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Stone Fox Capital Advisors is a registered investment advisor founded in 2010. The firm offers portfolio management with a focus on opportunistic stocks providing secular growth trends at an affordable value. An emphasis is placed on fundamental analysis though charts are used for timing entry... More
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  • Lincoln Financial Book Value Soars 20% In 2011
    Lincoln Financial (NYSE:LNC) reported after the close that earnings for Q4'11 were $1 which helped increase the book value 20% for the year. Now try explaining to a non investor why the stock price for Lincoln declined for the year. The company is worth more by every measure, but the stock is worth a lot less.

    Another mind boggler is that the short term earnings picture remains reasonable, even though low interest rates are keeping income artificially low. So not only did Lincoln report huge earnings in 2011, but it also has the potential for higher earnings down the road.

    Speaking of book value, it increased to $48.59. The main increase was due to earnings, but Lincoln also repurchased $575M shares during 2011 reducing the diluted shares by 6%. Anytime a company can buy shares at 50% of book value it provides huge value to shareholders.

    The company also raised the quarterly dividend 60% to $.08 to yield 1.3%. It also repaid $250M of Senior Notes.

    The question still remains what will kick investors into buying the stock. The value is cheap, earnings remain solid, and future will get better with higher interest rates. Investors though just ignore the stock.

    Some other details from the PR:

    Fourth Quarter 2011 Operating Highlights:

    • Consolidated deposits of $5.5 billion
    • Consolidated net flows of $1.6 billion up 21%
    • Total account balances of $160 billion
    • Life Insurance sales of $229 million up 11%
    • Retirement Plan Services net flows of $219 million
    • Group Protection sales of $207 million up 33%

    Full Year 2011 Operating Highlights:
    • Consolidated deposits of $21.6 billion
    • Variable annuity deposits of $8.7 billion up 6%
    • Retirement Plan Services net flows of $0.5 billion versus $(0.3) billion in 2010
    • Life Insurance sales of $0.7 billion up 10%
    • Group Protection loss ratio of 72.9% versus 76.2% in 2010

    The chart formed a nice base in the fall and is the process of breaking out. Just reclaiming the July highs get the stock quickly back to $30.

    Disclosure: Long LNC. Please review the disclaimer page for more details.

    Disclosure: I am long LNC.

    Additional disclosure: Please consult your financial advisor before making any investment decisions.

    Feb 07 5:18 PM | Link | 1 Comment
  • Big Earnings Beat By Radware
    Before the open, leading virtualization provider Radware (NASDAQ:RDWR) reported an earnings beat of roughly 15% reporting $.42 versus estimates of $.37. Revenue was also slightly above estimates.

    Oddly though the stock originally jumped over 5%, but it has been trailing off since the open even with the market up over 1%.

    The company also guided Q1 above estimates with guidance of $.35 compared to $.33 estimates. This guidance likely translates into $.37-.38 when reported.

    Radware remains one of the most under followed tech stocks especially with exposure to the virtual and cloud data centers. This is possibly due to the CEO being non-promotional. The company just takes care of business and each quarter it beats estimates.

    Details from the Press Release:

     

    • Record Annual Revenues of $167.0 Million
    • Record Quarterly Revenues of $45.1 Million
    • Record Quarterly Non-GAAP EPS $0.42
    • Record Quarterly Non-GAAP Operating Margin of 20%
    • "Strong demand for our traditional and ADC virtualization products, in combination with our string of attack mitigation successes that have protected high-profile public and private sector customers, is key to this growth."

    From Briefing.com:
    6:08AM Radware beats by $0.05, beats on revs (RDWR) 31.47 : Reports Q4 (Dec) earnings of $0.42 per share, $0.05 better than the Capital IQ Consensus Estimate of $0.37; revenues rose 15.3% year/year to $45.1 mln vs the $44.33 mln consensus. "Strong demand for our traditional and ADC virtualization products, in combination with our string of attack mitigation successes that have protected high-profile public and private sector customers, is key to this growth."
    Radware remains one of the largest positions in our Opportunistic models. Below details via Market Pulse as of January 27:

    Stone Fox Capital holds an allocation of 7.3% in $RDWR in his Opportunistic Arbitrage Long Only Investment Model

    Stone Fox Capital holds an allocation of 12.9% in $RDWR in his Opportunistic Arbitrage Investment Model

    Disclosure: I am long RDWR.

