Daniel Shvartsman

Long only, value
Daniel Shvartsman
Long only, value
Contributor since: 2012
Thanks for the comments GTP and mayman! I agree that Velti is the top play for now, but also that it will be interesting to see how the big platforms (P and FB) do. We'll see what happens, it's a new space so lots of questions.
Hi Stone, thanks for the comment!
Helps isn't the right word. My argument is that both MM and VELT's results show that mobile advertising, when done right, is growing fast and becoming more and more profitable. Research (like the Meeker report) shows other examples of mobile becoming profitable, that mobile usage is booming, and that mobile is not yet as profitable as desktop internet. As advertising dollars go towards mobile - which the research and Velti/MM results both suggest will happen - Pandora and Facebook, as major mobile "destinations" or channels, will become increasingly attractive venues for advertisement if those two companies can find a way to make themselves attractive. Facebook's work on sponsored story news feed is an example of their strategy, Pandora's building out of their local sales teams exemplifies their approach. The fact that Google has had some success with mobile and views this as equivalent to early days of the desktop internet boom also makes clear the opportunity at hand.
Basically, what I'm trying to add to the discussion is that for people following Pandora and Facebook, mobile = bad news. The things I cited above suggest mobile can be a positive, and a big one, considering the head start Pandora and Facebook have in access to users. Whether those two companies can take advantage or not remains to be seen, which is why they're risky and in part why FB has sank like a stone since coming public.
Anyway, hope that makes sense and that the same thesis comes across in the article. I enjoyed your article on Velti today too; looks like we agree that it's the best way to play the space. We'll see how the others do.
Daniel
Hi Plum,
That's a good question, and I'm not super sure. I think it's mostly due to the early summer distrust of industrials and Europe, both of which are part of PH's profile. The solid earnings beat and better overall sentiment have driven the stock up 15% since I wrote this, so it looks like I was wrong about this "not being the time to buy". I wouldn't call it criminally cheap any more, but there's a little room still left for the stock to rise.
I have a diversified portfolio with about half of a position in MT, and I'm thinking of adding CLF as the other half of that position, so to speak, instead of filling out MT. Together, they wouldn't take up more than 15% of my portfolio, and both would be high dividend, turnaround plays in my portfolio.
Thanks for all the comments, lots of interesting ideas to pick through!
Buy order in for 7.10. I like the loan growth, am not crazy about the net interest margin deterioration, and the tangible book value is around $5.30, but I think the stock is very cheap, this was an ok report, and the dividend looks well-supported during this transitional period. I have not yet read the call transcript, but my strategy is to sell my other bank holding (FFIC) and fill out my position (I'm about 70% of the way there) in FNFG.
What do you (or anyone else) think about earnings?
Thanks for the comment, Illuminati! I think there's a lot of chaos in these stocks, which creates the chance for gains. Given this week, those are either famous last words about ZNGA or the greatest prediction someone can make.
Only if those are the only two stocks you own, I think. In a diversified portfolio where industrials take up 20-30% of the portfolio, there's no reason you can't split that allotment between the two of these. That's what I'm doing, anyway.
Thanks for the comment Caymagnate (and TAS and Sethmcs)! I've done a bit of business with PNC as well and had no issues. I disagree with Sethmcs because the nature of PNC is different from that of a JP Morgan or Morgan Stanley or other huge banks; PNC is still a traditional, regional bank that works with individuals and small businesses and so on, just with more leverage and regional scope. I included Wells Fargo because I think they're the big bank that most compares to PNC, and Wells Fargo has done relatively well. But we'll see how it goes.
Also, a note: I wrote this on Sunday night; obviously, PNC crashed through its 200-day MA yesterday. We'll see what that means for the stock short-term, but I'm adding to my position at 55 or 56 if it gets there.
Hey Bronko,
I like diversification for sure, but I would do it gradually as Caterpillar's stock rises eventually. Now is not a good time to sell off. You could also buy other stocks with any new money to lessen the CAT concentration.
