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jstratt

jstratt
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  • An Update On American Airlines [View article]
    Thanks for an interesting article!

    I began evaluating AAL as analysts and the CEO are gushing about the prospects. I felt the guidance of $3.70 for 2014 x 12 PE = $44.40 might be a fair expectation for the price a year from now.

    The CEO stated they have 10 billion in cash as well which is much more than they need long term. Interesting given the entire company is only valued at 11 billion market cap at this writing.

    I can buy into the short to intermediate term story for AAL. Over the longer term many of the historic risks to airline profits such as high energy, interest and labor costs that exceed what customers are willing to pay will return.
    Jan 29 10:26 PM | Likes Like |Link to Comment
  • Too Much Leverage In The Latest Episode Of The Time Warner Cable/Charter Deal [View article]
    I thought I would look a little deeper into CHTR valuation and the merger deal. Some observations

    CHTR appears to me to be wildly over valued and it never ceases to amaze me at how the value of cable fluctuates. In 1998 Paul Allen bought CHTR for 4.5 bil and after many buyouts of other cable companies went bankrupt. They were able to negotiate 21 bil debt down by 8 bil in bankruptcy.

    TWC meanwhile isnt performing very well and nervous investors would like a payday. Few alternatives exist as Comcast would face FCC restrictions and no other players are big enough including CHTR.

    What makes sense is combining into a larger cable competitor for both TWC and CHTR. Malone wants control and can offer Chtr and Liberty assets for a deal but really needs more money. At the perceived bargain price he offered TWC he can get other investors.

    I will estimate that some TWC investors with CHTR, Liberty and a few investment banker/PE types along with combined operation savings might be able to seal a deal. However it might take a market or industry drop of 15% to help the parties seal the deal. The problem is the assets seem too highly valued to encourage the outside money needed for a deal.
    Jan 28 02:59 PM | Likes Like |Link to Comment
  • Johnson & Johnson Is A Dividend Growth Giant [View article]
    Guess I am a little more bullish than others on JNJ, here's why

    - I like a dividend growth company with huge cash flow and strong balance sheet

    - I like a company that has revenue growth along with productivity improvement and share buybacks driving results. Lots of stability with growth

    - After a huge run in 2013 I like a less volatile way to get returns so low beta and strong balance sheet is a nice compliment

    - JNJ has a good valuation that offers a 10%+ gain opportunity in 2014. Most of the difference I have with others is that JNJ had a horrible CEO up until 2 years ago who tried to destroy every product it seems. Viewed over a longer term that was a blip and JNJ has returned to its normal PE and operating performance in good markets and bad.

    - JNJ is not an average company and deserves a PE that reflects more than mediocrity given a unique combination of highest credit rating, huge FCF, stability in good and bad markets and growth in revenue and earnings.
    Jan 28 10:16 AM | 2 Likes Like |Link to Comment
  • BofA probed over trading practices [View news story]
    I would be more surprised if it didnt happen.

    How is this different than flash trading which is legal?
    Jan 26 06:34 PM | Likes Like |Link to Comment
  • GE's Immelt: 'We End The Year With Momentum' [View article]
    Good article with a valid conclusion IMO.

    I tend to think GE at its current price ($24.95) is a good buy. Some reasons include that GE is opaque and more complex than other companies. That is complicated by Immelt who investors with good reason tend to distrust.

    The stock rose rapidly in late 2013 as plans to list a piece of the financial business created a story for a rapidly rising market. The sharper drop than the market probably includes concerns about that happening in the time frame indicated.

    Then came earnings with 2.9% revenue growth projected in 2014 and 4.3% earnings growth on the earnings call. The 2015 projection of -0- revenue growth. Those numbers were delivered with Immelt throwing around double digit growth in what seemed like every division and record backlog as well. He reminds me of a a guy offering to double your money in 30 days with a get rich scheme.

    My own assessment is that GE is still not seen as properly capitalized to run its finance business which constitutes one of the worlds largest banks. So huge cash flow is used to increase capital levels.

    In the end I believe the finance business is satisfactorily capitalized and growth projections are sandbagged. As balance sheet pressure drops the credit rating will rise and at the current level I believe I can get a 20% return with GE at the current price.
    Jan 26 12:00 PM | Likes Like |Link to Comment
  • Apple: Too Many Upside Catalysts For The Stock To Go Down [View article]
    Just wanted to add that I dislike Icahn manipulating stock prices for his personal gain and note that he has driven AAPL above the market determined value.

    That said Icahn does have a point. Assuming the $150 bil is accurate it is hard to understand why AAPL would need more than say $50 bil in cash/short investments. Adding in the $31 bil annual free cash flow plenty of flexibility exists.

    addl thoughts

    The company doesnt want to use its cash however and even borrowed 16 bil to help it buy back 22 bil in stock.

    Icahn is out for Icahn only and if incidental benefits would accrue to other investors it would only be because Icahn couldnt move them into his pile.

    Mgt's with more cash than ideas probably lose the cash in one way or another

    In the end AAPL is unlikely to grow revenue or cash flow significantly so share buybacks should be part of investors return instead of going exclusively to employee bonuses or wasted.

