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Greece's Parliamentary Election: The More Things Change...
- SYRIZA has won the election by a surprisingly strong margin of victory and is near a majority of seats in Parliament.
- Its options for affecting the type of change feared by investors – a forced debt restructuring and wholesale rollback of austerity measures – are probably limited in the short run.
- As long as new PM Alexis Tsipras avoids incendiary rhetoric as he takes his victory laps, Greek share prices should rise in the weeks ahead.
A Bounce Could Signal A Bottom For Denbury
- Denbury’s share price is down 55.5% since June 30, much worse than the S&P’s 6.6% gain and the S&P Energy Sector’s 18.3% drop.
- The company is cutting its capex budget in half to preserve its financial flexibility and focusing on increasing dividends to shareholders over time.
- The stock is up 36% since its Dec. 16 low which may be an early sign of a bottom.
National Bank Of Greece: Still A Work In Progress
- NBG’s financial performance has improved only slightly in 2014; but the Group has reduced its reliance on Eurosystem loans and strengthened its capital base.
- More significant profit improvement may depend on several factors, such as a pick-up in Greece’s economic growth rate and enactment of reforms to speed up defaulted loan workouts.
- A recovery in NBG’s share price will most likely be driven first by resolution of the political crisis and further signs of gains in the economy and then by improved earnings.
- NBG’s stock has fallen 60% this year and now trades at 90% of tangible book value and 9 times projected 2015 earnings.
Brightcove Third Quarter Update
- The third quarter non-GAAP loss of $0.03 per share was significantly better than management’s guidance of a loss of $0.08 to $0.09 per share.
- Yet, Brightcove showed only slight sequential improvement in its revenues, loss per share and cash flow.
- Investors were relieved that Brightcove’s financial performance did not deteriorate in the third quarter, but the company remains a work in progress.
- With new products and progress in its revamped marketing efforts, Brightcove remains optimistic about its future prospects.
- As this transition period ends, investors will begin to focus more on the company’s sequential performance to assess its progress and growth potential.
Greece Schedules A Parliamentary Election, Shares Plunge
- Greece has scheduled a surprise parliamentary election for next week (Dec. 17) to bring to a head a potential political crisis.
- Given the progress made by the country to date, it should be able to hold back the threat to its economic recovery program from Syriza, the leftist party.
- The Greek stock market fell 12.8% yesterday. Greek banks fell more. This looks like a good buying opportunity.
Consolidated Water Update
- Third quarter earnings improved, due mostly to better weather and increased tourism in the Cayman Islands.
- Water sales growth has been slower than anticipated in Bali Indonesia, but the long-term prospects still look good.
- The Rosarito Mexico project has moved forward, but the company should provide clearer guidance on future project costs and an updated timeline.
- The stock will likely remain range-bound between $10 and $12 until resolution of key issues is in sight.
After The Special Dividend, Iron Mountain Can Deliver A 9% Total Return
- IRM’s conversion to a REIT in 2014 has been a big win for investors. YTD, the stock has delivered a 23% total return.
- Yet, the stock still carries a 5.2% dividend yield, well above the 3.5% average for all equity REITs.
- If the company can achieve its 4% growth objective for adjusted OIBDA, the stock should deliver an annualized total return of 9% (or better).
- Brightcove’s stock fell 38% to $6.38 on July 24, when it reduced its 2014 revenues and earnings outlook. The cut in outlook was modest. Second-quarter results actually exceeded guidance.
- BCOV’s fall was exacerbated by the resignation of its CFO, which raises concerns about hidden accounting or financial problems. Although disclosures should be improved, I found no proof of problems.
- With a recent acquisition and operating losses, BCOV’s cash position has dropped sharply this year. If the cash burn does not end soon, BCOV will need to raise capital.
- According to Frost & Sullivan, BCOV’s core market is expected to double by 2019 (in five years).
- Although BCOV looks expensive by traditional valuation measures, the stock still has upside (to my $15 target), assuming that no problems emerge and the company moves steadily toward profitability.
Crunch Time For UMH
- Despite weak industry conditions, UMH has been acquiring new communities to drive profit growth, in many cases by upgrading properties and sales staff to boost occupancy.
- UMH’s overall occupancy level has improved from 77% at the end of 2011 to 81.7% at mid-year 2014, but gains have been disappointingly slow in the past 18 months.
- With further improvement in the economy and the opening of four home sales centers by yearend, the pace of profit gains should begin to accelerate.
