Seeking Alpha
  • Today - Saturday, September 20, 2014

  • 9:30 AM
    • Nailed badly this summer over worries about its long-term care unit, Genworth (NYSE:GNW) - whose share price about doubled in 2013 - is offering investors another buying opportunity, writes Jonathan Laing in Barron's. Q2 results this year showed a drop in operating profit from LTC to $6M from $46M a year earlier, and surging claim losses has the company reviewing the adequacy of its reserves.
    • The results of the review - and whether the company will need to take a reserve charge - are expected at this quarter's end. A further sting: It was less than a year ago management had done a "deep dive" into LTC reserves and given the "all clear" to analysts.
    • Even a massive and unlikely reserve charge of $1B would only cut Genworth's book value per share just a couple of dollars from the current $31.37 (vs. Friday's closing stock price of $13.19), says Laing. The actual charge, he says, is likely to be closer to an easily covered $200M. He expects the gap to book value to begin closing in the coming years.
    • The company isn't sitting still in LTC either, says Laing, noting premium increases nearly nationwide and the tightening of policy terms - basically eliminating lifetime benefits in favor of maximum benefit periods of 3-5 years. The big issue, of course, are those legacy policies (sold from 1974-2001) where lapse rates have been 1% or less vs. the 5-5% expected, and investment returns of 5.5% are less than 6.75% expected. Genworth will do good to break even on these, but their number should shrink to 123K over the next decade from 331K today based on mortality statistics.
    | 1 Comment
  • 8:25 AM
    • Deutsche Bank analysts say they came away encouraged after hosting a series of one-on-one meetings with top energy companies; despite recent negative sentiment on the group, it paints an optimistic outlook for oil service companies, which see continued strength in the overall spending outlook from customers, even with the move down in commodity prices.
    • Among the firm's top Buy-rated stocks in the group is Schlumberger (NYSE:SLB), down 12.5% since July 1; despite a slowdown from Libya, Iraq and Russia, the DB team likes the outlook for Latin America, with a recent contract win in Brazil in wireline and better pricing in its drilling contract, and eyeing start-up work in Mexico.
    • DB also likes Hercules Offshore (NASDAQ:HERO), which has cratered 63% YTD; the company expects slow going in the Gulf of Mexico until the end of this year’s hurricane season, but opportunities look much brighter in 2015.
    • Rounding out the firm's favorites: BHI, BAS, EXH, FET, PES.
  • Friday, September 19, 2014

  • 6:15 PM
    • With a market cap of $233.9B as of today's close, Alibaba (NYSE:BABA) is the 4th-most valuable tech company on the planet, behind only Apple, Google, and Microsoft. Nonetheless, many on the Street have argued shares are fairly valued or undervalued.
    • Cantor, which started coverage with a Buy and $90 target earlier this week: "We believe that a differentiated pricing model, strong brand, and unmatched scale give Alibaba an unfair competitive advantage relative to peers ... While the stock's not cheap, we believe the company's outsized growth and margin profiles, if sustained, should support higher valuation over time."
    • Wedbush, whose $80 target has already been surpassed, thinks "Chinese e-commerce appears to have room to grow at 30%+ for several years." CRT Capital's $95 target implies a multiple of 26x 2016E EPS, something it considers justified given a 35%+ revenue CAGR is forecast for 2014-2017.
    • On SA, Triton Research observes Alibaba's 2013 marketplace revenue as a % of GMV (3.1%) was a tiny fraction of eBay's (19.3%), leaving plenty of room for growth even if eBay-like monetization isn't feasible in China.
    • Value Record is more cautious, viewing Alibaba's VIE legal structure as a risk and questioning how successful its international expansion plans will be - Baidu and many other Chinese Web names have had a rough time trying to replicate their domestic success.
    • Yahoo (YHOO -2.7%) closed lower, albeit off the day's lows. With shorts having trouble borrowing Alibaba shares, some may have settled for shorting Yahoo instead.
    • Josh Brown thinks Yahoo's pending IPO windfall and large remaining Alibaba stake once more make it a prime target for an activist. "There is absolutely no way, in my opinion, they're going to allow this management team, this board of directors to take $6 billion, do a buyback and then have another free $6 billion in cash to experiment."
  • 3:58 PM
  • 2:49 PM
    • Continental Resources (CLR -1.6%) is not enjoying a rebound from yesterday's big losses, even after various analysts come out in defense.
    • BofA reiterates its Buy rating, and says the selloff is not justified by any of the updated disclosure provided by management; the firm believes CLR is poised for a multi-year period of appreciation and outperformance vs. large-cap U.S. oil peers, and it likes CLR's new oil play in Oklahoma, a state CLR thinks is poised to surpass California and Alaska in oil production.
    • Global Hunter upgrades shares to Buy from Neutral and raises its target to $85 from $77, unmoved by investor concerns pertaining to the quality of the Bakken inventory and rising Bakken well costs (
    | 1 Comment
  • 12:57 PM
    • Golar LNG (GLNG +1.3%) is reiterated with a Buy rating and a higher $110 stock price target, raised from $75, at BofA/Merrill, which says GLNG is benefiting from rising demand for its planned floating liquefied natural gas production units.
    • GLNG recently announced plans to build its first FLNG, and vice chairman Tor Olov Troim noted the first FLNG contract likely would be firmed in October, increasing GLNG's confidence to contract for a second FLNG and setting plans to build 10 in five years.
    • The firm believes demand continues to scale for future FLNG vessels, which will drive bottom line value and support GLNG's desire to maintain its first to market mover advantage in building FLNGs.
    | Comment!
  • Thursday, September 18, 2014

