Prescient Investment Analysis

Value, growth at reasonable price, long/short equity
Prescient Investment Analysis
Value, growth at reasonable price, long/short equity
Contributor since: 2012
I have not followed this stock very closely but am familiar with it. While not criticizing a decision to invest in it (defensible business, probably not dependent on one product, does not involve shadowing big name investors or lionizing a manager...) some counter points might be appropriate?
Here are some potential issues:
The company is under new management (in my impression, past leadership might have been over-rated). Doing arithmetic based on information in this article, it has bought back shares at an average price of $143.61 during 2015, about 18% higher than it currently trades. On the other hand, statements of further aggressive repurchase activity might indicate that the current situation is in fact a worthwhile one.
Citing Jim Cramer, when there is a huge drop off in a stock like this, institutional investors are selling $10s or $100s of millions and it can take two days to unload their positions, so awaiting any further declines tomorrow would not hurt. There could also be some downgrades and lower estimates in the week ahead+ that result in wealth managers trimming their holdings, among others.
An investment in this company is not limited to the 787 and defense, right? What of the 777, it must still be an important product to Boeing and any problem would be a valid concern?
I know little about Network and Space Systems, but revenue and profit dropped. The earnings release says the segment should have 2016 revenues of $7.3 billion.
The dividend sounds nice (the situation with TNK could be similar as management has recently upped it, but where does yield put in a floor in this market?).
The reasoning against it involves repercussions to China's trading partners?
That story is informative; but does not seem as grim as you are toward Great Britain's membership.
I note that it is written almost exclusively in single-sentence paragraphs; except for the quotes of Prime Minister Cameron. Though it marks a higher effort at communicating than one tends to get through Twitter, in my opinion.
From what I am learning, the matter would not be revisited due to a substantial devaluation of the yuan--which seems to me that it could be what financial markets are pricing in.
I appreciate your perspective and never could have ascertained it without the reply.
Separately, your phrasing implies its likelihood: you think it is more probable than not?
My perspective tends to be such that the European Union can and will get through its ongoing challenges; though stress might be difficult. Financially, any British exit might even be described as a means to bring about a "Tail risk," perhaps similar to a substantial devaluation of China's yuan. Gold has been described as a type of insurance against tail risks, by Ben Bernanke, but I do not follow its market that closely. As you know, gold is also identified as a hedge against inflation, which seems to be disappearing globally...
Actually, the yuan is permanently a reserve currency with the IMF?
It seems that the suspected NPL issue I am referring to is a different matter involving financial institutions. Similar contentions have been made by multiple parties. There is a follow-up of one particular person's in-depth argument at his own web site:
Sometimes even authoritative finance and business professors are wrong (e.g. Greece is issuing IOUs), but the issue of banks reporting 3.7 x the revenue that firms report paying in interest...
So, if reserves drop from $3.33 trillion to beneath the IMF's recommended $2.6 trillion, it could jeopardize the yuan's prospects as a reserve currency. If so, it seems that if 3.5% of $28 trillion is a fomenting NPL problem, it is probable to have staggering implications?
The connection to producer prices is not making immediate sense.
My similar concerns stem from:
1) China's efforts toward the yuan as a reserve currency.
2) A $28 trillion credit bubble per a Bloomberg article this morning (source of $28 trillion not ascertainable:
3) The non-performing loan issue referenced in the article above; which is probably included in $28 trillion.
While a credit catastrophe might not result, or is off in the distant future after resilient government intervention, an ultimate loss of currency control should result in shockwaves of very high amplitude!
Can the PBoC backstop $28 trillion?
It can take varied amount of work to write an article, and if one is seeking compensation for it, then material has to be presented so that it is deemed acceptable for publication. Personally, I view the non-public research of big banks as content that should be valuable to some persons. However, there is not space to also present arguments about what the future price of oil is likely to be, though it is obviously important for Shell and its peers.
