Seeking Alpha
  • Today - Friday, October 31, 2014

  • 5:29 AM
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  • Wednesday, October 29, 2014

  • 1:43 PM
    • Fed purchases of mortgage-backed securities are ending today, but reinvestments are likely to keep a firm bid in the market, says Deutsche's MBS team. The "real risk" to the MBS market won't come until the Fed ends reinvestments - early 2016 at the soonest, and maybe not until 2017.
    • QE's end, says the team, leaves the Fed with $1.7T in MBS holdings and private investors with just $3.5T. The Fed's massive holdings - 1/3 of the universal amount, but 1/2 of dollar duration - keep a source of volatility out of the market.
    • The end of the Fed as a net buyer will be about the first time since the early 1990s when MBS haven't been getting a bid from either the GSEs, Treasury, or Fed.
    • ETFs" REM, MORT, MORL
    • Names of interest: Annaly (NLY -1.6%), American Capital Agency (AGNC -2.5%), Armour (ARR -1.2%), Hatteras (HTS -1.6%), CYS Investments (CYS -1.7%)
    | 7 Comments
  • 12:58 PM
    • PG&E (PCG +2.9%) is up nicely after Deutsche Bank upgrades shares to Buy from Hold and raises its stock price target to $52 from $49.50 following better than expected Q3 earnings.
    • DB had been cautious on PCG in the wake of continued legal and regulatory San Bruno-related headwinds and a lack of compellin valuation, but the firm now sees forward earnings power up ~$0.15 from prior assumptions following an improved rate base and outlook disclosures on yesterday's earnings call.
    • The firm see an attractive re-entry point and a decent value case for PCG after lagging an increasingly pricey regulated utility peer group.
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  • 5:47 AM
    • Compass Point analyst Ken Billingsley went to Buy on the stock back on May 5. His price target remains $52.
    • White Elm Capital recently said AFSI could approach $100 over the coming three years (implies almost 100% upside), noting CEO Barry Zyskind has "significant skin in the game."
    • Zyskind owns 10.3% of of AFSI, worth about $400M.
    • AFSI has been on a tear since Sept. 26, with shares gaining 38%.
    • AFSI reports Q3 earnings on Nov. 4.
    • Previously: AmTrust acquires renewal rights to Tower's commercial lines business
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  • Tuesday, October 28, 2014

  • 2:24 PM
    • "I think we'd be crazy not to," says Jim Chanos, still short Brazil, but taking some profits after a near 20% dive in the Bovespa over the last couple of months which may or may not have had its denouement in yesterday's post-election plunge.
    • Among the individual names Chanos had in the past talked about being short were Petrobas (PBR +4.3%) and Vale (VALE +0.6%), from which the Bovespa is heavily weighted. The two combine to represent about 8% of the assets in the iShares MSCI Brazil Capped ETF (EWZ +5.6%).
    • "I think a lot of [Rousseff's reelection] is priced in already now," says Chanos.
    • ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, BRZS, DBBR, FBZ
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  • 9:10 AM
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  • 9:07 AM
    • DryShips (NASDAQ:DRYS) +4.5% premarket after Imperial Capital upgrades shares to Outperform from Underperform with a $1.90 price target, up from $1.40,
    • Imperial believes the risk of a near-term restructuring has been all but eliminated given the secondary equity offering and the equity dilution has largely been reflected in the share price.
    • Although the secondary offering was priced punitively, the firm sees it as a necessity to foster a more sustainable capital structure given prospective refinancing needs through 2016 and to de-risk an over-levered balance sheet.
    | 7 Comments
  • Monday, October 27, 2014