  • 3:48 PM
    • Enbridge Energy Partners (EEP +2.8%) is reiterated with an Outperform rating and a higher stock price target of $42, up from $39, at Credit Suisse after the dropdown of Alberta Clipper to EEP announced yesterday.
    • The firm says the move is consistent with its thesis on EEP that many investors are missing the series of steps management has been taking recently to move EEP from what has been lagging distribution growth to at least average distribution growth in the coming years.
    | Comment!
  • 2:47 PM
    • RBC drops the bull case on Denbury Resources (DNR -1.9%) and Southwestern Energy (SWN -1.1%), downgrading both to Sector Perform from Outperform.
    • The firm thinks DNR’s relative upside is more in-line vs. peers, as “the market will remain more focused on peers that provide higher near-term growth optionality from unconventional oil resource plays.”
    • As for SWN, RBC notes that its core operations are located in the Fayetteville and Marcellus shales, both of which will have restricted production growth in the near-term.
    | Comment!
  • 2:32 PM
    • H.C. Wainwright's Kevin Dede: "We are initiating coverage of Novatel Wireless (NVTL +3.6%) with a Buy rating and setting a conservative $4 price target that we may be raising sooner rather than later."
    • Dede is pleased with Phillip Falcone's recent investment in Novatel, and notesthe deal requires "interim" CEO Alex Mashinsky to stay on board for at least 3 years. He's also upbeat about the long-term potential of the M2M modem market.
    • Peer Sierra Wireless (SWIR +2.3%) is also having a good day.
    | 1 Comment
  • 12:32 PM
    • A Chinese media report states 21Vianet's (VNET -3.9%) $175M debt financing deal has been temporarily suspended due to allegations recently levied by SA author Trinity Research. (h/t GEOInvesting).
    • Yesterday, Trinity asserted 21Vianet's co-founders directly and indirectly control 16 related parties that haven't been disclosed to the SEC. It also pointed out much of the Chinese data center owner's management team is linked to the related parties.
    • For its part, 21Vianet dismisses Trinity's allegations as "baseless," and claims it's fully meeting SEC disclosure requirements.
  • 11:26 AM
    • More on Goldman Sachs' downgrade of Peabody Energy (BTU -5.3%): The firm thinks coal prices are not yet close to the bottom, and it sees metallurgical coal falling as low as $120/metric ton during Q4 - bad news for all coal miners, but especially so for BTU and Alpha Natural Resources (ANR -4.1%).
    • Goldman says it is focusing on three themes into year-end 2014: Avoid met coal stocks including BTU and ANR, given their high leverage and low-to-negative free cash flow; own sum-of-the-parts winners, reiterating its Buy ratings on SunCoke (SXC +1.9%) and Consol Energy (CNX -2%); prefer stronger balance sheets including SXC and CNX over weaker ones such as BTU and ANR.
    • ETF: KOL
  • 10:21 AM
    • Coal names are broadly lower after Goldman Sachs downgrades Peabody Energy (BTU -5.1%) to Sell from Neutral and cuts its stock price target to $13 from $15, believing lower coal prices will hurt BTU's margins.
    • WLT -7.1%, ACI -4.1%, ANR -4.1%, CNX -1.5%, CLD -1.4%, WLB -0.9%, OXF flat.
  • 9:50 AM
    • ArcelorMittal (MT +1.5%) is upgraded to Buy from Neutral with a $17.50 price target at BofA/Merrill, which cites margin upside.
    • The firm's positive outlook on MT is based on the belief that Europe steel prices have troughed and will rise into Q4, steel margins are expanding with steel prices having proved more resilient than raw materials, and that iron ore will not prove a headwind for earnings from here.
    | Comment!
  • Wednesday, September 17, 2014

