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Michael Fitzsimmons

 
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  • Midyear Update: Petroleum & Resources Hopes Exxon And Chevron Join The Game [View article]
    Hi thanks - PEO closed today at an 11% discount to NAV and yielded 6.6% last year. The top-10 holdings:

    http://bit.ly/1sAjGvK

    are still Exxon and Chevron, which equate to 24% of the entire's funds net assets. XOM is yielding 3% and CVX 4%. While both do have downstream chemicals and refining operations that should do ok in a low oil price environment, it appears to me that Saudi Arabia is intent on turning this into a real crisis. If that is the case you may want to wait awhile longer before investing in PEO. That said, if it were me, I'd likely go with reallyu low-cost fund like Vanguard Energy. After all, why pay PEO management salaries and nice retirement plans when year-after-year the discount to NAV just seems to widen further? You can pick just about any broadly based energy fund and it will outperform PEO. But I guess an 11% discount to NAV is better than the 14.9% it was when I wrote this piece.
    Jan 14, 2015. 09:11 PM | Likes Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Thanks for the links - some good information there. I like WDC's position in SDD's, not so much for the consumer market, but for enterprise, which is where the big bucks are:

    http://wrd.cm/1xXaWQZ
    Jan 13, 2015. 11:13 AM | Likes Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    You raise an excellent point - thank you. While my $135 price target is based, primarily, on EPS growth (with HGST integration as the big catalyst) and cash on hand. However, part of my bullishness was belief that WDC can turn into a dividend growth story - especially if they decide to scale back stock buybacks in favor of the dividend. Honestly, I had not thought about the repatriation issue as it relates to taxes and cash available for shareholder returns - so thanks for pointing that out. That said, the cash hoard seems so huge, and with the Republicans coming back in control of Congress, I think there is a good chance Wash may pass some tax reform that will be favorable to corporations. WDC is on the ascendency.
    Jan 13, 2015. 11:10 AM | Likes Like |Link to Comment
  • Ohio State's Buckeye Partners - 'Texas Hub' Assets Will Ride The Coming Export Wave [View article]
    BUCKS beat the Ducks 42-20!
    Jan 13, 2015. 11:03 AM | 1 Like Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Yes - you mentioned Intel, but not Western Digital's (HGST) strategic technology partnership with Intel on NAND flash for SCSI (SAS) SSD's:

    http://bit.ly/1A9eMDx

    Even today WDC has a very good and fast growing foothold in the SSD market. From the last concall transcript, here is what the CEO said in response to an analyst noting strength in WDC's enterprise SSD revenue ($156 million from $113 million in the previous quarter)

    "That is really, I’ll call it, across the board and really speaks to the strength of our product line both in terms of – well, really across the board, performance enterprise, capacity enterprise as well as in terms of enterprise SSD. We clearly have the broadest product line in the industry and not only that. We have the broadest products that we arguably believe that we got very strong performance from a product standpoint as well. So that’s being reflected in our performance as well as the build out that we’re continuing to see from the customer perspective."
    Jan 12, 2015. 06:24 PM | Likes Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    On our discussion of the PC market, this just out:

    http://seekingalpha.co...
    Jan 12, 2015. 06:08 PM | Likes Like |Link to Comment
  • Bakken Crude Trading At $41.75/Bbl Is Continental Resources' Quandary [View article]
    Hi Energex - with Republicans being back in charge in Congress, I think there is a definite possibility that the export ban is either lifted or significantly eased. Not sure if this PRO article is still available:

    http://seekingalpha.co...

    but in that article I mentioned signs that the administration has already eased export restrictions.
    Jan 12, 2015. 04:53 PM | 1 Like Like |Link to Comment
  • Bakken Crude Trading At $41.75/Bbl Is Continental Resources' Quandary [View article]
    Right - the Eagle Ford/Permian are damn near capable of supplying all the light-sweet the Gulf refineries need. Much of the Bakken is railed to the East/West coasts and the refineries love the logistics of rail despite the relatively high transport costs. I suspect the 25% split may be on the high-side. Note that several pipelines related to Bakken exit capacity were recently cancelled after lack of producer interest during open season.
    Jan 12, 2015. 11:49 AM | 1 Like Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Hi glacier - good question. I see in the last quarter the tax rate was ~8%. That was down from 8.5% in the previous quarter. It's been as low as 7% recently. So, I glanced through the last several SA quarterly concall transcripts and here is the best quote I could find explaining the tax-rate, which the company models at 7-10%:

    "On the tax rate, when we announced the acquisition a year ago or more than a year ago, we indicated the 7% to 10% rate, which has really to do with the geographic generation of our profit. We still think that's the appropriate rate for now. I'm making an important point here. That is our midterm model. Like other successful, high-tech companies with a low effective tax rate, our profits and our cash accumulate offshore. This number doesn't -- does not include any repatriations, and we will not know how the laws will pan out after the election. But at this point, there is no repatriation planned in this business model."

