View Illuminati Investments' Articles BY TICKER:
Core Molding Technologies' Accelerating Earnings Propel Bullish Thesis
- Core Molding Technologies reported excellent earnings for the fourth quarter and full year, growing net income 57 and 35 percent over those prior-year periods, respectively.
- The value-added trucking accessory company continues to benefit from tailwinds in the trucking industry, which is seeing increased demand for new trucks to replace ageing fleets.
- Yet, CMT is still very reasonably priced for a company growing so fast in an attractive industry, at under 12 times earnings.
- I expect the company to continue to demonstrate strong operational and financial performance in growing earnings to a conservative estimate of $1.50 in 2015.
- With just a slight P/E expansion as the company becomes better known, the shares could reach my price target of $20 within a year, which would be a 30% gain.
USG Corp.: An Unjustly Cheap Housing Play
- Drywall maker USG has declined recently, despite ongoing strength in their main business line from the continued housing recovery.
- Fears that the recovery will falter and a writedown of a non-core shipping business, has left USG trading at a very low valuation.
- Berkshire Hathaway owns 30% of the company and could look to purchase it all, as Buffett continues to make bets on a consumer driven US economic recovery.
- A profitable overseas joint venture has also allowed them to quickly establish themselves as market share leaders, as they expand into other countries.
3D Systems: No Goodwill Impairment Despite Weak Results
- Despite the planned discontinuation of several legacy products, 3D Systems did not feel the need to take any of the goodwill writedowns I anticipated.
- If fact, goodwill actually increased due to the acquisition of botObjects at the end of last year, and will likely increase further with the closing of the Cimatron deal.
- Without these acquisitions, organic revenue growth was down to single digits, and continued adjustments to net income for ongoing acquisition costs is making non-GAAP earnings appear higher.
- Revenue also continues to be affected by currency headwinds that are likely to continue into the future, yet management reaffirmed revenue growth rates above last years levels.
- Given that guidance has proved to be overly optimistic in the past, I would take the stock's positive reaction to this as an opportunity to short the stock.
3D Systems: Goodwill Writedowns Are Coming
- 3D Systems declined 5% Tuesday in sympathy with weak guidance from fellow 3D printing company Stratasys, but the selloff still might not be over in this over-hyped sector.
- These companies seem to be continually cutting their revenue and earnings forecasts as 3D printing struggles to enter mainstream manufacturing.
- Of particular concern is the $100M goodwill impairment charge that SSYS took on its MakerBot acquisition, given that DDD has made many similar purchases over the past several years.
- Any writedown would have a detrimental effect on DDD's valuation, since more than half a billion dollars in goodwill it has makes up 40% of book value.
Merger And Industry Consolidation Should Help Dawson Geophysical
- Seismic data provider Dawson Geophysical has been beaten down amidst the slump in oil prices on fears of reduced Capital Expenditures by producers.
- However, the company still provides an essential service as America's shale oil and fracking boom continues.
- The company is taking advantage of the temporary slowdown and their strong balance sheet to enter into a strategic merger with TGC Industries.
Update: Falcone's Exit From Harbinger Group Clears Way For Leucadia Buyout
- Phil Falcone stepped down from his publicly traded Harbinger Group to focus on another investment vehicle.
- He was replaced as chairman of HRG by Leucadia chairman Joseph Steinberg, as Leucadia also bought an additional 5M shares to raise its stake to 22%.
- This plus the exit of Falcone sets the stage for a possible buyout by Leucadia since they understand the value contained within Harbinger's diverse assets.
Update: UCP Reports A Loss But Strong Growth
- Small-cap homebuilder UCP reported impressive growth, with revenue and new home orders up triple digits over the same period last year.
- However, earnings were still negative at an 8 cent loss, versus expectations of a slightly better than breakeven quarter.
- This temporarily delays the thesis that operating leverage would lead to increased earnings and a possible recognition of a tax benefit.
- However, the strong growth should still eventually translate into earnings as the company gains scale and operational efficiency.
Core Molding Technologies: A Cheap Stock In An Up Cycle
- Core Molding Technologies is a small-cap company that manufactures fiberglass reinforced plastic moldings, mostly for the trucking industry.
- With trucking undergoing a resurgence which will likely continue with falling gas prices, Core Molding Technologies looks well positioned to continue their solid results.
- Even after doubling in the past two years, the underfollowed company still looks quite cheap compared to its earnings and growth potential in this latest up cycle.
Update: ARC Group Earnings Weighed Down By Acquisition Costs
- ARC Group Worldwide reported record sales for their 2014 fiscal year ending in June, but increased expenses related to acquisitions hurt earnings.
- Adjusted earnings for the quarter were slightly negative, resulting in annual adjusted EPS of 38 cents, well below expectations of 50 cents.
- Even based on this non-GAAP metric that adds over a million dollars to net income, ARCW still looks expensive at over 35 times earnings.
- Despite the impressive revenue growth due to acquisitions and an increased focus on 3D printing, I would avoid the stock until they can demonstrate better earnings.
A Pair Trade To Play The Bursting 3D Printing Bubble
- 3D printing stocks continue to decline as investors seem to finally be paying more attention to their still sky high valuations.
- Another manufacturing company, ARCW, also has ridden the bubble higher even though 3D printing currently accounts for less than 5% of sales.
- Similar to 3D printing manufacturers, ARCW's earnings could come under pressure due to the haste in embracing the 3D printing hype.
