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GE Offers Investors An Electrifying Dividend Yield
- GE's dividend yield of 3.76% is double the yield on the S&P 500 as well as its peers.
- GE will complete its program to reduce its GE Capital balance sheet when it splits off Synchrony Financial at the end of this year.
- We expect GE to increase its dividend by 10% annually between now and 2018.
- Notable institutional shareholders include Berkshire Hathaway, Fisher Asset Management, Adage Capital Management, Levin Capital and Jabre Capital.
- GE has reduced its outstanding debt by 40% over the last 5 years.
IBM: Undervalued But Underachieving
- IBM is undervalued at 8.7X its expected 2016 operating EPS.
- IBM abandoned its insane Roadmap 2015 program which pushed for breakneck EPS growth at the expense of growing and building its business.
- IBM generated solid revenue growth (16%) from its strategic product, service and solutions offerings.
- IBM has institutional support: Warren Buffett, Prem Watsa and Loomis Sayles' Dan Fuss own IBM shares.
- Hewlett-Packard split itself up and IBM should consider doing the same if it can't revive its growth momentum.
Johnson & Johnson Is Slightly Overvalued, Time To Sell This Drug Maker
- JNJ's share price is overvalued by 8% relative to its fair intrinsic value.
- JNJ's outlook for growth has significantly decelerated, and it is too big to succeed.
- JNJ still has a strong financial position and solid dividend growth.
Bank Of America Is Still Undervalued
- Bank of America has resolved 98% of the balance relating to RMBS Securities that are the subject of litigation or potential litigation, reducing the likelihood of future "non-recurring charges".
- Bank of America is expected to earn $1.44/share in 2015 and $1.70/share in 2016, and its share price is only 9X projected 2016 EPS.
- We expect Bank of America to pass the Federal Reserve's CCAR Stress Test in 2015 and increase cash returned to shareholders due to its strong capital position.
- Warren Buffett's Berkshire Hathaway remains the largest (indirect) stockholder through its investment in Bank of America's preferred stock and warrants.
- Bank of America has been reducing its core operating expenses and we believe there remains potential for Bank of America to reduce its expense base further.
Tupperware Brands: Undue Emphasis On The Past 5 Quarters Creates An Attractive, Low-Risk Opportunity
- Tupperware Brands represents a low risk to the long-term investor, with liquidity and shareholder returns as main points of interest.
- Valuation analysis demonstrates superior management and excellent competitive advantages, but also reveals 42% of the market price reflects a well-justified growth premium and an 18% margin of safety.
- Tupperware’s 5 straight quarters of materially negative EPS surprises resulted in a 36% price drop from its 12/23/2013 high. Management projects Q4-2014 EPS to land between $1.55 and $1.60.
- Wall Street expects worse, anticipating EPS between $1.38 and $1.58. Analysts have pegged Tupperware anywhere from $55 to $76 per share.
- We think the sell-side overweighs the five past quarters and ascribes undue pessimism on the future considering its economic strengths and its long-term growth drivers.
Citigroup Is Still Undervalued, But Management Needs To Execute Better In 2015
- We believe Citigroup's share price is undervalued as it is trading at a 29% discount to its book value.
- We were pleased to see Citigroup announce additional pruning of non-core business operations.
- Citigroup's tangible common equity is well ahead of its peers and we think that helps justify any request to the Fed to return cash to its shareholders.
- We believe that Citigroup will incur significantly less "non-recurring charges for legal and corporate repositioning" in 2015, which will help it meet its $5.35/share EPS projections.
Are Cannabis Related Stocks The Place To Be?
- All three stocks CBDS, CNAB, and CANV have seen a tremendous upward swing in the past week which certainly justifies giving attention towards the industry.
- The young companies still have tremendous growth that could be seen through many of their projects such as CBDS's "Hi" edible that has not yet come out.
- Their involvement with various aspects of the Marijuana industry makes all 3 options more stable bets than other Marijuana-oriented penny stocks that focus on one aspect.
Forward Air Corporation: Fairly Strong And Fairly Valued
- Forward Air is a company with decent fundamentals.
