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Ray Merola  

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  • Aflac Is Undervalued In This Hot Market: Don't Buck The Duck [View article]
    sbally4

    I recommend doing some digging into the AFL 10-K. The assumption AFL pays the full statutory tax rate of 35% on all U.S. net appears incorrect. There are taxes paid and deferred tax accounts, etc.

    AFLAC U.S. also has over $14 billion in cash / assets booked.

    Bottom line: Aflac converts very few Yen to Dollars, and currency conversion is not an issue when paying the dividend.
    Mar 18, 2015. 11:43 AM | 3 Likes Like |Link to Comment
  • I Want Book Value: Annaly's Weakness Is Not The Dividend [View article]
    CWM

    Preferred share equity does seem to be included; but it's not completely clear.

    Looking forward to your thoughts on this.

    My reading is "equity" includes preferreds (with reservations), new equity issuance helps management, and since cash for share repurchases is subtracted from the calculation, it's apparently neutral?
    Mar 18, 2015. 10:56 AM | Likes Like |Link to Comment
  • Aflac Is Undervalued In This Hot Market: Don't Buck The Duck [View article]
    Quite possibly, mihailbogdan

    The general profile appears similar to AFL in several respects: higher historic P/E pre-recession, lower (9x) P/E since 2009, similar dividend yield, well-capitalized, lower price-to-book. MetLife's business model is different than AFL, too. I believe the company is more of a full-line property, casualty, and life insurer.

    I'd pay close attention to the requirements as labeled a TBTF financial institution. I believe this is an overhang on the shares. This overhang may or may not go away.

    AFLAC's currency worries should pass. The JPY/USD exchange rate goes up and down; frankly, it's a bit of a red herring, anyway.
    Mar 18, 2015. 10:23 AM | 1 Like Like |Link to Comment
  • Aflac Is Undervalued In This Hot Market: Don't Buck The Duck [View article]
    Hi Tom

    Indeed, AFLAC management doesn't just buyback stock, they do it opportunistically. Senior management believes the shares are undervalued, and has a pretty aggressive program to capitalize on it.

    The Duck is especially shareholder-friendly; consistent dividend increases and meaningful share repurchases.
    Mar 18, 2015. 10:16 AM | 1 Like Like |Link to Comment
  • Aflac Is Undervalued In This Hot Market: Don't Buck The Duck [View article]
    I found the peer comparisons most interesting. I'm already long Aflac several years, and remain happy (or at least patient) with the investment. However, MetLife in particular appears like another Insurance industry stock well worth considering.
    Mar 18, 2015. 10:14 AM | 1 Like Like |Link to Comment
  • AT&T: Some Good News [View article]
    I am positive on the DTV deal. It offers AT&T both product and geography diversification.

    I do wonder how any of the major video entertainment operators will manage a future where some consumer are "cutting the cable" for alternative and more selective programming. Of course, AT&T has its long arms into the consumer and enterprise broadband network business.
    Mar 18, 2015. 09:30 AM | 3 Likes Like |Link to Comment
  • Could This Liability End GM For Good? [View article]
    Of course, if fraud is proven, it would deal a serious blow to GM.

    It's normal M.O. for the plaintiff attorney to "talk his book" now, and get as much print as possible. On the other hand, the defense generally remains silent in these situations. It's almost never wise for the defense to "try the case in the media."

    This overhang, and that of pre-2009 bankruptcy protection remain in play.

    I've not seen many estimates of the financial cost if these items don't work out for General Motors. I could place the cost of losing bankruptcy protection at ~$1 billion or so for "diminution of value" on old GM vehicles.

    Fraud would certainly involve the ouster of some senior management, and the stock could likely take a short-term hit, but I suspect the GM corporation should weather the storm with new management taking the helm.
    Mar 18, 2015. 09:26 AM | 7 Likes Like |Link to Comment
  • Is Friedman Industries A Bargain? [View article]
    Quite reasonable approach, LSF

    FRD management has good attributes, including running a tight ship. They have also shown the ability to built shareholder equity consistently. Strong points all.

    However, post-discussion with some of the senior leadership, I was unhappy with the apparent lack of a strategic approach, and little focus upon creating shareholder value. I explained that I did not expect management to worry about creating value, other than running a sharp operation. I expect the board of directors to lead that initiative. That's what they are paid to do.

    I redirected my capital to Nucor, arguably the best steel operator in North America. The management team is transparent and shareholder-friendly.
    Mar 18, 2015. 08:56 AM | Likes Like |Link to Comment
  • Union Pacific's Dividend Growth Continues To Impress [View article]
    Last year, Union Pacific management indicated they were below the targeted leverage range. The company sought an adjusted debt-to-capital ratio of 40%.

    In 2014, the debt level was increased (levered) to just over the 40% D2C boundary.