  • 2:38 PM
    • Alcoa (AA -0.9%) is upgraded to Buy from Hold with a $20 price target, up from $16, at Deutsche Bank, which says the company's “metamorphosis [is] on track.”
    • DB admits it is now "eating crow" after misjudging the turnaround now apparent in Alcoa's upstream primary smelting business due to still rising U.S. premia plus an improved global aluminum price; "the net effect has been a resurrection of a business unit that had heretofore been a headwind for Alcoa's overall finances," the firm says.
    • DB sees a continued earnings turnaround with upside driven mainly by Primary Metals EBITDA, which could recover from a 2013 cyclical low of $475M to $1.8B by 2016 despite a lower capacity footprint.
    | 5 Comments
  • 1:16 PM
    • Goldman, Deutsche, Credit Suisse, and BofA/Merrill have launched coverage on Vivint Solar (VSLR +3.2%) with bullish ratings, while Citi has launched at Neutral.
    • "In our view, VSLR is positioned to outgrow peers in the residential solar industry with a unique sales model and low cost structure," writes CS' Patrick Jobin. "The company is vertically integrated from sales, installation, and long-term ownership and is unique with its exclusive use of neighborhood direct door-to-door sales, enabling low customer acquisition costs and clustering."
    • Deutsche's Vishal Shah: "We expect the company’s differentiated sales model and flexible supply chain will enable 100% YoY growth of installations through 2016. Vivint’s door-to-door sales model should enable lower customer acquisition costs and we expect the introduction of additional innovative financing structures to act as catalysts."
    • Citi's Shahriar Pourreza, on the other hand, sees competition from utilities and an expected decline in the solar investment tax credit to 10% by the end of 2016 as risks. He adds "there is an increased perception of risk associated with [Vivint Solar's] business model due to potential competition from fixed charges, financing bottlenecks, and low barriers to entry."
    • Shares remain nearly $2 below their $16 Oct. 1 IPO price.
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  • 12:50 PM
    • A recent SuperCom (NASDAQ:SPCB) 6-K filing points to "substantial cash generation" during Q3, writes Dane Capital Management in a column embargoed until 5AM Tuesday.
    • Dane likes the RFID hardware/software vendor's strong recurring revenue streams and "software-like" margins, and thinks additional contract wins and new initiatives could drive further upside. Its base case target is $22.
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  • 12:35 PM
    • Cliffs Natural Resources (CLF -1.7%) has tumbled 64% YTD, but WSJ's Spencer Jakab thinks CLF's release of Q3 earnings after today's close has the potential to spark at least a brief bounce in the shares.
    • Costs are coming down, volumes may have improved Q/Q, and the Q3 report could include word from management on the sale of assets such as mines in Australia, Jakab writes.
    • The impact of any good news would be magnified by a short squeeze, as ~42% of shares outstanding, equal to six days of turnover, were sold short recently by investors hoping to buy them back later at a cheaper price; just last Wednesday, CLF shares jumped 7% after Credit Suisse warned of a potential short squeeze.
    | 1 Comment
  • 12:24 PM
    • Caterpillar (CAT -1.5%) climbed 4.6% last week after its Q3 earnings easily beat Wall Street consensus, but Raymond James analyst Theoni Pilarinos thinks this is not the time for investors to chase the stock.
    • CAT deserves credit for right-sizing inventory, bringing production levels in-line with demand, maintaining a solid balance sheet and generating strong cash flow funding $5.4B YTD in share buyback and dividends, but management's forecast for flat 2015 sales growth prompts the firm to lower its numbers accordingly, and Pilarinos believes the stock will be range-bound until end markets improve.
    • AMong other big machinery makers: JOY -3.4%, MTW -1.7%, DE -0.8%.
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  • 12:16 PM
    • Barron's has joined the list of media outlets to argue Apple Pay could boost VeriFone's (NYSE:PAY) point-of-sale hardware sales.
    • The paper observes VeriFone has a 60% U.S. retail payment terminal share, and that retailers are aggressively moving to adopt terminals that support NFC (used by Apple Pay) and EMV (chip-and-PIN) payments following a slew of major payment card data breaches.
    • Last week, Jim Cramer cited Apple Pay as a reason to buy VeriFone. JPMorgan estimated in September less than 15%-20% of U.S. payment terminals support NFC.
    • Today, VeriFone launched a campaign with payment processor Vantiv urging merchants to "upgrade their payment hardware so they can quickly support vital technologies like Apple Pay and EMV."
    • Many leading retailers haven't yet embraced Apple Pay. EMV adoption is gaining steam ahead of an Oct. 2015 liability shift deadline that will result in a party that doesn't support EMV (whether the merchant or the card issuer) being responsible for any resulting counterfeit card fraud.
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  • 9:07 AM
    • "Autoliv (NYSE:ALV) needs to execute a fundamental, strategic change of direction to avoid being left behind by both smaller, higher-tech and larger, diversified competitors," Morgan Stanley says.
    • Firm says ALV needs to "de-prioritize stock buybacks" at elevated multiples and "change the current course of the company away from a passive safety company with a small sliver of secular growth."
    • Previously: Autoliv misses by $0.16, misses on revenue
    • Previously: More on Autoliv's Q3
    | 1 Comment
  • 8:55 AM
    • Goldman Sachs lowers its ratings on the oil services sector (NYSEARCA:OIH) to Cautious from Attractive and downgrades several specific stocks as it cuts its 2015 oil price forecast.
    • U.S. land activity will suffer the biggest impact of the lower price deck, Goldman says, with customer capital spending expected to decline 6% next year vs. its prior outlook for a 9% increase; as a result, the firm now forecasts the horizontal U.S. rig count to fall 7%, or ~200 rigs, over the next 12 months.
    • Goldman downgrades Parsley Energy (PE -3.8% premarket), Diamond Offshore (DO -1.5%), Laredo Petroleum (LPI -9%) and Basic Energy Services (BAS -6.2%) to Sell with sharply lower price targets; Patterson-UTI (NASDAQ:PTEN), Pioneer Energy (NYSE:PES) and Emerge Energy (NYSE:EMES) are cut to Neutral.
    • The firm adds Oceaneering (OII -0.3%) to its Conviction Buy list; it also removes Halliburton (HAL -1.5%) from the list but maintains its Buy rating on the stock.
    | 6 Comments
  • Saturday, October 25, 2014

