Last week, General Electric (GE) management announced it was buying Lufkin Industries (LUFK) for around $3 billion in cash.

Prior to the announcement, Lufkin's stock was down roughly 20% for the past 12 months, while the S&P 500 was up 12%. Even after this announcement, the shares are only up 10% in the past 12 months. This performance differential makes the acquisition look like an opportunistic buy.

This acquisition also fits into GE's strategic plan well. GE has discussed its desire to focus on industrial businesses. It has mentioned it would like the percentage of earnings from industrial areas to make up 60% to 70% of total earnings. Toward this goal, it has agreed to sell off its stake in NBC for $18 billion. Also, Mr. Immelt has discussed making small industrial acquisitions in the $3 billion range.

While this appears to be a well-timed purchase that fits with the

Warrants are relatively common for banking stocks these days and they are a popular way to gain long-term leveraged exposure to the companies. Outside of banking stocks though, warrants are relatively rare. There are two series of General Motors (GM) warrants that trade though. These warrants, like most bank warrants, were created when the government bailed out the company in the recent financial crisis.

One popular aspect of many TARP warrants is dividend protection, where the strike price of the warrant adjusts downward by any amount of dividends paid over a specific threshold. Regretfully, these GM warrants carry no dividend protection. Thus warrant holders should strongly prefer share buybacks instead of dividends if GM returns cash to shareholders.

The table below shows the relevant information about the warrants including their strike price, expiration date, and current price. Also, the table shows the time value of the warrants per year till

This is Part 6 of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value. Part I, on AIG, is located here. Part 2, on Bank of America (BAC), is located here. Part 3, on Citigroup (C) is located here. Part 4, on Wells Fargo (WFC) is located here, and Part 5, on JP Morgan (JPM) is located here.

As a result of the financial crisis and the aid the received from the government, warrants on The Hartford Group (HIG) were created and later sold to the public. Some general information on warrants can be found here. The Hartford warrants expire June 29, 2019 so the warrants provide a great way to gain exposure to the company until then. Also, the stated strike price is $9.79, which is well below

Bank of America (BAC) has been a continual underperformer amongst large money center banks since the financial crisis. As a result, the bank trades at 0.6 times book value. Recently, the most popular investment thesis for the company is a 'mean reversion' trade. This article looks at how much mean reversion potential there is for the bank going forward and the steps the bank is taking to achieve this.

Their underperformance has been largely attributed to mismanagement and the acquisition of Countrywide during the crisis. The bank is working hard to put these troubles behind them with new cost-cutting steps being taken by Brian Moynihan. Additional information on these cost-cutting steps should be provided in their next earnings report, which could prove to be a positive catalyst for the stock. Also, their legal troubles stemming from Countrywide and other mortgage deals are slowly being resolved.

All of these efforts

LEAPs have historically been the best way to get long term exposure to stocks without actually buying the stocks themselves. A new vehicle for this exposure was created when the government bailed out many companies during the financial crisis. As a part of some of those bailouts, the government was given warrants that expire in the 2016-2019 time frame. These warrants have since been sold off by the government and are now publicly traded.

These warrants provide a range of benefits over LEAPs for investors trying to get low cost leveraged exposure to companies over a long time period.

Longer Time Frames

The most obvious benefit of these instruments is their longer times till expiration than LEAPs. For example, the GM (GM) Series B warrants and the Bank of America (BAC) Series A warrants expire in 2019 while the JP Morgan (JPM) warrants expire

There has been a lot of news recently about Dell (DELL) and potentially higher buyout prices than what Michael Dell and Silver Lake have offered. This news has sent Dell's share price well above the only firm offer extended to shareholders. The table below lays out the current share price with relation to the expected offers.

To put all of this into perspective, Dell was around $10.00 per share to start the year before these bids materialized. Also, Dell has lowered their earnings estimate for future years several times since the offers were put together - that's not a good sign.

With the current share price, the risk-reward offered to investors is not great. The best outcome for investors is the bidding war continues with all parties raising their bids - but Wells

The banking industry as a whole is in vogue right now in the market - but there are several lingering issues with the banking system which hurt profitability. These include slow loan growth and high charge-off rates.

There is a sector of the banking industry that is not suffering from either of these two issues - agricultural lending.

The figure below shows the continued growth in agricultural lending over the past 20 years.

