Every week Barron's puts out a weekly magazine covering the markets and equities. It is widely read within the industry and by sophisticated investors. A positive article on a company can produce a nice pop the following week in the stock market. Here are three stocks that were profiled in a positive light this week and look like good long-term values as well.
Allstate (ALL), the #2 domestic personal insurer, was put in a favorable light this weekend. In a spotlight article, it was postulated the shares could rise some 50% over the next few years. Among the positives highlighted in the article was the company's improving balance sheet, its purchase of an online insurer platform Esurance which is growing at 30% a year, and the company's decision to tilt its bond holdings to short maturities to lessen the impact from interest rates rising if the Federal Reserve loses control of credit markets.
The shares do indeed look cheap at just over 9x next year's earnings and 14% above book value. It also should benefit like most insurers from rising interest rates which should increase the returns from its investment portfolio. It pays a yield of 2.1% and has a dividend payout of less than 25% of earnings. This should be increased substantially over the coming years as the company continues to put the remnants of the financial crisis behind it.
The giant international telecom carrier Vodafone (VOD) also received positive mention in a short article in this week's magazine. It was hardly unexpected that this British company would get some good press this week as it appears it is set to receive some $130B for its 45% stake in Verizon Wireless from Verizon (VZ). The company should be able to utilize its proceeds to reduce debt and focus on its European operations. The firm might also attract the interest of AT&T (T) once the deal is complete according to the article.
The shares yield nearly five percent and once the Verizon deal is finalized, dividend payouts should increase substantially over the coming years. I have held and been positive on the prospects for the stock for quite some time. Obviously, investors will need to digest details of the mega-deal but the stock should still have appeal after this huge transaction. Europe is slowly turning around and the company will have a huge hoard to better reward shareholders, target new opportunities and greatly improve its balance sheet.
Carmike Cinemas (CKEC) is the last of the many companies that received nice write-ups in this week's periodical. The magazine praised its CEO for reviving the firm over the past four years by paying down debt, making solid acquisitions, closing underperforming locations while opening new ones in promising locations. Barron's expected that further gains lie ahead as the industry undergoes consolidation and Carmike adds some 20% to its screen count in the next few years. Finally, the article postulated the fair value of the shares was $27 a share, significantly above its current price of $17.50.
CKEC looks undervalued at just over 5x operating cash flow. It is also selling at a discount to peers like Regal Entertainment (RGC) and Cinemark Holdings (CNK) based on EBITDA. The mean target by the seven analysts that cover the stock is north of $23 a share. In addition, summer box office receipts have been strong and overall 2013 box office tickets are now running over 2012's record levels. Finally, Carmike's 20% stake in cinema-advertiser Screenvision should be worth ~$2 a share.