    My expectation is that UP management will continue to keep this debt leverage on a go-forward basis.
    Mar 17, 2015. 01:41 PM | 1 Like Like |Link to Comment
  • Is Friedman Industries A Bargain? [View article]
    I wrote several positive S.A. articles about Friedman Industries after purchasing shares in 2013.

    The company is tiny. It's safe, clean, well-operated, fiscally-disciplined, and should be able to weather the economic storms. Indeed, from a valuation standpoint, the company is cheap. Very cheap. As the author pointed out, the stock sells for less than net book; and hardly more than NCAV.

    However, my view soured on the stock after attending the 2014 annual stockholders meeting. I asked a number of questions as to how management and the directors planned to improve shareholder value. Not just "run the company," but create shareholder value.

    I don't believe there is a plan to create shareholder value, other than continued sound operations. It appeared to me that senior management, nor the board envision any path forward to promote the company, its fine history record, or even talk about forward strategy. I was quite disappointed; I proposed several possible directions and approaches. One senior leader told me, "There is no story to tell."

    My recommendation is to follow progress on the Lone Star facility construction closely. The company may need to borrow money to complete it; I do not believe the neighboring U.S. Steel plant is bound to provide business there, and oil country tubular goods are not such a hot commodity in today's market.

    I believe a potential corporate buyout isn't likely, nor welcomed by the current management team.

    I sold down my holdings thereafter, and am out of the stock now. I continue to monitor it.
    Mar 17, 2015. 09:19 AM | 2 Likes Like |Link to Comment
  • I Want Book Value: Annaly's Weakness Is Not The Dividend [View article]
    CWM,

    Thank you for taking the time to thoroughly vet my query. It appears we both have some homework to do! I need to check the NLY management disclosures more closely, too. Here's a link to the SEC filing outlining the Management agreement:

    http://1.usa.gov/1Cri2RQ

    Some quick work indicated the following:

    Shareholder equity is defined as

    "..the sum of the net proceeds from any issuances of the Company’s equity securities since inception less any amount that the Company pays for repurchases of its equity securities (determined as of the most recent month end).."

    plus retained earnings and

    "any unrealized gains, losses or other items that do not affect realized net income as adjusted.....to exclude one-time events pursuant to changes in GAAP and certain non-cash charges.."

    In my cursory review, I could not find additional clarification as to what an "equity security" means; with an eye on the treatment of preferred stock. Equity or liability?

    I am not sure if net proceeds from equity "since the inception of the company" means that any issued equity subsequent to the Management agreement is counted in, or the clock stopped in 2013. Further, it appears that repurchasing shares reduces the equity calculation.

    Seeking any additional views/interpretations. Many thanks.
    Mar 17, 2015. 08:58 AM | Likes Like |Link to Comment
  • I Want Book Value: Annaly's Weakness Is Not The Dividend [View article]
    Some ideas need grounding among Annaly Capital investors.

    First, under a 2013 agreement, Annaly's management is remunerated based upon book value (shareholder equity). I believe the specific figure is 1.05% of SH equity. So why some readers insist NLY's management doesn't care about net book is puzzling me.

    Second, management can just as easily repurchase shares with maturing / sold securities as purchase new MBS. I do not understand why some commentators appear concerned that Annaly management lacks the cash, or jeopardizes the dividend by repurchasing shares.

    Please update/correct my understanding about these matters if I'm out in left field.

    Mar 16, 2015. 09:05 PM | 3 Likes Like |Link to Comment
  • Don't Over Think It: Buy AT&T [View article]
    Fine article, Nicholas. Well-researched and balanced. I believe you've identified a solid company and an undervalued stock.
    Mar 16, 2015. 08:35 AM | 9 Likes Like |Link to Comment
  • Annaly Capital: A Very Serious Check-Up [View article]
    Good article, Christopher

    The price-to-book discount appears too large. So I spend time trying to figure out what Mr. Market is saying. NLY has been around awhile, so I find it significant that never has the P/B been this low. Indeed, management is remunerated based upon book value, so it would seem in their interest to try to increase it.

    Therefore, I value you opinion as to why Annaly management has not elected to repurchase shares.
    Mar 13, 2015. 08:25 PM | 1 Like Like |Link to Comment
  • General Motors Caves: Giving Wilson A $5 Billion Buyback [View article]
    Over the past 3 years, the number of GM common weighted-average diluted shares outstanding has remained essentially constant. I believe this is without the benefit of a share repurchase plan.

    If management changed the employee compensation plan to dilute the effect of the prospective repo plan, I suspect GM institutional investors would start howling. This wouldn't meet expectations whatsoever.
    Mar 12, 2015. 12:54 PM | 3 Likes Like |Link to Comment
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