Ron Sommer - Seeking Alpha 'Ron Sommer' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/ron-sommer Oracle: On the Road to Recovery http://seekingalpha.com/article/179916-oracle-on-the-road-to-recovery?source=feed 179916 As the economic rebound further develops, the technology sector will play a leading role. Oracle Corporation (ORCL), a bellwether in the tech sector, will be a prominent leader. We believe there are a number of value drivers for the coming year:

  • The acquisition of Sun Microsystems (JAVA) will be completed. This will expand Oracle’s product line to include not only hardware that is optimized to run Oracle databases but also Sun’s open source software products.
  • Oracle continues to introduce new product such as the recently announced Communications Marketing and Advertising product.
  • Analysts are placing too much emphasis on 3Q10 revenue and currency adjustments. Given economic constraints and currency fluctuations, short term results are inconsequential.

For a detailed financial analysis of Oracle, click here.

]]> Mon, 28 Dec 2009 02:32:09 -0500 Ron Sommer As the economic rebound further develops, the technology sector will play a leading role. Oracle Corporation (ORCL), a bellwether in the tech sector, will be a prominent leader. We believe there are a number of value drivers for the coming year:

  • The acquisition of Sun Microsystems (JAVA) will be completed. This will expand Oracle’s product line to include not only hardware that is optimized to run Oracle databases but also Sun’s open source software products.
  • Oracle continues to introduce new product such as the recently announced Communications Marketing and Advertising product.
  • Analysts are placing too much emphasis on 3Q10 revenue and currency adjustments. Given economic constraints and currency fluctuations, short term results are inconsequential.

For a detailed financial analysis of Oracle, click here.


Complete Story »]]> ORCL JAVA Ron Sommer Stryker Corporation: An Opportunity or a Trap? http://seekingalpha.com/article/179089-stryker-corporation-an-opportunity-or-a-trap?source=feed 179089 Stryker Corporation (SYK) is one of the world’s leading medical technology companies with the most broadly based range of products in orthopedics and a significant presence in other medical specialties. Stryker works with respected medical professionals to help people lead more active and more satisfying lives.

The Company's products include implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose and throat and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment.

Notable Developments

]]> Mon, 21 Dec 2009 03:45:03 -0500 Ron Sommer Stryker Corporation (SYK) is one of the world’s leading medical technology companies with the most broadly based range of products in orthopedics and a significant presence in other medical specialties. Stryker works with respected medical professionals to help people lead more active and more satisfying lives.

The Company's products include implants used in joint replacement, trauma, craniomaxillofacial and spinal surgeries; biologics; surgical, neurologic, ear, nose and throat and interventional pain equipment; endoscopic, surgical navigation, communications and digital imaging systems; as well as patient handling and emergency medical equipment.

Notable Developments


Complete Story »]]> SYK Ron Sommer Reliance Steel & Aluminum: Patience Will Be Rewarded http://seekingalpha.com/article/176795-reliance-steel-aluminum-patience-will-be-rewarded?source=feed 176795

The patient, long term investor would rather be early to the party than late to it. The economy is struggling through the early stages of recovery. Looking out beyond the next quarter or even the next year, the reindustrialization of America will come. With this in mind, we are initiating coverage of Reliance Steel & Aluminum Company (RS) with a buy opinion. Our target price is $87.56.
Click here for a detailed analysis of Reliance Steel and Aluminum.
Highlights
  • For 3Q09, Reliance reported diluted earnings of $41.8 million, or $0.57 per diluted share as compared to $152.5 million ($2.07/share) in 3Q08. Sales in 3Q09 were $1.24 billion, down from $2.57 billion in 3Q08.
  • For the nine months ending September 30, 2009, net income amounted to $56.1 million ($0.76/share), compared with net income of $416.5 million ($5.65/share) for the same period in 2008.
  • Reliance Steel and Aluminum (RS) Upgraded By UBS
  • Reliance Steel & Aluminum Co. announced that on October 21, 2009, the Board of Directors declared a regular quarterly cash dividend of $0.10 per share of common stock. The dividend is payable on January 6, 2010 to shareholders of record December 4, 2009.
In spite of the above, we anticipate future growth of 38.85%. Our target price of $87.56 reflects a free cash flow multiple of 17.96X our estimate of $4.87 in free cash flow twelve months out.
Disclosure: The author has no position in Reliance Steel & Aluminum Company.
]]> Mon, 07 Dec 2009 03:11:42 -0500 Ron Sommer

The patient, long term investor would rather be early to the party than late to it. The economy is struggling through the early stages of recovery. Looking out beyond the next quarter or even the next year, the reindustrialization of America will come. With this in mind, we are initiating coverage of Reliance Steel & Aluminum Company (RS) with a buy opinion. Our target price is $87.56.
Click here for a detailed analysis of Reliance Steel and Aluminum.
Highlights
  • For 3Q09, Reliance reported diluted earnings of $41.8 million, or $0.57 per diluted share as compared to $152.5 million ($2.07/share) in 3Q08. Sales in 3Q09 were $1.24 billion, down from $2.57 billion in 3Q08.
  • For the nine months ending September 30, 2009, net income amounted to $56.1 million ($0.76/share), compared with net income of $416.5 million ($5.65/share) for the same period in 2008.
  • Reliance Steel and Aluminum (RS) Upgraded By UBS
  • Reliance Steel & Aluminum Co. announced that on October 21, 2009, the Board of Directors declared a regular quarterly cash dividend of $0.10 per share of common stock. The dividend is payable on January 6, 2010 to shareholders of record December 4, 2009.
In spite of the above, we anticipate future growth of 38.85%. Our target price of $87.56 reflects a free cash flow multiple of 17.96X our estimate of $4.87 in free cash flow twelve months out.
Disclosure: The author has no position in Reliance Steel & Aluminum Company.

Complete Story »]]> RS Ron Sommer Techne Corporation: Good Risk/Reward Proposition http://seekingalpha.com/article/174740-techne-corporation-good-risk-reward-proposition?source=feed 174740 Techne Corporation (TECH) is a mid-cap biotechnology company that offers a good risk/reward profile, It is engaged in the development and manufacture of biotechnology products and hematology calibrators and controls. The company appears to be richly priced as compared to its competitors. However, we think this is a hidden gem.

The company's strengths include a strong financial position with no long-term debt and cash in excess of current liabilities, expanding profit margins and outstanding return on equity.

]]> Mon, 23 Nov 2009 03:09:01 -0500 Ron Sommer Techne Corporation (TECH) is a mid-cap biotechnology company that offers a good risk/reward profile, It is engaged in the development and manufacture of biotechnology products and hematology calibrators and controls. The company appears to be richly priced as compared to its competitors. However, we think this is a hidden gem.

The company's strengths include a strong financial position with no long-term debt and cash in excess of current liabilities, expanding profit margins and outstanding return on equity.


Complete Story »]]> TECH Ron Sommer EZCORP: Fast Growth, Solid Profits, Low Price http://seekingalpha.com/article/173626-ezcorp-fast-growth-solid-profits-low-price?source=feed 173626 EZCorp offers pawn loans in 294 U.S.-based pawn shops and at 38 Mexico pawn shops. The company also sells forfeited collateral from its pawn shop operations. In 477 EZMONEY stores and 71 of its pawn shops, EZPW offers short-term, non-collateralized loans (pay-day loans.)
EZCORP Inc. (EZPW) reported net income of $20.9 million or $0.42 per share for the fourth quarter, compared to $16.0 million or $0.37 per share in the prior year quarter. Total Revenues for the fourth quarter increased 34% to $164.8 million from $123.4 million in the previous year quarter.
For the trailing twelve month period ending 09/30/09, EPS was $1.44. Consensus estimate for FY10 is $1.66.
The company announced that it has completed its acquisition of 108.22 million newly issued ordinary shares of Cash Converters International Limited, headquartered in Perth, Australia. EZCORP paid AUS $0.50 per share, for a total investment of AUS $54.11 million or about US$49.4 million U.S., and now owns about 30% of the outstanding ordinary shares of Cash Converters. The Cash Converters shares are listed on the Australian Stock Exchange and the London Stock Exchange (symbol, "CCVU"). EZCORP funded the investment primarily with cash on hand and expects the investment to be immediately accretive to earnings.
The PE ratio relative to the average 3-year, 5-year and 7-year EPS growth rate is 0.25X
Disclosure: Author is long EZPW.
]]> Mon, 16 Nov 2009 14:08:33 -0500 Ron Sommer EZCorp offers pawn loans in 294 U.S.-based pawn shops and at 38 Mexico pawn shops. The company also sells forfeited collateral from its pawn shop operations. In 477 EZMONEY stores and 71 of its pawn shops, EZPW offers short-term, non-collateralized loans (pay-day loans.)
EZCORP Inc. (EZPW) reported net income of $20.9 million or $0.42 per share for the fourth quarter, compared to $16.0 million or $0.37 per share in the prior year quarter. Total Revenues for the fourth quarter increased 34% to $164.8 million from $123.4 million in the previous year quarter.
For the trailing twelve month period ending 09/30/09, EPS was $1.44. Consensus estimate for FY10 is $1.66.
The company announced that it has completed its acquisition of 108.22 million newly issued ordinary shares of Cash Converters International Limited, headquartered in Perth, Australia. EZCORP paid AUS $0.50 per share, for a total investment of AUS $54.11 million or about US$49.4 million U.S., and now owns about 30% of the outstanding ordinary shares of Cash Converters. The Cash Converters shares are listed on the Australian Stock Exchange and the London Stock Exchange (symbol, "CCVU"). EZCORP funded the investment primarily with cash on hand and expects the investment to be immediately accretive to earnings.
The PE ratio relative to the average 3-year, 5-year and 7-year EPS growth rate is 0.25X
Disclosure: Author is long EZPW.

Complete Story »]]> EZPW Ron Sommer Forest Laboratories: Steady Growth in Sales and Earnings http://seekingalpha.com/article/172192-forest-laboratories-steady-growth-in-sales-and-earnings?source=feed 172192 I have written about Forest Laboratories, Inc. (FRX) before. FRX is a mid-cap player in the biotech and drug markets. It is characterized by steady growth in both sales and earnings. Call this a value play. Its new product pipeline is promising, and several products are now entering Phase 3 trials.

For a detailed analysis of the company, go to https://measuredapproach.wordpress.com.

