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jstratt

jstratt
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  • Why The IBM-Monitise Deal Is Better Than The IBM-Apple Deal [View article]
    I congratulate the PR departments for putting together irrelevant Apple-IBM and IBM Montize discussions.

    The press has spent weeks babbling endlessly about nothing. Meanwhile IBM marches on and the stock drops.

    The real story may be that the IBM Systems and Technology (Hdwe) business is in rapid decline. Witness IBM offering a potential buyer for its chip unit $1 billion to take it.

    I have been very bearish on IBM for 2 years but I am moving to a neutral outlook. My best guess is when you remove all of the subterfuge IBM should be valued based on its non hardware businesses and their static revenue with huge cash flow.

    IBM is nearing a compelling enough value to take the risk.
    Aug 7 03:26 PM | Likes Like |Link to Comment
  • Finding A Regional Bank Stock Before Interest Rates Rise [View article]
    Interesting article!

    I like the strategy as it is a good time to consider upcoming financial opportunities. Like the author I have some favorite banks in mind.

    That said everyone sees rates rising long term. In the shorter term I question that and see continued pressure on the 10 year Treasury due to a lack of economic growth worldwide. Banks earnings are being compressed as we speak and we are nearing the midpoint of 3Q 2014.

    For me it is too early to formulate an exact price. I am more likely to wait for a bear scare and go for a higher beta more well known name such as RF.
    Aug 7 03:02 PM | 1 Like Like |Link to Comment
  • Earliest Phase Of A Bear Market: When Good News Becomes Bad [View article]
    Stand aside... Not!

    I tend to agree with the author on short term trend and see turbulence and even a drop. Still at the end of the year stocks will be higher. Even if I didnt feel that way I would never stand aside. I didnt in 2008-9 and I would not now.

    With a flattening yield curve I have underweighted financials and moved into some deep value plays in my opinion. Gone are JPM and C. In their place I put a $25.00 buy on GE and the market executed it about a week later. GE is frustrating to investors and thus was undervalued.

    Then VZ with a 10+ PE is deeply undervalued. The best illustration is that 2014 EPS est are 25% higher than 2013 results and the stock is 2% below last years price. All with an excellent yield and growth in revenue and productivity. I look to recapture much of that 25% plus dividend for an excellent return.

    Selling out of the market is rarely a successful way to invest and in a period of rising earnings that is especially true.
    Aug 7 10:49 AM | 1 Like Like |Link to Comment
  • Verizon: Is Tablet Growth Enough? [View article]
    I wanted to add an additional point!

    VZ 2014 EPS est is 25% above 2013 EPS and the stock price is down slightly over 1 year ago.

    I think that illustrates the valuation potential to be recaptured and add to the dividend yield.
    Aug 7 10:00 AM | Likes Like |Link to Comment
  • Bank Of America: All Clear Ahead [View article]
    What we have just witnessed is the end of the recovery period and the beginning of forward looking normalcy. It's been a long time coming.

    Unfortunately a flattening yield curve will impact bank profits in the near term. In the longer term BAC is an excellent value with growing business units and growing profitability.
    Aug 7 08:13 AM | 6 Likes Like |Link to Comment
  • Goldman Sachs: The 3 Biggest Stock Market Risks [View article]
    GS should have a more informed view than I. However when I view the 10 year below 2.5% and falling, interest rates do not appear to be rising.

    A base case for growth at a rate high enough to cause the rise in rates is also suspect. Europe, China and Japan are lacking in growth.
    Aug 7 07:38 AM | 2 Likes Like |Link to Comment
  • More Signs A Market Bottom Is Forming [View article]
    I suspect we will go lower in the market and I continue to plan for at least a 10% drop. The 10 year Treasuries across the world signal slowing growth and are compressing financial results.

    The only difference that makes for me is I lighten up on financials and reinvest in other stocks. I have eliminated JPM and C but kept a larger position in BAC. The DOJ resolution should help BAC but still with NIM declining we could have some turbulent weeks ahead.

    I could be wrong but a slow grinding market has spent a month turning and it would seem that it must have further to go.

    That said after being out of telecoms for a couple of years I am investing back into VZ which I believe should be valued above a 10.98 PE. I have a target price of $55 and with the dividend would get a 16.9% return.
    Aug 6 11:18 PM | 1 Like Like |Link to Comment
  • Bank Of America: The Bottom Feels Like It Is In [View article]
    I have a 1 year target price of $20 on BAC.

    Very quickly we will have restored the dividend, share buyback and the resolution of the DOJ litigation. For BAC the operational improvements and earnings power will begin to dominate valuation discussions.