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Not only has the total loans outstanding continued to increase, the delinquency rates for agricultural loans remain well below the average delinquency rates for all loans. The graph below shows agricultural charge-off rates (blue line) and the charge-off rates for all loans (red line).

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The table below, with Q4 2012 data from the FDIC, shows the 12 public banks with the highest dollar value of agricultural loans outstanding and the percentage

Copper has had a rough month. The commodity is down over 10% in the month of February and is not off to a good start in March. Freeport McMoRan (FCX) itself has had a bad year as well, down 7% when the overall market is up over 6%. This severe drop is about to present a good buying opportunity for investors who want exposure to the global growth theme.

The chart below (from CME), shows the performance of May copper futures over the past several months. In February, the contract fell roughly 10% on strong volume, which is a negative technical sign. The biggest reason for copper's weakness is growing global growth concerns. An increasing amount of data suggests the situation in Europe is worse than previously thought and data from Asia continues to be weaker than expected. Another factor in the drop in commodity prices is the

On Thursday after the close, AIG reported better-than-expected results, with a profit, excluding one-time items of 20 cents per share versus an estimate of a 9 cent loss. Shares opened up over 5% Friday and closed up over 3%.

Now that I've had the weekend to dig through the results and all the interviews the CEO, Bob Benmosche, gave, I still believe AIG is very under-valued but the story is getting more complicated. Here are my big takeaways from the company's earnings and other recent news:

Complicated and a Little Risky

The company has a lot of moving parts, which muddy the story a lot. The slide below, from the Q4 earnings presentation (pdf), illustrates this.

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Of the eight metrics presented in the slide, five changed over 70% from the quarter a year ago. While it seems to be managing the changes well, changes that

On February 7th, the Federal Reserve Bank of St. Louis released a new batch of FRED data on the auto sector. Nearly all of the data suggests the environment for auto stocks is getting better - and has a long runway to continue to improve. I believe this data is particularly bullish for Ford (F), which is arguably the best run domestic producer.

Here are three sets of data in particular that illustrate the recent improvement - and how much potential there is for Ford to continue delivering for shareholders.

Total Vehicle Sales

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Total vehicle sales have rebounded sharply from the 2009/2010 lows of below 10 million units sold per year. The recent estimate is 15.7 million sales per year. From the chart, this is still over 1 million vehicles per year below the average from the late 90s through 2007. If the auto market returns

I stumbled across Blackrock Kelso Capital Corp (BKCC) looking for a high yielding stock (10%), with a small market cap ($786 million). The research below on the company led me to believe it is a well-run Business Development Company that has a track record of making sound investments and returning capital to shareholders.

The Basics

A Business Development Company is a closed-end investment company that primarily invests in private businesses. The company is also a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code. To maintain status as a RIC, the company must distribute annually to stockholders at least 90% of investment company taxable income; and to avoid an excise tax imposed on RICs, it must distribute annually at least 98% of ordinary income and 98.2% of net capital gains (from company website & Quarterly Filing).

In the most recent quarter, the company held investments

This is Part 4 of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value. In this article, I am looking into JPMorgan (JPM). Part 1, on AIG (AIG), is located here. Part 2, on Bank of America (BAC), is located here. Part 3, on Citigroup (C) is located here. Also, Part 4, on Wells Fargo (WFC) is located here.

JPMorgan received roughly $12 billion during the 2008 financial crisis from the government to help keep the bank operating. During the crisis, JPMorgan also purchased Bear Stearns.

The company recently reported earnings. A highlight of the earnings report was a third consecutive year of a 15% return on tangible common equity. The bank also flaunted its 'fortress' balance sheet. Many large banks now refer to their balance sheet as being

John Deere (DE) reports earnings on February 11th. The average earnings estimate is $1.39 per share. Since Deere reports relatively late, investors can form a good picture of the macro environment from other agriculture companies who report earlier. With that in mind, here is a quick summary of what the seed and fertilizer producers have reported for their most recent quarter.

During Mosaic's (MOS) earnings report, the CEO said that global agriculture trends are very positive and that US farmers have the cash to buy whatever will help them help them obtain the most crops possible.

DuPont (DD) reported a better than expected quarter helped by better than expected sales volumes of seed in Brazil.

In Agrium's (AGU) better than expected quarter they reported continued strength in grain and oilseed prices. Also, they said that low global grain supplies would result in a strong year in 2013.