  • 7:07 PM
    • Offshore drilling stocks already have dropped 15%-20% since late June, which Societe Generale says likely has priced in much of the risk from a further deterioration in fundamentals, but that doesn't stop the firm from downgrading and/or price cutting several stocks in the group.
    • The firm downgrades Noble Corp. (NYSE:NE) to Hold from Buy with a $27 target price, down from $35, cuts Ensco (NYSE:ESV) to Sell from Hold with a $44 price target, off from $52, and slashes Rowan (NYSE:RDC) to Hold from Buy with a $31 target, from $39.
    • While adopting a neutral rather than outright bearish stance on the group, the firm sees limited prospects for a near-term rebound in offshore drilling stocks as a result of worsening conditions, and believes offshore drilling could remain the most out of favor oil services subsector for several more quarters.
  • 3:56 PM
    • CARBO Ceramics (CRR -4.9%) is sharply lower after Iberia cut its price target for CRR shares to $85 from $108, as well as 2014 earnings estimates, citing lower expected ceramic sales volumes due to bad weather and delays to the pad drilling program.
    • Iberia says it is concerned the issues may drag into Q4 and 2015, keeping an Underperform rating on the shares.
    • Elsewhere, HCLP -1.8%, SLCA +1.3%.
    | 1 Comment
  • 2:32 PM
    • Investors have been lulled by a lack of volatility, but October is on the way, reminds Goldman, and it's time to buy options (volatility) on a number of companies where the market has yet to price in event risk.
    • "On average since 1928, October realized volatility has been 19 vs 15 for all other months," say the Goldman team of John Marshall and Katherine Fogertey. "In recent years, October volatility has been even higher and even more of a standout."
    • Bristol-Myers Squibb (NYSE:BMY), Dish Network (NASDAQ:DISH), Intel (NASDAQ:INTC), Ford (NYSE:F), J.C. Penney (NYSE:JCP), and Pioneer Natural Resources (NYSE:PXD) are all names, they say, that have key events in October for which the options market has not priced in elevated volatility.
  • 10:33 AM
    • Bill Barrett (BBG +2.8%) is upgraded to Buy from Neutral with a $28 price target, up from $24, at Mizuho following the recent transactions which complete BBG's transition to a Rockies oil producer while strengthening its balance sheet.
    • Mizuho likes the transactions, whose value totaled $757M and brought in $568M of cash proceeds that BBG will use to pay down its $280M revolving credit facility.
    • Lower leverage, a leaner and more attractive portfolio, and improved growth trajectory should generate multiple expansion, according to the firm, which believes valuation is supportive at these levels and sees upside to NAV from downspacing and longer laterals in the DJ Basin.
    | Comment!
  • Tuesday, September 16, 2014

  • 3:57 PM
    • Ocean shipping of dry bulk commodities and oil will nearly double earnings capacity during the next several years while the smaller container ship industry will tread water, Deutsche Bank says.
    • The firm believes the industry is "on the cusp of entering a new era of prosperity," driven by improved supply/demand dynamics, increased fleet utilization and abundant capital to fund profitable growth.
    • On average, DB forecasts a near doubling of earnings power across its coverage universe by 2016 vs. 2013, led by shippers in the Dry Bulk and Oil trades.
    • Initiated with Buy ratings: TNK +9.8%, CPLP +2.5%, DSX +2.8%, DRYS +5.5%, DLNG +2.4%, NNA +2.1%, SALT +0.8%, SSW +1.3%, GASS +3.3%.
    • Started at Hold: TK +1.2%, NMM +0.3%, FRO +3.3%, TGH -0.6%.
  • 3:31 PM
    • FMC Tech (FTI -0.8%) is downgraded to Market Perform from Outperform which a $58 price target, down from $68, at FBR Capital, which cuts estimates and price targets for several subsea rig stocks.
    • FTI's subsea processing effort on the boosting side may be struggling competitively more than anticipated, FBR says, where the company has not booked a single order since commercially entering the niche in 2012 even though it has placed several bids, and rival OneSubsea has won multiple awards.
    • For the subsea sector, the firm still expects net growth and a recovery inflection by H1 2016 but now at a slower pace, as it cuts its five-year compound average growth rate through 2018 to 4% from 7%; price targets also are cut for Dril-Quip (DRQ -0.7%) to $120 from $137 and Frank's International (FI -1.2%)to $24 from $28.
    | Comment!
  • 12:52 PM
    • Occidental Petroleum (OXY +0.8%) is downgraded to Equal Weight from Overweight with a $109 price target, down from $117, at Barclays, which believes any restructuring may disappoint.
    • The firm says OXY's MENA strategy has been difficult to implement; expected spinoffs and asset sales will leave OXY with a concentrated Permian Basin position along with a diverse MENA portfolio as well as chemicals, midstream and Latin American assets.
    • Barclays also believes OXY has been slower than peers to begin moving towards unconventional drilling opportunities, which will be reflected in at best a peer average multiple.
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