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Samsung Plugs Into The Internet Of Things: Powers Up For Q3
- 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
- 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
- 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
- The SEC-enforced 25 day quiet period on underwriter analyses of MBLY, initiated with the firm's July 31 IPO, will conclude on August 25.
- On August 26, 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
- 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
- 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 spinoff.
- 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
- 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
- August 25 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
- 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
- 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
- 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
- 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
- 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
- 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
- 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
- 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
PRO • Tue, Aug. 12 • 9 Comments
- 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
- 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
- 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
- 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
- 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
- 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
- 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
- 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
- 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.
Gilead: A Growth Story
- GILD is fighting a legal battle to hold off competitors claiming patent infringement after release a blockbuster hepatitis-C drug, Sovaldi.
- Sovaldi drove Q2 antiviral product sales in the US and abroad.
- GILD's focus on life-threatening diseases allows it to keep expenses low and be selective in R&D and maintain a strong competitive edge.
- With GILD's continued strong grasp on the market, others will have a hard time toppling its dominance.
- We are optimistic on GILD moving forward in 2014.
A New Buying Opportunity Forming With TerraForm Power's Quiet Period Expiration
- The 25-day SEC-enforced quiet period on underwriter analyses on TERP will come to an end on August 11, likely giving TERP a temporary boost in price.
- Results of recent studies show a share price increase in the eight-day (-5,+2) window, surrounding a company’s IPO quiet period expiration.
- Given the strong early market performance and solid yields, TERP looks like a solid buy both long-term and at the upcoming quiet period expiration.
General Electric Sees Africa As Its New Frontier
- GE recently announced a $2-billion investment in Africa, after the African Development Bank's 2013 annual report named it the fastest-growing continent.
- The company's global sales have already risen 33 percent in the region.
- The $2-billion price tag provides technology and partnerships that will improve infrastructure and supply chain development in many local communities.
- With a continued focus on core strengths and global expansion, we are optimistic on GE, moving forward in 2014 and beyond.
After Disappointing IPO, New Buying Opportunity Opens For Trupanion
- The 25-day SEC-enforced quiet period on underwriter research reports on TRUP will come to an end on August 11.
- On August 12th, TRUP’s IPO underwriters will likely release positive analyses - leading to a temporary increase in TRUP’s shares in the (-5, +2) day period surrounding the event.
- Despite a disappointing IPO, TRUP’s quiet period expiration could bring a buying opportunity as Barclays, Stifel, Canaccord and other reputable firms likely attempt to boost the firm’s share price.
Our Top IPO Pick Of The Week: China's iDreamSky IPO
- DSKY, a Chinese mobile game publishing platform with principal offices in Shenzhen, China, plans to raise $100.1 million in its upcoming IPO.
- DSKY's business model of importing well-regarded games from international developers for a Chinese audience makes good sense.
- The firm has attained profitability and a massive monthly active user base.
- With strong receptivity to Chinese IPOs recently, we are positive on DSKY.
Uncovering The Deal: Independent Contract Drilling IPO
- ICD, an independent provider of land-based oil and natural gas drilling services in the Permian Basin, plans to raise $150 million in its upcoming IPO.
- ICD has created significant income growth since 2012, and we suspect the firm's advanced drilling rigs will continue to prove attractive to customers.
- We are positive on this IPO and suggest investors consider buying in.
T2 Biosystems IPO With Goldman Sachs Underwriting And Goldman Sachs Ownership May Pop
- TTOO, an in vitro diagnostics firm with principal offices in Lexington, Massachusetts, plans to raise $64 million in its upcoming IPO.
- TTOO appears to be nearing FDA approval for its T2Candida, but there is little guarantee that the firm will be able to successfully commercialize its products, especially given strong competitors.
- We are positive on this IPO (as T2Candida could represent a life-saving advance in Candida diagnostics) and suggest aggressive investors consider this Polaris backed IPO.