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  • GE Offers Investors An Electrifying Dividend Yield
    Sun, Jan. 25 GE 15 Comments

    Summary

    • 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
    Fri, Jan. 23 IBM 16 Comments

    Summary

    • 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
    Thu, Jan. 22 JNJ 65 Comments

    Summary

    • 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
    Wed, Jan. 21 BAC 26 Comments

    Summary

    • 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
    Wed, Jan. 21 TUP 9 Comments

    Summary

    • 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
    Wed, Jan. 21 C Comment!

    Summary

    • 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?
    Mon, Jan. 19 CBDS, CNAB, CANV 20 Comments

    Summary

    • 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
    Sat, Jan. 17 FWRD Comment!

    Summary

    • 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
    Fri, Jan. 16 AAPL 74 Comments

    Summary

    • 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
    Fri, Jan. 16 MU 92 Comments

    Summary

    • 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
    Wed, Jan. 14 BRK.B, BRK.A 8 Comments

    Summary

    • 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
    Tue, Jan. 13 AIG 13 Comments

    Summary

    • 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
    Tue, Jan. 13 SVU 2 Comments

    Summary

    • 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
       • Thu, Jan. 8 LEE 8 Comments

    Summary

    • 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
    Editors' Pick • Thu, Jan. 8 AXE Comment!

    Summary

    • 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
    Wed, Jan. 7 MU 52 Comments

    Summary

    • 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
    Tue, Jan. 6 HAL 31 Comments

    Summary

    • 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
    Dec. 31, 2014 MCY 6 Comments

    Summary

    • 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?
    Editors' Pick • Dec. 31, 2014 HHC 14 Comments

    Summary

    • 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
    Dec. 31, 2014 LUK 28 Comments

    Summary

    • 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!
       • Dec. 13, 2014 HHC 20 Comments

    Summary

    • 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
    Dec. 12, 2014 BAC 32 Comments

    Summary

    • 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
    Dec. 10, 2014 C 7 Comments

    Summary

    • 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
    Dec. 5, 2014 BIP 4 Comments

    Summary

    • 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?
    Dec. 3, 2014 HHC 6 Comments

    Summary

    • 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
    Nov. 27, 2014 GGP, SPG 3 Comments

    Summary

    • 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
    Editors' Pick • Nov. 20, 2014 GLRE 1 Comment

    Summary

    • 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
    Nov. 3, 2014 SVU 1 Comment

    Summary

    • 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
    Oct. 21, 2014 AAPL 56 Comments

    Summary

    • 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
    Aug. 29, 2014 MCY 2 Comments

    Summary

    • 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
    Editors' Pick • Aug. 22, 2014 BRK.B, BRK.A 23 Comments

    Summary

    • 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?
    Jul. 24, 2014 GE 25 Comments

    Summary

    • 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).