued commercial lending operation.
- The Bancorp has until March 31st to file a 2014 10-K. We present the case that the bank will be booking an alarming 5% to 10% additional markdown.
- As a result, we believe that the stock will drop another 15% in the next week and will test its 52-week low of $7.81 a share.
Fusion: Cloud Services With A Ground Level Valuation
- Cloud services is a large and growing market.
- Fusion is a compelling value opportunity in a growth industry.
- Stable revenue base and acquisition strategy lead to continued solid EBITDA growth.
- Liquidity issues need to be overcome for Fusion to achieve peers' valuations.
BlackBerry: Even The Bulls Are Giving Up On Hardware
- Recent bullish sentiment on BlackBerry acknowledges hardware weakness, but points to software and services as growth areas.
- Enterprise mobile device management is pointed to as an opportunity for BlackBerry.
- The ongoing collapse of the hardware business will probably force BlackBerry out of hardware some time in the coming year.
Gray Television: Another Shade Of Gray
- Retrans fee hikes have been surprisingly strong, which has boosted Gray's share price, but network reverse comp hikes are being underestimated by the company and investors.
- TV ad sales have been sluggish. Now that the economy has recovered from the Great Recession, TV ad sales may be showing signs of "glacial melt" due to digital encroachment.
- We are short (and have been short-term wrong), but remain so with a $9 one-year target price.
TimkenSteel: Deteriorating Fundamentals Create Short Opportunity
- TimkenSteel is facing a prolonged period of downward pricing pressure due to the supply/demand dynamics of the steel market.
- Dividend and share repurchase will not be covered by cash from operations in 2015, forcing the company to increase leverage above internal targets.
- Exposure to the exploration aspect of Oil & Gas drilling leaves the company very exposed to declines in the North American rig count.
- The company is trading at a significant premium to peers, but looks cheap when initially screened due to lofty sell-side expectations.
- Return characteristics of an LBO do not look attractive, making a takeover less likely in my opinion.
Adobe: The SaaS Company That Grew From Zero To 4 Million Subscribers In 2.5 Years
Southwestern Energy: Double Down Or Fold?
- Value resides in what's lesser known and obvious.
- Analysts / sellers are looking at historical data.
- Market is mispricing fundamental changes.
A Closer Look At The Future Of Danaos Corporation
- Containership rates are on the rise, and Danaos Corporation could benefit.
- The macro outlook seems favorable, and a thin orderbook - especially in the 8,500 TEU class and under - provides some hope for Danaos Corporation.
- Prudent management looks to be paving the way for a reinstatement of dividends.
Kroger: The Top Grocer Earns Higher Multiples
- KR is the industry leader, but is still valued well below the industry.
- KR may not quadruple again soon, but it still has significant upside.
- Tech innovation is actually a growth driver for this particular grocer.
- Whether full acquisitions or select assets, expect more deals from KR.
Railcar Makers: Deep Value In An Overbought Market
- The collapse in oil prices since the summer has decimated most of the energy sector and a good portion of other industries which serve the energy complex.
- One of these industries is the rail car manufacturers where oil tank car demand has been a key source of growing revenues in recent years.
- The sector has been oversold as the industry has little spare capacity, a growing backlog and cheap companies. Below are two stocks that should rebound sharply in the near future.
Will Apple, Sony And DISH's Cord-Cutting Plans Really Make An Impact?
- Apple, Sony and DISH have all announced plans to get into the streaming subscription game, but each are missing a few key elements.
- Sporting events remain a hot button topic as none of the three can confidently say they have the average sports fan covered.
- Live streaming aside consumers are still going to want a Netflix, Hulu or Amazon type subscription as a companion service and that’s going to bump their monthly price up.
Essex Rental: Technical Default Masks Massive Value; Triple-Digit Returns Possible
- ESSX trades at under $0.80 per share, with an appraised orderly liquidation value of over $5/share. Going concern value could be significantly higher if/when crawler utilization improves.
- Given the debt load, the situation is not without risk, but the current enterprise value is below the company's borrowing capacity as assessed by conservative lenders.
- The valuation discount seems too extreme; investors could see triple-digit upside over the next year or two.