It just so happens that T. Boone Pickens, by all accounts an expert on the energy industry, has been predicting $70 oil on television during the past few months. I find him cogent.
Actually, I think there is better information in this past clip, in which he informs Sandra Smith that “It is going to take two years to get the rigs back up.”
Not all of us are knowledgeable about such things, or discuss the fact that each rig employs 50 persons, because most of us do not hire in groups of 50…
Anyhow, half of US production is probably going to disappear for two years. Pickens is also seems to anticipate some decline from Russia (I am a Russophile). Consequently, oil might get to $70 faster than either UBS or Jefferies predicts. While it still might not be adequate for Shell, the share price’s behavior could reflect changing commodity pricing.
Also, though it is only a detail in my article, the bond market might offer something similar to another expert opinion. The price of the company’s high yield debt has not dropped enough so that the stock’s yield is higher.
“Accidental high yielder” is probably the accurate term. If you like some of the peers they could make sense. It might be that my article amounts to “Chasing yield.”
To be clear, I am not saying that RDS is at its bottom. Though hopefully it won’t be yielding 7%...My own holding is very small, as I sold most of it months after my 2013 article. Any addition might come through BG shares…
I just own RDS.B and have the dividend tax automatically withheld. News like today's about its natural gas conversion plant in Louisiana (I do not know so much about their Jet A; though it must be better than 100LL), and its natural gas liquids fueling station agreement with TA makes me like it. No other super major oil company seems to be doing as much with natural gas.
Beyond that, some sort of speculative bet on a company entering an agreement to tap China's shale energy would be interesting but is taxing to try to figure out. Months ago, when looking into a case against SNP, some other companies, including HAL, seemed to offer a hedge.
According to months-old notes, China has 1,275 trillion cubic feet of shale gas that the People's Republic lacks the capability to use, and it is said to difficult even for the technically adept. There has been an initiative there to replace 10% of its oil demand with gas.
I know HAL just had a Dutch Tender and rallied much higher afterwards, but have not followed it beyond that. Operations in China is just one part of the company's global footprint.
NOV is a Buffett stock, and T. Boone Pickens has had a stake too. It has several Chinese subsidiaries.
Looking at my notes now, there is Anton Oil Services Field Group that SLB has an ownership stake in also.
I have not looked into BHI.
It would seem that if any of them, or someone else, enters an agreement with one of the Chinese companies there could be significant upside. However, some real time indication would be necessary; and even then, navigating the myriad of intercultural, governmental, and accounting issues is not easily done.
Other than that, I like RDS. It is a rich world asset, even though it is a foreign company.
I find value their analysis. It seems to include valid reasoning.
You are aware of a difference between procedural methods? Some of the people on The Motley Fool might think the drug candidate involves using eye drops the same way prior to surgery.
"A safeguard against complete erasure of data:" isn't that the function of cloud-based backup programs that security software uses?
It is probably only a matter of time before some focus articles are published with attention to the iPhone 5S's new processor (The Economist magazine has been touting ARM Holdings for some time, and it seems to validate it). Maybe someone would discuss its finger print reader also. There seems to be advancement.
It is up nearly 50%, a short squeeze based on that news is not the only reason?
You might want to be better familiarized with Tony Jannus, since it probably would have been more precise to use his name than either of the Wright brother's. Evidently Neeleman won the Tony Jannus Award in 2005...Though it is doubtful he would be remembered the same way as Jimmy Doolittle who won it in 1972...Frederick W. Smith in 2011...Do I get anything in exchange for educating people?
Good luck with that Chris. My incline trainer needs a new console, and though its warranty is up, the manufacturer is sending a replacement at what must be close to cost.
Thanks for that comment Humble Eagles. It seems like the real winner in all this might be Arm Holdings; whereas Intel has lots of cash and can increase the dividend.
Michael, it is nice to see that your options trade may be playing out. It sounds like the type of thing that utilizes amounts of margin that many of us do not have?