Lastly, Monsanto (MON)

This is Part 4 of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value. Part 1, on AIG, is located here and Part 2, on Bank of America, is located here and Part 3, on Citi is located here.

Wells Fargo (WFC) received roughly $25 billion during the 2008 financial crisis from the government to help keep the bank operating. In return for this capital infusion, the government was given long term warrants in the company. These warrants are now publicly traded.

Also during the financial crisis, Wells bought Wachovia for roughly $12.7 billion. This acquisition helped Wells become even larger and gave it a larger deposit base and share of the mortgage origination market. The bank now originates roughly 33% all mortgages nationally (Source).

As a result of their

This is Part 3 of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value. Part 1, on AIG, is located here and Part 2, on Bank of America, is located here.

During the crisis, Citigroup (C) was bailed out by the US government. As a result, the government was given two different long-term warrants in the company which they have since sold off. Both sets of warrants are now publicly traded and accessible to all investors. Series A warrants expire January 4, 2019. Series B warrants expire October 28, 2018. These warrants need to be investigated to see whether either warrant is a better way to gain long-term exposure to the company than simply buying the common stock.

In mid-2011, Citi performed a 10:1 reverse split. This had a significant impact

This is Part II of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value. Part I, on AIG, is located here.

Bank of America (BAC) received aid from the government during the financial crisis. As a result, the government was given two different long-term warrants in the company, which they have since sold off. Both sets of warrants are now publicly traded and accessible to all investors. Series A warrants expire Jan. 16, 2019. Series B warrants expire Oct. 28, 2018. This article investigates these instruments to see whether either warrant is a better way to gain long-term exposure to the company than simply buying the common stock.

Throughout 2012, Bank of America made slow but steady progress in returning the company to profitability. It has increased its capital position to conform

This is Part I of a series of articles discussing the returns on common stock and TARP warrants for a few financial institutions relative to the institution's book value.

During the crisis, AIG (AIG) received aid from the government to stay afloat. As a result, the government was given long term warrants and stock in the company which they have since sold off. The government still owns roughly 2.7 million of these warrants (Source). These warrants are now publicly traded and accessible to all investors. They expire January 13, 2021. They now serve as a low cost and leveraged way to gain long term exposure to the company.

AIG has had several positive catalysts in the past few months which have been under-appreciated. The government recently sold its remaining equity stake in the company (Source). AIG also recently agreed to sell their aircraft leasing business for

In early December, Freeport-McMoRan (FCX) announced it was buying two oil and exploration companies, McMoRan Exploration (MMR) and Plains Exploration and Production (PXP). The deal was received very negatively by the market; Freeport's stock fell roughly 20% in the two days after the deal was announced. The deal diversifies Freeport's revenue from a pure mining operation to include E&P activities. The deal also means that Freeport is no longer one of the purest ways to gain exposure to copper prices and risks alienating the investor base, which use Freeport to gain exposure to copper.

To compare pre- and post-merger revenue, I compiled a table of revenue from the three companies and categorized them. I then took the percentage of revenue from each of the categories for Freeport as an independent company and all three components as a whole. The revenue values used are from each company's CY 2012 Q3 earnings

Expense ratios, the ratio of fees charged for the amount invested, are important when selecting mutual funds or ETFs as they compound over the life of the investment. They have the potential to quietly diminish returns significantly if not considered when selecting a new fund or ETF. Recently the government has enforced higher visibility of this information to keep all investors aware of what they are being charged. As a result, companies that run index ETFs have dropped expense ratios to rock-bottom levels to gain more investors.

Multiple companies run ETFs that mirror the S&P 500 and I was curious to see what difference the expense ratios make over a 10-year period. For the analysis, I compared three - Vanguard's offering (VOO), SPDR's offering (SPY), and iShare's offering (IVV). There are many ETF offerings that mirror similar indexes but to keep the analysis simple, I'm just looking at the S&P

DuPont (DD) shares have gotten hit in the past few months because of warnings that profits will suffer as a result of depressed TiO₂ pricing. Titanium Dioxide, TiO₂, is used as white pigment in everything from auto paints to food colorings.

The table below summarizes each division and how much of the total profits they accounted for in the first 9 months of 2012.

As you can see, their Performance Chemicals division does make up a large percentage of the company's earnings. The largest portion of earnings comes from their agricultural division which produces crop protection products (pest control, herbicide, etc) and seeds. DuPont is