    Jan 25 10:17 AM | Likes Like |Link to Comment
  • Why We Expect More Credit Rating Downgrades For Verizon [View article]
    I appreciate the perspective offered in the article.
    Jan 25 09:30 AM | 1 Like Like |Link to Comment
  • IBM - Revenues Continue To Slide As Stabilization Is Not In Sight Yet [View article]
    It is likely IBM needs the cash as well as getting rid of a unit it appeared to be running into the ground. They agreed to buy lots of low end servers from Lenovo as part of the agreement.

    While it is possible IBM will stabilize for now one must assume the trend is down as virtually every business looks to be suffering. Even software is just treading water.

    I have no position in IBM after many years I sold all in 2013.
    Jan 23 02:43 PM | Likes Like |Link to Comment
  • Netflix: Set To Plummet [View article]
    As a value investor I find it hard to invest in NFLX.

    That said NFLX offers a worldwide powerhouse media potential. I dont think the author evaluates cash flow properly. The doubling of cash brought in was important. However the FCF at a time of hyper growth is unimportant. Investors want NFLX building the brand and business not accumulating cash.

    For a NFLX market cap is more important than EPS. Ask what you think the Market Cap should be 5 years from now and divide that by the $22 billion current market Cap. Last year NFLX at a $5 bil Market Cap area NFLX was clearly worth much more and I commented such.

    Today nearing 50MM subs and roughly $450 per subscriber valuation NFLX has a value that can be debated. If you think NFLX will have 150MM subs in 5 years you should buy. As NFLX is rapidly creating barriers to competitor entry I still se NFLX as a buy.

    Investors should ask themselves if in addition to valuation companies like GE they have a place in their portfolio for the next GOOG. NFLX isnt for everybody!
    Jan 23 10:17 AM | 2 Likes Like |Link to Comment
  • Dear Honeywell Management, There Will Be A Better Time To Buy Back Stock [View article]
    Enjoyed the analysis!
    Jan 23 08:18 AM | Likes Like |Link to Comment
  • What To Take Away From IBM's Earnings [View article]
    My takeaways

    - 3 billion + loss of cash flow in 2013
    - hardware business is in free fall
    - entire operation aside from hardware is stagnant

    Positives

    - Software and services didnt have as bad a quarter
    - 15 billion in free cash flow is still a lot
    - Valuation isnt historically high
    - At some price IBM will probably be a good buy

    Fears

    - Mgt is clueless and destructive to the future of IBM
    - Balance sheet levering to meet quarterly goals is destructive
    - Credit downgrade coming
    - Watson largely irrelevant
    - Insiders actually believe some of the things they state
    Jan 22 09:49 AM | Likes Like |Link to Comment
  • International Business Machines' Management Discusses Q4 2013 Results - Earnings Call Transcript [View article]
    Some thoughts!

    Once again an incompetent CEO was afraid to show up and the CFO with a full month on the job did a good job explaining.

    On the positive side I didnt feel IBM leaders were outright deceitful as I had felt in recent quarters.

    The real question is how much damage is being done to IBM in the post Palmisano period and can they recover? So far I would suggest 10%-20%.

    I am agnostic as I sold out of IBM after nearly 20 years as a shareholder. The quarterly results were about what I expected. I didnt think IBM could turn around very rapidly and headwinds would appear likely at a decreasing rate for another 2 quarters without further damage.

    Over the past 2 months I bought below $175 and sold at $190. Looking forward I probably will buy at $172 or less and sell at $185. I have invested to much time understanding IBM to walk away completely after being a long term shareholder.
    Jan 22 12:00 AM | Likes Like |Link to Comment
  • Q4 2013 Johnson & Johnson Earnings Conference call (Webcast) [View article]
    I will boil down this 2+ hr call

    13.8 Free Cash Flow 2013 (vs 12.8)
    2014 EPS 5.80 vs 5.85 analyst projection b4 call

    Earnings up 30+ yrs in a row
    Dividend up 50+ yrs in a row
    Rev up but not as fast in Pharma vs 2013 12%

    Overall I view JNJ as more valuable than yesterday but understand the .05c reduction in 2014 plugged into a model lowers the price. Based on the outlook presented I view that as more conservatism.

    It is hard for this investor to ignore the consistent growth in cash flow, earnings and revenue, given what I consider a reasonable forward PE valuation.
    Jan 21 02:11 PM | 1 Like Like |Link to Comment
  • Johnson & Johnson beats by $0.04, beats on revenue [View news story]
    JNJ is one of the few buys in the market. An investment at $93 could expect a 10% gain in 2014 without stretching valuation. I need to review the conference call regarding the tax on devices. On the surface I find it hard to believe a tax would affect whether one chooses a hip or knee replacement.
    Jan 21 12:46 PM | Likes Like |Link to Comment
  • 6 Reasons To Consider Pepsi [View article]
    Bram, I combined some trends because I wanted people to consider the thought process. I do strongly believe PEP will be broken up because it doesnt have acceptable leadership.

    Some of the same forces in the alcoholic beverage model apply to soft drinks as well. Predicting KO and PEP merge is much less likely, but I didnt expect Anheuser Busch to get sold off either.
    Jan 21 11:28 AM | 1 Like Like |Link to Comment
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