A 2.6% dividend yield and voracious buyback provide support here, so maybe bad news would be needed to send the stock lower. It may also be evident that CHL has leverage, in a negotiating sense. Otherwise, everything I have reviewed indicates that Apple is losing market share in China; and that phones are becoming commoditized.
Maybe some of the mREIT people are all over this?
Just for the record, if the trade was opened at $370 last Thursday, it could have been closed out today for $480. The amount tied up would have been $500 + $370 = $870. A $110 profit (before commissions) on $870 is 12.6%.
Thanks for all the terrific comments and please continue with your discussions. The stock is up slightly this morning, so there might be a better chance for the trade described tomorrow. It is something of a gamble; but you never know, a deal with China Mobile could be announced in two weeks. If you reference the graphic, CHL's growth is lagging and most of its subs are using 2G.
Hopefully UBS's research is helpful to some of you. The Swiss firm has a $75B market cap, and considerable resources. Several of their reports have been quite helpful on other articles, including TGT and PCLN.
Without admitting to following the matter, let me remark that some people seem to misuse the word frivolous as it pertains to legal matters. To me, the term connotes something so poorly reasoned and lacking support that no competent lawyer would have pursued it--and is probably worse than being defeated by a pro se party.
I am not sure what you are asking.
Evidently you would short the stock against them, then?
That is right about the dividend, thank you for pointing it out DM32. I reviewed sources (plural) other than ArcelorMittal's own web site about it and am not proud of the misinformation. Pertaining to the article, that is an important point because of the mistaken impression that there is more support for the stock price than is the case...let me see try and get corrections through.
Zheeem, if you have any resources supporting your vision of Europe picking up in H2 it would be nice to review them. It could perhaps be the case that management revised its consumption figures down far enough that there could be a positive surprise?
praveenbhargava, I think there is much support for what you say...does the following give you any ideas?
hokiecanecountry, your questions are quite pertinent and I lack definitive answers for them at this time. If anyone can post documents or links to resources that give resoundingly clear guidance it would be helpful. I have seen no indication that Michael Dell would be prohibited from voting his shares at the Meeting. Also, it is not clear to me how and when a person would control over 50% of stock as required under current provisions, or if changing the procedures would need to be voted upon.
Something similar is probable in the near future at NUAN, but rules in place probably differ.
Packrat1987, I know of no one who is calling Thursday's vote ahead of time.
elbrujo, that you for sharing your insight. If you can better address any of the other questions, it would be helpful.
According to my data, institutions have increased their holdings 8.49% this quarter, and UBS reiterated a Buy rating on July 3rd.
Implied volatility of put options is at 43%, nearly as high as it has been in a year. If, despite what seems to be institutional support for the stock and a recent sell off, you want to initiate a bet on its further decline, prior to earnings, it may be better to sell calls? You should get higher prices for them if IV increases prior to ARMH's Wednesday, 7/24 Report?
Currently, selling a $41/$42 January call spread should be worth about $0.40, so a January $30/$28 put spread would cost nothing. Aside from tying up margin until it all plays out, maximum loss would be $1 / contract, and maximum gain $2 if it trades below $28. Again, the deal could improve in a week or so...I am not convinced.
Er, I was looking at the 10-Q of the wrong corporation: Titan Machinery, Inc. (TITN), not Titan International Inc.'s (TWI)!
From the 10-Q
The Company’s 3.75% Senior Convertible Notes…[have a]
conversion price of $43.17.
So, evidently, the Contributor thinks he can do better than 3.75%with the stock? Insight is lacking...but it does not sound like he bought the notes in March...
Yahoo! Finance is showing close to $1B in debt against a market cap of over $800M?
Maybe they have been borrowing at low rates; partially in order to build in North Dakota?
I had not heard of this one.
Maybe they are not all booked up in North Dakota, or perhaps rental agreements are structured to result in higher revenues in future years?