Abbott Laboratories (ABT) recently announced that it has received approval for the Xience Xpedition Everolimus Eluting Coronary Stent System from the Ministry of Health, Labor and Welfare (MHLW) in Japan. The stent system has been approved for the treatment of coronary artery disease (CAD).
We note that Abbott Labs was expecting an approval for the same and plans to launch Xience Xpedition in Japan later this year. The Xience drug-eluting stent family is an important part of Abbott Labs' vascular business. Abbott Labs has been consistently making efforts for the last three years to innovate its Xience drug-eluting stent franchise (including Xience V, Prime, nano and Xpedition).
Xience nano and Xience Prime were launched in the US in 2011 while Xience Prime and Xience V were launched in Japan in Apr 2012 and Jan 2010, respectively. The launch of Xience Xpedition in the US in Jan 2013 and its approval in Japan will further boost the sales potential of the franchise.
Another promising device for CAD in Abbott Labs' kitty is Absorb. Last month, Abbott Labs initiated a randomized controlled study in Japan to evaluate Absorb, its bioresorbable vascular scaffold (BVS) device, in patients suffering from CAD.
The vascular business is an important part of Abbott Labs' product portfolio. The company is continuously working to boost its vascular products portfolio and expects to launch several products in the next five years. We believe the launch of new products should help Abbott Labs combat the decline in vascular sales due to pricing pressure.
The vascular business generated sales of $742 million in the first quarter of 2013, down 7.7% from the year-ago period. Of the total vascular sales, approximately $387 million came from the sale of drug-eluting stents and the BVS product portfolio.
We expect the continued uptake of Xience Xpedition in the US along with the expected launch of Xience Xpedition in Japan later in 2013 and traction in Absorb device should driv! e growth in the vascular business in the upcoming quarters.
We note that Boston Scientific (BSX) also has an everolimus-eluting stent platform.
Abbot Labs currently carries a Zacks Rank #3 (Hold). Right now, Baxano Surgical, Inc. (BAXS) and LeMaitre Vascular, Inc. (LMAT) look attractive with a Zacks Rank #2 (Buy).
Wednesday, August 28, 2013
Sunday, August 25, 2013
American Riviera Bank Reported Profitable Growth (OTCMKTS:ARBV, OTCMKTS:CLNO)
American Riviera Bank (ARBV)
Today, ARBV surged (+1.16%) up +0.10 at $8.70 with 1,000 shares in play thus far (ref. google finance Delayed: 9:50AM EDT July 24, 2013).
American Riviera Bank previously reported unaudited net income of $391,000 ($0.15 per share) for the quarter ended June 30, 2013 and $730,163 ($0.29 per share) for the six months ended June 30, 2013. Pre-tax income for the quarter increased 68% to $649,000 at June 30, 2013 compared to the $386,000 reported for the quarter ended June 30, 2012. Pre-tax income for the first six months of 2013 was $1,211,334, an 83% improvement from the $660,928 reported for the first six months of 2012.
American Riviera Bank (ARBV) 5 day chart:
Cleantech Transit, Inc. (CLNO)
Cleantech Transit, Inc. (OTCMKTS:CLNO) (www.cleantechtransit.net ) through its Discovery Carbon subsidiary, develops emissions offset strategies for companies, municipalities, and countries. Today, CLNO has shed (-16.82%) down -0.037 at $.183 with 195,002 shares in play thus far (ref. google finance Delayed: 12:06PM EDT July 24, 2013), but don't let this get you down.
Top Low Price Stocks To Own Right Now
CLNO's daily range is at ($.1895 – $.157) thus far and currently at $.183 would be considered a (+16536.36%) gain above the 52 wk low of $.0011. The stock is up +0.18 ( +8218.18%) since the concerning dates of January 25, 2013 – July 24, 2013. +8218.18% is the 6 month high and rightly so.
Cleantech Transit, Inc. (CLNO ) 5 day chart:
Friday, August 23, 2013
Twenty-Somethings Losing Financial Ground
Millennials feel less financially independent today than they did two years ago, according to a survey released Thursday by PNC Financial Services. Just 17% of 20-somethings with at least some college education said they feel completely independent financially, down from 23% in 2011.
Furthermore, nearly 60% said they are behind where they thought they’d be.
"Many of my peers suffer from a failure-to-launch syndrome directly related to the surge in unemployment during the Great Recession and slow pace of recovery," Mekael Teshome, economist at The PNC Financial Services Group, said in a statement. "It is not a lack of ambition we are seeing in these data. It is more about a lack of opportunity that has hindered many young adults' progress against their professional and financial objectives."
Despite feeling more dependent on their families, optimism is still high, the survey found, with 60% of less independent respondents saying they’ll stand on their own soon. The survey identified a turning point in optimism though, around age 25, when many respondents started to feel the effects of having to pay off debt, start a career and plan their financial future.
As for what defines financial independence, for 78% of respondents being able to pay the bills is the biggest milestone, although just 60% of older millennials (those between 25 and 29) said they’ve achieved it.
Nearly 60% of respondents said they’ll consider themselves independent when they get a full-time job in their chosen career. About a third have already achieved that goal, while 71% thought they’d be there by now.
Finally, 55% of respondents said moving out of their parents’ house was an essential part of financial independence, although 40% of all respondents said they still live at home. Over a quarter of older millennials live with their parents or other relatives. Interestingly, over half of respondents said they were better off than their parents were at their age.
In fact, although older millennial were more likely overall to rate themselves as financially independent, they were also more likely to feel like they were behind in their expectations. Women were especially likely to say they hadn’t achieved as much as they thought they would by their age.
Top 5 Undervalued Companies To Buy Right Now
College is an important part of feeling independent, too. About a third of high-school-only respondents said they feel fairly independent, compared to half of college educated respondents, and those with a degree rated themselves more independent on every factor versus those with only a high school education.
Artemis Strategy Group polled more than 3,200 adults between ages 20 and 29 in June for the PNC survey.
Sunday, August 18, 2013
Masco Unit Expands in Louisiana - Analyst Blog
Williams Insulation, a wholly-owned subsidiary of Masco Corporation (MAS) recently announced its plans to expand into Lake Charles, La.
Williams Insulation is a part of Masco Contractor Services, which is a group of subsidiaries owned by Masco Corporation. Masco Corporation manufactures, sells and installs home improvement and building products.
Williams Insulation offers various forms of insulation installations such as fiberglass batt, blown fiberglass, spray foam and cellulose. It also offers fireplaces and gutters. The company already serves both homebuilders and homeowners in Southeast Texas and Southwest Louisiana. Expansion in the Lake Charles area will further broaden the company's client base.
Recently, another Masco Contractor Services unit , Red Lion Insulation, announced its plans to expand into Farmingdale, N.J. Red Lion offers various forms of insulation installations such as fiberglass batt, blown fiberglass, spray foam and cellulose.
