3 Companies Worth a Look: Allied Resource, Ryanair - And National Bank of Greece

by: Yieldpig

Three companies worth a look this week:

1. Alliance Resource Partners LP (NASDAQ:ARLP)
Recent Price: 64.51
P/E: 11.6
Current Yield: 5.14%

The Skinny:
It’s kind of neat to find an energy MLP that’s not an oil and/or gas transporter. ARLP produces and markets coal mainly to utilities and industrial users in the U.S. They’ve got all kinds: low sulfur, medium sulfur, and high sulfur. The numbers are impressive: 32% ROE, steadily growing revenue. Analysts project 2011 EPS will grow by 8 percent. Love or hate coal, the U.S. is probably close to being the Saudi Arabia of it. It’s a cheap, abundant, flexible energy source. South Africa converts it to a liquefied auto fuel. There’s got to be something we can do with it here, right? That should benefit companies like ARLP directly.

The Danger:

Although coal is plentiful, it’s one of the most reviled energy sources available. The economy, healthcare, Finreg, and the battle over the Bush tax cuts have put energy policy on the back burner. Rest assured, it’s coming back to the forefront. Coal will be praised and damned mightily. Many industries (i.e. the utilities) know this and are planning as such. Any negative legislation wouldn’t be a positive for ARLP. Also, like most of the energy MLPs, ARLP has run hard and fast this year. Units are up 48%+ this year exclusive of income. May be time for a rest.

2. Ryanair Holding ADR (RYAAY)
Recent Price: 30.33
P/E: 63.72
Current Yield: 5.97%

The Skinny:
Emerging in 1996 as the Irish Tiger began to roar, RYAAY established itself as Europe’s premiere discount airline. Pull up a chart. The climb has been pretty steady, and even as the party came to an end in 2007-2008, share prices haven’t completely cratered. YOY load factor for October was steady (85% vs. 85%) despite the battering the European economy has been taking. In general, RYAAY appears to be a well-run outfit. Fourteen years and not a single bankruptcy! Few airlines can brag like that.

The Danger:

It’s an airline domiciled in one of the “I’s” in “PIIGS.” It makes its money when people spend it on travel. Sure, there’s a lot of business travel. But leisure travel’s an important component of the number. Folks in Europe, especially peripheral Europe, will be taking staycations for a while -- quite a while. Also, RYAAY’s share price is bumping its head a wee bit on the 52-week high. With some nasty headwinds, it might make sense to stay grounded.

3. National Bank of Greece SA Sponsored ADR Non-cumulative Perpetual Preferred Series A 9.00% (NBG)
Recent Price: 18.79
Current Yield: 11.97%

The Skinny:

Greek bank junior debt? Everybody’s looking for yield? Here you go! All kidding aside, there may be some validity here. The issuer, NBG, trades under two bucks and yields nothing. The contrarian wisdom says that since Greece was the first PIIG to get hammered, maybe a lot of the risk has been extracted. While the numbers look like a movie titled My Big, Fat, Greek Train Wreck, Q2 earnings were a little better than expected, driven primarily by decent loan growth in Turkey, which is one of peripheral Europe/Asia’s more vibrant emerging markets. NBG trades at a 25% discount to a par price of $25 and is callable at par in 2013. So if -- and it’s a big “if” -- NBG can maintain the payments, you get some sick yield and a nice bump if called (with a 9% coupon, if it has the ability to refinance at a lower rate, it probably will). And remember, in any sort of sovereign debt/monetary crisis, the first sector to be taken out and shot is the financial sector. Typically, it's also one of the first to come back when the market decides that the sun will shine again.

The Danger:
It’s Greek. If you’re going to drain this swamp, be prepared for alligators. As the Greek government imposes austerity measures, the Greek citizenry has reacted mainly through street protests and tire burning. That’s usually where the ugliness starts. Greece and all of the other PIIGS -- actually all of Europe -- has some rough sledding ahead, and it will take a lot of time to work through the mess. NBG trades at around 18. It could get cheaper. It’s also non-cumulative. If the bank decides to not pay the preferred dividend, oh well. "Non- cumulative" means that deferred dividends stay deferred forever. A Greek bank? I’d say the chances of a deferred preferred dividend are better than 50%, probably much higher: mid-60’s or even 70 percent. The question is: Do you feel lucky? Well do you, Zorba?

Disclosure: None