    Additional disclosure: Please consult your financial advisor before making any investment decisions.

    Tags: RDWR, Technology
    Feb 01 1:03 PM | Link | Comment!
  • Creative Uses Of Apple's Cash Hoard
    As reported last week, Apple (AAPL) now has a cash hoard of over $97B while generating $17.5B in cash flow from operations in Q4 alone. Yes, that is correct. Apple has more cash than most countries have in GDP.

    Most investors want Apple to return the cash via a dividend or major stock buyback. Neither are that appealing to me as a typical investor buys Apple for growth. A 5% dividend yield could easily be swamped by a 10-20% loss in normal markets and maybe something bigger if the iPad5 was to disappoint.

    A stock buyback while seeming cheap with the stock trading at a roughly 10x forward PE, it doesn't provide a lot of value with the company trading at over 5x book value. Besides by the time it gets announced and implemented the stock might soar over $500.

    What I want from management is bold thinking similar to product concepts. Use that cash to provide an investment opportunity that most investors don't have access too in these markets. Use that cash to fund deals in highly opportunistic investments ala what Warren Buffett has done via Berkshire Hathaway (BRK.A, BRK.B). Berkshire is now worth around $200B so these $2-5B deals don't move the needle any more.

    Recall joking back in 2009 that Apple should throw off $5B in cash and create a bank. Now I'm thinking that such a move could've created some good returns for investors. Something that getting a dividend and reinvesting in the market would never generate.

    The next time that Goldman Sachs (GS) needs a $5B bailout at attractive terms, I'd like to see Apple step up. Heck, why not buy a railroad such as Kansas City Southern (KSU) and spin it off to shareholders similar to what Buffett did. For less cash than what Apple will generate in Q1, investors could own that railroad.

    Plenty of opportunities exist where it takes an investment of scale at a minutes notice to get the deal. Something that Apple and very few others around the world could even invest. Below are a few examples of potential opportunities:

    • With natural gas prices hitting 10 year lows, use $5-10B to invest in a major lease holder that falls into financing problems such as possibly Chesapeake Energy (CHK).
    • Sears Holdings (SHLD) continues to face fears of bankruptcy where the potential might exist to buy a ton of real estate from them on the cheap.
    • Another trade on Sears Holdings would be to actually buy the stock if due diligence found plenty of cash existed to avoid bankruptcy. Heck, a sizeable investment in the open market would scramble shorts where a limited float exists.
    • European sovereign debt was ripe for the picking when the Corzine trade at MF Global caused them to go bankrupt last year. George Soros stepped in to buy some of the bonds, but what if Apple had a few billion dollars lined up instead of Soros.

    These of course are just examples of the investment opportunities that might present themselves. Most serious investors will just dismiss this idea as crazy, but I'd rather see something bold that creates value than just group think. Possibly just spin off the cash into an investment vehicle similar to a Blackstone Group (NYSE:BX) where Apple shareholders would get shares with each cash transfer. Or maybe get more creative and give investors the option of a dividend or stock in the new investment vehicle. Even if the money was completely lost it wouldn't be a big deal as investors aren't getting any benefit from the cash now.

    What investors could get though are some incredible investments. At this point, Apple can spin off every dollar of cash flow earned giving such a vehicle a stream of cash to make investments. Almost like a sovereign investment fund getting constant cash from oil earnings. Why not go bold?

    Disclosure: I am long AAPL, GS.

    Additional disclosure: Please consult your financial advisor before making any investment decisions.

    Tags: CHK, KSU, SHLD, BX, AAPL, long-ideas
    Jan 30 11:07 AM | Link | Comment!
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