]]> Mon, 09 Nov 2009 08:09:08 -0500 Ron Sommer I have written about Forest Laboratories, Inc. (FRX) before. FRX is a mid-cap player in the biotech and drug markets. It is characterized by steady growth in both sales and earnings. Call this a value play. Its new product pipeline is promising, and several products are now entering Phase 3 trials.

For a detailed analysis of the company, go to https://measuredapproach.wordpress.com.


Complete Story »]]> FRX Ron Sommer Friedman Industries: Great Prospects http://seekingalpha.com/article/168883-friedman-industries-great-prospects?source=feed 168883 HIGHLIGHTS

For a detailed analysis, go here.

  • Friedman Industries (FRD) is one of those rare occurrences - a company that is selling at near net asset value. For the quarter ending 06/09, the company reported current assets of $43.9 million and total liabilities of $5.6 million.
  • Inventory to Sales was 9.29% at the end of FY09. For the trailing 12 months, the Inventory to Sales ratio increased to 10.41%
  • The EPS growth rate for the trailing 12 months is 38.2%. The three and five year growth rates are 30.2% and 43.5% respectively.
  • FRD has a current ratio of 9.5 and no long term debt. This indicates that the company is financially secure. It is also indicative of a company that may not be putting its assets to the best use. Certainly, the company has room to employ some debt.
  • The company has a Price/Sales ratio of 0.2 based on trailing 12 month sales. This is very favorable.

VALUATION METRICS

]]> Mon, 26 Oct 2009 11:59:59 -0400 Ron Sommer HIGHLIGHTS

For a detailed analysis, go here.

  • Friedman Industries (FRD) is one of those rare occurrences - a company that is selling at near net asset value. For the quarter ending 06/09, the company reported current assets of $43.9 million and total liabilities of $5.6 million.
  • Inventory to Sales was 9.29% at the end of FY09. For the trailing 12 months, the Inventory to Sales ratio increased to 10.41%
  • The EPS growth rate for the trailing 12 months is 38.2%. The three and five year growth rates are 30.2% and 43.5% respectively.
  • FRD has a current ratio of 9.5 and no long term debt. This indicates that the company is financially secure. It is also indicative of a company that may not be putting its assets to the best use. Certainly, the company has room to employ some debt.
  • The company has a Price/Sales ratio of 0.2 based on trailing 12 month sales. This is very favorable.

VALUATION METRICS


Complete Story »]]> FRD Ron Sommer Black & Decker: Best in Industry http://seekingalpha.com/article/161325-black-decker-best-in-industry?source=feed 161325 The global economic recession during 2008 and 2009 caused the major appliance and tool sectors to experience significant macroeconomic challenges including instability in the financial markets.

These challenges have impacted the global economy, the capital markets, operating costs throughout the sector and global demand for products. The results of these challenges include higher material and oil-related costs, liquidity strains on the supply chain, decreased consumer confidence and reduced consumer discretionary spending.

]]> Mon, 14 Sep 2009 04:47:04 -0400 Ron Sommer The global economic recession during 2008 and 2009 caused the major appliance and tool sectors to experience significant macroeconomic challenges including instability in the financial markets.

These challenges have impacted the global economy, the capital markets, operating costs throughout the sector and global demand for products. The results of these challenges include higher material and oil-related costs, liquidity strains on the supply chain, decreased consumer confidence and reduced consumer discretionary spending.


Complete Story »]]> WHR HELE SNA BDK SWK Ron Sommer Smile Communications: Eye on the 'Other' Israel http://seekingalpha.com/article/160383-smile-communications-eye-on-the-other-israel?source=feed 160383 Do you picture Israelis spending their day scurrying from bomb shelter to bomb shelter much like Londoners during the blitz? Does your image of Israel include soldiers patrolling the streets, buses being blown-up and men in long black coats rioting? If these images inform your opinion of Israel, then media distortions are keeping you from some exciting investment opportunities.

Tel Aviv is not Baghdad. Each morning in Israel, children go off to school and people go to work. Leisure time is spent in restaurants, cafes, movie theaters and malls. During the current financial crisis, the Israeli economy suffered less than most developed countries and a recovery is already under way.

]]> Tue, 08 Sep 2009 06:57:23 -0400 Ron Sommer Do you picture Israelis spending their day scurrying from bomb shelter to bomb shelter much like Londoners during the blitz? Does your image of Israel include soldiers patrolling the streets, buses being blown-up and men in long black coats rioting? If these images inform your opinion of Israel, then media distortions are keeping you from some exciting investment opportunities.

Tel Aviv is not Baghdad. Each morning in Israel, children go off to school and people go to work. Leisure time is spent in restaurants, cafes, movie theaters and malls. During the current financial crisis, the Israeli economy suffered less than most developed countries and a recovery is already under way.


Complete Story »]]> SMLC CHKP TEVA Ron Sommer Restaurant Industry Outlook: Generally Unappetizing http://seekingalpha.com/article/159157-restaurant-industry-outlook-generally-unappetizing?source=feed 159157 The restaurant industry is experiencing significant damage from the contraction of the economy as consumers continue to cut back on discretionary spending. At the beginning of 2009, the food service industry consulting firm Technomic forecast industry nominal growth of -2.2 percent. That estimate is probably too conservative. In June, the National Restaurant Association confirmed that challenges persisted for this industry and that same store sales and traffic continued to soften. We can expect to see an increase in bankruptcy filings as over-leveraged chains begin to violate loan covenants.
The restaurant industry is composed of several segments: quick service restaurants (QSR) and the casual dining segment. Some would say the QSR segment is better positioned to weather the storm because of consumer perceptions of vale, lower priced menu items and the poaching of customers from full-service restaurants. In this segment, Burger King (BKC), McDonald's (MCD), and YUM Brands (YUM) appear to be the healthiest with significant liquidity and do not have near term maturities.
Our outlook for the casual dining segment is negative as costs continue to escalate and consumers are either trading down to the QSR segment or just staying home. Several companies have engaged in large debt-financed acquisitions or share repurchases and are now feeling the pinch. Examples include Darden Restaurants (DRI) and Brinker International (EAT). These companies may experience credit downgrades as they struggle with their debt.
Market capitalizations of most major restaurant operators have declined drastically on the past 12-18 months. However, because of lack of access to low cost debt and free cash flow pressure, we do not expect much in the way of share repurchases or restaurant acquisitions. An increase in the number of bankruptcy-related closures will reduce industry capacity. Buffet's, Vicorp, and Metromedia Restaurant Group all filed for bankruptcy this year and are closing hundreds of restaurants.
In this challenging environment, we find one company, Rick's Cabaret International (RICK) as an interesting prospect. Rick's is an operator of "adult" nightclubs and bars. From Reuters:

Rick's Cabaret International, Inc. incorporated in 1994, owns and/or operates a total of 19 adult nightclubs that offers live adult entertainment, restaurant and bar operations. Nine of its clubs operate under the name Rick's Cabaret; four operate under the name Club Onyx, upscale venues that welcome all customers but cater especially to urban professionals, businessmen and professional athletes; four operate under the name XTC Cabaret; one club that operates as Encounters; and one club that operates as Tootsie’s. The Company’s nightclubs are in Houston, Austin, San Antonio, Dallas and Fort Worth, Texas; Charlotte, North Carolina; Minneapolis, Minnesota; New York, New York; Miami Gardens, Florida; Philadelphia, Pennsylvania and Las Vegas, Nevada. The Company owns and operates adult entertainment Internet Websites. The Company’s online entertainment sites include CouplesTouch.com, NaughtyBids.com and xxxpassword.com. In April 2008, the Company acquired a media division, including the trade magazine serving the multi-billion dollar adult nightclubs industry. As part of the transaction the Company also acquired two industry trade shows, two other industry trade publications and more than 25 industry Websites.

What makes Rick's a standout in this industry? For one thing, it is profitable. Sex sells. Rick's has a current P/E of 12.4 vs a three year average of 23.5x. Other valuation ratios are similarly depressed. Price to Book is now 0.96 vs 2.54 and Price to Sales is 0.98 vs a three year average of 2.15. The company's gross margin is a strong 65.9 percent for the training twelve months (TTM) vs 65.3 for FY2008. TTM operating margins are down to -2.0 as compared to 22.9 percent in 2008 but net margins are about 7.6 percent.
Debt is not an overwhelming problem for Rick's. Total liabilities to total assets are 45 percent; long term debt to capital is 30.2 percent and long term debt to equity is 43.4 percent. sales growth is strong at 45 percent y-o-y and continuing strength in gross profit which grew 19.8 percent y-o-y. There is weakness in net income which declined .8.5 percent y-o-y.
At current prices, RICK is trading at 12.22X FY09 consensus of $0.64, 8.19X FY10 consensus of $0.955 and 5.47X FY11 consensus of $1.43. The June 2009 quarter actual of $0.20 beat the Street consensus of $0.19 and the March 09 actuals of $0.16 beat the consensus of $0.11.
Disclaimer: Author holds no position in any company mentioned in this article.
]]> Mon, 31 Aug 2009 09:13:57 -0400 Ron Sommer The restaurant industry is experiencing significant damage from the contraction of the economy as consumers continue to cut back on discretionary spending. At the beginning of 2009, the food service industry consulting firm Technomic forecast industry nominal growth of -2.2 percent. That estimate is probably too conservative. In June, the National Restaurant Association confirmed that challenges persisted for this industry and that same store sales and traffic continued to soften. We can expect to see an increase in bankruptcy filings as over-leveraged chains begin to violate loan covenants.
The restaurant industry is composed of several segments: quick service restaurants (QSR) and the casual dining segment. Some would say the QSR segment is better positioned to weather the storm because of consumer perceptions of vale, lower priced menu items and the poaching of customers from full-service restaurants. In this segment, Burger King (BKC), McDonald's (MCD), and YUM Brands (YUM) appear to be the healthiest with significant liquidity and do not have near term maturities.
Our outlook for the casual dining segment is negative as costs continue to escalate and consumers are either trading down to the QSR segment or just staying home. Several companies have engaged in large debt-financed acquisitions or share repurchases and are now feeling the pinch. Examples include Darden Restaurants (DRI) and Brinker International (EAT). These companies may experience credit downgrades as they struggle with their debt.
Market capitalizations of most major restaurant operators have declined drastically on the past 12-18 months. However, because of lack of access to low cost debt and free cash flow pressure, we do not expect much in the way of share repurchases or restaurant acquisitions. An increase in the number of bankruptcy-related closures will reduce industry capacity. Buffet's, Vicorp, and Metromedia Restaurant Group all filed for bankruptcy this year and are closing hundreds of restaurants.
In this challenging environment, we find one company, Rick's Cabaret International (RICK) as an interesting prospect. Rick's is an operator of "adult" nightclubs and bars. From Reuters:

Rick's Cabaret International, Inc. incorporated in 1994, owns and/or operates a total of 19 adult nightclubs that offers live adult entertainment, restaurant and bar operations. Nine of its clubs operate under the name Rick's Cabaret; four operate under the name Club Onyx, upscale venues that welcome all customers but cater especially to urban professionals, businessmen and professional athletes; four operate under the name XTC Cabaret; one club that operates as Encounters; and one club that operates as Tootsie’s. The Company’s nightclubs are in Houston, Austin, San Antonio, Dallas and Fort Worth, Texas; Charlotte, North Carolina; Minneapolis, Minnesota; New York, New York; Miami Gardens, Florida; Philadelphia, Pennsylvania and Las Vegas, Nevada. The Company owns and operates adult entertainment Internet Websites. The Company’s online entertainment sites include CouplesTouch.com, NaughtyBids.com and xxxpassword.com. In April 2008, the Company acquired a media division, including the trade magazine serving the multi-billion dollar adult nightclubs industry. As part of the transaction the Company also acquired two industry trade shows, two other industry trade publications and more than 25 industry Websites.

