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Teekay Tankers: The Good News Keeps On Floating In
- TNK is a survivor of the prolonged crude tanker recession that appears to have ended last year. They are well poised to capitalize on the improving fundamentals of crude transport.
- We look for TNK to earn 50-55c for 2014 and 75c-$1 in 2015. The equity is trading at a very cheap 6-7 times forward PE and 25% cash flow yield.
- TNK is expanding its fleet and increasing spot exposure at the right time. With improved tanker rates, TNK will be able to organically grow and maintain their fleet age.
BioScrip's Turnaround Story Will Turn Around Some Heads
- Bioscrip is in the growth sector of home infusion therapies but debt-fueled acquisitions have proven hard to integrate. That looks to change over the next few quarters.
- The recent deal by Pfizer to purchase Hospira for $90/share highlights the potential value in this company. Ownership by deep value investors adds to the allure.
- If BIOS can improve their business margins to industry standards, comparable valuations would argue for a 3-4 times increase in the share price. But be warned, this is speculative.
Denbury Resources: Built To Win
- DNR's earnings breakeven is $71 per boe generating positive cash flow down to $50. Capex is flexible and their low decline rate leaves operational flexibility limiting downside risk.
- DNR's current dividend of 25c is safe and their stated goal of increasing it to 55c in 2015 is intact even with today's low oil prices. Valuation looks attractive.
- DNR has no significant debt maturities until 2020 with minimal liquidity risk. DNR will have a 4.5% 2015 dividend yield with potential for 5-10% growth earning it a buy rating.
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