- But its current market price carries a 63% premium for growth, which we think is unreasonable given its historical record.
- Ultimately, we think the business is fairly valued at best and slightly overvalued at worst.
Apple: Very Attractive Value But Based On Growth Expectations Dependent On Continued Innovation
- Apple poses a low to moderate risk to the long-term investor because of its superior fundamental performance.
- But this came at the cost of gargantuan amounts of cash sitting on the sidelines, unused and undirected.
- Aggressive capital investments by Apple’s peer group may someday threaten the company’s competitiveness.
- 47% of Apple’s current price reflects a premium for its future growth, which is justified by the company’s historical record.
- Such growth requires a drive to innovate, and Apple may not be hungry enough.
Micron: This Time Is Not Different
- We believe projected long-term growth rates for Micron and its peers to be too optimistic and we expect growth to slow down after 2016, preventing PE multiple expansion(s).
- SanDisk's recent profit warning shows potential headwinds in the NAND Flash memory space, which represents 28% of Micron's revenues.
- Samsung's new $14.7B chip factory has a high likelihood of disrupting the delicate supply-demand balance in the DRAM industry, which accounts for 68% of Micron's revenues.
- Even if Samsung wasn't building its new chip factory, it has significantly more resources than Micron, which gives it the ability to undercut prices to potentially steal market share.
Berkshire Hathaway Is Still 14% Undervalued And Generates Solid Profit Growth
- Berkshire's share price is 14% undervalued relative to its fair intrinsic value, even after including the impact of a $2B decline in its IBM shares.
- Berkshire's revenue and profit grew by 8.5% in the first nine months of 2014 versus YTD 2013.
- Berkshire rebranded its real estate brokerage brand in order to create a franchise network in order to generate strong potential organic growth in this segment through franchising fee revenues.
- Berkshire generated a 9.29% ROE even though over 60% of its book value is comprised of non-earning assets and low-earning assets such as bonds, cash or goodwill.
- Hedge fund manager and well-known value investor Whitney Tilson still sees value in Berkshire.
AIG: Industry Leading Insurer At 32% Discount To Fair Value
- AIG's share price is trading at a 32% discount to its book value, we believe its fair value is at least its book value.
- AIG has made steady progress deleveraging its balance sheet since the crisis and its equity-to-assets ratio is double its pre-crisis high, which gives it a very conservative balance sheet.
- AIG has steadily been returning capital to its shareholders since 2012.
- We expect AIG to raise its dividend per share by at least 20% next year.
- We think potential value exists if AIG split itself into two companies focused on life insurance, and property/casualty operations rather than remaining together under one corporate conglomerate.
SUPERVALU's Turnaround Is Starting To Take Flight
- SVU is undervalued by 12% relative to its fair intrinsic value per share of $10.88.
- SVU saw improved year-over-year growth rates in its revenues and EBITDA in its most recent quarter.
- We expect Save-A-Lot's operating margin to bottom out this year and stabilize or grow next year.
Lee Enterprises Offers 35% Free Cash Flow Yield And Continued Balance Sheet Deleveraging
- Lee Enterprises offers investors a 35% free cash flow yield, and we expect its share price to reach $20.50 by 2023, due to continuous reductions in its outstanding indebtedness.
- Lee refinanced its debt last year in order to extend its maturities, and we expect the company to retire its remaining debt on or before its 2017-2022 scheduled maturity dates.
- Lee's digital revenue growth of 17% in FY 2014 is well above its newspaper publishing peer competitors.
- The expected absence of non-recurring charges should give investors in the company confidence that it is executing on its transition plan.
- Lee's digital revenue growth enables it to mitigate print revenue declines better than its peers.
Anixter International: Pessimism Fuels An Attractive Contrarian Opportunity
- Overall, Anixter International poses a moderate risk to the long-term investor.
- Relative fundamental performance to AXE’s peer group illustrates its mediocrity.
- Future prospects for AXE’s cash flows and ROICs are neither appealing nor repulsive.
- AXE is presently trading at a 36% discount to intrinsic value.