  • 4:58 PM
    • Shares, -28% YTD, don't look like a good deal yet, Barron's says.
    • With investor sentiment waning, shares could trade according to fundamentals over the next year, and those could continue to disappoint.
    • Q3 sales hit the "midpoint" of guidance. Under normal circumstances, that wouldn't trigger a selloff, but for Amazon - a stock that trades mostly on revenue growth - "that's terrible."
    • Also see: Part Of Amazon.com's Core Is Dying (Paulo Santos, Oct. 24)
    • Also see: No One Wants To Hear Anything Good About Amazon, But... (Dana Blankenhorn, Oct. 24)
    | 73 Comments
  • Friday, October 24, 2014

  • 5:52 PM
    • "Investor pessimism doesn’t seem to dampen [Jeff] Bezos’s appetite for risk. Employees unsettled by Amazon’s (AMZN -8.2%) steadily depreciating stock price are probably the only thing that can force Bezos to slow down," writes BloombergBusinessweek's Brad Stone in the wake of Amazon's Q3 miss and soft guidance.
    • Stone, who wrote a popular book on Bezos and Amazon, notes declining employee stock grant values caused by investor angst over Amazon's losses could increase employee turnover, something management is unlikely to ignore. Thus, curbing spending (with the goal of boosting Amazon's shares) could go hand-in-hand with keeping needed employees happy.
    • How much could lower spending boost profits? In a much-discussed September post, Benedict Evans estimated Amazon's trailing free cash flow would be around $4B (rather than a current $1.08B) if its capex/sales ratio remained at 2009 levels.
    • Nonetheless, Evans defended Bezos' strategy: "Amazon has perhaps 1% of the US retail market by value ... Jeff Bezos’s view is pretty clear: keep investing, because to take profit out of the business would be to waste the opportunity ... The question to ask isn’t whether Amazon is some profitless ponzi scheme, but whether you believe Bezos can capture the future."
    • The sell-side was in a less forgiving mood today: Two downgrades arrived (from Cowen and Janney), as did a slew of target cuts. Notably, analysts often expressed more concerns about Amazon's top-line growth slowdown (particularly for media and international sales) than its bottom-line pressures.
    • Prior Amazon earnings coverage
    | 9 Comments
  • Thursday, October 23, 2014

  • 3:14 PM
    • "I am as optimistic as I've been in a long time," says Don Wordell, noting the pull back in energy prices is a big economic stimulus. His RidgeWorth Mid-Cap Value Fund (MUTF:SAMVX) has topped 97% of peers over the last decade, and the $3.9B fund has returned 2.2% YTD - slightly ahead of the category average.
    • His top five picks: SanDisk (NASDAQ:SNDK) is off more than 10% over the last month, but demand for its products is strong and growing. Cigna (NYSE:CI) and Aetna (NYSE:AET) stand to profit as hiring picks up, and with it more people into the healthcare system. Baker Hughes (NYSE:BHI) has been especially beaten down along with the price of oil, but Wordell says this hasn't caused companies to scale back production plans. OshKosk (NYSE:OSK) has been weighed on by sluggish commercial construction, but Wordell says it's about to pick up.
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  • Wednesday, October 22, 2014

  • 10:30 PM
    | 19 Comments
  • 3:53 PM
    • Coeur Mining (CDE -14.1%) plunges after BMO Capital downgrades shares to Underperform from Market Perform and slashes its stock target price to $4 from $9.50, pointing out signs of "strained" valuation.
    • The downgrade comes as BMO describes its view that silver will continue to underperform gold over the next 12 months, and that silver miners "will need to look increasingly toward grade as a mechanism to reduce unit costs at the expense of reserve life."
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