What makes Rick's a standout in this industry? For one thing, it is profitable. Sex sells. Rick's has a current P/E of 12.4 vs a three year average of 23.5x. Other valuation ratios are similarly depressed. Price to Book is now 0.96 vs 2.54 and Price to Sales is 0.98 vs a three year average of 2.15. The company's gross margin is a strong 65.9 percent for the training twelve months (TTM) vs 65.3 for FY2008. TTM operating margins are down to -2.0 as compared to 22.9 percent in 2008 but net margins are about 7.6 percent.
Debt is not an overwhelming problem for Rick's. Total liabilities to total assets are 45 percent; long term debt to capital is 30.2 percent and long term debt to equity is 43.4 percent. sales growth is strong at 45 percent y-o-y and continuing strength in gross profit which grew 19.8 percent y-o-y. There is weakness in net income which declined .8.5 percent y-o-y.
At current prices, RICK is trading at 12.22X FY09 consensus of $0.64, 8.19X FY10 consensus of $0.955 and 5.47X FY11 consensus of $1.43. The June 2009 quarter actual of $0.20 beat the Street consensus of $0.19 and the March 09 actuals of $0.16 beat the consensus of $0.11.
Disclaimer: Author holds no position in any company mentioned in this article.

Complete Story »]]> BKC MCD YUM DRI EAT RICK Ron Sommer Retail: We're Most Optimistic About Foot Locker http://seekingalpha.com/article/157840-retail-we-re-most-optimistic-about-foot-locker?source=feed 157840 Spotlight On: Retail-Apparel

The U.S. retail clothing industry includes approximately 11,000 stores nationwide and accumulates a combined $150 billion in revenues each year. The retail clothing industry is very concentrated and the 50 largest companies bring in 65% of the total industry revenue. Most companies in the retail clothing industry are specialized and have found a niche market of customers to appeal to such as women's wear, sporting apparel, maternity, men's clothing, or children's clothing. The size of retail clothing companies range from small independently owned boutique shops to large department stores.

]]> Mon, 24 Aug 2009 02:28:36 -0400 Ron Sommer Spotlight On: Retail-Apparel

The U.S. retail clothing industry includes approximately 11,000 stores nationwide and accumulates a combined $150 billion in revenues each year. The retail clothing industry is very concentrated and the 50 largest companies bring in 65% of the total industry revenue. Most companies in the retail clothing industry are specialized and have found a niche market of customers to appeal to such as women's wear, sporting apparel, maternity, men's clothing, or children's clothing. The size of retail clothing companies range from small independently owned boutique shops to large department stores.


Complete Story »]]> TJX GPS ROST FL COH Ron Sommer Software Industry Trends: Synopsis Currently Very Attractive http://seekingalpha.com/article/156449-software-industry-trends-synopsis-currently-very-attractive?source=feed 156449 The software industry is ever changing and subject to new mergers, acquisitions, partnerships and strategic alliances between vendors. The industry can be fairly described as consisting of tiers.
Tier I vendors serve the upper end of the market. Their products are for the Fortune 500, multi-location, and multi-national companies. These companies have complex needs and rely upon ERP systems. The major Tier I players are SAP (SAP) and Oracle (ORCL). Tier II vendors focus on companies that are fairly complex and large and require significant work but are not as large as the the Fortune 500. This may be the sweet spot of the software industry. The market is fairly large and the customers require fairly sophisticated product and support. Leaders in this market are Lawson (LWSN), Infor, and IFS.
The mid-market is represented by Tier III companies such as Epicor (EPIC), Consona, and Tyler. This is a huge market serving customers with revenues in the $25-$250 million range. The lower tiers, IV and V, serve small companies and the shrink wrap market. Vendors in this market, such as Sage, serve the small company. The SOHO market is includes vendors such as Sage and Intuit (INTU).
The Tier I vendors are moving down market by offering scaled-down pre-configured versions of their products and using new distribution channels. They are also acquiring Tier II and Tier III vendors. On the other hand, Tier III and Tier IV vendors are trying to move upstream into the Tier II market. The vendors have significantly improved the functionality and scalability of their products.
The newest trend in software distribution is Software as a Service (SaaS) and cloud computing. This model is gaining market acceptance and is particularly appealing to the smaller customer that have limited in-house technical support. SaaS applications for certain types of applications such as Customer Relationship Management (CRM), HR/Payroll, Project Management, and low end accounting software have been growing. ERP systems for large and mid sized companies have not seen widespread acceptance yet due to cost and security concerns.
The software industry is not immune to the economic downturn. Technology spending has been cut and the market may not see any significant increase in spending for some years to come. Forrester Research is projecting that overall business IT sales will grow 6 percent in 2009.
While most software companies are implementing a series of internal cost-cutting measures - reducing staff, cutting travel budgets, etc., these measures have an uneven effect on the software company. For some companies, reducing the cost of doing business enables the company to stay in the game. For others, it increases margins and makes this company a more attractive investment.
We screened our database for software companies with a market capitalization of $1 billion or more and for some measures of balance sheet strength. We were looking for companies with the wherewithal for surviving this down turn and came up with more than 40 names. We think the following companies are fairly priced today: Adobe Systems (ADBE), Check Point Software Technology (CHKP), Microsoft (MSFT), Novell (NOVL), Oracle (ORCL), Quest Software (QSFT) and Sybase (SY). We consider the following companies significantly over valued today: Cognizant Technology Solutions (CTSH), Concur Technologies (CNQR), Longtop Financial Technologies (LFT), McAfee (MFE), Quality Systems (QSII), Red Hat (RHT) and salesforce.com (CRM).

We find Synopsis, Inc. (SNPS) very attractive at the current market price.

From Reuters:

]]> Mon, 17 Aug 2009 05:27:55 -0400 Ron Sommer The software industry is ever changing and subject to new mergers, acquisitions, partnerships and strategic alliances between vendors. The industry can be fairly described as consisting of tiers.
Tier I vendors serve the upper end of the market. Their products are for the Fortune 500, multi-location, and multi-national companies. These companies have complex needs and rely upon ERP systems. The major Tier I players are SAP (SAP) and Oracle (ORCL). Tier II vendors focus on companies that are fairly complex and large and require significant work but are not as large as the the Fortune 500. This may be the sweet spot of the software industry. The market is fairly large and the customers require fairly sophisticated product and support. Leaders in this market are Lawson (LWSN), Infor, and IFS.
The mid-market is represented by Tier III companies such as Epicor (EPIC), Consona, and Tyler. This is a huge market serving customers with revenues in the $25-$250 million range. The lower tiers, IV and V, serve small companies and the shrink wrap market. Vendors in this market, such as Sage, serve the small company. The SOHO market is includes vendors such as Sage and Intuit (INTU).
The Tier I vendors are moving down market by offering scaled-down pre-configured versions of their products and using new distribution channels. They are also acquiring Tier II and Tier III vendors. On the other hand, Tier III and Tier IV vendors are trying to move upstream into the Tier II market. The vendors have significantly improved the functionality and scalability of their products.
The newest trend in software distribution is Software as a Service (SaaS) and cloud computing. This model is gaining market acceptance and is particularly appealing to the smaller customer that have limited in-house technical support. SaaS applications for certain types of applications such as Customer Relationship Management (CRM), HR/Payroll, Project Management, and low end accounting software have been growing. ERP systems for large and mid sized companies have not seen widespread acceptance yet due to cost and security concerns.
The software industry is not immune to the economic downturn. Technology spending has been cut and the market may not see any significant increase in spending for some years to come. Forrester Research is projecting that overall business IT sales will grow 6 percent in 2009.
While most software companies are implementing a series of internal cost-cutting measures - reducing staff, cutting travel budgets, etc., these measures have an uneven effect on the software company. For some companies, reducing the cost of doing business enables the company to stay in the game. For others, it increases margins and makes this company a more attractive investment.
We screened our database for software companies with a market capitalization of $1 billion or more and for some measures of balance sheet strength. We were looking for companies with the wherewithal for surviving this down turn and came up with more than 40 names. We think the following companies are fairly priced today: Adobe Systems (ADBE), Check Point Software Technology (CHKP), Microsoft (MSFT), Novell (NOVL), Oracle (ORCL), Quest Software (QSFT) and Sybase (SY). We consider the following companies significantly over valued today: Cognizant Technology Solutions (CTSH), Concur Technologies (CNQR), Longtop Financial Technologies (LFT), McAfee (MFE), Quality Systems (QSII), Red Hat (RHT) and salesforce.com (CRM).

We find Synopsis, Inc. (SNPS) very attractive at the current market price.

From Reuters:


Complete Story »]]> SAP ORCL LWSN EPIC INTU ADBE CHKP MSFT NOVL QSFT SY CTSH CNQR LFT MFE QSII RHT CRM SNPS Ron Sommer Spotlight on Biotech: 10 Promising Companies http://seekingalpha.com/article/154832-spotlight-on-biotech-10-promising-companies?source=feed 154832 The U.S. biotechnology industry includes about 1,000 companies, of all sizes, with combined annual revenues close to $50 billion. Large companies include Amgen (AMGN), Biogen Idec (BIIB), Genetic (GENE), Genzyme (GENZ), Life Technologies (LIFE) and Monsanto (MON). Because so many drugs are now developed using biotechnology, the biotech and pharmaceutical industries overlap.