Masco Corporation will report its second quarter 2013 earnings results on Jul 30, 2013. The Zacks Consensus Estimate for the quarter stands at 19 cents per share. The Zacks Consensus Estimate for 2013 is 69 cents while that for fiscal 2014 is $1.02 per share.
Masco carries a Zacks Rank #3 (Hold).
We are encouraged by Masco's continued focus on product innovation and cost improvements. The company is benefiting from new home construction and repair and remodel activities. However, weak consumer spending on big ticket remodeling and a sluggish European economy remain headwinds.
Other stocks in the construction sector that are performing well and deserve a mention include PulteGroup, Inc. (PHM), DR Horton, Inc. (DHI), and USG Corporation (USG). PulteGroup and DR Horton carry a Zacks Rank #1 (Strong Buy) whereas USG Corporation carries a Zacks Rank #2 (Buy).
Williams Insulation is a part of Masco Contractor Services, which is a group of subsidiaries owned by Masco Corporation. Masco Corporation manufactures, sells and installs home improvement and building products.
Williams Insulation offers various forms of insulation installations such as fiberglass batt, blown fiberglass, spray foam and cellulose. It also offers fireplaces and gutters. The company already serves both homebuilders and homeowners in Southeast Texas and Southwest Louisiana. Expansion in the Lake Charles area will further broaden the company's client base.
Recently, another Masco Contractor Services unit , Red Lion Insulation, announced its plans to expand into Farmingdale, N.J. Red Lion offers various forms of insulation installations such as fiberglass batt, blown fiberglass, spray foam and cellulose.
Masco Corporation will report its second quarter 2013 earnings results on Jul 30, 2013. The Zacks Consensus Estimate for the quarter stands at 19 cents per share. The Zacks Consensus Estimate for 2013 is 69 cents while that for fiscal 2014 is $1.02 per share.
Masco carries a Zacks Rank #3 (Hold).
We are encouraged by Masco's continued focus on product innovation and cost improvements. The company is benefiting from new home construction and repair and remodel activities. However, weak consumer spending on big ticket remodeling and a sluggish European economy remain headwinds.
Other stocks in the construction sector that are performing well and deserve a mention include PulteGroup, Inc. (PHM), DR Horton, Inc. (DHI), and USG Corporation (USG). PulteGroup and DR Horton carry a Zacks Rank #1 (Strong Buy) whereas USG Corporation carries a Zacks Rank #2 (Buy).
Saturday, August 17, 2013
Parade of Weak Top-Line Results Continues - Ahead of ...
Tuesday, July 23, 2013
Earnings will be front and center on an otherwise low-news day today. Even though the overall tone of this morning's releases from DuPont (DD) and Travelers (TRV) is on the positive side, top-line weakness is emerging as an enduring trend this earnings season as well. The aggregate Q2 growth rates and beat ratios look respectable enough at this stage, but a lot of that is due to strength in the Finance sector. Look a little deeper and the picture isn't that reassuring.
Apple will be reporting after the close today, but including this morning's reports from DuPont, United Technology (UTX), Travelers and others, we now have Q2 results from 130 S&P 500 companies or 26% of the index's total membership that combined account for 37% of its total market capitalization. Total earnings for these 130 companies are up +6.7%, with 61.5% beating earnings expectations. On the revenue side, we have a growth rate of +3.8%, with 42.3% coming ahead of top-line expectations. The earnings and revenue growth rates and the revenue beat ratio seen thus far are broadly in-line with what we saw from the same group of 130 companies in Q1, while the earnings beat ratio is tracking a bit lower.
Strong results from the Finance sector are playing a big role in keeping the aggregate Q2 data for the S&P 500 thus far in the "not-so-bad" category. Total earnings for the Finance sector are up +34.5% on +10.3% higher revenues, with beat ratios of 78.6% for earnings and 67.9% for revenues. It is very hard to be satisfied with the aggregate numbers once Finance is excluded. Strip out Finance from the reports that have come out already and total earnings growth turn negative – down -3%. This is weaker than what these same companies reported in Q1. There are few positive surprises outside of Finance as well, with the earnings and revenue beat ratios outside of Finance tracking below Q1's levels.
The composite Q2 growth rate, where we combine the results for the 13! 0 that have come out with the 370 still to come, is for +1.4% total earnings growth on +0.3% higher revenues. Excluding Finance, the composite earnings growth rate drops to a decline of -4.1%. Bottom line, the earnings picture outside of Finance is very weak in Q2, but expectations for the second half of the year reflect a meaningful recovery.
Current consensus estimates for Q3 reflect total earnings growth rate of +4.1% and +10.9% in Q4, followed by +11.2% growth in 2014 as a whole. Hard to envision these growth rates holding up given the overall negative tone of company guidance thus far. The question is whether investors will continue to shrug the resulting negative estimate revisions or will finally start paying attention to the underwhelming earnings growth picture?
Sheraz Mian
Director of Research
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Earnings will be front and center on an otherwise low-news day today. Even though the overall tone of this morning's releases from DuPont (DD) and Travelers (TRV) is on the positive side, top-line weakness is emerging as an enduring trend this earnings season as well. The aggregate Q2 growth rates and beat ratios look respectable enough at this stage, but a lot of that is due to strength in the Finance sector. Look a little deeper and the picture isn't that reassuring.
Apple will be reporting after the close today, but including this morning's reports from DuPont, United Technology (UTX), Travelers and others, we now have Q2 results from 130 S&P 500 companies or 26% of the index's total membership that combined account for 37% of its total market capitalization. Total earnings for these 130 companies are up +6.7%, with 61.5% beating earnings expectations. On the revenue side, we have a growth rate of +3.8%, with 42.3% coming ahead of top-line expectations. The earnings and revenue growth rates and the revenue beat ratio seen thus far are broadly in-line with what we saw from the same group of 130 companies in Q1, while the earnings beat ratio is tracking a bit lower.
Strong results from the Finance sector are playing a big role in keeping the aggregate Q2 data for the S&P 500 thus far in the "not-so-bad" category. Total earnings for the Finance sector are up +34.5% on +10.3% higher revenues, with beat ratios of 78.6% for earnings and 67.9% for revenues. It is very hard to be satisfied with the aggregate numbers once Finance is excluded. Strip out Finance from the reports that have come out already and total earnings growth turn negative – down -3%. This is weaker than what these same companies reported in Q1. There are few positive surprises outside of Finance as well, with the earnings and revenue beat ratios outside of Finance tracking below Q1's levels.
The composite Q2 growth rate, where we combine the results for the 13! 0 that have come out with the 370 still to come, is for +1.4% total earnings growth on +0.3% higher revenues. Excluding Finance, the composite earnings growth rate drops to a decline of -4.1%. Bottom line, the earnings picture outside of Finance is very weak in Q2, but expectations for the second half of the year reflect a meaningful recovery.