    Unfortunately banking as a whole probably has some near term suffering from a very flat yield curve impacting profits. By the end of the year BAC will begin to shine. It has a lot of room to run with double digit returns for the next 3 years projected.
    Aug 6 04:20 PM | Likes Like |Link to Comment
  • AT&T, Verizon slip as Sprint ends T-Mobile bid [View news story]
    I continue to think a stronger 3rd competitor was more dangerous than 2 weaker competitors. T/VZ have the ability to stiff arm competitors and limit customer losses.
    Aug 6 01:36 PM | 1 Like Like |Link to Comment
  • Cyclically Adjusted Price To Earnings Ratio, By Country [View article]
    I just want to suggest that CAPE will probably hurt your returns depending on how you use it. I tend to believe that CAPE is invalid beyond 20 years ago. During that time we have had crushing lows and euphoric highs leading me to believe it is a fair period to use. The CAPE today is below the median for the past 20 years.

    As for valuing individual companies by CAPE one can do further damage. The best investment by CAPE is the company that hasnt increased earnings in 10 years.

    I would also add that at the bottom in March 2009 CAPE suggested stocks were still overvalued when the market hit 666.
    Aug 6 01:26 PM | 1 Like Like |Link to Comment
  • Don't Be Fooled: IBM Still Reporting Low-Quality Earnings [View article]
    I find the debate on IBM interesting and dont feel the need to insult anyone. Time will tell!

    On one hand IBM is marching toward $20 non GAAP EPS by next year. They have been throwing their balance sheet at that goal by building up debt to buy shares which has significant risk. At the same time they may be able to pull it off.

    Those risk averse investors see the increasing risk and also see the ground underneath IBM shifting rapidly as the entire industry transitions. Certainly revenue is in decline and cash flow has also declined.

    In my view IBM is choosing to invest heavily in its business, buy back large quantities of stock and pay dividends. The use of debt to accomplish this may be a stroke of genius as debt is historically cheap and they are building for the future. Or it may hurt shareholder returns significantly in the future if not invested wisely.

    The result is IBM is cheap and it may be risky. The good news is investors today have a great chance to vote with their capital. I dont think IBM is going to stay around $188 a share.

    I dont know where it is going but I do believe it is going somewhere and it may not take long to get there! I will reinvest when I see a clearer path forward.
    Aug 6 01:12 PM | 1 Like Like |Link to Comment
  • Bank Of America: Short-Term Obstacles Outweigh Long-Term Value [View article]
    I take an opposing view but appreciate the authors contribution.

    1) C is exposed to the world which isnt good just now. Add in C has lost everything thru poor risk management multiple times in my investment lifetime. In fact it is still selling for less than 10% of its 2007 peak.

    2) Litigation is quantified for BAC in the sense that the only significant litigation left is DOJ and BAC has offered $13 bil and the Govt is asking $17 bil.

    I am long BAC but feel with a flattening yield curve the share price will go lower before it goes higher.

    Reasons to be bullish

    The earnings power of BAC businesses is phenomenal and growing.

    The capital plan approved with share buyback of 2%+ and raising of the dividend

    BAC is a $250 bil Mkt Cap company that has had the power to eliminate over $100 bil in debt over the past 3+ years. As the focus turns to adding to shareholder value amazing results will emerge.

    Over the past year BAC shares are up less than 3% but the operational improvement and forward looking earnings prospects have substantially increased.
    Aug 6 11:03 AM | 1 Like Like |Link to Comment
  • Inflation: Will The Fed Move Too Soon? [View article]
    Interesting article!

    I tend to look at the 10 year Treasury. The 10 year dropping below 2.5% tells me growth is not about to drive increased inflation. This becomes more clear when about a week ago 4 European countries hit 200-400 year lows.

    If anything we may be closer to deflation. The flat yield curve suggests the deflation could reach stock prices as well.
    Aug 6 10:29 AM | Likes Like |Link to Comment
  • Why The Arguments Against IBM Are Misleading [View article]
    I think the fear of owning IBM is symbolized by the chip business where IBM was attempting to sell it after running it into the ground. The deal broke down when the buyer demanded IBM give them $2 billion + the Chip unit and IBM was only willing to offer $1 billion.

    Plus some level of truth is needed regarding the debt. IBM says it is all financing yet the debt increase has been created during a time when the purchase of shares is similar in scope to the increase in debt. IBM clearly intends to keep borrowing and buying back stock.
    Aug 6 09:29 AM | Likes Like |Link to Comment
  • Exxon Mobil: Undervalued Industry Leader With Large Growth Runway [View article]
    Enjoyed the article!

    I would just add a few thoughts regarding XOM and an investment.

    - XOM is not projected to grow earnings in the next 18 months and only at a 5% rate for the next 5 years.

    - revenue has been dropping over the past 3 years

    Over the long term XOM has outperformed the S&P500 significantly including by about 195% over the past 20 years. Over the past 5 years however the S&P500 is up 120% while XOM is up 32%. The problem with a PE10 view is if anything looks good it means a company has had poorer growth in the past 10 years.

    I would suggest analyst 5 year share price growth of 5% + 2.7% dividend would lead to a 7.7% expected yield and I have seen XOM trade at a PE below 10 in periods of higher growth.
    Aug 6 08:09 AM | 6 Likes Like |Link to Comment
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