Anybody else have any thoughts?
Yeah, ugly news. The P/E ratios are still low, but Rovi has no credibility or positive momentum right now.
For sure, management is a key factor. Exelon's CEO is new, so we'll see how he manages through a tougher period.
I am actually long NFG, but in a portfolio that I inherited the management of from my partner, so I can't claim much credit or blame for it. I think its fortunes are obviously tied to natural gas prices.
Big Thunder, I understand the move. If you feel you have better options than a high yielder that you can only really trade the position on for a few years, you should go for it. In a diversified portfolio, it has its place.
Yes ETEP, you're right, thanks for the correction.
Thanks for all the comments!
Bluehorseshoe, thanks for the comment! I think Congress is likely to stave off the fiscal cliff, the euro's weaknening currency will help the bloc a bit, and that the election will provide clarity going forward, so I think, if not a fall rally, we could get a winter rally like this year. Of course, all that could go wrong, and I know there are plenty of dour forecasts out there.
I agree, Ray, that the analysts are over pessimistic, but this is a tough environment. Caterpillar, as a powerhouse, should be back into gear by the end of the 3rd quarter I think. We'll see how it goes.
Hey all,
Thanks for the comments! On Exelon's unchanging dividend vs. PPL, it's a fair point, but I wonder if PPL can keep growing over these next two years. I like both stocks, I had to liquidate my PPL position in one portfolio earlier this year but it's a good stock, and I've written about my support of Exelon elsewhere. Duke is also interesting and definitely still at a discount with the whole CEO scandal. Baseballbill, utilities are for sure not as boring as the business would suggest. I imagine they will continue to provide intrigue, for better or worse. It's one of the shared characteristics among big business of any sort.
Highyieldsoldier, I think the $44M is the potential value involving stock and other deals. As this article - http://on.wsj.com/NlSXaZ - says, "Most of (the $44M) stemmed from stock grants he received while CEO of Progress."
Of course, the numbers remain outrageous, but that's how it goes. I think I'm in the same boat as you about the stock - it stinks, but if the price drops, it's hard to ignore the company. Duke is up today so far.
MTMatt, I only used that quote because I thought it appropriate and because it's what came to mind when I thought about writing this article. The next step is to jam wholly inappropriate music quotes into my writing. We'll see how on top of it the editing staff is here.
(That's a joke, SA editing folks. You're very on top of it, and I'm glad for it).
Hey Jamie, nice article on Eaton's acquisitions. I noticed today that Eaton closed on a smallish deal for a hydraulics company in South Korea. It looks like the company is developing quite the power play unit.
Yowwwie, I sympathize with the frustration over the current drop in the stock price. I'm not sure I totally get where you had shares of PGN at $68/share though, I see the stock maxing out at $60.82/share. The 2.61/share for 100 shares and then the reverse split cutting the share count by three, I get how that goes to 87 shares.
The small premium paid for Progress by Duke was supposed to come with Johnson taking over the company, so that's added salt in the wound for sure.
MexCom, it looks like it was still front page of the business section in the WSJ today (page B1 for the latest story). I agree that Duke and Rogers will have opportunities, starting tomorrow to win back trust, but it should take a bit of time.
czugk, not sure I totally get your question. I mentioned Progress is working out a renewal or retire issue for the plant in Florida, but I don't know a ton more than that. There is for sure more to the story than I'm telling, but I'm not hiding anything, it's just plain ol' ignorance.
Thanks for the comments!
Just a follow-up: I doubled my FNFG long position today at 7.4, and I'm looking to double it one more time, eventually. Overall bad day for banks has brought it to its 52-week low, but nothing's changed with the FNFG fundamentals.
Dag and batteredup,
I read Krugman's articles; even if it sounds like he's banging the same drum or two over and over, he always seems to hit it right on the nose. It'd be nice if both politicians and folks in the media on different sides of these (and other) debates could sit down and talk with one another, and not just past each other on their separate talking points.
