Seeking Alpha

Ray Merola

 
View as an RSS Feed
View Ray Merola's Comments BY TICKER:
Latest  |  Highest rated
  • EOG Resources Inc. At $80 Oil [View article]
    Casey

    You make another excellent point. In the area of E&P technology, EOG is king. The business continues to drive down cost, thereby improving margin.
    Nov 14, 2014. 01:15 PM | Likes Like |Link to Comment
  • EOG Resources Inc. At $80 Oil [View article]
    I had the opportunity to speak with the I.R. director as part of my research for a recent S.A. article I wrote about EOG. She indicated that EOG Resources can make an adequate return on capital with oil prices below $70 a bbl. In some locations, even considerably lower than that.

    In the event crude prices stay down, EOG would re-deploy capital to drill in fields whereas the returns are the greatest: the easy oil. The company has the best leases in the most prolific domestic fields.

    Nov 14, 2014. 09:55 AM | 2 Likes Like |Link to Comment
  • Why I Like General Motors At Today's Undervalued Price [View article]
    Nicholas, one of the most comprehensive and thorough GM articles I've seen on S.A. Appreciate the research effort and understandable writing style. Looking forward to more of your work.

    GM is a spec stock; however, one that pays a good dividend. For those taking the long view, I concur with your thesis. This investment will pay off over time: though maybe not when WE want it to pay off.
    Nov 14, 2014. 07:42 AM | 3 Likes Like |Link to Comment
  • What The Duracell Deal Says About Procter & Gamble's Valuation [View article]
    Tremendous analogy, Gregg. What an image! A+
    Nov 13, 2014. 11:42 PM | 1 Like Like |Link to Comment
  • AT&T: Why Its New Acquisition Makes Sense? [View article]
    Thanks for the reply Ferdinando

    I could not find anything either. At some point we will obtain more data; in the meantime, I certainly agree with your thesis.
    Nov 13, 2014. 04:52 PM | Likes Like |Link to Comment
  • AT&T: Why Its New Acquisition Makes Sense? [View article]
    Fine article, Ferdinando. Many thanks.

    Do you have any historical EBITDA or cash flow data for Iusacell? What multiple thereof did AT&T pay for the company? Furthermore, do the current Iusacell revenues "move the needle" for the T behemoth?

    I believe AT&T strategy is clear and there's a long runway ahead.
    Nov 13, 2014. 11:24 AM | Likes Like |Link to Comment
  • International Paper Breaks Out [View article]
    Certainly a reasonable approach, Praveen. If management can unlock value, it's up to investors as to when they cash out on it. No requirement to hang in until the shooting match is over.
    Nov 11, 2014. 09:08 PM | Likes Like |Link to Comment
  • International Paper Breaks Out [View article]
    Indeed. I believe this is why International Paper management is spending so much time and energy studying the situation.

    I agree a paper mill MLP is considerably different than a mid-stream energy MLP.

    Recommend taking a quick look at the Perry Capital link embedded in my article. It offers a rough pro forma of a before-and-after International Paper MLP. Note that the maintenance capex isn't changed. It's the same in both scenarios. This may provide some assurance.

    Improved cash distributions to unitholders (versus dividends) are largely a product of the elimination of double taxation-- at the corporate and then again at the shareholder level-- and some capital structure efficiencies. Sometimes MLP distributions include some return of capital; but I'm not sure a paper mill MLP has this in play.

    For MLP holders, I suspect increasing distributions would be a function of increasing free cash flow, just as it is now. I agree that a paper mill MLP would be unlikely to seek to add accretive assets like some other MLPs. I see it as more of a tax and capital structure efficiency play.

    In any event, the issue isn't ripe yet. Let's see what management has to say in another quarter or so. All the best and thanks for reading.
    Nov 11, 2014. 05:32 PM | Likes Like |Link to Comment
  • Should You Sell General Mills After 2015 Outlook Reduction? [View article]
    Thanks Bingo 2
    Nov 11, 2014. 03:08 PM | Likes Like |Link to Comment
  • International Paper Breaks Out [View article]
    While many scenarios are possible, I do believe the situation has changed considerably from the prior days to which you refer. CEO Faraci changed the calculus and set the company up to run for cash. Indeed, the timberland REIT is long gone, as well as all the timber assets. The ballgame has changed. Having owned shares since 2010, I have particularly impressed with Faraci (now gone); successor Mark Sutton came out of the blocks well on the first CC.