Current consensus estimates for Q3 reflect total earnings growth rate of +4.1% and +10.9% in Q4, followed by +11.2% growth in 2014 as a whole. Hard to envision these growth rates holding up given the overall negative tone of company guidance thus far. The question is whether investors will continue to shrug the resulting negative estimate revisions or will finally start paying attention to the underwhelming earnings growth picture?
Sheraz Mian
Director of Research
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Friday, August 16, 2013
Inside the Surging China Technology ETFs - ETF News And ...
Concerns have been building over the Chinese market lately, with many funds tracking the country facing nearly double digit losses over the past three month time period. In fact, the most popular ETF tracking the nation, FXI, has lost about 7.2% in the past 90 days, suggesting some serious pain for the country's biggest stocks.
Bad news lately
The main reason behind the country's slump is the financial sector. Low rates pushed investors into risky ventures, but as short-term interest rates have been rising, it is becoming clear how shaky the Chinese economic foundation really is.
This is especially true now that the country's economic growth is expected to slow down further this quarter, which is putting extra pressure on lending, and the financial sector in general. Given this situation and the optimism over the U.S. market, many are having a hard time looking beyond domestic shores for investments (See Is the Tech ETF Signaling Trouble Ahead?)
Bright Spot
Despite this doom and gloom over the broad Chinese economy, investors have seen a bright spot in the nation; technology. This corner of the market has been relatively immune from the financial woes, and it has managed to prosper despite the overall economic slowdown.
As evidenced by having the world's fastest supercomputer, Tianhe-2, China is also starting to make a name for itself in the technology world. This is particularly true given that the new system was only expected to be ready in 2015 and came online early to surpass estimates.
Furthermore, companies like Qualcomm and Huawei, have shown considerable interest in China. A leading Internet company, Tencent, has signed a deal to build West China's first cloud computing center (see Three Tech ETFs Still Going Strong).
The Chinese market is also expected to witness a surge in PC sales. On June 24, Microsoft signed an anti-piracy deal with Samsung and HP to install genuine Windows and Microsoft Office in upcoming systems. This ! long awaited pact gives positive vibes for investors in the Chinese technology market.
Given this, investors may want to consider Chinese tech ETFs as better plays in the current environment. These funds have arguably better exposure profiles and may be interesting choices in this environment for those seeking to still make a play on the world's second biggest economy:
GUGGENHEIM CHINA TECHNOLOGY ETF (AMEX: CQQQ)
Launched in Dec 2009, CQQQ tracks the AlphaShares China Technology Index, which measures the performance of the information technology sector in China and Hong Kong.
The fund holds 38 stocks in total and the top ten stocks make up 61% of the fund.
Mid cap comprise 68% while large cap makes up 16% of the fund, suggesting a good dispersion among cap levels. The fund charges 70bps in fees, and has a decent yield of 1.70%, especially considering it is a tech-focused ETF (read New Leadership in the Tech ETF Space?).
The ETF is more volatile compared to the S&P 500 index, but CQQQ has done well nonetheless. CQQQ currently has a Zacks Rank of #3 or 'Hold', and has added over 13% in the past three months.
GLOBAL X NASDAQ CHINA TECHNOLOGY ETF: (NASD: QQQC)
Launched in Dec 2009, QQQC replicates the NASDAQ OMX China Technology Index, which tracks the performance of the technology sector in China. QQQC is a large growth fund and has an AUM of $3.3 million.
The fund holds 29 stocks and the top ten holdings contribute 63% to the fund. The market capitalization of the fund in mid caps is 64% and small cap is 20%.
The product charges 65bps in fees, but it has a low yield of .52%. Although the fund is more volatile compared to the S&P 500 and has a high beta of 1.24%, the fund is capable of holding its ground. Currently, QQQC has a Zacks Rank of #3 or 'Hold', and has added about 18.9% in the past three months.
The Bottom Line
Negative sentiments about the Chinese markets have strongly impacted the Asi! an Stock ! markets. With China's money market rates easing and the rate falling to 5.73%, the banks are on pins and needles. The Chinese market is also signaling bearish trends, and market experts predict a further slowdown (See The Top Choice in the Tech ETF World?).
Despite this, the technology sector is expected to weather the storms. The space has handily outperformed FXI in the past three months, as well as the S&P 500, and it could remain a decent choice for those seeking to make a play on the shaky market with a solid exposure profile, as evidenced by its recent performance and better sector fundamentals.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Bad news lately
The main reason behind the country's slump is the financial sector. Low rates pushed investors into risky ventures, but as short-term interest rates have been rising, it is becoming clear how shaky the Chinese economic foundation really is.
This is especially true now that the country's economic growth is expected to slow down further this quarter, which is putting extra pressure on lending, and the financial sector in general. Given this situation and the optimism over the U.S. market, many are having a hard time looking beyond domestic shores for investments (See Is the Tech ETF Signaling Trouble Ahead?)
Bright Spot
Despite this doom and gloom over the broad Chinese economy, investors have seen a bright spot in the nation; technology. This corner of the market has been relatively immune from the financial woes, and it has managed to prosper despite the overall economic slowdown.
As evidenced by having the world's fastest supercomputer, Tianhe-2, China is also starting to make a name for itself in the technology world. This is particularly true given that the new system was only expected to be ready in 2015 and came online early to surpass estimates.
Furthermore, companies like Qualcomm and Huawei, have shown considerable interest in China. A leading Internet company, Tencent, has signed a deal to build West China's first cloud computing center (see Three Tech ETFs Still Going Strong).
The Chinese market is also expected to witness a surge in PC sales. On June 24, Microsoft signed an anti-piracy deal with Samsung and HP to install genuine Windows and Microsoft Office in upcoming systems. This ! long awaited pact gives positive vibes for investors in the Chinese technology market.
Given this, investors may want to consider Chinese tech ETFs as better plays in the current environment. These funds have arguably better exposure profiles and may be interesting choices in this environment for those seeking to still make a play on the world's second biggest economy:
GUGGENHEIM CHINA TECHNOLOGY ETF (AMEX: CQQQ)
Launched in Dec 2009, CQQQ tracks the AlphaShares China Technology Index, which measures the performance of the information technology sector in China and Hong Kong.
The fund holds 38 stocks in total and the top ten stocks make up 61% of the fund.
Mid cap comprise 68% while large cap makes up 16% of the fund, suggesting a good dispersion among cap levels. The fund charges 70bps in fees, and has a decent yield of 1.70%, especially considering it is a tech-focused ETF (read New Leadership in the Tech ETF Space?).
The ETF is more volatile compared to the S&P 500 index, but CQQQ has done well nonetheless. CQQQ currently has a Zacks Rank of #3 or 'Hold', and has added over 13% in the past three months.
GLOBAL X NASDAQ CHINA TECHNOLOGY ETF: (NASD: QQQC)
Launched in Dec 2009, QQQC replicates the NASDAQ OMX China Technology Index, which tracks the performance of the technology sector in China. QQQC is a large growth fund and has an AUM of $3.3 million.