- UMH’s core FFO has averaged about $0.60 per share over the past three years, below the $0.72 per share dividend on its common shares.
- If profit growth accelerates, UMH’s shares have the potential to reach $14-$15. If not and investment property spending requirements remain high, it will have to pare the dividend eventually.
Brightcove 2014 Second Quarter Earnings Preview
- BCOV has fallen back modestly after a 38% gain in eight weeks, probably on profit taking.
- New product introductions should resonate with big media customers and lift revenues within the next few quarters.
- Consensus estimates for the second quarter and management's guidance for 2014 appear to be conservative.
Starwood Waypoint: 50% Upside And A Potential 5% Yield
- In January, Starwood Property Trust joined forces with Waypoint Real Estate Group to form Starwood Waypoint to pursue opportunities in non-performing residential mortgages and the single-family rental market.
- Despite posting losses since its inception, SWAY should see steady increases in occupancy which should bring it to profitability within the next few quarters.
- Based upon earnings growth opportunities within its existing portfolio and from future property acquisitions, SWAY’s stock has 50% upside and a potential 5% dividend yield.
An Overview Of The Single-Family Rental REIT Sector
- Some RE pros question the viability of the single-family rental business, but tight mortgage underwriting standards and low savings rates should sustain rental demand and a role for SFR REITs.
- SFR REITs are boosting profits by fine tuning their operating policies and practices and gaining greater scale in metro markets.
- SFR REIT valuations currently anticipate profit growth, but further gains in occupancy, operating refinements, modest house price appreciation (HPA) and steady new household formations should eventually raise profit outlooks.
Another Step Forward For Electronic Bond Trading
- The SEC will work with FINRA and the MSRB and propose new rules to enhance disclosure and ensure fair dealing in the fixed income markets.
- Price quotes and trading activity for fixed income securities on online trading platforms have improved markedly in the past two years.
- The SEC should take care to ensure that its rule-making does not inadvertently reduce liquidity in the fixed income markets.
Detroit In Chapter 9: Orr Plays Hardball
- Detroit’s bankruptcy filing will likely set a number of precedents with significant implications for the municipal bond market.
- The City has proposed paying unsecured creditors 20 cents on the dollar, even holders of its General Obligation bonds, which have traditionally been viewed as having a priority claim.
- It has also proposed canceling $1.4 billion of Certificates of Participation used in a complex and controversial financing to shore up Detroit’s pension funds in 2005 and 2006.
- Although trading is sparse, prices of unsecured bonds are above levels implied by the City’s proposed recoveries. Some of the difference may be due to the availability of insurance.
- Even though the task is admittedly daunting, if the City is unable to reach an agreement with creditors, it may raise questions about its handling of the bankruptcy process.
Greece: Lots Done, More To Do
- Greece has achieved a primary budget surplus; unit labor costs are down sharply; the banking system has been recapitalized; and GDP is expected to grow in 2014.
- Unemployment is a record 27%. Many structural reforms are on hold. House prices are still falling. Most Greeks are behind on their mortgages. Many Greeks suffer from austerity fatigue.
- Greece’s stock and bond markets have rallied sharply over the past 18 months, but they are probably due for a correction.
- Greek stocks remain well off 2008 highs and are among the cheapest on a P/E basis. Consequently, they still have good long-term upside potential.
- Despite obvious frustrations in negotiations with the troika, Greece and its people should remain committed to its reform initiatives to provide a solid foundation for a sustainable economic recovery.
- Give Brightcove Some Time
- Notes, Observations And Analysis From EEI's Wall Street Briefing
- Consolidated Water: A Speculative Bet On Desalinated Water
TIPS Underperform Treasurys In The 2013 Fourth Quarter
Jan. 18, 2014 • 7 Comments
- The Lowdown On Sky High Corporate Profits
- Booz Allen Hamilton STILL Looks Cheap
- TIPS: Modest Returns In Q3
- Waning Momentum: What Will Lift The Market Going Forward?
- NBG Takes Another Step On The Path To Recovery
- Thinking Through The Normalization Of Interest Rates
- In Detroit's Wake: A Review Of The Muni Bond Landscape, Part 2
- In Detroit's Wake: A Review Of The Muni Bond Landscape, Part 1
- TIPS Get Hammered In Second Quarter
- Sentiment On Greece Reverses: NBG Shares Plunge 86% In 6 Weeks
- Some Thoughts On The Recent Surge In National Bank Of Greece
- After Clearing A Major Hurdle, Greece's Outlook Brightens
- A Closer Look At The Dell LBO