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Don Dion

 
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  • Berkshire Hathaway Expands In Asia: New Frontier Offers Further Growth For Shareholders
    Yesterday, 11:20 AM AIG, BRK.B, BRK.A 7 Comments

    Summary

    • Berkshire Hathaway has announced expansion into several Asian general insurance markets, many of which are underserved, with rapidly growing middle classes and strong economic momentum.
    • According to a recent study by Ernst and Young, China represents the greatest opportunity within the Asian markets (defined as China, Hong Kong, India, Indonesia, Malaysia, Thailand and Vietnam).
    • Q2 results show revenue increase of 11% and $55.5 billion in cash—enough to maneuver into new markets—and always with room to move up.
    • We are continually optimistic on Berkshire Hathaway, moving forward in 2014, and suggest other investors be so, as well.
  • T2 Biosystems' Quiet Period Expiration Provides Buying Opportunity
    Yesterday, 7:17 AM TTOO 1 Comment

    Summary

    • The SEC-enforced 25 day quiet period for TTOO will come to an end on August 31.
    • On August 31, TTOO’s underwriters, including Goldman Sachs and Morgan Stanley, could likely boost TTOO share prices with the publication of positive reports.
    • TTOO's low-balled IPO pricing has given the stock room to grow over the past two weeks; we suspect that TTOO's momentum could continue.
    • Investors should consider buying into TTOO as the quiet period expiration approaches in order to take advantage of the strong opportunity to get a piece of an exciting stock.
  • Bank Of America And Merrill Lynch Avoid Death Penalty
    Yesterday, 3:52 AM BAC 78 Comments

    Summary

    • It is announced that BAC will pay ~$17 billion to the Department of Justice and to consumers to settle its well-publicized shoddy mortgage practices.
    • BAC stock was up on Thursday on the news (8.21), suggesting investors are looking ahead to a potential buying opportunity.
    • Certain bright spots appeared in BAC’s Q2 earnings results, including increased volumes in retail debit and credit cards; and business segments, brokerage assets, and global banking gains.
    • Alongside the recovering US economy, we are cautiously neutral and no longer negative on BAC’s prospects moving forward in 2014.
  • Westlake Chemical Partners' Quiet Period Expiration Could Offer A Short-Term Buying Opportunity
    Thu, Aug. 21 WLKP Comment!

    Summary

    • September 7 will conclude the 40-day quiet period on WLKP, formed by Westlake Chemical to acquire and operate ethylene production assets and facilities.
    • WLKP's share prices could enjoy a temporary rise as a result of the publishing of the likely positive underwriter reports.
    • Long-term, we like WLKP, for its potential to generate strong yields, given the steady flow of revenue from OpCo's fixed-margin sales to Westlake, along with strong management.
    • Short-term, WLKP could see at least a 2% increase in share price in the days surrounding the quiet period expiration, according to recent and historical research.
  • Abnormal Negative Returns Around The IPO Lockup Expiration Provides Shorting Opportunity
     • Thu, Aug. 21 4 Comments

    Summary

    • Building on prior academic studies, our investment firm analyzed 242 companies with lockup expirations in 2013 and 2014, through June.
    • Our findings suggest the greatest negative returns (-5.5%) occur within the Day (-11, +9) period surrounding the lockup event (Day 0).
    • These negative returns occur for tech firms who have not completed a secondary offering and whose share price has increased from IPO to Day (-11) from the lockup expiration.
  • London, Calling For Blackstone, As Private Equity Soars In 2014
    Thu, Aug. 21 BX 10 Comments

    Summary

    • Increased confidence in U.K. housing has prompted Blackstone, along with TPG Capital Management, to make a bid for Investec’s London-based mortgage business, Kensington Group.
    • Blackstone's stock still shows room to appreciate, following news of the deal.
    • Blackstone's 4.2% forward annual dividend rate and 12.6 P/E, compared to an industry peer average of 18.1, makes it appealing to many investors.
    • With strong historical and current earnings results, and bullish analyst ratings, we are ever-more positive on BX, moving forward in 2014.
  • Yahoo's China Strategy Is Paying Off
    Thu, Aug. 21 BABA, YHOO 20 Comments