The fund holds 29 stocks and the top ten holdings contribute 63% to the fund. The market capitalization of the fund in mid caps is 64% and small cap is 20%.
The product charges 65bps in fees, but it has a low yield of .52%. Although the fund is more volatile compared to the S&P 500 and has a high beta of 1.24%, the fund is capable of holding its ground. Currently, QQQC has a Zacks Rank of #3 or 'Hold', and has added about 18.9% in the past three months.
The Bottom Line
Negative sentiments about the Chinese markets have strongly impacted the Asi! an Stock ! markets. With China's money market rates easing and the rate falling to 5.73%, the banks are on pins and needles. The Chinese market is also signaling bearish trends, and market experts predict a further slowdown (See The Top Choice in the Tech ETF World?).
Despite this, the technology sector is expected to weather the storms. The space has handily outperformed FXI in the past three months, as well as the S&P 500, and it could remain a decent choice for those seeking to make a play on the shaky market with a solid exposure profile, as evidenced by its recent performance and better sector fundamentals.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Thursday, August 15, 2013
Leon Cooperman Buys Fashion Companies and Pharmacy Benefits Managers
Leon Cooperman founded Omega Advisors in 1991 after 25 years at Goldman Sachs. He is a more eclectic investor than Warren Buffett, and will buy any stock or bond at the right price if the company has honest management, he told Forbes in 2009. As a long-term investor, stocks that are fundamentally mispriced appeal to him. While at Columbia University's business school, he studied security analysis under value investor Roger Murray. He recently wrote an open letter to President Obama criticizing his "divisive, polarizing" tone of his class rhetoric. In the fourth quarter, he took advantage of price dips to purchase 18 new stocks. His biggest buys were: Express Scripts Inc. (ESRX), Warnaco Group Inc. CL A (WRC), PVH Corp. (PVH) Medco Health Solutions Inc. (MHS).
Express Scripts Inc. (ESRX)
Express Scripts is a pharmacy benefit manager that generates revenue through delivering prescription drugs through its network of contracted retail pharmacies, specialty pharmacy services, home delivery and EM services.
Express Scripts' stock tumbled to a 52-week low of $34.37 at the end of the third quarter, from a high of $60.89. Cooperman bought 719,000 shares of the company at an average of $43 per share. He previously owned shares of Express Scripts in 2007 when the price was about $23 per share, and sold over the next several quarters as the stock climbed to $34 in the second quarter of 2008, when he closed his position.
Express Scripts Inc. has a market cap of $24.76 billion; its shares were traded at around $50.17 with a P/E ratio of 17.8 and P/S ratio of 0.5. Express Scripts Inc. had an annual average earnings growth of 28.6% over the past 10 years. GuruFocus rated Express Scripts Inc. the business predictability rank of 5-star.
Over the past decade, Express Scripts has generated strong and growing free cash flow, which grew from $1.6 billion in 2009 to a record of almost $2 billion in 2010.
In October, the company had to lower its earnings per share guida! nce from the previously expected $3.15 to $3.25, to a range of $2.95 to $3.05. The decrease was due to multiple factors: a greater shortfall in claims versus expectations, a stagnant economy impacting claims volumes, additional expenses, including accelerating spending on projects in preparation for the integration of Medco Health Solutions Inc., expenses to support clients and members as they transfer from Walgreen's pharmacies and to comply with new regulations. The company is also facing heightened competition.
Later, on October 25, the company announced that it expects 95% of its clients' prescription volume to continue after it loses Walgreens as a network supplier in 2012. It also expects that the merger with Medco, another PBM, will be slightly accretive to EPS in the first full year after closing and moderately accretive once fully integrated. Together, the two companies will aim to make prescription drugs more cost-effective and improve the quality of care.
Warnaco Group Inc. CL A (WRC)
Warnaco Group Inc is a manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories sold under a variety of recognizable brands.
Cooperman bought 508,1000 shares in the fourth quarter of 2011 at about $48 per share.
Warnaco Group Inc. Cl A has a market cap of $2.38 billion; its shares were traded at around $58.49 with a P/E ratio of 15.9 and P/S ratio of 1. Warnaco Group Inc. Cl A had an annual average earnings growth of 26.2% over the past 10 years.
Warnaco had been having negative cash flow for the years 2006 to 2009. It turned positive at $67.6 million in 2010, but for the trailing 12 months it is negative $238 million. It is also at rather high historical valuations:
WR pe,ps,pb Interactive Chart
If management is one of Cooperman's key criteria, however, he may have liked the fact that they recently got a new CEO. Helen McCluskey was elected president and CEO, succee! ding Joe ! Gromeck, who retired. McCluskey joined Warnaco in 2004 as Group President-Intimate Apparel and eventually rose to chief operating officer in 2010.
PVH Corp. (PVH)
PVH Corp. designs and markets branded dress shirts, neckwear, sportswear, footwear and other related products. Cooperman bought 352,300 shares of PVH Corp. in the fourth quarter at an average of $67 per share.
PVH has a market cap of $5.35 billion; its shares were traded at around $81.3 with a P/E ratio of 15.5 and P/S ratio of 1.3. The dividend yield of PVH Corp. stocks is 0.2%. PVH Corp. had an annual average earnings growth of 9.3% over the past 10 years.
PVH recently drastically increased its revenue, from $2.4 billion in 2010 to $4.6 billion in 2011, helped by its 2010 acquisition of Tommy Hilfiger. Earnings, however, were lower, falling from $162 million in 2010 to $53.8 million in 2011, as the cost of goods sold was increased significantly as well. The company expects earnings growth for 2012 to occur in the second half of the year as the first half's margins will be pressured from higher product costs over last year.
The company recently raised its 2011 earnings per share guidance to a range of $5.28 to $5.30 from the previously expected range of $5.23 to $5.25. The raised guidance came due to strong performance in its Calvin Klein and Tommy Hilfiger businesses. Year over year fourth quarter sales are expected to increase by 15% in the Calvin Klein business, 12% in the Tommy Hilfiger North America business, 12% in the Tommy Hilfiger International business and 4% in the Heritage Brands business.
PVH Corp. had about $782 million in cash on its balance sheet at the end of the third quarter, and approximately $3.1 billion in long-term liabilities and debt.
Medco Health Solutions Inc. (MHS)
Cooperman also bought shares of Medco, the company merging with his largest new holding, Express Scripts. Under their agreement, Medco shareholders will receive $71.36 per share in cash and s! tock, or ! $2.9 billion. Medco shareholders will receive $28.80 in cash and $0.81 shares for each Medco share they own upon closing of the transaction.
David Snow, chairman and CEO of Medco, commented: "Our organizations represent two great success stories in American business. We have each been successful in creating shareholder value because we are both passionate about driving value to our customers through service, innovation and a focus on cost and quality. We have a shared desire to improve the way healthcare is delivered in this country and I believe this creates a strong best-of-breed foundation, culturally, for a very successful merger.