Demand for biotechnology products and services is driven primarily by the willingness of insurers to pay for new medical treatments. With the pending introduction of Obamacare, new uncertainties are introduced to this industry. Biotech products and treatments tend to be expensive and the drive to reduce costs through rationing will no doubt effect this industry. The profitability of individual companies depends on the discovery and effective marketing of new products. Because the market for potential products is so large, small biotech companies can co-exist successfully with large ones if they have expertise in a particular line of research.
The most successful uses of biotechnology so far have been in the production of therapeutic drugs (biologics); genetically modified plants and medical diagnostic tools such as DNA testing.
Biotechnology is a high risk venture. Failure may result from poor results during clinical trials, issues involving patents, competition from other companies and government regulation. Biotech companies burn cash until their product comes to market and even then if there is not widespread acceptance of the product. Investing in biotech companies is more often an act of speculation than one of investment.
We screened our database for biotech companies with market capitalizations of $1.0 billion or more and some degree of balance sheet strength. Of the companies mentioned below, we especially like Biogen Idec. We recommend that you perform your own due diligence of the following companies which we find promising:
Biogen Idec (BIIB): "Biogen Idec Inc. is engaged in the development, manufacturing, and commercialization of therapies. The Company’s products address diseases such as multiple sclerosis, non-Hodgkin’s lymphoma [NHL], rheumatoid arthritis [RA], crohn’s disease [CD] and psoriasis. The Company has four products: AVONEX (interferon beta-1a), RITUXAN (rituximab), TYSABRI (natalizumab) and FUMADERM (dimethylfumarate and monoethylfumarate salts). AVONEX is used in the treatment of relapsing forms of multiple sclerosis [MS]. RITUXAN is one of the selling oncology therapeutics. In the United States, RITUXAN is approved for NHL. TYSABRI is approved for the treatment of relapsing forms of MS. FUMADERM acts as an immunomudulator. The Company also has product candidates, such as BG-12, which is a oral fumarate; ANTI-CD80 monoclonal antibody [MAb](galiximab); ANTI-CD23 MAb (lumiliximab); Humanized Anti-CD20 MAb (ocrelizumab), Lixivaptan, an oral compound for the potential treatment of hyponatremia, and ADENTRI, which is an adenosine A1 receptor antagonist, being developed under a licensing agreement with CV Therapeutics, Inc."
Covance (CVD): "Covance Inc. is a drug development services company providing a range of early-stage and late-stage product development services on a worldwide basis primarily to the pharmaceutical, biotechnology and medical device industries. The Company also provides laboratory testing services to the chemical, agrochemical and food industries. Covance maintains offices in more than 20 countries. The services it provides constitute two segments: early development services, which include preclinical services and clinical pharmacology services, and late-stage development services, which include central laboratory, clinical development, periapproval and market access services. Covance Inc. provides product development services on a global basis to, among others, the pharmaceutical and biotechnology industries. During the year ended December 31, 2008, the Company served in excess of 300 biopharmaceutical companies. In March 2009, the Company acquired Swiss Pharma Contract, a 50-bed clinical research company based in Basel, Switzerland."
Forest Laboratories (FRX): "Forest Laboratories, Inc. and its subsidiaries develop, manufacture and sell both branded and generic forms of ethical drug products, which require a physician’s prescription. The Company’s products in the United States consist of branded ethical drug specialties marketed directly or detailed to physicians by its Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales. Its products include Lexapro, the Company’s selective serotonium reuptake inhibitor [SSRI] for the treatment of major depression and generalized anxiety disorder [GAD]; Namenda, its N-methyl-D-aspartate [NMDA] antagonist for the treatment of moderate and severe Alzheimer’s disease; Bystolic, its beta-blocker for the treatment of hypertension, and Savella, a dual reuptake inhibitor for the treatment of fibromyalgia."
Genzyme (GENZ): "Genzyme Corporation (Genzyme) is a biotechnology company. The Company’s product and service portfolio is focused on rare disorders, renal diseases, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing. Genzyme operates in four segments: Genetic Diseases, Cardiometabolic and Renal, Biosurgery and Hematologic Oncology. Genetic Diseases unit develops, manufactures and distributes therapeutic products, with a focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders [LSDs]. Cardiometabolic and Renal segment develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure and endocrine and cardiovascular diseases. Biosurgery develops, manufactures and distributes biotherapeutics and biomaterial-based products, with a focus on products that meet medical needs in the orthopaedics and broader surgical areas. Hematologic Oncology develops, manufactures and distributes products for the treatment of cancer."
Myriad Genetics (MYGN): "Myriad Genetics, Inc. is a healthcare company focused on the development and marketing of molecular diagnostic products. The Company has seven marketed products: BRACAnalysis (breast and ovarian cancer predisposition), COLARIS (colorectal and uterine cancer predisposition), COLARIS AP (colon polyp forming syndrome predisposition), MELARIS (melanoma predisposition), TheraGuide 5-FU (chemotherapy selection), PREZEON (chemotherapy selection) and OnDose (chemotherapy dosing). In July 2009, the Company announced the completion of the spin off of Myriad Pharmaceuticals, Inc., which comprised research and drug development businesses."
Novo Nordisk A/S (NVO): "Novo Nordisk A/S, incorporated on November 28, 1931, is a Denmark-based healthcare company. The Company provides diabetes care and is engaged in haemostasis management, growth hormone therapy and hormone replacement therapy. The Company manufactures and markets pharmaceutical products and services to patients, the medical profession and society. The Company is organized in two segments: diabetes care and biopharmaceuticals. Diabetes care includes discovery, development, manufacturing and marketing of products within the areas of insulin, glucagon-like peptide [GLP]-1 and related delivery systems, as well as oral antidiabetic products [OAD]. Biopharmaceuticals includes discovery, development, manufacturing and marketing of products within the therapy areas haemostasis management, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas."
Pharmaceutical Product Development (PPDI): "Pharmaceutical Product Development, Inc. is a global contract research organization engaged in providing drug discovery and development services, post-approval expertise and compound partnering programs. The Company’s customers and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. It operates in two segments: Discovery Sciences and Development. The Discovery Sciences Group focuses on the discovery research segment of the biopharmaceutical research and development outsourcing market. The Development Group provides a range of development services, either individually or as an integrated package. In April 2009, the Company acquired Magen BioSciences, Inc. In April 2009, the Company completed the acquisition of AbC.R.O., Inc. [AbCRO]."
Techne Corporation (TECH): "Techne Corporation, incorporated on July 17, 1981, along with its subsidiaries, is engaged in the development and manufacture of biotechnology products and hematology calibrators and controls. These activities are conducted through its wholly owned subsidiary, Research and Diagnostic Systems, Inc (R&D Systems). It distributes biotechnology products in Europe through its wholly owned subsidiary, R&D Systems Europe Ltd. (R&D Europe). R&D Systems Europe Ltd. has a sales subsidiary, R&D Systems GmbH, in Germany. Techne Corporation operates in three segments: biotechnology, R&D Systems Europe and hematology. The biotechnology segment consists of R&D Systems Biotechnology Division, Fortron Bio Science, Inc. (Fortron), BiosPacific, Inc. and R&D Systems China Co. Ltd. (R&D China), which develop, manufacture and sell biotechnology research and diagnostic products worldwide. R&D Systems Europe distributes Biotechnology Division products throughout Europe. The hematology segment develops and manufactures hematology controls and calibrators for sale worldwide. During the fiscal year ended June 30, 2007, the Company established a subsidiary, R&D Systems China Co. Ltd. (R&D China), in Shanghai, China, to distribute biotechnology products throughout China."
Teva Pharmaceutical Industries (TEVA): "Teva Pharmaceutical Industries Limited (Teva), incorporated on February 13, 1944, is a global pharmaceutical company that develops, produces and markets generic drugs covering all treatment categories. The Company has a pharmaceutical business, whose principal products are Copaxone for multiple sclerosis and Azilect for Parkinson’s disease and respiratory products. Teva’s active pharmaceutical ingredient [API] business provides vertical integration to Teva’s own pharmaceutical production and sells to third party manufacturers. The Company’s global operations are conducted in North America, Europe, Latin America, Asia and Israel. Teva has operations in more than 60 countries, as well as 38 finished dosage pharmaceutical manufacturing sites in 17 countries, 20 generic research and development (R&D) centers operating mostly within certain manufacturing sites and 20 API manufacturing sites around the world. During the year ended December 31, 2008, Teva generated approximately 60% of its sales in North America, 25% in Europe and 15% in other regions (primarily Latin America, including Mexico, Israel and Central and Eastern Europe). In July 2008, Teva completed the acquisition of Bentley Pharmaceuticals, Inc. In December 2008, the Company completed the acquisition of Barr Pharmaceuticals, Inc. (Barr) In January 2009, Phibro Animal Health Corporation completed the acquisition of the Abic Animal Health business (Abic) from the Company."
Warner Chilcott (WCRX): "Warner Chilcott Limited is a Bermuda-based specialty pharmaceutical company focused on the women’s healthcare and dermatology segments of the United States pharmaceutical market. It is an integrated company with internal resources dedicated to the development, manufacturing and promotion of its products. Its operations are carried through its wholly-owned subsidiaries in the United States, Puerto Rico, the Republic of Ireland and Northern Ireland. The Companies franchises are comprised of complementary portfolios of established branded and development-stage products."
Disclaimer: Author is long FRX.
]]> Sun, 09 Aug 2009 02:44:12 -0400 Ron Sommer The U.S. biotechnology industry includes about 1,000 companies, of all sizes, with combined annual revenues close to $50 billion. Large companies include Amgen (AMGN), Biogen Idec (BIIB), Genetic (GENE), Genzyme (GENZ), Life Technologies (LIFE) and Monsanto (MON). Because so many drugs are now developed using biotechnology, the biotech and pharmaceutical industries overlap.