- Both the prevailing market price and the Wall Street consensus are embedded with excessively pessimistic long-term assumptions in the face of long-term global trends.
Time To Take Profits In Micron
- Micron is seeing soft pricing and production in the DRAM market place, which will result in flat Q2 2015 revenue performance relative to Q2 2014.
- Although Micron has many leading institutional investors holding its shares, David Einhorn and Whitney Tilson have been reducing their stakes since March.
- Value of Micron's unrealized tax is more than offset by premium cost to retire its dilutive convertible bonds.
- Samsung's new $14.7B chip factory may potentially serve to make the supply-demand relationship in the memory chip marketplace less favorable than it has been recently.
Why Investors Should Take A Look At Halliburton: Its Regional Global Positions
- Halliburton remains the largest player in the Completion and Production, and Drilling and Evaluation segments of Oil production in North America generating $4.72 Billion in revenue.
- HAL increases total revenue in North America by 21.72% from Q3 2013 to Q3 2014, while also increasing revenue by 17.53% in the Middle East and Asia from Q3 2013.
- HAL agrees to acquire Baker Hughes in a $34.6 Billion Stock and Cash Transaction expected to close in the second half of 2015.
Mercury General Offers A High Dividend Yield And Potential Dividend Growth
- MCY's dividend yield of 4.4% is well above its property/casualty insurance peers.
- MCY generated solid performance from its California operations and is looking to improve its operations outside of California.
- MCY's share price is trading at a 68% premium to its book value and its adjusted ROE is only 9.09%.
- MCY seeks to reduce its combined underwriting ratio to 95% by 2017, which would increase adjusted pre-tax income by 16.9%.
Are Howard Hughes Shareholders Suffering From Irrational Exuberance?
- Howard Hughes' share price is 32% overvalued relative to its fair intrinsic value based on a sum-of-the-parts model.
- Howard Hughes' rapid growth in its asset base has been through debt financing rather than organic free cash flows from operations.
- Howard Hughes' share price is at a premium relative to its more established real estate peers.
- Howard Hughes is expected to generate strong net operating income growth from 2014-2018 from its Operating Assets division, but this debt-financed growth is reflected in its share price.
- Howard Hughes may potentially consider converting itself into a REIT, or spinning off its income-generating Operating Assets into a REIT over the long term.
Leucadia Is An Undervalued 'Baby Berkshire' Trading At A 20% Discount To Book Value
- Leucadia's share price is at a nearly 20% discount to its book value.
- Leading institutional shareholders such as Fairholme, Soros Fund Management and JANA Partners, as well as a 14% ownership stake by its four largest executive insider shareholders.
- Leucadia's price to book value is at a significant discount relative to its peers.
- Leucadia's management has had a strong record of creating value for its shareholders.
- Leucadia announced plans to dispose of its money-losing futures brokerage business.
Howard Hughes Is Still Overvalued!
- Howard Hughes is trading at a rich valuation of of 2.36X Book Value and 29.9X TTM operating income.
- Howard Hughes's book value closely reflects the market value of its operating assets.
- Investors should not underestimate the impact of oil prices on Howard Hughes's results.
- Projected income growth from Downtown Summerlin property is likely to offset declines in Howard Hughes's MPC Division.
Brighter Days Are Ahead For Bank Of America
- Warren Buffett's Berkshire Hathaway owns 700M equity warrants of Bank of America, which if converted represents 6.6% of Bank of America's outstanding shares.
- Bank of America's share price is still trading at a 17% discount to its book value.
- Bank of America's Projected FY2015 EPS of $1.49 exceeds its combined EPS from 2011 to 2014.
- Bank of America is putting its litigation woes behind it through its numerous charges for litigation.
Citigroup Is Catching Up To Its Peers
- Citigroup's share price is still at a 17% discount to its book value.
- Citigroup has used $5.4B in deferred tax assets since the end of 2012, which reduces its cash tax outlays.
- Citigroup's business unit performance trends are comparable or better than its peers.
- Citigroup has strong institutional investor support.
- Citigroup's tangible common equity is significantly higher than its peers and offers shareholders the potential for dividend boosts and share repurchases.