Medco is the nation's largest pharmacy benefits manager with more than 20,000 employees worldwide and 65 million members, and ranks 34th on the 2011 Fortune 500 list. The merger with Express Scripts is expected to close in the first half of 2012.
Medco Health Solutions Inc. has a market cap of $23.47 billion; its shares were traded at around $60.82 with a P/E ratio of 15.7 and P/S ratio of 0.3. Medco Health Solutions Inc. had an annual average earnings growth of 24.3% over the past 10 years. Medco grew its revenue at a 20% annual rate over the last ten years to $66 billion in 2010, and its free cash flow at an 11% annual rate to over $2 billion in 2010.
Leon Cooperman bought 400,000 shares of the company at an average of $53 per share in the fourth quarter of 2011.
See Leon Cooperman's portfolio here, or check out the undervalued stocks, top growth companies and high-yield stocks of Leon Cooperman.
Express Scripts Inc. (ESRX)
Express Scripts is a pharmacy benefit manager that generates revenue through delivering prescription drugs through its network of contracted retail pharmacies, specialty pharmacy services, home delivery and EM services.
Express Scripts' stock tumbled to a 52-week low of $34.37 at the end of the third quarter, from a high of $60.89. Cooperman bought 719,000 shares of the company at an average of $43 per share. He previously owned shares of Express Scripts in 2007 when the price was about $23 per share, and sold over the next several quarters as the stock climbed to $34 in the second quarter of 2008, when he closed his position.
Express Scripts Inc. has a market cap of $24.76 billion; its shares were traded at around $50.17 with a P/E ratio of 17.8 and P/S ratio of 0.5. Express Scripts Inc. had an annual average earnings growth of 28.6% over the past 10 years. GuruFocus rated Express Scripts Inc. the business predictability rank of 5-star.
Over the past decade, Express Scripts has generated strong and growing free cash flow, which grew from $1.6 billion in 2009 to a record of almost $2 billion in 2010.
In October, the company had to lower its earnings per share guida! nce from the previously expected $3.15 to $3.25, to a range of $2.95 to $3.05. The decrease was due to multiple factors: a greater shortfall in claims versus expectations, a stagnant economy impacting claims volumes, additional expenses, including accelerating spending on projects in preparation for the integration of Medco Health Solutions Inc., expenses to support clients and members as they transfer from Walgreen's pharmacies and to comply with new regulations. The company is also facing heightened competition.
Later, on October 25, the company announced that it expects 95% of its clients' prescription volume to continue after it loses Walgreens as a network supplier in 2012. It also expects that the merger with Medco, another PBM, will be slightly accretive to EPS in the first full year after closing and moderately accretive once fully integrated. Together, the two companies will aim to make prescription drugs more cost-effective and improve the quality of care.
Warnaco Group Inc. CL A (WRC)
Warnaco Group Inc is a manufacturer of intimate apparel, menswear, jeanswear, swimwear, men's and women's sportswear, better dresses, fragrances and accessories sold under a variety of recognizable brands.
Cooperman bought 508,1000 shares in the fourth quarter of 2011 at about $48 per share.
Warnaco Group Inc. Cl A has a market cap of $2.38 billion; its shares were traded at around $58.49 with a P/E ratio of 15.9 and P/S ratio of 1. Warnaco Group Inc. Cl A had an annual average earnings growth of 26.2% over the past 10 years.
Warnaco had been having negative cash flow for the years 2006 to 2009. It turned positive at $67.6 million in 2010, but for the trailing 12 months it is negative $238 million. It is also at rather high historical valuations:
WR pe,ps,pb Interactive Chart
If management is one of Cooperman's key criteria, however, he may have liked the fact that they recently got a new CEO. Helen McCluskey was elected president and CEO, succee! ding Joe ! Gromeck, who retired. McCluskey joined Warnaco in 2004 as Group President-Intimate Apparel and eventually rose to chief operating officer in 2010.
PVH Corp. (PVH)
PVH Corp. designs and markets branded dress shirts, neckwear, sportswear, footwear and other related products. Cooperman bought 352,300 shares of PVH Corp. in the fourth quarter at an average of $67 per share.
PVH has a market cap of $5.35 billion; its shares were traded at around $81.3 with a P/E ratio of 15.5 and P/S ratio of 1.3. The dividend yield of PVH Corp. stocks is 0.2%. PVH Corp. had an annual average earnings growth of 9.3% over the past 10 years.
PVH recently drastically increased its revenue, from $2.4 billion in 2010 to $4.6 billion in 2011, helped by its 2010 acquisition of Tommy Hilfiger. Earnings, however, were lower, falling from $162 million in 2010 to $53.8 million in 2011, as the cost of goods sold was increased significantly as well. The company expects earnings growth for 2012 to occur in the second half of the year as the first half's margins will be pressured from higher product costs over last year.
The company recently raised its 2011 earnings per share guidance to a range of $5.28 to $5.30 from the previously expected range of $5.23 to $5.25. The raised guidance came due to strong performance in its Calvin Klein and Tommy Hilfiger businesses. Year over year fourth quarter sales are expected to increase by 15% in the Calvin Klein business, 12% in the Tommy Hilfiger North America business, 12% in the Tommy Hilfiger International business and 4% in the Heritage Brands business.
PVH Corp. had about $782 million in cash on its balance sheet at the end of the third quarter, and approximately $3.1 billion in long-term liabilities and debt.
Medco Health Solutions Inc. (MHS)
Cooperman also bought shares of Medco, the company merging with his largest new holding, Express Scripts. Under their agreement, Medco shareholders will receive $71.36 per share in cash and s! tock, or ! $2.9 billion. Medco shareholders will receive $28.80 in cash and $0.81 shares for each Medco share they own upon closing of the transaction.
David Snow, chairman and CEO of Medco, commented: "Our organizations represent two great success stories in American business. We have each been successful in creating shareholder value because we are both passionate about driving value to our customers through service, innovation and a focus on cost and quality. We have a shared desire to improve the way healthcare is delivered in this country and I believe this creates a strong best-of-breed foundation, culturally, for a very successful merger.
Medco is the nation's largest pharmacy benefits manager with more than 20,000 employees worldwide and 65 million members, and ranks 34th on the 2011 Fortune 500 list. The merger with Express Scripts is expected to close in the first half of 2012.
Medco Health Solutions Inc. has a market cap of $23.47 billion; its shares were traded at around $60.82 with a P/E ratio of 15.7 and P/S ratio of 0.3. Medco Health Solutions Inc. had an annual average earnings growth of 24.3% over the past 10 years. Medco grew its revenue at a 20% annual rate over the last ten years to $66 billion in 2010, and its free cash flow at an 11% annual rate to over $2 billion in 2010.
Leon Cooperman bought 400,000 shares of the company at an average of $53 per share in the fourth quarter of 2011.