    Summary

    • Yahoo!'s early China strategy reveals impressive growth in a new and challenging business environment.
    • Yahoo!'s stake in Chinese e-commerce giant Alibaba could pay off soon in a variety of ways, including making Yahoo! more attractive to a potential buyer.
    • While Yahoo's Q2 results disappointed from several angles, the new influx of cash from selling its Alibaba stake could allow the company more power and flexibility to grow in Q3.
    • We suggest shareholders hold positions through the IPO, as the future could be bright for the nimble firm.
  • Samsung Plugs Into The Internet Of Things: Powers Up For Q3
    Tue, Aug. 19 SSNLF 2 Comments

    Summary

    • Samsung recently announced its acquisition of US company SmartThings, which builds ways to connect home devices.
    • The acquisition should solidify Samsung's competitive position, alongside rivals Apple and Google, with regard to the new "internet of things."
    • The acquisition makes strong strategic and fiscal management sense, given Korea's newly instated corporate tax.
    • With solid results YTD and growth at home and abroad, we reiterate our positive stance on Samsung in the second half of 2014.
  • JPMorgan Amputates Its Private Equity Arm
    Tue, Aug. 19 JPM 8 Comments

    Summary

    • JPMorgan recently struck a deal with AlpInvest Partners and Lexington Partners to sell its roughly 50 percent stake in the portfolio of One Equity Partners.
    • One Equity produced $36 million in revenue in Q2 2014, down from $410 million the previous year, during a peak for global deals.
    • In contrast, other P-E rivals, such as KKR, have seen strong growth YTD in a favorable environment.
    • As JPMorgan could not bring its P-E arm up to speed, along with its poor results so far YTD and legal woes, we reiterate our negative stance on the firm.
  • Inogen Inc. Lockup Expiration Offers A Short Opportunity
    Mon, Aug. 18 IVC, INGN Comment!

    Summary

    • The 180-day lockup period for INGN was originally set to expire August 12; however, due to INGN's quarterly earnings release, this will now occur August 29.
    • On August 29, major pre-IPO shareholders in INGN, largely VC firms, will be able to sell their outstanding shares, likely leading to at least a temporary decline in share prices.
    • The lockup expiration could potentially create a short opportunity for aggressive investors, particularly as VC firms likely move on to other projects.
  • Mobileye N.V.: Driving Up High Into The Quiet Period
    Mon, Aug. 18 MBLY 13 Comments

    Summary

    • The SEC-enforced 25 day quiet period on underwriter analyses of MBLY, initiated with the firm's July 31 IPO, will conclude on August 26.
    • On August 27, MBLY’s IPO underwriters can publish analyses of this Israeli ADAS technology developer, likely leading to a rise in MBLY share price.
    • Our own studies, performed on a sample of 2014 IPOs, show above-market returns of 2.3% within an 8 day (-5, +2) window (day 0 being the quiet period expiration).
    • The upcoming quiet period expiration will likely create a strong buying opportunity for those interested in getting a piece of this rising company.
  • Berkshire Beyond Buffett: A Lasting Bet- Book Review
    Mon, Aug. 18 BRK.B, BRK.A 35 Comments

    Summary

    • Lawrence A. Cunningham’s latest book, Berkshire Beyond Buffett: The Enduring Value of Values (Columbia Business School Publishing), is a close examination of Buffett’s “hidden method” of success.
    • Cunningham highlights themes among many Berkshire acquisitions, such as straightforward, family owned businesses, with American can-do work ethic, savvy cost controls, and foresight.
    • Berkshire Hathaway released Q2 earnings, with a stunning 41% jump in profit; YTD total shareholders’ equity has increased $12.1 billion.
    • With consideration of the company values that Buffet will very likely keep intact post-retirement, Cunningham's book is another testament to Berkshire Hathaway's being a lasting bet in 2014 and beyond.
  • Strong Buying Opportunity: General Electric's Synchrony Financial Quiet Period Expiration
    Fri, Aug. 15 SYF 15 Comments