Brookfield's Infrastructure Partners Offers Consistent Growth In Dividends And Cash Flows
- BIP offers investors a 4.5% dividend yield with 7% expected dividend growth.
- BIP's share price is at a 13.5% discount to its fair intrinsic value.
- Shares in BIP are owned by leading asset managers such as Brookfield Asset Management, Legg Mason, Principal Global Investors and Baron Asset Management.
- Analysts project BIP will grow its FFOs/share by 15% in 2015.
- BIP's disciplined approach to infrastructure investing.
Can Howard Hughes Sustain Its Strong Sales Growth?
- Howard Hughes achieved strong sales growth, which was driven by its Master Planned Communities Division.
- Howard Hughes' shares are held by Bill Ackman and other leading institutional investors.
- Howard Hughes has seen strong growth recently in the asset base of its Strategic Developments Division.
- The decline in the price of oil may provide revenue and profit headwinds at its Greater Houston Area Properties.
- Howard Hughes is trading at a rich valuation (2.6X Book Value and 33X TTM Operating Income).
General Growth Properties' Performance Is Improving, But Still Trails Simon Property Group
- General Growth Properties' operating margin has increased from 25% in 2011 to 36% in 2014.
- The company's largest shareholder is Brookfield, which owns approximately 41% of its shares.
- GGP's dividend has nearly doubled since 2010.
- However, GGP's operating margins and revenue growth is below Simon Property Group during this period.
Fast Growing Reinsurance Firm Managed By David Einhorn
- GLRE is a fast-growing reinsurance institution and its investment general account (float) is managed by David Einhorn.
- GLRE has pruned less profitable reinsurance contracts and learned its lesson from previous underwriting mistakes.
- GLRE's new Insurance Underwriting & Actuarial hires should enable it to continue to improve its Combined Ratio (Profitability from Insurance Underwriting Operations).
SUPERVALU's Sales Are Starting To Show Steady Growth
- SVU's Save-A-Lot Hard Discount Business Achieved Solid Revenue Growth by improving its value proposition to its customers.
- SVU's Traditional Retail Grocery Stores Have Achieved Positive Identical Store Sales Growth for the last three quarters.
- Cerberus and JANA Partners own nearly 30% of SVU.
Apple's iPhone Sales Are Surging While Samsung's Sales Are Sinking
- Notable value investors like Carl Icahn, David Einhorn, Soroban Capital, Adage and Coatue Management collectively own $10B of Apple’s stock.
- Apple’s iPhone continues to generate strong revenues, sales volumes and profits while Samsung’s Galaxy smartphone is losing share to cheap Chinese competitors.
- Revenue gains in FY 2015 from Apple’s new products (Apple Pay, iWatch).
- Apple finally has a competent manager to oversee its Apple Retail division.
- Apple’s willingness to reward its shareholders with dividends and share repurchases will continue to put an implicit floor on its shares.
Mercury General Offers 4.8% Dividend Yield And Improved Financial Performance
- Mercury General has a high dividend yield of 4.8% due to its high dividend payout ratio.
- Mercury General's financial performance was mixed from 2004 to 2013, but showed solid improvement in H1 2014.
- Company founder still owns 34% of Mercury General's stock; the value management firm Royce & Associates also owns shares in Mercury General.
Berkshire Hathaway Is 13% Undervalued
- Berkshire Hathaway is 13% undervalued relative to its fair intrinsic value.
- Berkshire continues to identify new investment opportunities to acquire.
- Whitney Tilson continues to see value in Berkshire.
- Berkshire continues to generate solid organic profit growth from its diverse mix of industrial business units.
Will General Electric's Strategic Reorganization Help Electrify The Company's Performance?
- General Electric's recent strategic reorganizations (Alstom deal, Synchrony Split-Off and potential sale of its Appliances & Lighting division).
- Strong performance from its Aviation, Power & Water and Oil & Gas business units.
- Berkshire still owns 10M shares of GE.
- GE's share price within 7.6% of its 52 week high (which we believe is its fair value).