See Leon Cooperman's portfolio here, or check out the undervalued stocks, top growth companies and high-yield stocks of Leon Cooperman.
Top 10 China Stocks To Buy Right Now
Related links:WR pe,ps,pb Interactive ChartLeon CoopermanWarren BuffettAn open letter to President ObamaThe business predictability rank of 5-starPVH recently drastically increased its revenueMedco Health Solutions Inc had an annual average earnings growth of 243% over the past 10! yearsSee! Leon Cooperman's portfolio hereUndervalued stocksTop growth companiesHigh-yield stocks
Wednesday, August 14, 2013
Reflections from 20 Years of Investing (2001 to 2008) Pt. 1
"Enlightenment must come little by little -- otherwise it would overwhelm" -- Idries Shah
The pursuit of value is an eclectic process; it is also highly subjective and it rarely fits into a tidy framework or is unveiled through the use of rigid formulas. Value is frequently revealed to the investor in tiny bits and pieces almost as if a person is peering through binoculars and struggling to get them into focus. Above all, successful value investors must be adaptable and their thought process must never become dogmatic. Such were the lessons I was beginning to learn as I entered into the next phrase of my investing journey.
I resume the story in early August of 2001, about one month prior to one of the saddest days in American history, Sept. 11, 2001. For some reason I had suddenly become very apprehensive about the market and for one of the few times in my investing career, I acted completely on impulse. I sold out of about 60 percent of my stock positions. I simply called up my broker one morning (I was not doing my transactions on line at that point) and read off the list companies which I wanted to delete from my investment portfolios.
I recall one thing in particular about going to such a heavy position in cash: It made my life extremely boring for the next few weeks. Still, I held tight to my resolution that I would not make any further investments until the market corrected and I temporarily quit doing stock research altogether. The decision was extremely foolish since it was based upon pure speculation rather than any analysis about the valuations of my holdings. As things would turn out, I did not have to wait before the market corrected.
Like most Americans, I remember exactly what I was doing on Sept. 11, 2001; I was watching CNBC as the horrific drama unfolded. I will never forget watching the backdrop of the Twin Towers when the second plane hit; at that point it was evident to all Americans that their country was under siege from terrorists. Mark Haynes navigated! the viewing audience through the terrible ordeal with exquisite poise, never cracking or wavering as Americans sat mesmerized in front of their television sets, watching the shocking developments in stunned silence.
September 11 had a profound effect on the psyche of Americans and without question it had a dramatic influence on their buying and spending patterns. About a month after the attack I attended the Fall Home Show in Omaha and almost none of the vendors did any significant business with one notable exception. The man who sold America flags and retractable flag poles sold out his entire inventory quickly. Many of his customers were forced to endure back order periods of several months before they were able to openly display their love for the United States.
The tragedy had reawakened the patriotic spirit of the American people, drawing its citizens closer together; although it also triggered some temporary changes in their behavior. Americans became much less apt to travel long distances for an extended period, following the tragedy. Airplane traffic dropped dramatically and the following year, businesses which relied upon tourist traffic during the summer months would suffer mightily. It appeared that September 11 had significantly reduced the desire of many Americans to spend their money on things pertaining to leisure and entertainment or much of anything else that did not reflect upon their basic needs. Fortunately, the effects of the attack on the American economy would be temporary in duration.
After the shock and sadness of September 11 began to wane a few days later, I resolved that I was going to spend all my available doing stock research. Free time had become an abundant commodity as my business phone had gone silence following the attack. I began purchasing stocks a few weeks following the tragedy, and within about a month, I was once again fully invested. I would remain fully invested in equities for longer than a decade.
Camtek: An Education in the AOI! Sector
One of first investment ideas which I had uncovered during my post 9-11 stock search was Camtek, a small Israeli technology company, ticker symbol CAMT. Camtek had come public a few years prior and had fallen to about $2 a share in the late summer of 2001.
Camtek was an automated optical inspection (AOI) company that designed and manufactured inspection systems for printed circuit boards (PCB). Further, they were in the process of designing systems to inspect semiconductors as well. The logic for investing in AOI companies was simple: Many circuit boards still employed visual inspection and circuits were getting smaller every year.
This miniaturization process was rendering visual inspection obsolete and creating a need for AOI systems. Additionally, semiconductors were becoming ubiquitous in electronic equipment. Flaws in tiny semiconductors were virtually impossible to detect without the aid of an AOI system. Electronic companies would need to purchase the systems to protect against massive recalls which would do substantial damage to their profits as well as their reputations.
AOI companies had little in the way of competition since they held a specialty niche and their systems were protected by patents. Years of R&D would be required to unseat them by way of technological superiority; therefore it made more sense for a larger company to assimilate them should they wish to enter the AOI sector. That said, CAMT was much smaller than its archrival Orbitech (ORBK) in the PCB AOI sector; thus their key to long term growth lied in their penetration into the rapidly expanding semiconductor AOI sector. In that area, their main completion was August Semiconductor.
I originally purchased shares of CAMT at 2.05 in September of 2001; the shares quickly rose to the $4.00 range by the end of the year. At that point, I did not comprehend the extreme cyclicality of the AOI market but it would not be long before I would witness the extreme volatility of these equities first hand! . When th! eir revenues and profits began to turn downward, their stock prices would fall off a cliff.
By early 2003, Camtek had lost over 90 percent of its market cap and my original investment had been whittled down by roughly 85%. That was the bad news; the good news was that CAMT was now trading at a large discount to its net current assets. Its market cap was now only about 8 million but the company held net current assets in excess of 30 million. In other words, it was selling for about 25% of its net current assets with its fixed assets and R&D available at no extra charge.
I had never witnessed a net/net proposition before and I started buying, filling limit order after limit order at 30 cents a share. I even filled a few hundred shares for as low as 25 cents. Finally, after I had added about 15,000 shares to my account, my ability to purchase shares at 30 cents subsided. All those shares had cost me well under $5,000.
Camtek stock eventually ascended in price to over seven dollars a share; however, I never sold a share. I can vividly recall proudly viewing the breakdown of my gain/loss statement on one of my monthly statements and becoming awe struck. One 200 share lot that I purchased for $50 was worth over $1,400 at that point. I was particularly enamored with a 4,500 share lot that I had purchased for $1,350 (30 cents a share); it showed a value in excess of $31,000 on my statement. I should have framed that statement and hung it on the wall. To reference the old statement about money: "That statement was what dreams are made of."
In case you are wondering, I only made peanuts on what should have been a monumental success. You see I never sold a share of Camtek until the autumn of 2008. I exchanged them for shares in their arch rivals Orbitech (OBRK) and Rudolph (RTEC) which had become large net/net propositions (more on those purchases of ORBK and RTEC later in the series).