    Summary

    • The 40 day quiet period for SYF will conclude September 8, allowing SYF’s IPO underwriters to publish (likely positive) analyses of the GE consumer financial services spin-off on September 9.
    • This event could lead to positive, above-market returns for SYF in the days surrounding the quiet period expiration—a phenomena tracked in academia and our own research.
    • Though SYF got off to a rocky start, we remain optimistic on SYF moving forward, given impressive revenues and consumer spending moving in a positive direction.
    • The upcoming quiet period expiration may help to galvanize potential investors and present a strong buying opportunity.
  • Credit Suisse Teams Up With Fidelity, Brings A Bright Spot To Credit Suisse's 2014 Outlook
    Fri, Aug. 15 GS, CS 1 Comment

    Summary

    • Credit Suisse plans to team up with Fidelity’s retail clients to get their hands on promising IPOs, as well as follow-on share sales, underwritten by Credit Suisse.
    • This allows Credit Suisse to distribute shares to the mass market in a way that they could not have done before.
    • While the deal might seem unprecedented, a similar situation unfolded five years ago with Fidelity and KKR.
    • Given Credit Suisse’s poor performance thus far in 2014, we do not recommend a a buy; however, investors should watch the bank’s post-deal performance for an uptick.
  • VTTI Energy Partners Revs Up For Quiet Period Expiration
    Fri, Aug. 15 VTTI Comment!

    Summary

    • August 26 marks the conclusion of the 25 day quiet period on underwriter research for VTTI.
    • We remain optimistic on this stock -- both long-term and at the upcoming quiet period expiration.
    • Our recent research shows +2.3% returns within an 8 day (-5, +2) period surrounding the quiet period expiration of many firms.
    • We believe that the firm's strong quarterly distributions will continue to attract investors, along with its likely continued generation of steady revenue streams.
  • Quiet Period Expiration For Transocean Partners LLC: Full Steam Ahead
    Thu, Aug. 14 RIGP 2 Comments

    Summary

    • The 25 day quiet period on underwriter reports for RIGP will come to an end on August 25.
    • On August 26, the firm's IPO underwriters are allowed to publish research reports on the Transocean-formed owner and operator of offshore drilling rigs.
    • RIGP has seen mostly gains in its early market performance, after pricing above its expected price and enjoying a healthy 10.5% return in its first day.
    • With academic studies and our own research showing returns of at least 2%-4% in the period surrounding the quiet period expiration, we see this event as a new buying opportunity.
  • Another Tasty Opportunity With El Pollo Loco
    Thu, Aug. 14 CMG, NDLS, PBPB 10 Comments

    Summary

    • The 25 day quiet period on underwriter research on LOCO that began with the firm's July 24 IPO will conclude on August 18th.
    • The publication of the underwriter reports will likely lead to at least a brief rise in the price of LOCO shares on August 19th.
    • Though LOCO may not be the next Chipotle, and certainly isn’t likely to sustain its meteoric rise in value, fast-casual restaurants in general have performed well in recent years.
    • We see LOCO’s upcoming quiet period expiration as another chance to buy into a successful company.
  • Ladder Capital Corp. Lockup Expiration: A Step-By-Step Short Opportunity
    Thu, Aug. 14 LADR 3 Comments

    Summary

    • The 180-day lockup period on LADR will conclude on August 21, allowing LADR's major pre-IPO shareholders to sell their outstanding shares numbering over 35 million.
    • LADR is a commercial real estate finance firm, with the largest pre-IPO shareholders currently private equity firms GI Partners and Towerbrook.
    • Evidence suggests that LADR's stock price could decline ~2% surrounding the lockup expiration event.
    • While LADR's market performance has been inconsistent, it has still seen growth, along with its business; we note a temporary short opportunity.
  • This Just In: Buying Opportunity At Townsquare Media's Quiet Period Expiration
    Thu, Aug. 14 TSQ Comment!

