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Douglas E. Johnston

 
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  • Potash Corporation: An Excellent Entry Point
    Fri, Sep. 12 POT 7 Comments

    Summary

    • 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
       • Fri, Sep. 5 CLF 53 Comments

    Summary

    • 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
    Thu, May. 1 HOLX Comment!

    Summary

    • 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
    Thu, Mar. 20 KKR 32 Comments

    Summary

    • 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
       • Tue, Mar. 18 SDR 70 Comments

    Summary

    • 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
    Thu, Mar. 13 ABX 26 Comments

    Summary

    • 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
       • Sat, Mar. 1 XCO 56 Comments
  • Teekay Tankers: An Explosive Growth Story That Is Set To Sail
       • Wed, Feb. 26 TNK 28 Comments
  • CenturyLink: A Lost Connection To Growth
    Tue, Jan. 28 CTL 42 Comments
  • Fifth Street Finance Corp. Still Won't Cover Its Dividend
    Dec. 5, 2013 FSC 46 Comments
  • KKR Financial Holdings: 20% Upside For 2014
       • Nov. 13, 2013 KKR 17 Comments
  • EXCO Resources: Why We Are No Longer Bulls
    Nov. 12, 2013 XCO 58 Comments
  • Calumet Specialty Products: No Fuel For Growth
    Nov. 7, 2013 CLMT 51 Comments
  • Corning: A Real Glass Act With A Ton Of Upside
    Oct. 30, 2013 GLW 27 Comments
  • PetroLogistics: This High Yielder Should Yield A Higher Price
    Oct. 29, 2013 PDH 29 Comments
  • CAT: This Dead One Will Not Bounce
    Oct. 23, 2013 CAT 18 Comments
  • Annaly Capital: The Endless Struggle Between Book Value And Income
    Sep. 26, 2013 NLY 10 Comments
  • So Why Did The Fed Do A Non-Taper?
    Sep. 22, 2013 GLD, TLT 28 Comments
  • American Capital Agency: What Will The Dividend Cut Yield?
    Sep. 22, 2013 AGNC 33 Comments
  • Letting The CAT Out Of The Bag
    Sep. 18, 2013 CAT 9 Comments
  • American Capital Agency: How We Stopped Worrying And Learned To Like This mREIT
    Sep. 12, 2013 AGNC 43 Comments
  • Potash: Trapped Value Or Value Trap?
    Sep. 9, 2013 POT 23 Comments
  • Barrick Gold: This Short Is Getting Long In The Tooth
    Jul. 11, 2013 ABX 26 Comments
  • Annaly: Anatomy Of An mREIT In A Fed Tapering Scenario
    Jun. 19, 2013 NLY 38 Comments
  • Annaly: Waiting To Buy Still The Best Course
    Jun. 12, 2013 NLY 58 Comments
  • CYS: A Nice Yielding REIT, BUT...
       • Jun. 7, 2013 CYS 50 Comments
  • EXCO: Finally Some News Worth Talking About
    May. 1, 2013 XCO Comment!
  • SandRidge Mississippian Trust II: More Risk, More Reward
    Editors' Pick • Apr. 24, 2013 SDR 38 Comments
  • Corning: A Nice Quarter With More To Come
    Apr. 24, 2013 GLW 8 Comments
  • PetroLogistics: Let The Dividends Come
    Apr. 22, 2013 PDH 20 Comments
  • SandRidge Permian Trust: A 10% Permanent Yielder?
       • Apr. 18, 2013 PER 61 Comments
  • Cliff Natural Resources: We Prefer The Common Shares
    Apr. 12, 2013 CLF, CLV 8 Comments