I even recorded a tax loss carry-forward on my original purchase of CAMT for which I ha! d paid $2! .05 per share. It seems that I was a slow learner in regard to the necessity of selling AOI companies long before they entered a cyclical trough in their earnings. Happily, I have since remedied that problem. For informational purposes I must disclose that in the spring, I repurchased shares of CAMT and made a larger purchase in a Cyberoptics (CYBE) another AOI company, which was near a multiyear low at the time.
The Investing Climate in 2002 and 2003
After reinvesting all my funds back into stocks shortly after September 11, I enjoyed a stellar performance until the market engaged in a severe correction in the late summer and early fall of 2002. Following September 11, my portfolios advanced about 25% by year end and by the mid summer of 2002, they had advanced by over 55 percent. Bear in mind that I had never enjoyed any real success in investing prior to that point; therefore I was developing a bit of a "Messiah Complex." Legendary turf writer Andrew Beyer coined that term to describe the tendency of a horse player to become overconfident following a successful run of luck at the race track.
The late summer of 2002 quickly destroyed any personal delusions I held about shutting down my business and living off my investments. I lost every cent of the 55% in paper gains which I had recorded following September 11 in approximately two months.
Another problem presented itself: My wife was now in full scale panic mode and she was putting me under extreme pressure to sell out of all our equities "while we still had something left." It seems that she had been talking with one of her friends who had recently gone to cash in her 401-K after knuckling under to the pressure of a rapidly dropping market. My wife thought it would be much more prudent to buy a larger house than to invest our life savings in the market.
Fortunately for us, I refused to knuckle under and resolved not to sell any of our positions. The process was greatly aided by the fact that the market tur! ned almos! t exactly at the point of my wife's heaviest insistence to liquidate our positions. In the future, I would use her as a "contrarian indicator" and I made a special point to remind her of her wholesale panic whenever she became nervous in regard to a falling market. The experience became extremely important about six years later when the credit crisis developed and our portfolios would lose well over half of their value in a few short months. To her credit, she weathered that storm extremely well.
After the market reversed in the early fall of 2002, our portfolios began an unprecedented run of good fortune. In 2003, the portfolios were up in excess of 80% and by October of 2007 they had more than quadrupled from their trough, around early October of 2002. It was a great five year run; although I never anticipated that approximately that one year later, the majority of those gains would be sacrificed in merely a few short months. But that is a story to be told later in the series.
NDS Group: Making a Bundle in the Smart Card Business
Sometime in 2002, I developed an interest in NDS Group, formerly ticker symbol NNDS. The main business of NDS was designing and manufacturing the smart cards which are installed in every satellite receiver to prevent the unauthorized use of their signal. The business also had developed some other interesting products (such as digital video recorders (DVR)); however at that time Tivo was dominating the sector.
NDS Group had become highly profitable by 2001 and it appeared that the company had excellent growth possibilities. Satellite TV was still in its early stages and possessed outstanding growth potential. Furthermore, the necessity of protecting satellite signals against piracy virtually insured that the company's products would continue to flourish.
At the time, NDS Group was 80% owned by News Corp (NWSA) and they were providing the smart cards for all Direct TV (DTV) receivers. Further, they were one of only three smart card! provider! s and one of their competitors, Canal Plus a Vivendi subsidiary, was struggling with maintaining the security of their smart card systems which they were providing to non-News Corp television companies throughout Europe. It seems that the access codes on their systems were turning up on the internet and bootleggers were stealing the signals. EcoStar, which would later be spun off by DISH, was making the same claims back in the 1990s. Both companies maintained that News Corp, acting through its subsidiary NDS Group, was the culprit. To make a long story short, Canal Plus filed a multi-billion dollar lawsuit against News Corp and later on EcoStar would follow suit.
The Canal Plus lawsuit roiled the price of NNDS and when it dropped to around 12 dollars a share, I decided to buy into the stock. At that time, I was much more apt to invest in businesses where the stock dropped as a result of potential litigation. I simply blocked out the risk angle, assuming that powerful New Corp would eventually prevail. Fortunately for me that turned out to be the case since Vivendi (who controlled Canal Plus) was struggling financially at the time. They agreed to drop the lawsuit when News Corp consented to purchase one of Canal Plus's struggling Italian operations. I figured that settlement would stop the precipitous drop in NNDS; that assumption proved to be incorrect.
One of my major assumptions in the investment was grounded in the belief that News Corp would maintain their alliance with Direct TV and continue to furnish them with their smart cards. Losing that account would severely damage the profits of NNDS and when I entered the investment I believed that News Corp would eventually assimilate Direct TV. Whatever companies that News Corp acquired would obviously use all of the NDS products, insuring sort of a monopoly on their products.
In the fall of 2002, things got worse for NDS Group; EcoStar and Direct TV had attempted to merge and now Direct TV was joining their new alliance in filing ! a lawsuit! against NNDS. It now appeared that NDS Group might be sued out of existence, in addition to losing their smart card account with Direct TV; their contract was set to expire in 2003.
Following the new developments, the stock of NNDS tanked. I believe at one point it fell under five dollars a share. I recall adding considerably to my position at around 7 dollars a share; I nearly tripled my position in the stock. In retrospect, it was a decision that I would not make today; although I probably would have continued to hold on to my original position. At that point in my investing career, I was extremely stubborn about acknowledging that I might have made a mistake in selecting an equity.
As the story unfolded, the merger between DISH and DTV was blocked by the US government and in 2004 NNDS signed a new six year agreement with Direct TV to supply them with smart cards. From that point on the stock rose steadily. I ended up selling all my shares for over 30 dollars a share and recorded my largest long term capital gain to date. The whole scenario took several years to unfold but in the end, my stubbornness had prevailed. Later on I will discuss how my refusal to change my opinion resulted in a financial disaster. Since that time I have become much more conservative and much more apt to change my opinion as the facts and my assumptions of the future profitability a company change. It would seem that I have learned a great deal about managing risk as time has passed.
The story culminated long after I sold my shares in NNDS. The company was eventually taken private for 63 dollars a share in 2008 by News Corp and Permira. In early 2012 Cisco purchased the company; I am unaware of the amount which they paid.
Learning to Love Microcap Stocks
I will conclude Part one of Reflections from 20 Years of Investing (2001- 2008) with the discussion of three more sizable winners: Forward Industries (FORD), Lake Gaming (LACO) and Fairchild (FA).
By 2003 I was developing quit an af! finity fo! r purchasing microcap stocks. Apparently, my early experience with Camtek had not destroyed my interest in investing in tiny companies. I decided that I would start investing significant capital in microcap stocks for the following reasons: They were largely under appreciated and under followed by the investing community, and they were more apt to be mispriced than their larger brethren.
I started following a rather sleazy microcap tout service which was later exposed by Barron's; the service was Ceocast.com. The newsletter did not charge its reading audience a fee; rather they billed the companies which they promoted in the form of cash and shares of their stock. The "pump sheet" was full of extremely low-grade companies which typically traded on the Bulletin Board; however occasionally they would promote a real "diamond-in-the-rough" which traded on a reputable exchange.