Demand for biotechnology products and services is driven primarily by the willingness of insurers to pay for new medical treatments. With the pending introduction of Obamacare, new uncertainties are introduced to this industry. Biotech products and treatments tend to be expensive and the drive to reduce costs through rationing will no doubt effect this industry. The profitability of individual companies depends on the discovery and effective marketing of new products. Because the market for potential products is so large, small biotech companies can co-exist successfully with large ones if they have expertise in a particular line of research.
The most successful uses of biotechnology so far have been in the production of therapeutic drugs (biologics); genetically modified plants and medical diagnostic tools such as DNA testing.
Biotechnology is a high risk venture. Failure may result from poor results during clinical trials, issues involving patents, competition from other companies and government regulation. Biotech companies burn cash until their product comes to market and even then if there is not widespread acceptance of the product. Investing in biotech companies is more often an act of speculation than one of investment.
We screened our database for biotech companies with market capitalizations of $1.0 billion or more and some degree of balance sheet strength. Of the companies mentioned below, we especially like Biogen Idec. We recommend that you perform your own due diligence of the following companies which we find promising:
Biogen Idec (BIIB): "Biogen Idec Inc. is engaged in the development, manufacturing, and commercialization of therapies. The Company’s products address diseases such as multiple sclerosis, non-Hodgkin’s lymphoma [NHL], rheumatoid arthritis [RA], crohn’s disease [CD] and psoriasis. The Company has four products: AVONEX (interferon beta-1a), RITUXAN (rituximab), TYSABRI (natalizumab) and FUMADERM (dimethylfumarate and monoethylfumarate salts). AVONEX is used in the treatment of relapsing forms of multiple sclerosis [MS]. RITUXAN is one of the selling oncology therapeutics. In the United States, RITUXAN is approved for NHL. TYSABRI is approved for the treatment of relapsing forms of MS. FUMADERM acts as an immunomudulator. The Company also has product candidates, such as BG-12, which is a oral fumarate; ANTI-CD80 monoclonal antibody [MAb](galiximab); ANTI-CD23 MAb (lumiliximab); Humanized Anti-CD20 MAb (ocrelizumab), Lixivaptan, an oral compound for the potential treatment of hyponatremia, and ADENTRI, which is an adenosine A1 receptor antagonist, being developed under a licensing agreement with CV Therapeutics, Inc."
Covance (CVD): "Covance Inc. is a drug development services company providing a range of early-stage and late-stage product development services on a worldwide basis primarily to the pharmaceutical, biotechnology and medical device industries. The Company also provides laboratory testing services to the chemical, agrochemical and food industries. Covance maintains offices in more than 20 countries. The services it provides constitute two segments: early development services, which include preclinical services and clinical pharmacology services, and late-stage development services, which include central laboratory, clinical development, periapproval and market access services. Covance Inc. provides product development services on a global basis to, among others, the pharmaceutical and biotechnology industries. During the year ended December 31, 2008, the Company served in excess of 300 biopharmaceutical companies. In March 2009, the Company acquired Swiss Pharma Contract, a 50-bed clinical research company based in Basel, Switzerland."
Forest Laboratories (FRX): "Forest Laboratories, Inc. and its subsidiaries develop, manufacture and sell both branded and generic forms of ethical drug products, which require a physician’s prescription. The Company’s products in the United States consist of branded ethical drug specialties marketed directly or detailed to physicians by its Forest Pharmaceuticals, Forest Therapeutics, Forest Healthcare, Forest Ethicare and Forest Specialty Sales. Its products include Lexapro, the Company’s selective serotonium reuptake inhibitor [SSRI] for the treatment of major depression and generalized anxiety disorder [GAD]; Namenda, its N-methyl-D-aspartate [NMDA] antagonist for the treatment of moderate and severe Alzheimer’s disease; Bystolic, its beta-blocker for the treatment of hypertension, and Savella, a dual reuptake inhibitor for the treatment of fibromyalgia."
Genzyme (GENZ): "Genzyme Corporation (Genzyme) is a biotechnology company. The Company’s product and service portfolio is focused on rare disorders, renal diseases, orthopaedics, cancer, transplant and immune disease, and diagnostic and predictive testing. Genzyme operates in four segments: Genetic Diseases, Cardiometabolic and Renal, Biosurgery and Hematologic Oncology. Genetic Diseases unit develops, manufactures and distributes therapeutic products, with a focus on products to treat patients suffering from genetic diseases and other chronic debilitating diseases, including a family of diseases known as lysosomal storage disorders [LSDs]. Cardiometabolic and Renal segment develops, manufactures and distributes products that treat patients suffering from renal diseases, including chronic renal failure and endocrine and cardiovascular diseases. Biosurgery develops, manufactures and distributes biotherapeutics and biomaterial-based products, with a focus on products that meet medical needs in the orthopaedics and broader surgical areas. Hematologic Oncology develops, manufactures and distributes products for the treatment of cancer."
Myriad Genetics (MYGN): "Myriad Genetics, Inc. is a healthcare company focused on the development and marketing of molecular diagnostic products. The Company has seven marketed products: BRACAnalysis (breast and ovarian cancer predisposition), COLARIS (colorectal and uterine cancer predisposition), COLARIS AP (colon polyp forming syndrome predisposition), MELARIS (melanoma predisposition), TheraGuide 5-FU (chemotherapy selection), PREZEON (chemotherapy selection) and OnDose (chemotherapy dosing). In July 2009, the Company announced the completion of the spin off of Myriad Pharmaceuticals, Inc., which comprised research and drug development businesses."
Novo Nordisk A/S (NVO): "Novo Nordisk A/S, incorporated on November 28, 1931, is a Denmark-based healthcare company. The Company provides diabetes care and is engaged in haemostasis management, growth hormone therapy and hormone replacement therapy. The Company manufactures and markets pharmaceutical products and services to patients, the medical profession and society. The Company is organized in two segments: diabetes care and biopharmaceuticals. Diabetes care includes discovery, development, manufacturing and marketing of products within the areas of insulin, glucagon-like peptide [GLP]-1 and related delivery systems, as well as oral antidiabetic products [OAD]. Biopharmaceuticals includes discovery, development, manufacturing and marketing of products within the therapy areas haemostasis management, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas."
Pharmaceutical Product Development (PPDI): "Pharmaceutical Product Development, Inc. is a global contract research organization engaged in providing drug discovery and development services, post-approval expertise and compound partnering programs. The Company’s customers and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. It operates in two segments: Discovery Sciences and Development. The Discovery Sciences Group focuses on the discovery research segment of the biopharmaceutical research and development outsourcing market. The Development Group provides a range of development services, either individually or as an integrated package. In April 2009, the Company acquired Magen BioSciences, Inc. In April 2009, the Company completed the acquisition of AbC.R.O., Inc. [AbCRO]."
Techne Corporation (TECH): "Techne Corporation, incorporated on July 17, 1981, along with its subsidiaries, is engaged in the development and manufacture of biotechnology products and hematology calibrators and controls. These activities are conducted through its wholly owned subsidiary, Research and Diagnostic Systems, Inc (R&D Systems). It distributes biotechnology products in Europe through its wholly owned subsidiary, R&D Systems Europe Ltd. (R&D Europe). R&D Systems Europe Ltd. has a sales subsidiary, R&D Systems GmbH, in Germany. Techne Corporation operates in three segments: biotechnology, R&D Systems Europe and hematology. The biotechnology segment consists of R&D Systems Biotechnology Division, Fortron Bio Science, Inc. (Fortron), BiosPacific, Inc. and R&D Systems China Co. Ltd. (R&D China), which develop, manufacture and sell biotechnology research and diagnostic products worldwide. R&D Systems Europe distributes Biotechnology Division products throughout Europe. The hematology segment develops and manufactures hematology controls and calibrators for sale worldwide. During the fiscal year ended June 30, 2007, the Company established a subsidiary, R&D Systems China Co. Ltd. (R&D China), in Shanghai, China, to distribute biotechnology products throughout China."
Teva Pharmaceutical Industries (TEVA): "Teva Pharmaceutical Industries Limited (Teva), incorporated on February 13, 1944, is a global pharmaceutical company that develops, produces and markets generic drugs covering all treatment categories. The Company has a pharmaceutical business, whose principal products are Copaxone for multiple sclerosis and Azilect for Parkinson’s disease and respiratory products. Teva’s active pharmaceutical ingredient [API] business provides vertical integration to Teva’s own pharmaceutical production and sells to third party manufacturers. The Company’s global operations are conducted in North America, Europe, Latin America, Asia and Israel. Teva has operations in more than 60 countries, as well as 38 finished dosage pharmaceutical manufacturing sites in 17 countries, 20 generic research and development (R&D) centers operating mostly within certain manufacturing sites and 20 API manufacturing sites around the world. During the year ended December 31, 2008, Teva generated approximately 60% of its sales in North America, 25% in Europe and 15% in other regions (primarily Latin America, including Mexico, Israel and Central and Eastern Europe). In July 2008, Teva completed the acquisition of Bentley Pharmaceuticals, Inc. In December 2008, the Company completed the acquisition of Barr Pharmaceuticals, Inc. (Barr) In January 2009, Phibro Animal Health Corporation completed the acquisition of the Abic Animal Health business (Abic) from the Company."
Warner Chilcott (WCRX): "Warner Chilcott Limited is a Bermuda-based specialty pharmaceutical company focused on the women’s healthcare and dermatology segments of the United States pharmaceutical market. It is an integrated company with internal resources dedicated to the development, manufacturing and promotion of its products. Its operations are carried through its wholly-owned subsidiaries in the United States, Puerto Rico, the Republic of Ireland and Northern Ireland. The Companies franchises are comprised of complementary portfolios of established branded and development-stage products."
Disclaimer: Author is long FRX.

Complete Story »]]> BIIB CVD FRX GENZ MYGN NVO PPDI TECH TEVA WCRX Ron Sommer Daktronics: Spotlight on Advertising http://seekingalpha.com/article/153095-daktronics-spotlight-on-advertising?source=feed 153095 In today's market, the advertising industry is adapting to new business models and broadening its offerings. Traditional advertising agencies are accustomed to mass media advertising. Digital advertising represents a new paradigm as advertising is customized for each consumer. Though mass advertising will not disappear, the trend will be to consumer-centric advertising.