That said, calling this a Great Recession or a small depression seems like a manner of semantics. In either case, the world needs to unleash some growth policies or we're going to keep trudging along.
CBD001, your point about TEX is a good one. I don't know much about the company beyond these numbers; I'll go through the company and get back to you in more detail, maybe with an article.
Thanks for the comments Foosie and Dag! Dag, that statement meant that while MTW's stock is cheap, it has gone much lower, so this is probably not bottom for the stock. So before the bottom. It is worded a bit poorly, and I'm sorry for that.
As for double-dip recession, it is one of those cliches that gets batted about a little too much by me and other writers, but I think the technical issue is not one of how many years since the past recession, but whether the overall economic output has caught up to pre-recessionary levels. I believe we are still below pre-recessionary levels, and so any recession before we regain those levels would be a second dip.
Anybody else have added insight?
Tim and Jweissman, thanks for the comments! I'm looking forward to using this format occasionally going forward, including for a couple more utility articles in the coming week or two, so hope you'll check them out as well.
Also, if anybody saw this - http://on.wsj.com/NtxOOe - the Duke CEO issues are creating either a major red flag or a buying opportunity depending on your view; DUK is down huge compared to its peers today. Anybody have any thoughts?
Mtbb,
Thanks for bringing that up. As you mention it, I remember that question from the conference call. I'm not totally sure what accounts for the difference. I know that, for example, the Raymond James' report I alluded to lists FNFG's tangible book value for the end of Q1 at $7.86. I did the calculation I know ([Total Assets - Total Liabilities - Preferred Stock] / Total # of diluted shares outstanding) and got $7.82 TBV/share at end of quarter, and $8.38 as the 2011 year end number, which I used. The company took on more debt than it gained in assets in Q1. Perhaps that trend has continued? Anybody else have an insight?
That will be something to watch for in the quarterly report to come. I still think the value proposition is strong for FNFG and that a 9.7 price target is a reasonable, somewhat conservative estimate for the next year. But it bears watching.
(Edit: Looking further at that RJ report, again as a base: the analysts estimate 5.97 TBV/share at Q2 end, 6.18 TBV/share at 2012 year end, and 6.75 TBV/share at 2013 year end. The intangible share of equity is expected to jump greatly this quarter, before FNFG slowly works off debt and converts the intangible into tangible. Book value/share is expected to be in the high 13s/low 14s. That's just one analyst group's estimates, but it provides a guideline. I'm sticking with 9.7 as a target, which is still a discounted blend of the industry average valuations for those figures.)
Thanks again for the comment!
Daniel
Hi Paul,
If you go to Dominion's website, you'll find a link plastered all over the site exhorting viewers to write to congress to "defend my dividend". So for sure, if the tax goes higher that will affect the value proposition of owning high-dividend payers like utilities. And while the impact isn't huge on low-to-middle income investors, it will be significant for the high-income investors who presumably fuel the big money and hedge funds and the like.
I can't really do more than speculate about the impact, and I can't offer that much insight. I think congress will probably stave off the "fiscal cliff" of which this dividend tax hike is a part of, so any related decline might come later. I don't think the share prices reflect that tax hike now, not in any significant way. Tax hikes usually correspond to growing economies, so if/when the dividend tax goes up, it would exacerbate the rotation away from utilities. If the tax is delayed, there might be a slight boost to utility and other big-dividend paying stocks out of relief.
I'm afraid that's all I can add for the short-term. In the long-term sense, the tax rates are only going to return to pre-Bush levels, so we could look at utility stock performance in the 90s to get an idea of how they perform and pay dividends under that scenario.
I hope that helps.
Good article, thanks Kyan. Smart Balance has been on an insane run, and I think it has to slow down and correct at some point in the near future, but I'm enjoying the ride. My only regret with Smart Balance is I didn't get in for more before it popped (I entered a small spec position at 5.70, long SMBL).
Thanks LD, great info! I agree that Teva is hard at work to maintain Copaxone share/profit beyond the 2015 date, which will also lessen the risk built into the stock.
