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  • Should Warren Buffett Break Up Berkshire Hathaway?

    As Berkshire's shareholders descend on Omaha, the big question on everyone's mind is what will the company be without Warren Buffett?

    This weekend while equine aficionados tune into the Kentucky Derby and tipple mint juleps, the investing world will be fixated on Omaha for the annual Berkshire Hathaway (BRK/A) shareholder's convention.

    It's not unusual to meet so-called "Berkshire Millionaires" in Omaha. But this weekend there will be even more of them. You could have bought shares in the holding company for $11 a share back in 1969. An early $20,000 investment would be worth more than $70 million today.

    And the 83-year old Buffett shows little sign of slowing down. Sure the New York Times likes to pose the question of whether the oracle's still got it. But there can be no doubt that Buffett is one of the most respected financial minds in the world. His opinion moves the needle on just about everything, from income inequality to "Too Big To Fail" banks to the sharing economy.

    The big question on everyone's mind this year though, will be Berkshire's plan for life-after-Buffett.

    Check out Warren Buffett's portfolio here.

    He has announced a succession plan. And he has no shortage of strong and like-minded candidates to choose from. Although some prominent newspapers like The Economist are calling for Buffett to break the company up.

    Only a man with the reputation and prestige of Buffett could have kept shareholders from demanding participation in the Dotcom boom, and such conservatism is a key facet of the firm's success. The Economist's editorial board is skeptical that a replacement could project that kind of authority.

    As advocates for a break-up point out, many of the companies in Berkshire's portfolio - like Heinz Ketchup - are fully capable of making it on their own. Taking apart the company in an orderly fashion has the potential to preserve more value in the long run.

    In honor of the Oracle, we decided to build a list using his holdings. Starting with a universe of 43 of the largest Berkshire holdings, we screened that list for signs of growing profitability by looking for encouraging accounts receivable trends.

    These trends are noted when revenue outpaces receivables as a percentage of net assets. Since revenue is money in the bank, and receivables are simply money that's "promised," the smaller percentage of your assets that are receivable, the better.

    A sixth of Berkshire's holdings made it through the screen. Sure seems like the old man's still got it. Perhaps talks of departure are premature.


    1. DIRECTV, Inc. (DTV, Earnings, Analysts, Financials): Provides digital television entertainment in the United States and Latin America. Market cap at $40.33B, most recent closing price at $80.76.

    Revenue grew by 6.7% during the most recent quarter ($8,594M vs. $8,054M y/y).

    Accounts receivable grew by -5.53% during the same time period ($2,547M vs. $2,696M y/y).

    Receivables, as a percentage of current assets, decreased from 48.54% to 42.79% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    2. DaVita, Inc. (DVA, Earnings, Analysts, Financials): Provides kidney dialysis services in the United States. Market cap at $14.39B, most recent closing price at $69.93.

    Revenue grew by 23.62% during the most recent quarter ($3,063.21M vs. $2,477.85M y/y).

    Accounts receivable grew by 5.68% during the same time period ($1,844.57M vs. $1,745.43M y/y).

    Receivables, as a percentage of current assets, decreased from 60.57% to 53.12% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    3. Procter & Gamble Co. (PG, Earnings, Analysts, Financials): Provides consumer packaged goods in the United States and internationally. Market cap at $222.17B, most recent closing price at $82.34.

    Revenue grew by 0.47% during the most recent quarter ($22,280M vs. $22,175M y/y).

    Accounts receivable grew by -3.79% during the same time period ($6,911M vs. $7,183M y/y).

    Receivables, as a percentage of current assets, decreased from 28.06% to 25.16% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    4. Suncor Energy Inc. (SU, Earnings, Analysts, Financials): Operates as an integrated energy company. Market cap at $57.51B, most recent closing price at $38.78.

    Revenue grew by 7.44% during the most recent quarter ($10,194M vs. $9,488M y/y).

    Accounts receivable grew by -7.53% during the same time period ($5,548M vs. $6,000M y/y).

