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Stephen Simpson, CFA

 
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  • Xenoport's Path Is Long, But The Potential Is There
       • Thu, Apr. 17 BIIB, ALKS, XNPT 1 Comment

    Summary

    • XenoPort appears to be taking a longer but clearer regulatory path for '829 in multiple sclerosis.
    • Testing '829 in psoriasis is a valid approach for generating data germane to Phase III MS studies and could put a psoriasis indication into play.
    • XenoPort is likely funded through at least the end of 2015, and the shares don't fully reflect the risk-adjusted sales potential of '829.
  • After A Rough Patch, Tidewater Looks A Lot More Interesting
       • Thu, Apr. 17 BOUBF, OII, GLF Comment!

    Summary

    • Tidewater has been punished for seasonality in the North Sea and pulling some drydocking activities into fiscal 2014.
    • Tidewater remains in a good position to leverage growing offshore activity with its very large and modern offshore vessel fleet.
    • An expansion into ROVs is risky and outside the company's core ops, but the initial investment is pretty modest.
  • Unit Corp. Still Not Getting Its Full Due
       • Thu, Apr. 17 HP, PTEN, LINE 2 Comments

    Summary

    • Unit's hydrocarbon production has turned more towards liquids and has become more profitable.
    • Unit's land rigs are significantly under-utilized but don't compare so well with the top players in the space.
    • Unit offers good upside with its E&P business and the shares continue to trade at a "conglomerate" discount.
  • Frustrating To Value, Bank Of The Ozarks Keeps Growing
       • Wed, Apr. 16 OZRK 4 Comments

    Summary

    • Bank of the Ozarks continues to leverage its complex real estate lending expertise to drive above-average loan growth in a competitive market.
    • Asset acquisitions are a good use of a highly-valued stock.
    • Expanding leasing operations and growing lending activity in new markets can support above-average growth for years.
  • Even After A Little Rally, Credicorp Could Have More Headroom
       • Wed, Apr. 16 BNS, BBVA, BAP Comment!

    Summary

    • Credicorp has better than one-third share in a country that is seriously under-banked.
    • Cost control is a tradeoff between maintaining an accessible branch network and maximizing near-term profits.
    • Credicorp has a balanced loan book and the acquisition of Mibanco will significantly expand its micro-lending presence.
  • WEX Still Has Good Growth Prospects, But A Fair Valuation
       • Wed, Apr. 16 FLT, WEX Comment!

    Summary

    • WEX still has a large, under-penetrated global market to address with its fleet card business.
    • Virtual cards are growing well, and WEX has emerged as a leading player.
    • Valuation is still demanding, as high teens growth appears to be factored into today's price.
  • XL Group Plc Is Over-Reserved, But Not That Undervalued
       • Wed, Apr. 16 ACE, ACGL, AIG Comment!

    Summary

    • XL Group is over-reserved and over-capitalized, but that actually weighs on reported results.
    • The nature of XL Group's underwriting demands higher-than-average reserves, but generates below-average premiums relative to capital.
    • Management is trying to change the business mix, but the valuation today seems pretty fair.
  • Orchids Paper Products A Paper Tiger, But In A Good Way
       • Tue, Apr. 15 TIS 11 Comments

    Summary

    • Orchids continues to outgrow the fast-growing private label paper products market.
    • Additional capacity in towels and tissues should accelerate the move up-market.
    • Private label offerings are a win-win for Orchids and its retail customers, suggesting meaningful long-term growth potential.
  • Cal Dive Still Waiting For That Offshore Recovery
       • Tue, Apr. 15 OII, TKPPY, TTI 33 Comments

    Summary

    • Cal Dive's backlog is at a multiyear high and utilization levels are low, suggesting meaningful margin leverage potential.
    • There is a real risk that business migrates away from Cal Dive's established areas of expertise.
    • Relatively low coverage, a high short interest ratio, and a relatively undemanding valuation could propel the shares on good news.
  • More Positive News For Lexicon, But Not The Big Announcement
       • Tue, Apr. 15 LXRX 4 Comments

    Summary

    • Co-administration of LX4211 led to a nearly one-third reduction in mealtime insulin for Type 1 diabetics.
    • Although there was no reduction in basal insulin use, the LX4211 group saw better glucose control, lower HbA1c, and weight loss.
    • Partnering LX4211 is still management's top priority but independent development in Type 1 diabetes is at least an option.
  • Titan Machinery Needs More Than Short Covering
       • Tue, Apr. 15 DE, CNHI, TITN 1 Comment

