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Potash Corporation: An Excellent Entry Point
- Upcoming seasonal pressure and an end to share repurchases have hindered Potash's shares. We remain bullish on the long-term outlook and see the lower $30s as an excellent entry price.
- POT's balance sheet is rock solid and leverage is low. An improving cost structure and lower capital expenditures will insure adequate cash flow for dividends and potential buybacks.
- While concerns around supply and demand remain, we believe POT can flourish in a low-price environment providing a solid dividend and growth investment.
Cliffs Natural Resources: Stuck In A Quagmire
- At the most recent iron ore price of $85 per metric ton, Cliffs will have cash flow needs of $100-150mn/annum, assuming bare bones capital expenditures. Coal mining is no help.
- The book value looks significantly overstated, as assets have not been revalued at lower commodity prices. Market capitalization implies a feasible 34% haircut on asset carrying values. Cliffs is not cheap.
- Recent plans to sell assets in a depressed pricing environment and fund buybacks is not a sound long-term strategy. Cliffs should cut the dividend and issue equity to improve liquidity.
Hologic: A Focused Image Of Renewed Growth And Share Outperformance
- Hologic's Q2 results beat expectations and guidance has been upped for the year. The company is on its way toward a resumption of growth and improved metrics.
- They generate significant cash flow enabling debt reduction and share buybacks. At less than 7 times EBITDA, the equity is too cheap. We'd expect a buyout if share price lags.
- Significant upside exists from a resumption of revenue growth, improved margins, and multiple expansion. We have a $27 near-term target and shares could easily double by 2017.
KKR Financial: KKR Should Pay More For Us
- KKR offered to buy KFN in December in an all stock transaction. By all measures it appears that KKR is getting a bargain at the expense of KFN shareholders.
- The timing of KKR's offer was fortuitous. KKR shares had a great run and KFN was suffering from year-end selling. The net result was a depressed purchase price.
- Fair value is $14-15 per share or a conversion rate of .6. This is 10x forward earnings and a 20% premium to our estimate of KFN's true NAV.
SandRidge Mississippian Trust II: Significant Downside Risk Remains
- Sandridge Trusts' well and share performance have been abysmal since IPO. We expect this to continue as distributions will start declining later this year. We see a further 20% downside.
- SDR's downwardly revised PV-10 revenue estimate of $7.61/share is still optimistic and seemingly based on future well estimates that are inconsistent with performance to date.
- SDR's increasing NGL production, versus oil, will only make matters worse. Subordinated units will no longer support the common distribution by Q2, possibly as early as this quarter.
Barrick Gold: A Significant Rebound Is In Play
- Barrick Gold has significantly improved its balance sheet and has all the makings of a continued rebound story. Net debt should decline to $7bn with continued management focus.
- Net income per share at $2.5 for 2014, free cash-flow of $1.5bn, and low leverage of 1.5 times (net-debt to EBITDA) all point to a $25-30 share price.
- Looking beyond 2014, we see room for accretive acquisitions, dividend increases, and/or equity repurchases. Large tax-loss carry-forwards (~$11bn) only sweeten the outlook.
- EXCO Resources: The Slog Continues. Next Stop Dividend Elimination
- Teekay Tankers: An Explosive Growth Story That Is Set To Sail
- CenturyLink: A Lost Connection To Growth
- Fifth Street Finance Corp. Still Won't Cover Its Dividend
- KKR Financial Holdings: 20% Upside For 2014
- EXCO Resources: Why We Are No Longer Bulls
- Calumet Specialty Products: No Fuel For Growth
- Corning: A Real Glass Act With A Ton Of Upside
- PetroLogistics: This High Yielder Should Yield A Higher Price
- CAT: This Dead One Will Not Bounce
- Annaly Capital: The Endless Struggle Between Book Value And Income
- So Why Did The Fed Do A Non-Taper?
- American Capital Agency: What Will The Dividend Cut Yield?
- Letting The CAT Out Of The Bag
- American Capital Agency: How We Stopped Worrying And Learned To Like This mREIT
- Potash: Trapped Value Or Value Trap?
- Barrick Gold: This Short Is Getting Long In The Tooth
- Annaly: Anatomy Of An mREIT In A Fed Tapering Scenario
- Annaly: Waiting To Buy Still The Best Course
- CYS: A Nice Yielding REIT, BUT...
- EXCO: Finally Some News Worth Talking About
- SandRidge Mississippian Trust II: More Risk, More Reward
- Corning: A Nice Quarter With More To Come
- PetroLogistics: Let The Dividends Come
- SandRidge Permian Trust: A 10% Permanent Yielder?
- Cliff Natural Resources: We Prefer The Common Shares