    Receivables, as a percentage of current assets, decreased from 42.61% to 37.76% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    5. Visa, Inc. (V, Earnings, Analysts, Financials): Operates retail electronic payments network worldwide. Market cap at $130.01B, most recent closing price at $206.09.

    Revenue grew by 10.86% during the most recent quarter ($3,155M vs. $2,846M y/y).

    Accounts receivable grew by -41.75% during the same time period ($1,748M vs. $3,001M y/y).

    Receivables, as a percentage of current assets, decreased from 40.63% to 22.51% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    6. Verisk Analytics, Inc. (VRSK, Earnings, Analysts, Financials): Provides proprietary data, analytics methods, and embedded decision support solutions to property and casualty (P&C) insurance, mortgage, and healthcare industries primarily in the United States. Market cap at $10.00B, most recent closing price at $59.91.

    Revenue grew by 14.93% during the most recent quarter ($332.46M vs. $289.26M y/y).

    Accounts receivable grew by 0.66% during the same time period ($225.89M vs. $224.41M y/y).

    Receivables, as a percentage of current assets, decreased from 57.46% to 47.57% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    7. WABCO Holdings Inc. (WBC, Earnings, Analysts, Financials): Develops, manufactures, and sells braking, stability, suspension, and transmission control systems primarily for commercial vehicles. Market cap at $6.52B, most recent closing price at $106.82.

    Revenue grew by 20.75% during the most recent quarter ($720.4M vs. $596.6M y/y).

    Accounts receivable grew by 16.02% during the same time period ($397.6M vs. $342.7M y/y).

    Receivables, as a percentage of current assets, decreased from 43.24% to 32.2% during the most recent quarter (comparing 3 months ending 2013-12-31 to 3 months ending 2012-12-31).

    (List compiled by James Dennin using CNBC's Berkshire portfolio tracker. Monthly returns sourced from Zacks Investment Research, accounts receivable souced from Google Finance. All other data sourced from Finviz.)

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    ABOUT US

    © Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

    Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

    Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.

    Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: DTV, PG, SU, V, DVA
    May 07 11:38 AM | Link | Comment!
  • 8 Small Cap Stocks With Significant Short Selling

    Small cap stocks have had an amazing bull run. Does increased institutional short selling signal the end?

    Lots of attention has been directed toward the rise and fall of big names during the recent stock market bull run.Facebook (FB), Twitter (TWT), Google (GOOG) and Apple (APPL) results dominate headlines as pundits and analysts try to determine whether we can expect to see more upside, or if smart money is betting on a contraction.

    According to Alexis Xydias at Bloomberg, smart money appears to be betting against small cap stocks. Fund manager Eric Cinnamond says, "small-cap stocks are the most expensive I've ever seen them." The rising tide that lifted the entire Russell 2000 lifted some junk along with it. As last year's wave of optimism crests and retreats, overvalued small caps are sitting ducks for short sellers.

    To see what stocks are most likely to be targeted by institutional short selling, we set up a screen to look for companies with market caps between $300 million and $2 billion that are 20% above their 200 day simple moving average (200SMA). This indicates they have risen with broader the bull market.

    Read more about free cash flows and EPS trends.

    Then we narrowed the search by looking for stocks with 20% of their stock float shorted. Finally, we looked for companies that have high debt-to-equity ratios. If there are any future glitches in the recovery, these stocks will be the first to get hit.

    Out of that list we got some surprising results. Amkor Technology, Inc. (AMKR), which provides outsourced semiconductor packaging and test services to integrated device manufacturers, "fabless" semiconductor companies and contract foundries, shows both encouraging inventory turnover and accounts receivable trends. Alon USA Energy, Inc. (ALJ), which engages in refining and marketing petroleum products in the south western United States, appears undervalued by its levered free cash flow to enterprise value (LFCF/EV).

    That is to say, despite sending up red flags, some of these companies may squeeze the short sellers and turn out to be good long term investments.

    Do you think these companies will defy expectations, or are clouds on the economic horizon predicting a fall in these stocks? Use the links below to begin your own analysis.

    Click on the interactive chart to view data over time.