- Selling ARCW short against going long another undervalued manufacturing company could be a good way to play the deflating 3D printing bubble.
Homebuilder UCP Could Rise On Increased Earnings Or A Buyout
- UCP, Inc. is a small cap homebuilder that develops lots in desirable geographic areas.
- It has just swung to a profit in the past quarter and is expected to increase earnings dramatically next year.
- This will allow it to recognize an income tax benefit that will show up as further increased earnings through a lower tax burden going forward.
- The company also has a large inventory of undeveloped or partially developed lots that are being carried on the books at low purchase prices.
- Despite this likely understatement of land value, the company trades near book value, making it a desirable buyout candidate for other homebuilders facing tight inventory in desirable locations.
MDC Holdings Will Benefit From The Continued Housing Recovery
- MDC Holdings is an attractive mid-tier homebuilder that operates primarily in the West under the Richmond American name.
- The company has reported increased revenues and earnings on the back of the housing rebound that began in 2012 and has continued despite naysayers.
- Increases in both price and volume of sales has been a boon to homebuilder margins and profits, but for the most part their stock prices have not kept up.
- MDC should continue to benefit from the improved housing environment because of their recent land purchases and strong balance sheet.
- Despite this desirable geographic and financial position, the stock is also cheap relative to other homebuilders and the overall market.
Payments Not Guaranteed To Pay Off For Amazon, No Immediate Threat To PayPal
- Amazon is making another push into a crowded industry, hoping to steal market share with their usual strategy of undercutting more established players.
- This would seem to bode poorly for currently dominant PayPal, but I believe they are well enough established, especially with larger retailers, to fend off Amazon's charge.
- eBay shareholders stand to benefit from the continued strong performance of PayPal, while Amazon shareholders could see just another unprofitable foray into a low margin business.
Update: Roundy's Earnings Disappoint
- Roundy's earnings disappointed again, despite increased contributions from new Mariano's stores.
- Same store sales were weak, even at the better performing Mariano's banner.
- Management seems upbeat about the continued expansion of Mariano's, but an overly aggressive buildout could stretch the company's fragile financial position too thin.
Roundy's Could Turn Around Soon
- Buying stocks trading at 52 week lows is difficult while markets are near all time highs, since there are not many and you can temporarily look quite foolish.
- However, these shunned stocks could be where the value is in this overstretched market, if they have a strong enough business to turn things around in a still improving economy.
- This article will look at a stock currently trading near a 52 week low that offers potential upside due to a solid turnaround plan that is being underestimated.
- Roundy's is a company that is transitioning to focus on their premium Mariano's brand, but struggling legacy grocery stores and a high debt load are holding them down.
- The CFO's just announced departure is not a worrisome sign, because he is still a major shareholder and recently joined other insiders in purchasing shares.
What To Do When You Can't Find Anything To Buy
- With indices at all time highs, value investors like yours truly are struggling to find anything cheap enough to buy.
- Even slow growing companies are trading at elevated valuations, along with most of the rest of the market.
- Fast growers are trading at even higher, often absurd, valuations that count on years of sustained high growth rates.
- Finding growth at a reasonable price remains elusive, unless you're willing to overlook hopefully temporary concerns that are weighing down the rare stock that has pulled back to attractive levels.
Quality Closed-End Real Estate Fund Now Trading At A Discount
- Cohen & Steers Total Return Real Estate Fund is an unleveraged closed-end fund that now trades at a significant discount to its holdings of quality equity REITs.
- A merger with another fund seems to have temporarily brought down the price even further below their most recent net asset value.
- A dividend increase announced with the merger has brought the annualized yield up to an enticing 7.8%.
Buy Axiall As Short-Term Issues Temporarily Drag Down Earnings
- Formed by a recent spin-off and subsequent merger, Axiall Corporation's diverse product lineup of chemicals and building materials offers strong long-term earnings power.
- Recent issues are obscuring the cost savings likely to be realized through synergies and masking the potential long-term earnings power of the combined company.
- A number of recent setbacks led to temporarily depressed earnings and an opportunity to buy shares at a discount.
TJX Should Buy Ross, And So Should You
- Ross Stores is trading at a very reasonable valuation given its impressive revenue and earnings growth history.
- The discount retailer would be a natural fit in the portfolio of stores operated by the larger competitor TJX.
- TJX could use their strong balance sheet to accelerate their own expansion by buying all of Ross Stores while it's on sale.
Monitoring The Cheap Oil Services Company, Geospace Technologies
- Geospace Technologies is trading at a very low valuation given its strong earnings growth history.
- The company is now even cheaper after the market overreacted to a contract delay.
- This gives investors a good opportunity to benefit from the potential of its innovative new products.
- Green Mountain's Pop Will Fizzle Out
- Atwood Oceanics Cheap Due To Unrelated Weakness
- Denbury Resources: A Pure Play On Enhanced Oil Production
- A SodaStream Mea Culpa
- Don't Count On Growth Forever From Chipotle
- Conn's Is Creating A New Subprime Lending Bubble
- Buy GSV Capital Before The Next NAV Report
- Harbinger Group Still On Sale, Will Leucadia Buy It All?
- Buy Some Portfolio Insurance While It's Cheap
- Could Salesforce.com Be Fudging Their Sales Numbers?
- EMC Stores Big Data And Big Value
- eBay's Wonderful Businesses Now Available At A Fair Price