The 10 Biggest Myths About Resonant
- Misinformation and misunderstandings have created a compelling buying opportunity under $10 for speculators. But do your own due diligence first.
- Top-tier banks and institutions, including Barclays, are taking increasing interest in the company.
- Securing a first design win with leading RF front end suppler, Skyworks, is the next key catalyst.
- Once commercialization commences, performance of Skyworks' and Avago's stocks demonstrate upside is multiples higher for RESN, as RF industry is in a multi-year, rapid growth trend.
- Risk averse investors should wait until after a design win is announced and technology risk is completely eliminated before entering a position.
Tessera Technologies Offers Investors The Complete Package
- My investment thesis is that Tessera Technologies presents a highly appealing investment opportunity as a unique technology innovation and intellectual property licensing firm for semiconductor packaging and image processing solutions.
- Key investment merits include a leading market position, high entry barriers, significant market potential, strong growth opportunities, robust margins, healthy balance sheet, strong cash flows, shareholder-friendly management, and attractive valuation.
- Key investment catalysts include additional sales opportunities (including both recurring and episodic revenues), potential merger and acquisitions, and increased investor awareness.
- Key investment risks seem manageable and include customer concentration, technology displacement, patent obsolescence, potential litigation, and slow uptake of new technologies.
- My analysis of the "thesis tiles" composing the Tessera Technologies "investment mosaic" suggests that it offers equity investors the complete package: High quality, strong growth, and attractive value.
KGHM Starts The Largest Investment Program In Its History
- KGHM wants to produce 1 million tons of copper in 2020.
- The results reported in 2014 confirm that the company is very effective in capital allocation.
- In the short term, the company's results may be boosted due to the U.S. dollar strength.
Intel Or TSMC? Which Deserves Your Investment Dollar?
- Intel and TSMC have close to the same market cap, but have radically different sales and trajectories.
- Intel is losing badly in the growing mobile market, while TSMC is expanding with it, allowing for a larger Capex than Intel in 2015.
- TSMC has far stronger partners, but also stronger competitors.
- High resale values for used iPhones have been pointed to as an “insane advantage” for Apple by helping defray the cost of new iPhone models.
- While high resale value indicates the inherent worth of the iPhone, it doesn't drive new iPhone sales.
- The key advantages that drive new iPhone sales for Apple are its mobile operating system and ecosystem, its custom-designed processors and its superior systems integration.
Sina/Weibo Relative Valuations Present Huge Arbitrage Opportunity
- We estimate the value of Sina's stake in Weibo, plus the cash and investments on its balance sheet, is worth over $50/share, or 55% upside from SINA's current share price.
- Sina's stake in US-listed Weibo alone is worth over $28/share to SINA shareholders. Net cash and investments are worth another $22+/share.
- SINA management has been taking advantage of its ample balance sheet and this market inefficiency by aggressively buying back its stock, a fact that has gone largely overlooked by analysts.
- We lay out a relatively simple long/short pair trade in SINA/WB to capture this arbitrage opportunity.
Outerwall - The Company Everyone Loves To Hate
- Continued share buybacks at depressed prices.
- Management's commitment to share buybacks.
- 1-year PT - $90.
Activision Blizzard: Priced For Perfection, With Headwinds Coming
- ATVI has gone from a 10-12x P/E stock to a current valuation near 20x 2015 guidance.
- The massive repurchase of Vivendi's stake has hidden the fact that the net income has been flat for five years.
- With the market assuming perfect execution and lowballed guidance, any slip in Q2 numbers could lead the stock down sharply.
Despite Recent Strong Gains, There's A Lot More Upside In Panoramic Resources
- Panoramic has re-rated 56% since mid December, when I highlighted the 20% plus cash flow yield the company offered to investors in 2015 and 2016.
- Since then, Panoramic has announced a potentially significant new discovery within its Lanfranchi Mine, potentially extending it 3 years beyond late 2016 and further de-risked its other exploration projects.
- The next 3-6 months of resource definition drilling will be a tipping point for Panoramic, with the stock likely to increase 129% as these additional reserves and resources are booked.
- PAN should also see a re-rating in its share price as its current short mine life discount is removed, which alone should increase to the share price some 74%.