    1. Alon USA Energy, Inc. (alj, Earnings, Analysts, Financials): Operates as an independent refiner and marketer of petroleum products in south central, southwestern, and western regions of the United States. Market cap at $910.81M, most recent closing price at $14.48.

    2. Amkor Technology, Inc. (AMKR, Earnings, Analysts, Financials): Provides outsourced semiconductor packaging and test services in the United States and internationally. Market cap at $1.23B, most recent closing price at $5.70.

    3. Albany Molecular Research Inc. (AMRI, Earnings, Analysts, Financials): Provides contract services to various pharmaceutical and biotechnology companies primarily in the United States, Europe, and Asia. Market cap at $482.25M, most recent closing price at $15.03.

    4. Comstock Resources Inc. (CRK, Earnings, Analysts, Financials): Engages in the acquisition, development, production, and exploration of oil and natural gas properties in the United States. Market cap at $937.61M, most recent closing price at $20.31.

    5. Diamond Foods, Inc. (DMND, Earnings, Analysts, Financials): Engages in processing, marketing, and distributing snack products, as well as culinary, in-shell, and ingredient nuts. Market cap at $629.42M, most recent closing price at $28.67.

    6. Goodrich Petroleum Corp. (GDP, Earnings, Analysts, Financials): Engages in the exploration, development, and production of oil and natural gas properties. Market cap at $475.31M, most recent closing price at $12.94.

    7. Penn Virginia Corporation (PVA, Earnings, Analysts, Financials): Engages in the exploration, development, and production of natural gas and oil in various domestic onshore regions of the United States, including Texas, Appalachia, the Mid-Continent, and Mississippi. Market cap at $982.63M, most recent closing price at $15.01.

    8. Susser Holdings Corporation (SUSS, Earnings, Analysts, Financials): Operates convenience stores and distributes motor fuels in Texas, New Mexico, Oklahoma, and Louisiana. Market cap at $1.28B, most recent closing price at $60.63.

    (List compiled by Will Kenton. Financial data sourced from Finviz and Zacks Investment Research.)

    Analyze These Ideas: Getting Started

    Dig Deeper: Access Company Snapshots, Charts, Filings

    ABOUT US

    © Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

    Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

    Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC.

    Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: Kapitall is a team of analysts. This article was written by Will Kenton, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

    Apr 30 12:21 PM | Link | Comment!
  • Is Apple Headed For A Miss In Expected IPad Sales?

    Market consultancy NPD DisplaySearch reportedly out with a research note on Sunday indicating Apple (NASDAQ:AAPL) will miss its 2013 iPad shipment target by quite a wide margin. The combined sales of the two models will only reach 74 million units, according to the report, well below the 88 million initially estimated. Total is comprised of 31 million of the 9.7-inch version and 43 million of the "iPad Mini". Last two reporting quarters saw sales of just below 23 million and 20 million respectively.

    Apple typically does not comment on speculation about its internal estimates in tech blogs, and this is also not the first time that rumors circulated about a major slowdown in iPad demand. Supply chain sources have hinted that sales this quarter could drop as low as 10 million units, pointing to tighter competition from the popular Samsung Galaxy Note lineup as well as some of the lower-priced entry-level tablet alternatives.

    Notwithstanding the development and transition to iOS 7, Apple could benefit from greater visibility on its product refresh cycle. Reports out of Gartner last week estimating that the iPad Mini now accounts for some 60% of the first quarter iOS sales, but projections for the release of the next version of the device are now being extended into the early part of 2014.

    That uncertainty, compounded by what a research note from Gartner saw as a shift in focus toward software rather than hardware, is in all likelihood extending the household lifetime of the iPad Mini that will ultimately translate into bloated inventories. Already on the last earnings conference call, CEO Tim Cook expressed disappointment over the declining iPad Mini margins and falling ASPs.

    Shares of Apple are at a particularly precarious juncture, failing to gather any upward momentum after a brief respite from the selloff in early May. Instead, AAPL once again slid below the $400 level, threatening the first close below $39 since late 2011.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: AAPL
    Jul 01 7:05 AM | Link | Comment!
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