Hawaiian Tides, I'm not an expert on Biogen or its drug. I imagine you mean the BG-12 drug due for approval in the first half of 2013? Generally, there's no doubt that Teva will face competition over the drug. I think the market and analysts have factored that in (for example, Credit Suisse rates both Biogen and Teva buys). Also, consider that Copaxone is suspected to represent, at most, 1/3 of Teva's profits. If you took Copaxone out, the stock would be trading at just over 11x 2012 earnings and just over 10x 2013 earnings. So even worst case, the stock is fairly or undervalued, depending on your comparison. And that's before figuring out if Biogen's drug will compete with Teva internationally and all the rest.
So while there are concerns for Teva, I think they've been overweighted compared to the company's value and opportunity. But thanks for raising the issue!
Hi Ric,
I'm certainly no handyman, but I used Dewalt drills while working on houses a year ago, and it felt like the industry standard. I guess that's why the company's products hold water with me, but taking your point in mind, I'll look into how the company does on customer satisfaction surveys and that sort of thing. Thanks for the input!
Daniel
Hey Lancejay, thanks for the comment! The dividend increase isn't a sure thing - I haven't seen any management comments about it since January's Q4 call - but it seems like a decent bet, as does the company. Another leg or two further down from today's drop and I'm planning on adding. Hopefully it'll work out!
Cyrus, the stats from the comment are from a presentation at the Jefferies 2012 Global Technology Conference. If the link in my comment doesn't work, try this: http://bit.ly/KVX5TN
You're welcome on the reply, I hope it helped.
For anybody who comes across it, this is the sort of secular trend Velti can take advantage of this summer and beyond: http://nyti.ms/KVXbdP
I second that. Low-fat and no sugar chocolate don't work. Health concerns are prominent, but I don't think Reese's PB cups are going anywhere, let alone chocolate as an industry. Not if I have anything to say about it, at least...
Hi Cyrus,
Velti gets most of its revenue from the Software as a Service (SaaS) model of the type that Salesforce.com (CRM) uses. According to a presentation just before the Q1 earnings call (http://tinyurl.com/7a2..., check page 11), only 16% of revenue and 3% of profit came from pay per click. I think the key difference is that Velti gets paid by companies to develop or enable advertising or marketing campaigns, and not so much to host ads; and also that Velti does this through its software expertise.
Desperado, sorry about Facebook (and not responding earlier), though I think the stock will get there eventually. Velti will probably need a strong quarter or two to convince skeptics, but it's a very unpredictable stock in some ways. No dividend, but definitely could be a high-flyer in the months to come. And check out Stone Fox's articles on MM, I think he's the resident expert about them; all I can say is Velti is further along the road to profitability than MM.
Hope that answers your questions.
Titleguytx, that does make sense, thank you. So your argument is that FAF's focus on market share is misguided and leads them to getting stuck in lower-margin situations than FNF, who focuses on that margin, did I get that right? But FAF fails to actually capture that market share? Do you foresee anything changing, or would that only come with a change of management?
Skyler, thanks for the comment! I'm definitely on the lookout for a pullback to 72, I think as a steady consumer goods play this is strong.
TAS, I take your point. Having too many brands is something of a sticky situation. Figuring out how to juggle the old stalwarts and new products is always a tough nut to crack. I think the acquisitions team at SJM has put together a number of nice combinations spread over the 115-year history of the company, and I don't think management is full of goobers: they've made a recent initial acquisition in China and should find the future steady but fruitful. All in all, I think they should smooth out these issues and deliver creamy returns to investors.
Tom, I appreciate your input and have enjoyed your articles. I think your strategy is a good one, and I think the share prices will resume the upward path, I'm just not sure it's the best stock to wait around for.
Jagmanvdp, thanks; I wish I had added to my position last fall in the low 40s, but that was my first go-around in a steep drop-off, and I was a little trigger-shy. I plan to look into some of those other companies mentioned in the next week or two, so look out for those articles too.