    Summary

    • A large short position likely had a lot to do with Titan's big run after earnings.
    • Ag sales are weak, and 2014 could be a challenging year for the major OEMs.
    • Reducing costs in the construction business is a smart move, and a new warranty policy from CNH could drive better growth in the coming years.
  • PTC Therapeutics Looks Like A High-Risk Play On Rare Diseases
       • Fri, Apr. 11 ISIS, PTCT 4 Comments

    Summary

    • Lead drug ataluren could potentially address a meaningful number of genetic diseases.
    • Both of ataluren's lead indications, Duchenne muscular dystrophy and cystic fibrosis, saw prior trials failure to achieve the primary endpoint.
    • Even 50% penetration of these markets would be worth almost $1.5 billion in revenue, but the market is very down on the odds of success.
  • Impala Platinum Seeing Short-Term Pain For Uncertain Gains
       • Fri, Apr. 11 AGPPY, LNMIY, AQPTY 3 Comments

    Summary

    • Impala is dealing with higher wage demands from striking South African miners and seemingly neverending demands from the government of Zimbabwe.
    • Impala's underlying reserve and cost base are both relatively quite attractive.
    • Impala can act as a consolidator and technology adopter, but first it has to resolve outstanding labor issues in SA and production/legal issues in Zimbabwe.
  • AngioDynamics Delivering The Growth, Margins Next?
       • Fri, Apr. 11 BCR, TFX, BIAJF 1 Comment

    Summary

    • Good acceptance of new products and easier comps has led to meaningful revenue growth improvements at AngioDynamics.
    • Tip location is likely key to maintaining PICC growth and better leveraging BioFlo.
    • Improved margins will go a long way toward unlocking more value from this business.
  • MSC Industrial Continues To See An Early Cyclical Recovery
       • Thu, Apr. 10 FAST, GWW, HDS 8 Comments

    Summary

    • MSC Industrial's sales beat the weather-inspired bear whispers.
    • Manufacturing and industrial activity levels continue to point to an emerging recovery.
    • MSC Industrial has considerable self-help margin improvement potential, but conventional valuation multiples are starting to run a little high.
  • Quality Doesn't Come Dirt-Cheap With Franco-Nevada
       • Thu, Apr. 10 RGLD, FNV 5 Comments

    Summary

    • Franco-Nevada uses attractively-priced capital to fund multiple gold mining projects, generating diversified streams of high-margin revenue.
    • The structure of Franco-Nevada's business allows investors to gain leverage to gold prices and a dividend.
    • Cobre Panama represents over 20% of NAV, but production will not start for another three or four years.
  • Summer Infant Looking To Get Smaller, Smarter, And More Profitable
       • Thu, Apr. 10 NWL, DIIBF, SUMR 14 Comments

    Summary

    • Summer Infant's process of eliminating less profitable SKUs is leading to major declines in revenue.
    • Summer Infant's baby monitors are very competitive, but the company may struggle to keep or gain shelf-space in other segments of the baby/juvenile market.
    • Improving birthrates should add some underlying market growth in the coming years.
  • EnerNOC Working, But The Outlook Still Cloudy
       • Thu, Apr. 10 NRG, ENOC 2 Comments

    Summary

    • EnerNOC is expanding its overseas demand response opportunities while waiting for the U.S. markets to develop.
    • Software and services for enterprise-level energy planning and analysis represent a multibillion-dollar opportunity still in its early years.
    • Regulatory changes in EnerNOC's biggest market could mean greater long-term stability at the cost of short-term uncertainty.
  • Has Universal Stainless & Alloy Products Bottomed?
       • Wed, Apr. 9 ATI, HAYN, CRS Comment!

    Summary

    • Weak volumes, pricing, and mix resulted in a very weak fourth quarter.
    • USAP saw significant order growth in Q4, and management remains committed to improving the mix of high-margin specialty alloys.
    • The end of inventory destocking should lead to higher orders from the aerospace market.
  • Parker Drilling Starting Slow, But On A Better Path
       • Wed, Apr. 9 TDGCF, WFT, PKD 2 Comments

    Summary

    • Poor weather seems to be hurting utilization for the first quarter, leading to lower EBITDA expectations.
    • Parker's most recent addition to its barge fleet is getting a 25% premium on dayrates.
    • Leveraging increasing offshore activity and better margins in the international business should give the rental tools business a one-two punch.
  • Vistaprint Still Consistently Inconsistent
       • Wed, Apr. 9 SFLY, CTCT, INTU Comment!