We see the emergence of new advertising models driven by the growth in online advertising revenues. Online advertising involves many different formats including, but not limited to, search, games, online directories and other permission-based models.
The biggest question for today is what effect the global financial crisis will have on advertising expenditures. We have already seen advertising budget cuts for 2008 and 2009.
There are not many players in this sector; we reckon about twenty or so if you eliminate over-the-counter stocks. Of these twenty, only several have market caps of $1.0 billion or more. Even fewer companies have solid balance sheets; they appear to be highly leveraged.
We would focus our efforts on Daktronics (DAKT). Daktronics has a market cap of about $340 million. The company reported earnings of $0.01 for the quarter ending 05/02/09 and $0.65 for the year. Daktronics reports $36.5 million in cash and $10.5 million in long term debt. We think Daktronics is a buy up to $12.82.

Disclosure: No position
]]> Sun, 02 Aug 2009 05:37:54 -0400 Ron Sommer In today's market, the advertising industry is adapting to new business models and broadening its offerings. Traditional advertising agencies are accustomed to mass media advertising. Digital advertising represents a new paradigm as advertising is customized for each consumer. Though mass advertising will not disappear, the trend will be to consumer-centric advertising.

We see the emergence of new advertising models driven by the growth in online advertising revenues. Online advertising involves many different formats including, but not limited to, search, games, online directories and other permission-based models.
The biggest question for today is what effect the global financial crisis will have on advertising expenditures. We have already seen advertising budget cuts for 2008 and 2009.
There are not many players in this sector; we reckon about twenty or so if you eliminate over-the-counter stocks. Of these twenty, only several have market caps of $1.0 billion or more. Even fewer companies have solid balance sheets; they appear to be highly leveraged.
We would focus our efforts on Daktronics (DAKT). Daktronics has a market cap of about $340 million. The company reported earnings of $0.01 for the quarter ending 05/02/09 and $0.65 for the year. Daktronics reports $36.5 million in cash and $10.5 million in long term debt. We think Daktronics is a buy up to $12.82.

Disclosure: No position

Complete Story »]]> DAKT Ron Sommer Spotlight on Aerospace / Defense Sector: 3 Investment Candidates http://seekingalpha.com/article/151315-spotlight-on-aerospace-defense-sector-3-investment-candidates?source=feed 151315 After a six-year run of improving performance, resulting in a composite industry share price performance approximately three times better than the S&P 500 Index, the U.S. aerospace and defense industry finds itself in transition and facing uncertainty and, perhaps, leaner times ahead.
With core defense spending expected to slow, U.S. defense contractors need to identify additional revenue sources for the coming years. The near term should see some interesting merger and acquisition activity, mostly smaller deals by larger contractors to fill in capability gaps - particularly in the security, defense electronics and aftermarket service business areas.
Taking the uncertainty of current economic conditions into consideration, it is difficult to predict overall aerospace industry performance in the near term. In the longer term, however, prospects are good for continued, steady growth. Large civil aircraft, rotocraft, general aviation aircraft, regional and business jets, engines / power plants, communications satellites, military unmanned aerial systems and airport infrastructure and safety equipment should continue to experience steady growth. Other sectors, such as launch services, are experiencing lower but steady growth as they recover from market disruptions and / or adapt to commercial markets. The launch services sector could experience faster growth if the demand for satellite telecommunications services increases.
The maintenance, repair and overhaul [MRO] market has finally recovered to pre-9/11 levels, and growth in this sector will be led by expanding aircraft fleets in India, Eastern Europe, South America and China. The market for civil / commercial unmanned aerial systems remains stagnant in the absence of the civil regulations for certification and operation in the national air space; however, the Federal Aviation Administration and civil aviation authorities in Europe and Asia are working towards rationalization of civil certification procedures. Key markets for U.S. aerospace exports remain India, China, Russia, Japan, and Europe.
In summary, the overall level of defense spending will trend downward in response to unfocused threats, big budget deficits, a weak economy and an ambition domestic agenda. The business outlook for second-tier defense companies that grew rapidly during the Bush years will weaken as larger companies invade their market turf in pursuit of a more diverse business mix, leading a wave of consolidation in the sector that eliminates many smaller companies.
Our database categorizes 78 companies as being part of the aerospace and defense industry. Our screening criteria looks for companies with a healthy balance sheet, not too much debt and ROI and CFROI of at least 10%. This screen brings the number of candidates eligible for closer examination down to three: AeroVironment (AVAV), Cubic Corporation (CUB), and Force Protection (FRPT).
Our recommendation is to hold AVAV, sell CUB and hold FRPT.
Disclosure: Author has no position in any company mentioned in this post.

]]> Sun, 26 Jul 2009 03:25:16 -0400 Ron Sommer After a six-year run of improving performance, resulting in a composite industry share price performance approximately three times better than the S&P 500 Index, the U.S. aerospace and defense industry finds itself in transition and facing uncertainty and, perhaps, leaner times ahead.
With core defense spending expected to slow, U.S. defense contractors need to identify additional revenue sources for the coming years. The near term should see some interesting merger and acquisition activity, mostly smaller deals by larger contractors to fill in capability gaps - particularly in the security, defense electronics and aftermarket service business areas.
Taking the uncertainty of current economic conditions into consideration, it is difficult to predict overall aerospace industry performance in the near term. In the longer term, however, prospects are good for continued, steady growth. Large civil aircraft, rotocraft, general aviation aircraft, regional and business jets, engines / power plants, communications satellites, military unmanned aerial systems and airport infrastructure and safety equipment should continue to experience steady growth. Other sectors, such as launch services, are experiencing lower but steady growth as they recover from market disruptions and / or adapt to commercial markets. The launch services sector could experience faster growth if the demand for satellite telecommunications services increases.
The maintenance, repair and overhaul [MRO] market has finally recovered to pre-9/11 levels, and growth in this sector will be led by expanding aircraft fleets in India, Eastern Europe, South America and China. The market for civil / commercial unmanned aerial systems remains stagnant in the absence of the civil regulations for certification and operation in the national air space; however, the Federal Aviation Administration and civil aviation authorities in Europe and Asia are working towards rationalization of civil certification procedures. Key markets for U.S. aerospace exports remain India, China, Russia, Japan, and Europe.
In summary, the overall level of defense spending will trend downward in response to unfocused threats, big budget deficits, a weak economy and an ambition domestic agenda. The business outlook for second-tier defense companies that grew rapidly during the Bush years will weaken as larger companies invade their market turf in pursuit of a more diverse business mix, leading a wave of consolidation in the sector that eliminates many smaller companies.
Our database categorizes 78 companies as being part of the aerospace and defense industry. Our screening criteria looks for companies with a healthy balance sheet, not too much debt and ROI and CFROI of at least 10%. This screen brings the number of candidates eligible for closer examination down to three: AeroVironment (AVAV), Cubic Corporation (CUB), and Force Protection (FRPT).
Our recommendation is to hold AVAV, sell CUB and hold FRPT.
Disclosure: Author has no position in any company mentioned in this post.


