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The Oil Price Has Limited Downside
- The price of oil has pronouncedly declined in the last 3 months, from 105 to 92 $/bbl, largely due to the appreciation of the dollar.
- However, the dollar is approaching its limit while the fundamentals of the oil market provide a great support.
- Therefore, there is not much further downside for the oil price.
Chevron Currently Offers A Win-Win Profile To Investors
- Chevron has almost always outperformed the market during bear markets or corrections.
- However, it currently has promising prospects to outperform the market even if the market continues to thrive.
- Its major growth projects, which have resulted in extreme capital expenses so far, will start to bring fruit in the next few months.
BP: Why You Should Grasp This Opportunity
- Last week's court decision wiped off almost $9 B of the market cap of BP on a single day.
- However, investors should realize that the net income of BP will be reduced by only 2/3 of the fine, as the 1/3 will be offset by the gain in taxes.
- Moreover, as it may take up to 10 years for the case to be closed, the present value of the fine will be much lower than its nominal value.
- Therefore, whoever missed the first chance to buy BP after the accident, has now a second chance to purchase its shares at an opportune level.
Is Dun & Bradstreet Still A Bargain?
- Although DNB has a moat in its business, it has not grown its revenue and its net income in the last 6 years.
- The aggressive share repurchases have grown the earnings per share by 10% in the last 4 years even though the earnings declined 20% during that period.
- However, the aggressive buyback program has resulted in a huge net debt, most of which is coming due in the years 2015-2017.
An ETF That Has An Edge Over The Market
- The PowerShares Buyback Achievers ETF allocates all funds on stocks that have reduced their share count by at least 5% in the last 12 months.
- This ETF has an edge over the market thanks to various factors, which are analyzed in the article.
- The most solid evidence for its edge is its pronounced outperformance over the market since its inception eight years ago (85% vs. 40%).
Should Conn's Shareholders Sell At A Loss After The 30% Decline?
- The shares of Conn’s collapsed yesterday, losing 30% after the Q2 earnings report.
- Although the retail segment maintained its great performance with a 12% increase in comparable sales, the financial segment more than offset the benefit, reducing the earnings per share by 4%.
- Every 1% increase in the percent of bad loans out of the total portfolio reduces the earnings per share by $0.20.
- Given this extreme sensitivity and the fact that the management will put its whole effort on improving the financial segment, I expect the company to positively surprise us in Q3.
Torchmark Has As Predictable Growth As It Gets
- With the market at its all-time highs, investors should look for stocks with predictable growth.
- Almost 1/3 of Torchmark's net income per share will continue to grow at about 10% per year for the next few years.
- Therefore, given also the consistency of the company in the other portion of its earnings, its growth is as predictable as it can get for a stock.
- Torchmark will also benefit from the expected rise in the interest rates.
This Low-Cost Producer Can Return 20% In A Year
- Lyondell derives 50% of its profit from its US segment of olefins and polyolefins.
- Thanks to the booming production of natural gas liquids (NGLs) in the US, the production cost of Lyondell has been reduced by more than 50% in the last two years.
- At the same time, the selling price of its products has remained essentially flat. This has resulted in record earnings for the company.
- Given the low P/E, the above growth coupled with the aggressive share buyback program that will eliminate 10% of outstanding shares in 12 months is very promising for the stock.
Why Aflac Is So Cheap
- Investors wonder why Aflac, a dividend aristocrat, is trading at a P/E of 10, while the S&P is trading at a P/E of 17.
- Aflac has already sold insurance to 1/4th of Japanese households, so it is hard to sustain its past growth rate.
- Investors are also cautious to see that 40% of the company's assets have been invested in Japanese government bonds. Japan has the heaviest debt load in the world (238% GDP).
- Nevertheless, part of the low P/E is due to the last financial crisis, which made investors fearful of financial companies. Astute investors should utilize this situation.
Target: The Gist Of The Earnings Report
- In today's earnings report, the management of Target continued its string of lowering its guidance for this year’s earnings. From the initial EPS $5.50 a year ago to $3.20 now.
- Despite the lower guidance, the company has to improve its performance by 70% in the second half of the year in order to meet the guidance of its management.
- Given the performance and the debt figures I analyze, I expect the management to lower again its projected earnings in the next few weeks.
Share Buybacks: The Good And The Bad
- Share repurchases increased 50% in the first quarter, standing at $155 B. It is the third largest amount ever spent on share repurchases.
- Investors should pay great attention to the efficiency of the share repurchases. If they are not executed correctly, they waste the money of the shareholders.
- Gathering the data of the first semester, I assorted the most popular companies that perform significant buybacks based on their efficiency.
When The Aggressive Distribution To Shareholders Is Promising
- Some companies offer a very high distribution (in the order of 10%) to their shareholders. However, this does not guarantee a great profit to the shareholders.
- Investors should check some elements in the balance sheet to determine whether the company can maintain its high distribution rate.