    Summary

    • Vistaprint's decision to focus on less price-sensitive customers is improving margins, but at the cost of volume and new customers.
    • Vistaprint continues to build an attractive printing-based business, but its other offerings and efforts seem more haphazard and less competitive.
    • Sentiment can swing widely on these shares, making it attractive to traders but more problematic for investors.
  • Marlin's Retreat Starting To Get Interesting
       • Wed, Apr. 9 MRLN 8 Comments

    Summary

    • Leasing activity is picking up, with industry new leasing activity up about 8% YTD.
    • Marlin's expanding its sales force and targeting higher lease amounts to offset spread pressure.
    • Access to bank deposit funding gives the company a cost of funds edge, and the over-capitalized balance sheet provides ample room for growth.
  • A Sharp Pullback In Celldex Could Be A Window Of Opportunity
       • Tue, Apr. 8 RHHBY, ALXN, PFE 8 Comments

    Summary

    • Celldex has pulled back sharply as investors flee the once-hot biotech sector.
    • Incremental data from rindopepimut has suggested real biological activity in glioblastoma.
    • Multiple shots on goal in oncology immunotherapy give the company broad exposure to a multibillion-dollar emerging oncology therapeutic area.
  • Still Waiting For Tenneco's Margin And CV Leverage
       • Tue, Apr. 8 FURCF, CMI, TEN Comment!

    Summary

    • Worries about antitrust investigations have created a window of opportunity.
    • Tenneco is among the global leaders in emissions control, but under-represented in commercial vehicle markets.
    • Alternative vehicle fuels and technologies represent a threat, but are counterbalanced by tougher emissions regulation and margin improvement potential.
  • Some Of PICO Holdings' Value Finally Peeking Through
       • Tue, Apr. 8 UCP, PICO 7 Comments

    Summary

    • Water rights values have stabilized, but need a stronger housing market to start moving higher.
    • PICO's UCP homebuilding business is transitioning towards becoming a more active builder.
    • Canola crush margins have dramatically improved, and that should boost agribusiness profits.
  • In A Shaky Biotech Market, Alnylam's Prospects Are Getting Stronger
       • Tue, Apr. 8 ISIS, SNY, TKMR 32 Comments

    Summary

    • Alnylam has assembled a collection of clinical candidates that offer multiple shots on goal with sales potential of $1B or more.
    • Alnylam's partnership with Sanofi adds marketing power, development funding, and capital.
    • Having multiple potential billion-dollar drugs targeting the liver is good, but developing delivery technology with broader utility would be a major win.
  • Cascade Microtech Still Waiting On The Semi Rebound
       • Tue, Apr. 8 FORM, CSCD Comment!

    Summary

    • Sluggish 2013 results were capped with a record level of bookings in the fourth quarter.
    • Cascade's focus on more complex probing markets should serve it well as fabs ramp up production of more complex next-gen chips.
    • On the basis of its margins and peer-group comps, Cascade's EV/revenue multiple should be 25% higher than it is.
  • RPC's Winter Of Discontent Has Passed
       • Sat, Apr. 5 BAS, HAL, BHI 1 Comment

    Summary

    • Contract expirations and surplus capacity has led to tough pricing and utilization in pressure pumping.
    • Pricing seems to be turning around in the Permian, where RPC has close to half of its fleet.
    • A meaningful rally in energy services has pushed up valuations, but RPC seems more reasonably priced on a relative basis.
  • FMC Corp's Exceptional Performance Comes At A Cost
       • Sat, Apr. 5 SYT, MON, ROC 1 Comment

    Summary

    • FMC has delivered incredible growth from its ag chemicals business, where its variable cost structure and low R&D intensity support strong margins.
    • Leading positions in several health and nutrition markets create a valuable second driver of growth.
    • Spinning off the Minerals business will allow this business to once again invest in growth and expansion projects.
  • Global Payments' Transformation Continues
       • Sat, Apr. 5 GPN Comment!

    Summary

    • Fiscal third quarter revenue and margins were okay, but guidance was a little weak relative to expectations.
    • Global Payments' shift from ISOs to direct sales offers better long-term margins, but short-term growth disruptions.
    • Integrated payment services can capture more high-margin revenue from clients while making those relationships stickier.
  • Should Investors Buy PMC-Sierra Ahead Of Big Product Ramps?
       • Sat, Apr. 5 PMCS Comment!

    Summary

    • PMC-Sierra is looking to new storage products to drive significant incremental revenue growth.
    • OTN and Mobile are more challenging markets where PMC-Sierra needs a bigger revenue base to drive better profits.
    • The shares don't look cheap today, but nobody seems to be giving full credit to management's projections.
  • The Wait Goes On At PCTEL
       • Fri, Apr. 4 LAIRY, PCTI Comment!

    Summary

    • Revenue growth is stalled as sluggish antenna revenue offsets growth in RF Solutions.
    • Positive train control, precision agriculture, and advanced automation represent large potential addressable markets.
    • PCTEL has to reignite revenue growth to attract more interest, but the valuation looks attractive if that growth materializes.