Complete Story »]]> AVAV CUB FRPT ITA PPA Ron Sommer Prepare for Significant Growth in Medical Equipment Sector http://seekingalpha.com/article/148193-prepare-for-significant-growth-in-medical-equipment-sector?source=feed 148193 The medical equipment and supplies sector includes surgical and medical instruments; orthopedic, prosthetic and surgical appliances and supplies; dental equipment and supplies; x-ray apparatus, tubes and related irradiation apparatus; electro-medical and electro-therapy apparatus; and ophthalmic equipment.
The main demographic change influencing this industry is the rapidly growing number of elderly in the United States. Projections show that the percentage of people 65 and older will increase from 12.4 percent in 2000 to an estimated 20.7 percent by 2050. According to Census estimates, there were approximately 35 million Americans over the age of 65 in 2000; due to the influx of "baby boomers" and an anticipated increase in overall life expectancy, by 2020 there will be more than 54 million people 65 and older, and more than 86 million by 2050.
The aging population is already influencing the future direction of the medical device industry due to their changing health needs and an accompanying shift in thinking on how and where seniors will be treated. baby boomers are living longer lives than previous generations, requiring more sophisticated and longer-term healthcare. This has driven the need for advanced medical electronic devices and raised expectations that new technologies will enhance the quality and length of patients' lives as they get older. As the U.S. population ages, and pressures to contain costs increase, expensive hospital stays will be discouraged, and health care will be increasingly delivered in alternative settings, such as nursing homes, hospices, and, especially, the patient's own home.
As a result, home health-care products are expected to become one of the fastest growing segments of the medical device industry. In recent years, these products have become increasingly more sophisticated and are now used in a wider variety of situations. For instance, unskilled health care workers who previously were limited to using only low technology products now have high-tech devices at their disposal for responding to critical care needs. In addition, patients will have access to an increasing array of sophisticated equipment to address their own medical care. Demographics and technological advances will continue to increase demand for pacemakers and defibrillators.
The mid- to late-nineties saw a tremendous number of mergers and acquisitions within the medical device industry, and this trend is expected to continue. The long-term effects are not known but consolidation of the medical device industry is already changing the structure of firms and the delivery of medical technology to patients.
There are a number of dynamics driving this trend. Small firms that find it too expensive to devote significant resources to providing "proof data" for their new innovations are merging into larger firms that have the financial resources necessary to bring new technology products to market. Larger firms receive the benefit of the new technology and, therefore, maintain market share, while small firms can afford to continue to produce and get the benefit of the large firm devoting resources to continued incremental improvements crucial to the industry. The rate of consolidation has been further augmented by two other trends in recent years:
  1. Larger firms generally have a greater capability for exporting products globally than do small stand-alone firms.
  2. Larger firms are better positioned to negotiate favorable deals with group purchasing organizations such as HMOs and health care companies with nationwide reach.
The federal government would like to implement incentives to encourage doctors, health care providers and patients to become actively involved in using technology to create a more seamless health care system. These initiatives fall under several broad headings:
  1. Adoption of electronic health records by physicians should result in workplace efficiencies as well as better levels of care for patients.
  2. Ensuring that clinicians can share information seamlessly with each other will make availability of patient records easier and more useful.
  3. From the patient's perspective, wide use of Personal Health Records that are truly portable and accessible could result in more educated patients able to make well-informed decisions regarding necessary treatments, as well as choosing qualified physicians and hospitals.
Medical device manufacturers are benefiting from a new generation of materials and manufacturing processes. As medical device and biotechnological products converge, one area that will see tremendous growth is drug delivery devices - many treatments and therapies derived from research will not necessarily be available in pill form. Medical devices will therefore act as delivery systems for new products resulting from genetic engineering and biotech research. Most industry experts view the impending convergence of medical devices with biotechnology with great enthusiasm, but also warn that if the regulatory and reimbursement issues are not addressed, problems will ensue as convergence takes place.
Of the more than 300 companies listed in our database as members of this sector, we would focus our attention on Steris Corporation (STE). Steris is currently trading at 3.84X trailing earnings, 3.5X tangible book and 13.8X free cash flow. The company has low debt, a strong balance sheet, and is highly profitable. Our price target is $30.
Disclosure: At the time of this writing, author has no financial interest in STE.
]]> Sun, 12 Jul 2009 02:05:51 -0400 Ron Sommer The medical equipment and supplies sector includes surgical and medical instruments; orthopedic, prosthetic and surgical appliances and supplies; dental equipment and supplies; x-ray apparatus, tubes and related irradiation apparatus; electro-medical and electro-therapy apparatus; and ophthalmic equipment.
The main demographic change influencing this industry is the rapidly growing number of elderly in the United States. Projections show that the percentage of people 65 and older will increase from 12.4 percent in 2000 to an estimated 20.7 percent by 2050. According to Census estimates, there were approximately 35 million Americans over the age of 65 in 2000; due to the influx of "baby boomers" and an anticipated increase in overall life expectancy, by 2020 there will be more than 54 million people 65 and older, and more than 86 million by 2050.
The aging population is already influencing the future direction of the medical device industry due to their changing health needs and an accompanying shift in thinking on how and where seniors will be treated. baby boomers are living longer lives than previous generations, requiring more sophisticated and longer-term healthcare. This has driven the need for advanced medical electronic devices and raised expectations that new technologies will enhance the quality and length of patients' lives as they get older. As the U.S. population ages, and pressures to contain costs increase, expensive hospital stays will be discouraged, and health care will be increasingly delivered in alternative settings, such as nursing homes, hospices, and, especially, the patient's own home.
As a result, home health-care products are expected to become one of the fastest growing segments of the medical device industry. In recent years, these products have become increasingly more sophisticated and are now used in a wider variety of situations. For instance, unskilled health care workers who previously were limited to using only low technology products now have high-tech devices at their disposal for responding to critical care needs. In addition, patients will have access to an increasing array of sophisticated equipment to address their own medical care. Demographics and technological advances will continue to increase demand for pacemakers and defibrillators.
The mid- to late-nineties saw a tremendous number of mergers and acquisitions within the medical device industry, and this trend is expected to continue. The long-term effects are not known but consolidation of the medical device industry is already changing the structure of firms and the delivery of medical technology to patients.
There are a number of dynamics driving this trend. Small firms that find it too expensive to devote significant resources to providing "proof data" for their new innovations are merging into larger firms that have the financial resources necessary to bring new technology products to market. Larger firms receive the benefit of the new technology and, therefore, maintain market share, while small firms can afford to continue to produce and get the benefit of the large firm devoting resources to continued incremental improvements crucial to the industry. The rate of consolidation has been further augmented by two other trends in recent years:
  1. Larger firms generally have a greater capability for exporting products globally than do small stand-alone firms.
  2. Larger firms are better positioned to negotiate favorable deals with group purchasing organizations such as HMOs and health care companies with nationwide reach.
The federal government would like to implement incentives to encourage doctors, health care providers and patients to become actively involved in using technology to create a more seamless health care system. These initiatives fall under several broad headings:
  1. Adoption of electronic health records by physicians should result in workplace efficiencies as well as better levels of care for patients.
  2. Ensuring that clinicians can share information seamlessly with each other will make availability of patient records easier and more useful.
  3. From the patient's perspective, wide use of Personal Health Records that are truly portable and accessible could result in more educated patients able to make well-informed decisions regarding necessary treatments, as well as choosing qualified physicians and hospitals.
Medical device manufacturers are benefiting from a new generation of materials and manufacturing processes. As medical device and biotechnological products converge, one area that will see tremendous growth is drug delivery devices - many treatments and therapies derived from research will not necessarily be available in pill form. Medical devices will therefore act as delivery systems for new products resulting from genetic engineering and biotech research. Most industry experts view the impending convergence of medical devices with biotechnology with great enthusiasm, but also warn that if the regulatory and reimbursement issues are not addressed, problems will ensue as convergence takes place.
Of the more than 300 companies listed in our database as members of this sector, we would focus our attention on Steris Corporation (STE). Steris is currently trading at 3.84X trailing earnings, 3.5X tangible book and 13.8X free cash flow. The company has low debt, a strong balance sheet, and is highly profitable. Our price target is $30.
Disclosure: At the time of this writing, author has no financial interest in STE.

Complete Story »]]> STE Ron Sommer Reliance Steel & Aluminum: Down but Not Out http://seekingalpha.com/article/143113-reliance-steel-aluminum-down-but-not-out?source=feed 143113

Reliance Steel & Aluminum Co. (NYSE:RS) is one of the largest metals service center companies in the United States. Though a network of more than 200 locations in 38 states, Belgium, Canada, China, Mexico, Singapore, South Korea and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of more than 100,000 metal products. These products include galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel sold to more than 125,000 customers in a broad range of industries. Some of these metal service centers provide processing services for specialty metals only.

The challenge for Reliance Steel (RS), and all other metal service centers, is that lower demand for steel and aluminum is expected to continue through the first half of 2009. Perhaps, we will see the beginnings of a pick-up in demand by the end of the year. Data for the first six months is not available yet.

]]> Mon, 15 Jun 2009 02:53:57 -0400 Ron Sommer

Reliance Steel & Aluminum Co. (NYSE:RS) is one of the largest metals service center companies in the United States. Though a network of more than 200 locations in 38 states, Belgium, Canada, China, Mexico, Singapore, South Korea and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of more than 100,000 metal products. These products include galvanized, hot-rolled and cold-finished steel, stainless steel, aluminum, brass, copper, titanium and alloy steel sold to more than 125,000 customers in a broad range of industries. Some of these metal service centers provide processing services for specialty metals only.

The challenge for Reliance Steel (RS), and all other metal service centers, is that lower demand for steel and aluminum is expected to continue through the first half of 2009. Perhaps, we will see the beginnings of a pick-up in demand by the end of the year. Data for the first six months is not available yet.


Complete Story »]]> RS Ron Sommer Better Investment Opportunities Lie in Small Caps http://seekingalpha.com/article/139548-better-investment-opportunities-lie-in-small-caps?source=feed 139548 Are there opportunities in today's markets? I believe there are if you know where to look. A distinguishing aspect of American culture is how we react to adversity. Many people see the turmoil in the markets as a sign of gloom and disaster. Certainly, people have seen their 401K's shrink in value and retirement dreams dashed. Others, however, see opportunities in this chaos.

We believe greater opportunities exist among small cap stocks rather than in the large or mega-cap segments of the market. To test this thesis, we examined the Standard & Poors 1500. This composite index is representative of the overall market. Our examination presents our findings for both the median value within the index and the mean value for a variety of measures. Admittedly, a fuller study would have segmented this index into deciles. Neither time nor resources allows me that luxury.
Summary
The median stock price of the S&P 1500, as of May 22, 2009 is $20.09 and the mean stock price is $24.52. The median EPS [TTM] is $1.18 and the mean EPS [TTM] is $0.37 which provides us with a median P/E of 17X and a mean P/E of 66X, respectively. Using another measure, Enterprise Value to EBITDA, we find the median EV/EBITA to be 12.5X and the mean -5.8X; indicating the market weighted mean has a negative EBITDA.
Data
MedianMean
Price$20.09$24.52
Shares Outstanding (Average Q1)71.80237.10
Equity (common) Q1$843.40$3,162.43
Average Net Income (5 Yr)$74.30$383.02
Market Value of Invested Capital$3,261.88$20,700.61
Total Assets Q1$2,429.80$17,847.26
Average EBITDA (5 Yr)$154.98$785.34
Sales (TTM)$1,683.60$7,061.77
Number of Employees4,704.0018,757.39
Operating Margin (TTM)7.85%3.00%
Return on Equity (TTM)9.80%2.39%
Free Cash Flow (TTM)$0.98$1.05
Goodwill & Intangibles Q1$201.70$1,829.37
Average Return on Assets (5 Yr)5.14%5.87%
Total Liabilities Q1$1,369.30$14,460.02
Earnings Per Share (TTM)$1.18$0.37
Cash From Operations (TTM)$194.80$1,028.29
Net Income (TTM)$59.50$112.70
Sales (TTM)$1,683.60$7,061.77
Multiples
MedianMean
PE14.3022.73
PE - Average 3 Years19.4026.04
PE - Average 5 Years20.1025.71
PE - Average 7 Years20.2024.41
Price/Book1.512.50
Price/Book - Average 3 Years2.353.27
Price/Book - Average 5 Years2.393.13
Price/Book - Average 7 Years2.322.91
Price/Sales0.861.37
Price/Sales - Average 3 Years1.492.23
Price/Sales - Average 5 Years1.552.31
Price/Sales - Average 7 Years1.512.27
Price/CFPS11.6516.78
Price/CFPS - Average 3 Years16.6019.91
Price/CFPS -Average 5 Years17.0019.75
Price/CFPS - Average 7 Years17.1019.27
Price/FCFPS13.7028.49
Price/FCFPS - Average 3 Years22.7033.52
Price/FCFPS - Average 5 Years24.1532.53
Price/FCFPS - Average 7 Years22.9030.96
Ratios
MedianMean
Gross Margin (TTM)37.75%41.25%
Gross Margin - 5 Year Average37.60%40.85%
Operating Margin (TTM)7.85%3.00%
Operating Margin - 3 Year Average10.50%12.35%
Operating Margin - 5 Year Average10.50%13.48%
Return on Equity (TTM)9.80%2.39%
Return on Equity - 5 Year Average12.60%13.52%
Return on Equity - 7 Year Average11.80%11.86%
Return on Invested Capital (TTM)8.20%5.84%
Return on Invested Capital - 5 Year Average9.20%8.50%
Growth
MedianMean
Cash Flow - Growth 12M-11.70%-53.67%
Cash Flow - Growth 1 Year0.00-38.12%
Cash Flow - Growth 3 Years5.85%-1.67%
Cash Flow - Growth 5 Years9.40%6.33%
Cash Flow - Growth 7 Years9.60%7.05%
Free Cash Flow - Growth 12M1.20%15.88%
Free Cash Flow - Growth 1 Year-0.95%1.09%
Free Cash Flow - Growth 3 Years5.90%6.43%
Free Cash Flow - Growth 5 Years4.40%5.04%
Free Cash Flow - Growth 7 Years8.05%6.68%
Net Income - Growth 12M-19.55%-57.09%
Net Income - Growth 1 Year-7.10%-44.07%
Net Income - Growth 3 Years2.05%-2.80%
Net Income - Growth 5 Years 8.65%6.06%
Net Income - Growth 7 Years10.60%8.16%
Sales - Growth 12M2.90%4.51%
Sales - Growth 1 Year7.20%8.65%
Sales - Growth 3 Years10.20%12.28%
Sales - Growth 5 Years11.30%14.43%
Sales - Growth 7 Years9.70%12.20%
My analysis of the above referenced data draws me to conclude that smaller companies represent better investment opportunities than the large and mega-cap components of the S&P 1500. Important measures of growth, most particularly cash flow and net income, show that small companies, as presented in the median, show better prospects than their big brothers. These smaller companies also show strong measures of profitability over the long term. Not insignificantly, the smaller companies are selling at significant discounts to the large companies and do so for both short time periods and over the long haul.