- Philip Morris has stretched its balance sheet to the extreme and hence it cannot maintain its past rate of share repurchases.
- On the other hand, Viacom has a healthy balance sheet so its shareholders can rely on the stock to maintain its exceptional returns for many years.
Chicago Bridge & Iron: Why You Should Grasp This Rare Opportunity
- The stock of CBI has plunged lately due to a report from Prescience Point, which accused CBI of manipulating its balance sheet.
- In an almost identical case, Moody's stock plunged 20% in 2 days last year, but the news was soon forgotten and the stock has doubled since then.
- The great growth potential of CBI, thanks to the energy boom, the endorsement of Buffett and the technical reaction of the stock, render the current situation an excellent opportunity.
Is There An Imminent Bear Market? Don't Ask
- As the market is celebrating its third anniversary without a single correction next month, investors are becoming increasingly worried that a significant correction or even a bear market is imminent.
- However, no-one can time the market consistently. Humans tend to predict what just happened instead of what is about to happen.
- There are still many experts waiting for the final collapse after the one 5 years ago. They cannot realize that the collapse occurred and is not going to happen again.
- The current bull market has been fueled not only by the Fed but also by the great (once in a generation) expansion of the American companies abroad.
- As history has taught us, the market advances to unprecedented highs every 10-20 years. The market currently seems to be in its first steps of its generational advance.
A Great Bargain In Today's Fully Valued Market
- Conn's lost almost half of its value a few months ago, when the company reported that the delinquency rate of its customers rose from 8.5% to 8.8%.
- The stock is now trading at an attractive P/E of 13, and is expected to grow its EPS by 23% next year.
- Some insiders have already grasped the opportunity, and David Einhorn has acquired a 9% stake in the company, characterizing the concerns as overblown.
Target Corporation: The Factors To Consider
- The outlook for the EPS of this year has incurred several downward revisions, from $5.50 nine months ago to $3.75 recently.
- As the current outlook still implies 15% growth for this year, I expect more downward revisions to come soon.
- The management did not mention any steps to imrpove its Canadian segment, which continues to incur heavy losses.
- Although the company has consistently repurchased its shares for years, even at elevated prices, the weak balance sheet has recently eliminated share repurchases and leaves little room for future buybacks.
- The technical picture of the stock shows a clear downtrend, with no signs of bottoming yet.
A Rare Opportunity To Profit From Volatility
- The market has been consolidating around all-time highs and Fed has been curtailing its program so many investors are seeking a way to hedge against an imminent correction.
- Selling part of the portfolio or buying put options have both been very damaging strategies during the whole 5-year bull market.
- The current value of VIX and the time remaining till the expiration of its June futures offer a very rare opportunity to profit from a spike in volatility.
Michael Kors: The Factors To Consider
- KORS has exhibited exceptional growth without raising any debt. The question is whether it is a bargain at the current elevated price.
- As the company generates 85% of its revenue in North America, there is ample room for growth in Europe. Moreover, the company can even double its stores in the US.
- Given the example of its competitor, COH, it is reasonable to assume that the high-growth era will end only after the initiation of a dividend.
- Nevertheless, given its high market cap and its extremely fast growth, this is not a buy-and-hold stock. In addition, only investors who can handle high volatility should consider this stock.
General Mills: Some Points That Are Rarely Mentioned
- General Mills has excellent prospects for further international growth in Europe, Asia, Canada and Latin America.
- Its double-digit total yield and its growth potential make it a rare value play in today's almost fully valued market.
- Nevertheless, investors should closely monitor the efficiency of the share buyback program as the company spent $1 B last year with almost no reduction in the share count.
Why Total Is Likely To Continue Outperforming Exxon And Chevron
- While capital expenses have greatly escalated for the oil companies in the last few years, Total seems to be better positioned than Exxon and Chevron.
- As Total provides detailed figures for its projected 30% increase in oil production by 2017 and its recent record is on track, it is likely to accomplish its goal.
- Based on Total's projection, we calculated that its earnings per share will increase by about 30% in 2017, which means a compounded annual return of 12% till 2017.
- Given the above and the great difficulties Exxon and Chevron are having in replenishing their oil reserves, Total is likely to continue outperforming Exxon and Chevron.
- Why IBM Should Follow The Example Of Apple
- Ross Stores: A Great Growth Stock With At Least 20% Upside
- Has The Market Topped?
- Selling Puts Of High-Dividend Stocks For Maximum Yield
- Are The Aggressive Buybacks Signaling The Top Of The Bull Market?
- The Great Strategy Of Trading On The Fundamentals
- Green Mountain Coffee Roasters: Why The Market Reacted Like This
- What Are The Real Earnings Of These Premium Companies?
- Why The Oil Companies Are Cheap
- Exxon Mobil: Finally A Good Earnings Report
- Bed Bath & Beyond: Many Years Of Growth Ahead
- Philip Morris: What To Keep From The Earnings Report