- Even ignoring the strongly encouraging exploration drill results recently, the company's existing reserve base is already sufficient to deliver an investor today a payback period of around 2.5 years.
Throw The Dice With Eldorado Resorts
- Eldorado Resorts, a somewhat geographically diversified regional gaming operator, is the result of a recent merger between El Dorado casinos and MTR gaming group.
- ERI is under followed and under valued, but major analysts have taken notice so that may be about to change.
- I see 40% upside in 2015, particularly if they are able to successfully refinance debt this summer.
Alibaba: Short-Term Problems May Continue, But This Is Why It's Still A Long-Term Winner
- Alibaba: The who, what, where, when and why.
- Why Alibaba meets Warren Buffett's advice of "Be fearful when others are greedy and to be greedy only when others are fearful.".
- With a price target of $120, investors today could potentially see a return of close to 50% on their investment within the next 12-18 months.
Herbalife: Mr. DeSimone's Neighborhood Of Accounting Make Believe
- Herbalife’s Q4 2014 “Adjusted Net Income” results failed to meet management’s guidance which was delivered only weeks earlier - again.
- Herbalife's list of non-recurring (but consistently recurring) "add-backs" to GAAP net income grows longer with every passing quarter.
- Chief Financial Officer John DeSimone appears to be propping up reported GAAP results with aggressive accounting techniques.
- The quality of Herbalife’s earnings has deteriorated significantly since the third quarter of 2013, as cash generated from operations (including Forex) is now substantially lower than reported GAAP net income.
- Herbalife’s financial picture continues to deteriorate as balance sheet strength, book value, cash flow and operating performance have been negatively impacted by reputational disfavor.
The Insane Apple Advantage Revisited
- Apple has historically had an insane advantage that few talk about, but is crucial for it being able to sell a massive number of high-priced iPhones.
- As it stands, this advantage might be narrowing significantly.
- If such narrowing is to persist, it might become a significant problem as soon as the iPhone 6S replacement cycle comes around, later in 2015.
Aflac Is Undervalued In This Hot Market: Don't Buck The Duck
- Aflac is one of the best-run insurance franchises in the industry.
- Shareholder-friendly management rewards patient investors.
- Investor concerns over yen/dollar currency exchange is overblown.
- The shares trade far below fair value; it's one of a dwindling number of undervalued securities in today's hot market.
Intel Inside The World's Possibly Most Powerful Android Phone
- Asus has released its new flagship ZenFone 2 Android phone. It’s cheaper than Xiaomi’s Mi4.
- In spite of its 4GB of RAM, premium build, and superior camera technology, the ZenFone 2 retails for less than $300.
- The high AnTuTu benchmark score of the ZenFone 2 confirms Intel's older x86 Atom mobile processors are as good as Qualcomm’s Snapdragon 800 series.
Rexnord: A Private Equity-Backed Industrial Company Supplying Mission-Critical Products
- Rexnord's high EBITDA margins and strong recurring aftermarket revenues for its Process & Motion Control business should persist in the future.
- The company's Water Management segment has benefited from a growth in specified products and retrofit installations.
- Rexnord's M&A growth strategy is sustainable, considering the low valuation multiples that it paid for target companies in the past and its ability to generate strong free cash flows.
- A three-year target price of $39.76 implies 51.3% upside, or an annualized investment return of 14.8%.
Cat-astrophe? No, But There Is A Good Case Against Caterpillar Shares
- Caterpillar Inc. has seen its business prospects dim over the past few years.
- Its stock has held up better than its earnings.
- Multiple trends that affect the most variable parts of its business show few if any signs of improving, and several have continued to worsen.
- The downtrend in resource stocks is reminiscent of other major busts the past 15 years, thus CAT shares could have much farther to fall.
Will TheFind Help Facebook Make Inroads In The E-Commerce Space?
- Facebook will control e-commerce because it is the place users spend the most time online.
- This makes buying online more convenient.
- The new buy button, product ads and purchase of TheFind will accelerate this initiative.
- Facebook can use its data to help firm's figure out which product to produce.
- Facebook can tell consumers which products their friends like. In the future this may be used with the smartwatch to encourage purchases.