MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Today - Friday, May 17, 2013
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3:58 PM TC Pipelines (TCP +2.6%) is upgraded to Buy from Neutral with a $51 price target at BAML on plans to acquire additional equity interests in Gas Transmission Northwest and Bison. The firm views TCP's recently announced drop-down as alleviating most concerns about uncertainty around the ability to re-contract pipeline capacity on attractive terms and below peer-average distribution growth. Comment!
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3:41 PM Deutsche Bank raises its price target on Buy-rated Access Midstream Partners (ACMP +1.4%) to $57 from $46 after the MLP's analyst day introduced guidance for 20% EBITDA growth into 2015. A peak in organic capex this year, a 1.4x distribution coverage ratio, and no need for equity issuance for three years show a potential for distribution growth to top expectations. Comment!
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1:48 PM Real Goods Solar (RSOL +105.9%) skyrockets after SA contributor Andy Zelenak makes a bull case, citing the potential of the company's partnership with homebuilder Lennar (LEN) and its PowerOn solar modules. Zelenak notes the Lennar deal allows home buyers to install panels "with no money down at a guaranteed 20% lower-than-grid cost," and that PowerOn modules sell for just $2.33/watt, well below the national average of $4/watt. He also considers its valuation reasonable relative to that of high-flyers such as SolarCity. 2 Comments
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12:43 PM Tetra Technologies (TTI +4.6%) is upgraded to Outperform with a $12 target price, up from $10, at RBC Capital, which says TTI appears to be in the early phases of a transformation that will help boost free cash flow generation. The firm believes the current share price offers an attractive entry point to take advantage of TTI's repositioning strategy. Comment!
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11:38 AM Jim Cramer chooses MLPs Kinder Morgan Partners (KMP) and Enterprise Products Partners (EPD) as antidotes to potential froth in the broader stock market. Cramer likes KMP's strategic acquisitions during recent years and is bullish on its outlook. On EPD, Cramer praises the management team and likes its track record of executing growth projects and integrating acquisitions. 15 Comments
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10:58 AM Vertex Energy (VTNR +3.1%) is started with a Buy rating and $4 price target at Wunderlich, which cites flexibility in responding to price/supply fluctuations across the collection/resale markets for used oil. In addition to economies of scale and low capital requirement, the spread between VTNR's feedstock and its end products are more highly correlated than fully re-refined Group II base lube oils, the firm says. Comment!
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10:16 AM Imperial Holdings (IFT +0.6%) has run more than 50% in a month, but that's just the "hard money," says SA Pro's Whopper Investments. The "easy money" is still out there as all substantial risk has been taken off the table, leaving a company trading below liquidation value. Chairman Phil Goldstein last year believed intrinsic value to be at least $8/share, but warned on risks of shareholder lawsuits, an SEC investigation, not-yet-filed audited statements, and the ability to hold onto its life insurance policies. "Those risks are now behind the company," says Whopper. Comment!
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9:48 AM Laredo Petroleum (LPI +4.2%) is started with a Buy rating and $23 target price at Topeka Capital, which thinks the market is undervaluing its Anadarko Basin assets: "The story may require patience to get the balance sheet in shape and asset value to be realized, but we believe this could evolve sooner rather than later." Comment!
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Thursday, May 16, 2013
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4:59 PM Cabot Oil & Gas (COG) is upgraded to Overweight at Simmons, which calls it one of the premier, low-cost producers in the Marcellus shale whose production should grow 40% per year for the next three years. COG is expected to generate nearly $400M in free cash flow next year, rare for an E&P company and “indicative of a high quality company with top tier assets,” the firm says. Comment!
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2:58 PM Red-hot ADA-ES (ADES +6.4%) gets even hotter as new SA author Nick Toor says it's a matter of when, not if, the company's refined coal operation (a JV with Goldman Sachs as minority partner) is able to monetize its tax assets. Assigning zero value to the rest of the company, Toor believes there's another 70% of upside over the next 12 months. Comment!
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12:33 PM Diamondback Energy (FANG +3.2%) is raised to Buy from Hold with a $35 target price (from $25) at Wunderlich, which believes strong results from 13 Wolfcamp B-targeted horizontal wells (11 operated) shows the operational expertise, asset strength and horizontal potential for FANG, while the recent equity offering puts it in a position to fund and accelerate its growth. Comment!
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11:39 AM Rosetta Resources (ROSE +3.5%) is upgraded to Outperform with a $63-$67 price target, up from $52-$56, at Wells Fargo, which likes the direction the company is headed. Concerns about inventory and long-term production growth visibility have been effectively removed thanks to the Permian acquisition, and with financing of the transaction addressed, the firm finds shares attractively priced. Comment!
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10:47 AM Chesapeake Energy (CHK -2.6%) is downgraded to Neutral from Overweight at J.P. Morgan, which cites valuation, a lack of visible catalysts and a "perpetual funding gap" that could total $9.3B by 2015. The firm believes planned asset sales will help CHK fund its cash outspend in 2013 but will need to take on debt in 2014-15. Comment!
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9:40 AM Barrick Gold (ABX -3.2%) is downgraded to Underperform from Neutral with an $18 price target (from $21.50) at Macquarie, which views ABX as a mature company with few opportunities to grow and high debt. The firm calls ABX's recent amendment to its Dominican Republic mine contract a dangerous precedent. 4 Comments
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9:34 AM AMD (AMD -12.9%) opens sharply lower on a downgrade to Sell from Goldman, which doesn't see the chipmaker's giant spring rally as justified. "As has been the case with many of the other rallies in AMD, which have all faded, ultimately, the numbers do not justify the move in the stock ... we expect continued disappointing results in the PC segment to mitigate the impact of increased revenue from gaming." Goldman upgraded AMD to Neutral last September, when shares were at $3.47. 4 Comments
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7:50 AM Those now kicking it in their new beachside homes courtesy of buying into Altisource Asset Management (AAMC.OB) when it was spun off from ASPS late last year (it's up 20-fold since), might be interested in the potential spinoff of Solutionstar from Nationstar Mortgage (NSM). Management won't confirm it because they can't, says FBR's Paul Miller, but he has no doubt they're actively discussing it. ASPS is itself a spinoff - from Ocwen (OCN) in 2009, and up 500% since. 1 Comment
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Wednesday, May 15, 2013
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4:53 PM Ned Davis Research finds MLPs in a familiar bind: They look rich by historical standards but not relative to income investing alternatives. Judging MLPs just by distributable cash flow, their 6.85% average DCF yield is well below their long-term 9.2% median, which would make MLPs “dramatically overvalued." NDR's favorites on a pullback: ETP, OKS, EEP, EPB, ACMP. 9 Comments
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3:30 PM Golden Star Resources (GSS -7.8%) is downgraded to Underperform with a $0.50 target price (from $1.50) at BMO, which sees news flow bringing further production curtailments and cost cutting. GSS plans to issue a revised outlook at a later date, but the firm sees limited options at the Bogoso mine in Ghana, with refractory operations remaining unprofitable and sourcing additional oxide ore requiring significant expense. 1 Comment
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3:22 PM When looking to invest in drillers, Sterne Agee's Tim Rezvan likes companies that can earn positive results at $80 oil and are achieving traction on expense reductions. His favorites are Gulfport Energy (GPOR) for its exposure to the Utica shale and coming steep production ramp, and Energen (EGN) after receiving little share price reward for a subsidiary that could be attractive as a spinout. Comment!
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