    This came from the 2012 analyst day meeting:

    http://seekingalpha.co...
    Jan 12, 2015. 11:45 AM | 1 Like Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Thanks and raise some good points. I meant to mention in the article that one reason I wrote it now was that when we had the big sell-off in the market to start the year, WDC held up very well. To me, that showed an underlying strength in the shares. Sure enough, when the market bounced back, WDC certainly participated.
    Jan 12, 2015. 11:34 AM | 1 Like Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Yes - the value of HDD's keep going up as technology improvements keeps driving the price/GB down. While it is true that SDD's are going to be increasing used on mobile devices, I can't imagine they will be a serious threat on a cost basis for consumer's large storage requirements for photos & backups etc. So the PC market looks very solid and meantime, you've got huge growth potential in the enterprise, cloud, and streaming set-top box/TV businesses. And yes, the duopoly is very much a moat around revenues and FCF. So barring some kind of worldwide global financial catastrophe (which is why I wish the hell the US would drop these terrible sanctions against Russia), the outlook looks very bright for WDC. That said, it would be nice if MOFCOM approved integration sooner rather than later.
    Jan 12, 2015. 11:32 AM | 1 Like Like |Link to Comment
  • Inter Pipeline: A Record Q3 Leads To The Largest Dividend Hike In Company History [View article]
    Hi fairguy - agreed, the capital expenditures for existing oil sands production has already been spent, so those projects will continue to pump out barrels with new cap-ex being limited to maintenance, small efficiency projects, and operational expenses. That said, brand new projects, like Suncor's Fort Hills, could be put on indefinite hold until things get sorted out - including not only -XL, but more importantly supply/demand. Some good news for IPL is the oil contango in Europe, along with rising diesel demand, which will lead to better returns from its storage business which is optimally located in Denmark and Britain.
    Jan 12, 2015. 11:24 AM | Likes Like |Link to Comment
  • Bakken Crude Trading At $41.75/Bbl Is Continental Resources' Quandary [View article]
    Jerrydd: I think if you look at the shareholder base of Exxon and Conoco that are very much American, and that means their billions in dividends go to Americans. That money over time will simply dwarf any short-term gain in jobs. That is the point I am trying to make: the biggest gain for Americans in terms of -XL ain't the short-term jobs it will create, it's the long-term dividend stream of the, yes, American companies that produce in the oil sands. Lastly considering -XL originates in Canada, you may be fooling yourself that them majority of capacity will be for tight-oil produced in the US. The heavy oil from Canada will be routed to the Gulf Coast refiners that are configured to run it, and it will put pressure on Venezuelan, Mexican, and even Saudi crude that is currently being imported to feed those refineries.
    Jan 12, 2015. 11:18 AM | 2 Likes Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Thank you Jonathan. Yes, HGST is a big catalyst, but it looks as though the PC market (that was written off for dead) is showing signs of life, not just in WDC's latest quarterly results, but by a Citi analyst (in mid-December), who says PC's still make up ~60% of total HDD units:

    http://yhoo.it/1sn0WzP

    Also, I can't help feeling that lower oil (gasoline) prices will be very bullish for PC demand in emerging economies.
    Jan 11, 2015. 03:54 PM | 1 Like Like |Link to Comment
  • Western Digital: A Cash Cow With Management Commitment To Return 50% Of FCF To Shareholders [View article]
    Well said. There is a lot to be said for comfort investments and I do view the yield of STX as an advantage. That said, as for dividend growth, it appears to me WDC has the edge, especially if WDC shareholders let management know they would prefer dividends directly to them over share buybacks. Currently, the management of WDC is like XOM - they over-emphasize buybacks because it benefits them. In addition, while it is certainly nice to have dry-powder for strategic acquisitions, potential economic downturns, and inventory moderations, it would appear to me that WDC's net cash position is significantly more than needed. I haven't been a shareholder of WDC for all that long, but I have been contacting the company on this issue, and I would encourage others to do so as well.
    Jan 11, 2015. 12:53 PM | 2 Likes Like |Link to Comment
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