    Summary

    • The 25 day quiet period on TSQ will come to a close on August 17.
    • August 18 marks the first day TSQ’s IPO underwriters, can publish research reports on TSQ; these will likely be positive and lead to a brief increase in TSQ shares.
    • Despite a disappointing early start to trading, TSQ has strong underwriters, including Bank of America, who may use the opportunity to give TSQ a boost.
    • While we do not suggest a long-term play, the upcoming quiet period event could provide a temporary purchasing opportunity.
  • Kinder Morgan Disassembles For Greater Growth
    Wed, Aug. 13 EPB, KMP, KMR 27 Comments

    Summary

    • Richard Kinder, billionaire founder of KMI, has decided to acquire and consolidate KMR, KMP, and EPB into a single company.
    • Shares of KMI, KMP, and EPB, rose 9%, 17% and 21%, respectively, on Monday's news.
    • The newly structured company will rank as the third largest energy company in the United States, following Exxon and Chevron.
    • Given the positive direction of US energy trends, this is a very timely corporate change for KMI investors.
  • C1 Financial, Inc. IPO Could Be Slow Out Of The Gate
    Wed, Aug. 13 BNK 3 Comments

    Summary

    • BNK, a Florida commercial bank with principal offices in St. Petersburg, Florida, plans to raise $50 million in its upcoming IPO.
    • BNK has attained profitability, and the firm certainly has made impressive progress in terms of growing its assets and its deposits.
    • BNK's efforts to expand via relatively low-cost acquisitions have already borne fruit.
    • However, we suggest investors exercise caution with BNK, as the market could continue to be wary of banking-related stocks in the aftermath of the Great Recession.
  • A New Buying Opportunity For Intersect ENT At Quiet Period Expiration
    Wed, Aug. 13 XENT Comment!

    Summary

    • The 25 day SEC-enforced quiet period for XENT will expire on August 17.
    • On August 18 XENT’s IPO underwriters can release analyses of the ear, nose, and throat drug device company, likely leading to at least a temporary rise in shares.
    • Research has shown above-market returns of 2.3% in the 8 day (-5, +2) period, surrounding a company’s IPO quiet period expiration.
    • Given that XENT is already gaining ground in the market, the event could be an additional boost and create a new buying opportunity.
  • Don't Listen Too Closely For Otonomy IPO
    Tue, Aug. 12 NVS, TTP, EARS Comment!

    Summary

    • OTIC, a clinical-stage biopharmaceutical firm seeking to develop and commercialize treatments for ear conditions, plans to raise $80 million in its upcoming IPO.
    • Though OTIC is closing in on FDA approval for AuriPro, there is no guarantee that the firm will be able to successfully gain commercial traction with its products.
    • Competitor Auris Medical IPOed last week, with lukewarm response; investors could be hesitant to buy into another ear treatment company this week.
    • Also given the high executive compensation, given OTIC’s lack of commercial success to date, we suggest investors hold off on this IPO.
  • Above-Market Returns In The IPO Quiet Period: Updated Research
     • Tue, Aug. 12 11 Comments

    Summary

    • The IPO quiet period is a unique event, which our firm has studied closely for the past three years.
    • Prior research, focusing on above market returns in the (-2, +2) days surrounding a company's quiet period event appears inconsistent and unreliable from certain angles.
    • Focusing on 118 companies that IPOed in 2014 thus far, we concluded the only holding period for quiet period plays with statistically significant above-market returns is (-5, +2) days.
    • Returns in the (-5,+2) time frame are +2.3% for the IPO sample (p value: 0.061694).
  • ITT Education Services Plummets: Investors Should Take Their Schooling Elsewhere
    Tue, Aug. 12 ESI 14 Comments

    Summary

    • ESI has postponed issuing its 2013 10-K and first quarter 10-Q due to questions revolving around the accounting for third party private loans.
    • A recent ESI agreement to a sales-lease-back for 24 of its properties to College Portfolio Buyer LLC also fell through recently.
    • Under pressure related to recent events, Kevin Modany, the company’s current CEO, announced that he plans to resign in 6 months.
    • With increasingly negative news and performance, we suggest investors steer clear of ESI in the second half of 2014.
  • JPMorgan: Still Immersed In Legal Woes, While Rivals Power Up
    Mon, Aug. 11 GS, MS, JPM 13 Comments