Disclosure: At the time of writing this article, the author holds positions in small cap, mid-cap and large cap companies.
]]> Tue, 26 May 2009 04:28:06 -0400 Ron Sommer Are there opportunities in today's markets? I believe there are if you know where to look. A distinguishing aspect of American culture is how we react to adversity. Many people see the turmoil in the markets as a sign of gloom and disaster. Certainly, people have seen their 401K's shrink in value and retirement dreams dashed. Others, however, see opportunities in this chaos.

We believe greater opportunities exist among small cap stocks rather than in the large or mega-cap segments of the market. To test this thesis, we examined the Standard & Poors 1500. This composite index is representative of the overall market. Our examination presents our findings for both the median value within the index and the mean value for a variety of measures. Admittedly, a fuller study would have segmented this index into deciles. Neither time nor resources allows me that luxury.
Summary
The median stock price of the S&P 1500, as of May 22, 2009 is $20.09 and the mean stock price is $24.52. The median EPS [TTM] is $1.18 and the mean EPS [TTM] is $0.37 which provides us with a median P/E of 17X and a mean P/E of 66X, respectively. Using another measure, Enterprise Value to EBITDA, we find the median EV/EBITA to be 12.5X and the mean -5.8X; indicating the market weighted mean has a negative EBITDA.
Data
MedianMean
Price$20.09$24.52
Shares Outstanding (Average Q1)71.80237.10
Equity (common) Q1$843.40$3,162.43
Average Net Income (5 Yr)$74.30$383.02
Market Value of Invested Capital$3,261.88$20,700.61
Total Assets Q1$2,429.80$17,847.26
Average EBITDA (5 Yr)$154.98$785.34
Sales (TTM)$1,683.60$7,061.77
Number of Employees4,704.0018,757.39
Operating Margin (TTM)7.85%3.00%
Return on Equity (TTM)9.80%2.39%
Free Cash Flow (TTM)$0.98$1.05
Goodwill & Intangibles Q1$201.70$1,829.37
Average Return on Assets (5 Yr)5.14%5.87%
Total Liabilities Q1$1,369.30$14,460.02
Earnings Per Share (TTM)$1.18$0.37
Cash From Operations (TTM)$194.80$1,028.29
Net Income (TTM)$59.50$112.70
Sales (TTM)$1,683.60$7,061.77
Multiples
MedianMean
PE14.3022.73
PE - Average 3 Years19.4026.04
PE - Average 5 Years20.1025.71
PE - Average 7 Years20.2024.41
Price/Book1.512.50
Price/Book - Average 3 Years2.353.27
Price/Book - Average 5 Years2.393.13
Price/Book - Average 7 Years2.322.91
Price/Sales0.861.37
Price/Sales - Average 3 Years1.492.23
Price/Sales - Average 5 Years1.552.31
Price/Sales - Average 7 Years1.512.27
Price/CFPS11.6516.78
Price/CFPS - Average 3 Years16.6019.91
Price/CFPS -Average 5 Years17.0019.75
Price/CFPS - Average 7 Years17.1019.27
Price/FCFPS13.7028.49
Price/FCFPS - Average 3 Years22.7033.52
Price/FCFPS - Average 5 Years24.1532.53
Price/FCFPS - Average 7 Years22.9030.96
Ratios
MedianMean
Gross Margin (TTM)37.75%41.25%
Gross Margin - 5 Year Average37.60%40.85%
Operating Margin (TTM)7.85%3.00%
Operating Margin - 3 Year Average10.50%12.35%
Operating Margin - 5 Year Average10.50%13.48%
Return on Equity (TTM)9.80%2.39%
Return on Equity - 5 Year Average12.60%13.52%
Return on Equity - 7 Year Average11.80%11.86%
Return on Invested Capital (TTM)8.20%5.84%
Return on Invested Capital - 5 Year Average9.20%8.50%
Growth
MedianMean
Cash Flow - Growth 12M-11.70%-53.67%
Cash Flow - Growth 1 Year0.00-38.12%
Cash Flow - Growth 3 Years5.85%-1.67%
Cash Flow - Growth 5 Years9.40%6.33%
Cash Flow - Growth 7 Years9.60%7.05%
Free Cash Flow - Growth 12M1.20%15.88%
Free Cash Flow - Growth 1 Year-0.95%1.09%
Free Cash Flow - Growth 3 Years5.90%6.43%
Free Cash Flow - Growth 5 Years4.40%5.04%
Free Cash Flow - Growth 7 Years8.05%6.68%
Net Income - Growth 12M-19.55%-57.09%
Net Income - Growth 1 Year-7.10%-44.07%
Net Income - Growth 3 Years2.05%-2.80%
Net Income - Growth 5 Years 8.65%6.06%
Net Income - Growth 7 Years10.60%8.16%
Sales - Growth 12M2.90%4.51%
Sales - Growth 1 Year7.20%8.65%
Sales - Growth 3 Years10.20%12.28%
Sales - Growth 5 Years11.30%14.43%
Sales - Growth 7 Years9.70%12.20%
My analysis of the above referenced data draws me to conclude that smaller companies represent better investment opportunities than the large and mega-cap components of the S&P 1500. Important measures of growth, most particularly cash flow and net income, show that small companies, as presented in the median, show better prospects than their big brothers. These smaller companies also show strong measures of profitability over the long term. Not insignificantly, the smaller companies are selling at significant discounts to the large companies and do so for both short time periods and over the long haul.

Disclosure: At the time of writing this article, the author holds positions in small cap, mid-cap and large cap companies.

Complete Story »]]> SPY Ron Sommer TurkCell: A Worthwhile Long Term Investment http://seekingalpha.com/article/138207-turkcell-a-worthwhile-long-term-investment?source=feed 138207

Under the radar. Turkcell Iletisim Hizmetieri (TKC) is a cell phone provider in Turkey. The company also has investments in several of the central Asian republics and other areas formally part of the old Soviet empire. The company's profile states:

"Turkcell Iletisim Hizmetleri A.S. (Turkcell), incorporated on
October 5, 1993, is a provider of mobile services in Turkey. The Company provides mobile voice and data services over its global system for mobile communications network. As of December 31, 2008, Turkcell provided service to its subscribers in 202 countries through commercial
roaming agreements with 607 operators. The Company provides wireless and value-added mobile communications services to subscribers
throughout Turkey. Subscribers can choose between its postpaid and pre-paid services. As of December 31, 2008, Turkcell had approximately 29.5 million pre-paid subscribers and 7.5 million postpaid subscribers.
The Company has investments in Azerbaijan, Georgia, Kazakhstan, Moldova, and also in the Turkish Republic of Northern Cyprus, Ukraine and Belarus. In August 2008, Turkcell announced that it had completed the acquisition of an 80% stake in Belarusian Telecommunications
Network (BEST).

]]> Mon, 18 May 2009 06:24:50 -0400 Ron Sommer

Under the radar. Turkcell Iletisim Hizmetieri (TKC) is a cell phone provider in Turkey. The company also has investments in several of the central Asian republics and other areas formally part of the old Soviet empire. The company's profile states:

"Turkcell Iletisim Hizmetleri A.S. (Turkcell), incorporated on
October 5, 1993, is a provider of mobile services in Turkey. The Company provides mobile voice and data services over its global system for mobile communications network. As of December 31, 2008, Turkcell provided service to its subscribers in 202 countries through commercial
roaming agreements with 607 operators. The Company provides wireless and value-added mobile communications services to subscribers
throughout Turkey. Subscribers can choose between its postpaid and pre-paid services. As of December 31, 2008, Turkcell had approximately 29.5 million pre-paid subscribers and 7.5 million postpaid subscribers.
The Company has investments in Azerbaijan, Georgia, Kazakhstan, Moldova, and also in the Turkish Republic of Northern Cyprus, Ukraine and Belarus. In August 2008, Turkcell announced that it had completed the acquisition of an 80% stake in Belarusian Telecommunications
Network (BEST).


Complete Story »]]> TKC Ron Sommer Why I'm Long Check Point Software Technology http://seekingalpha.com/article/134965-why-i-m-long-check-point-software-technology?source=feed 134965 Why buy Check Point Software Technology (CHKP)? Check Point is the gorilla of pure-play security software. The company is a global leader in cyber security software with products deployed in virtually every major global corporation including all Fortune 100 companies and its technology dominates the global market for perimeter defenses such as firewalls and virtual private networks. The company describes itself as:

Check Point Software Technologies Ltd. (www.checkpoint.com) is the leader in securing the Internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers' dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets.

]]> Mon, 04 May 2009 04:20:33 -0400 Ron Sommer Why buy Check Point Software Technology (CHKP)? Check Point is the gorilla of pure-play security software. The company is a global leader in cyber security software with products deployed in virtually every major global corporation including all Fortune 100 companies and its technology dominates the global market for perimeter defenses such as firewalls and virtual private networks. The company describes itself as:

Check Point Software Technologies Ltd. (www.checkpoint.com) is the leader in securing the Internet. Check Point offers total security solutions featuring a unified gateway, single endpoint agent and single management architecture, customized to fit customers' dynamic business needs. This combination is unique and is a result of our leadership and innovation in the enterprise firewall, personal firewall/endpoint, data security and VPN markets.


Complete Story »]]> CHKP Ron Sommer