    The Ilim JV is a 50/50 joint venture. I suppose anything is possible in Russia, but here again I suspect the entity structure is less likely to lend itself to a bald government nationalization scheme. The back half of the JV is owned by Russian investors. When I spoke with IP, it was stated, "They (the Russians) like their dividends." Ilim is set up as a standalone entity. It isn't operated by International Paper, nor do I believe the company owns any assets: it's an equity JV, not a partnership or UJI. I may check up on that to be sure.
    Nov 11, 2014. 03:04 PM | 1 Like Like |Link to Comment
  • EOG Shows Why It Is A Top Upstream Pick [View article]
    Thanks PricePoint, for a good article about EOG

    I agree that EOG is the best-of-breed domestic E&P company (though it does have some minor overseas interests). Superior management, technology, and properties put EOG Resources ahead of its peers. Growth, margins, returns, and a strong balance sheet highlight the firm.
    Nov 11, 2014. 02:33 PM | Likes Like |Link to Comment
  • Should You Sell General Mills After 2015 Outlook Reduction? [View article]
    Yes, maybenot

    I am not tethered to just one stock per sector always; I overweight sectors and specific stocks based upon my overall view of the economic business cycle, fair value, and maintaining good portfolio diversification.

    Currently, I'm overweight more of the cyclical stocks like Industrials, Materials and Energy. Underweight Consumer Staples, Telecom, and Utilities. I find CS easier to underweight since it's typically more aligned with recession (I'm generally more bullish on the U.S. economy) coupled with my view that it seems so many great companies' stocks are just to pricey.

    Hence PG is my only CS name.
    Nov 10, 2014. 11:08 PM | 2 Likes Like |Link to Comment
  • Should You Sell General Mills After 2015 Outlook Reduction? [View article]
    Thanks for the kind words, maybenot

    Your query is easy to answer since S.A. published an article I wrote about this just recently: "Sell General Mills and Buy Procter and Gamble"
    If you review it, please let me know what you think.

    http://bit.ly/1ysegAT

    However, there's a caveat. When I wrote that article and began a position, the PG stock was ~$84. In just a few weeks the stock has risen to $89. So while I continue to like the company, the financials, the management and the forward business plan (very much), I am less excited about the stock.

    If the stock price "comes in" around $84 or less again, I likely buy more. Otherwise, I'll wait. I rarely "pay up" for any stock, let alone a Consumer Staples name. Since I'm sitting on a decent short-term gain, I'm not unhappy, and I believe the investment thesis is correct. It's just the shares look a little ahead of themselves.

    One of the problems I had when researching CS stocks is so many of them appeared over fair value. So I sit today with a starting position (about 1/3) of what I'd like to own.......but at least I got some at a "good" price.
    Nov 10, 2014. 08:59 PM | 2 Likes Like |Link to Comment
  • Energy Transfer Rocks On... Reloads The Cannons [View article]
    txbeekeeper

    The 3Q earning release did nothing to change my ETE investment thesis. This MLP has many moving parts.

    IDR relinquishments totaled $67 million, or 30% of the total IDRs earned during the period. When these relinquishments are over, that cash goes straight to the bottom line. With no growth assumption, that's $0.12 a share this quarter; therefore, an additional $0.50 a year, once reinstated seems plausible.

    For perspective, 2014 3Q DCF came out to about $0.43 a share.

    Certainly, some assumptions must be made, but my ETE valuation rule of thumb is about 10x cash flow. Currently, such a valuation comes to ~$62 a unit. Fair value.
    Nov 10, 2014. 06:00 PM | 1 Like Like |Link to Comment
  • Should You Sell General Mills After 2015 Outlook Reduction? [View article]
    Thanks for the article on General Mills, SD

    I suspect GIS remains in a tough spot. U.S. retail YoY revenues have finished down in each of the last 4 quarters. The problem appears to be the RTE cereal group. The question for investors is whether the segment is in secular decline, or the company can prop up sales. It's too big a part of the company for other growing segments to overshadow: international sales and the organic market (via the Annie's acquisition) just won't counteract a slow decline in domestic RTE cereal.

    Subdued inflation and lower energy / transportation costs help. So does the outstanding dividend track record. However, RTE cereal needs to improve. Otherwise, I suspect the shares will stagnate along with LSD sales and EPS growth: at best.

    In this scenario, the most likely resultant is multiple compression.

    Management is excellent. The company isn't going away, and the dividend is sacrosanct. However, I suspect there are easier places to make a buck in the Consumer Staples sector.
    Nov 10, 2014. 03:16 PM | 3 Likes Like |Link to Comment
COMMENTS STATS
3,357 Comments
4,904 Likes