    Summary

    • JPM recently announced its legal reserves have risen dramatically to $4.6 billion.
    • This could reduce the amount available to pay shareholders as JPM's dividends struggle to return to pre-financial-crisis levels.
    • JPM saw a 8% decline in earnings, slowed down by decreased mortgage lending in Q2, while rival GS posted 5% growth.
    • We suggest investors consider alternatives to JPM moving forward in 2014.
  • Russians Dump Their Own Currency; Investors Should Also Look Elsewhere
    Fri, Aug. 8 RSX 44 Comments

    Summary

    • As Russia's President Putin pursues his strategy of defiance, the Russia economy is in danger of entering a full-blown crisis.
    • Russian-based ETFs, such as RSX, have seen uninterrupted net outflows as investors tire of the uncertainty surrounding Russia.
    • As a result, some larger Russian firms are in the process of transferring funds to Asian banks.
    • With no strong signs of Putin changing policies, we are increasingly negative on RSX in particular, and suggest investors be so, as well.
  • Massive Moves For Carlyle Group
    Fri, Aug. 8 CG 1 Comment

    Summary

    • CG is in the process of purchasing a majority position in Acosta Sales And Marketing, which could produce enormous, multifaceted benefits.
    • In Q2, Carlyle spent $3.4 billion on new deals, a massive increase over the $1.3 billion spent on deals during the same quarter last year.
    • In the past year, CG's share price has risen by approximately 35 percent.
    • We are optimistic that CG will be able to maintain its upward momentum in the second half of 2014.
  • Berkshire Hathaway Hits New Highs, Buffett Can Rest Easy
    Thu, Aug. 7 BRK.A, BRK.B 3 Comments

    Summary

    • Berkshire Hathaway announced record quarterly profits of over 41% on a year-over-year basis, with growth in nearly all 70 subsidiaries.
    • Of the nearly $2 billion in investment gains, about half ($1.1 billion) are related to the Graham Holdings Co., cash, and a Miami TV station swap.
    • Berkshire Hathaway stock increased over 2.5% from Friday to Monday's close.
    • It's increasingly apparent that Buffett will be able to rest easy heading into retirement, knowing his company is well-managed and well-received by its shareholders.
  • Bank Of America To Take Out Their Checkbook, Buying Time In Sight
    Thu, Aug. 7 BAC 90 Comments

    Summary

    • BAC CEO Brian Moynihan is about to give the Obama administration what it wants: a $17 billion settlement, following shoddy mortgage deals from the financial crisis.
    • $9 billion of this will be cash, returned to the US government and to homeowners, for their losses.
    • This is a positive direction for CEO Moynihan, making good on his initial promise to steer BAC back on track and return value to shareholders.
    • We reiterate our stance that upon settlement, BAC could be a deep value play for investors.
  • Hoegh LNG Partners IPO: Moving Full Steam Ahead
    Thu, Aug. 7 HMLP 1 Comment

    Summary

    • Oslo-based HMLP, a limited partnership formed by Hoegh LNG Holdings Ltd. to acquire, own, and operate LNG infrastructure assets, plans to raise $192 million in its upcoming IPO.
    • HMLP's interests in FSRUs with long-term charters should provided the company with steady cash flows, along with opportunities to expand.
    • HMLP’s excellent potential quarterly distributions (~6.75%) should also serve to entice investors.
    • With additionally strong management, we are optimistic on this IPO and suggest investors consider buying in.
  • Yahoo Outlook Is Fantastic After Alibaba IPO In September
    Wed, Aug. 6 BABA, YHOO 28 Comments

    Summary

    • 2014 has not been the best for YHOO - critical search revenue dipped at least 8 percent, and price per ad has dropped ~24% since last year.
    • YHOO will likely see increased flexibility for improvement with a much-needed cash influx from the upcoming Alibaba IPO.
    • YHOO has promised to return at least half of the after-tax Alibaba IPO proceeds to shareholders.
    • We are positive in the near-term on YHOO, particularly with a payout in sight for shareholders.