Lake Gaming (LACO)
I originally discovered Lake Gaming in the Ceocast newsletter and I eventually purchased shares in the stock, but not for the reasons which the newsletter discussed. Upon reviewing the company, I noticed that Mario Gabelli held a significant position in the stock and it was trading at less than 50% of its tangible book value.
As it turned out, one the major assets the company held, was land on the far south portion of Las Vegas, in close proximity to the airport; they were in the process of monetizing that interest by selling the property to time-share companies. The scenario was reminiscent of Aztar. Furthermore, their balance sheet held significant cash and large amounts of money which was owed to them by certain Indian tribes.
At the end of 2002 the company had a book value in excess of 15 dollars per share. I bought my original position for around 7 dollars a share and following the announcement of non-cash accounting restatement, which had no effect on the book value; the stock dipped to about 4 dollars a share. I doubled my position at around $4.25 per share.
Fate! was on my side in the case of LACO; although their Indian Gaming business would not drive their earnings in the near term, another catalyst was about to emerge in early 2003. Lyle Berman, the CEO of LACO was an avid poker player and he had an idea that provided the impetus for the stock to move forward.
Berman pioneered the idea of the World Poker Tour (WPT) and sold the concept to the Travel Channel. Watching poker on television had always been boring since the viewing audience could not see the down cards which the players held. Berman remedied that problem by allowing a camera to expose the down cards to the TV audience. That idea suddenly transformed Texas Holdem into a fascinating spectator's sport. By the end of 2003 the stock had reached its book value of 15 dollars a share and I decided to take my profits, perhaps a bit prematurely. The stock quickly climbed to about 30 dollars a share on sheer momentum.
In the longer term, the decision to sell turned out to be prudent since the TV success of the WPT never translated into significant profits. The idea may have revolutionized the TV viewing of poker events but it never turned LACO into a cash cow.
Forward Industries (FORD)
Another interesting stock that Ceocast promoted was Forward Industries, a tiny distributor of cell phone covers. What made FORD interesting was a promotion from Nokia which supplied anyone who purchased a new Nokia phone with a free cell phone cover. The cover was included in the box of each new cell phone. As it turned out, FORD was supplying the majority of these cell phone covers for US customers.
The company reported in a quarterly filing in late 2004, that US sales of Nokia phones were accelerating and each unit sold would result in the sale of a Forward-produced cell phone cover. However, it seemed that no one was reading the company's 10Q. I immediately purchased a substantial position in FORD and waited for the company to announce the impending earnings explosion. Ford obliged ! its share! holders by announcing earnings in the middle of the day. The stock exploded shortly after the announcement and quickly attracted the usual momentum traders who follow the day's largest gainers list.
When tiny stocks, with extremely low floats announce an earnings explosion, the result is invariably a rapid multibagger. Unfortunately, such parabolic moves upward generally result in a rapid downward descent as well. Therefore, it is prudent to put in a limit sell order at a price well under the likely apex of the upward movement. In other words, what starts off as a buy generally becomes a short candidate in a matter of days or weeks.
In the case of FORD that is exactly what happened; although the apex of the stock explosion was much higher than I could have imagined and the duration of the move defied logic. I sold out following a quick triple in the mid 6 dollar range, only to watch the stock ascend to the high twenties.
The stock continued to ascend for weeks, while all the time the management continued to exercise options and sell their shares as quickly as possible. The buying frenzy lasted much longer than I anticipated and the management had quickly become multimillionaires by exercising exorbitant option package.
When the promotion ended, FORD quickly returned to a price which better reflected its intrinsic value. Unfortunately, none of the temporary windfall was returned to the shareholders in the form of a special dividend. The only real beneficiaries were the management and the shareholders who recognized their capital gains by selling their shares following the large run up in the share price.
Fairchild (FA)
I will conclude today's discussion with another balance sheet play that resulted in my largest gain at that point in my investing career. The company was Fairchild and I had started accumulating shares in the company, following my reentry to the stock market in the fall of 2001.
It was another company in which Mario Gabelli held a sig! nificant ! position.. I can not recall for certain, but I believe the stock was mentioned by Gabelli on CNBC. As is typical with a Gabelli holding, the stock held real estate which was understated on the balance sheet. Specifically, the company owned a large shopping center in Long Island which was almost fully occupied and provided the heavily debt-burdened company with a steady cash flow.
Fairchild held another asset which was extremely undervalued and held a much high intrinsic net worth than the shopping center. More specifically, Fairchild owned a large airplane fastener company which had recorded well over a half a billion dollars in sales in fiscal year 2002 and was returning the company over 70 million a year in EBITDA.
One of the reasons Gabelli liked Fairchild was due to the fact they were extremely overleveraged. That may sound strange but "The Chairman" believed that the CEO and controlling shareholder, Jeffrey Steiner, would be required to do a deal to prevent the holding company from being forced into bankruptcy proceedings.
Steiner had a reputation for several things: Most importantly, he could be described as a very successful wheeler/dealer that was known for buying businesses and later selling them for a tidy profit. Secondly, he was one of the most notoriously overcompensated CEOs on Wall Street and he controlled the board of directors at Fairchild.
When he made a successful deal he was handsomely rewarded in the form of a bonus as well as drawing an excessive base salary. Steiner's legendary greed was profiled in newspaper articles, business magazines and was even the subject of an entire chapter from the book: "In Search of Excess: The Overcompensation of American Executives".
I bought a large position in Fairchild at around three dollars and when the company dropped to slightly over $2 a share I bought considerably more stock. At that point in my investing career is seems that I was fearless. I as recall, the company represented nearly 20% of my enti! re holding! s when I was finished purchasing the stock. Never before had I taken such a large position as a percentage of my entire portfolios.
In mid July of 2002, I awoke and turned on my living room television set; scrolling across the bottom of the CNBC ticker was the following headline: Alcoa buys Fairchild's fastener division for 657 million in cash. I jumped so high that I almost hit the 8-foot ceiling in my living room. It seems I had hit the mother lode on Fairchild in less than a year's time.
When I performed the calculations, I figured that the sale alone should be worth at least $6.50 a share to the Fairchild shareholders but the stock quickly settled under six dollars per share. I pondered the situation carefully and decided that Steiner would never return a dime to the Fairchild shareholders. I sold my entire position at around $5.50 a share, deciding to pay the short capital gains taxes on the shares in my taxable accounts.
The decision turned out to be prudent since Steiner eventually squandered the entire windfall without returning a dime to the shareholders. Of course he received a tens of millions as a finder's fee for executing the transaction. Gabelli on the other hand, decided to maintain his entire position. For once I had out thought "The Chairman."
Thereafter, Fairchild dropped slowly and steadily, never again reaching the five dollar range. Following the death of Jeffrey Steiner, the company was liquidated at a small percentage of its former price. As I recall it brought a little over a dollar a share.
In the second edition which covers the years between 2001 and 2008, I will profile a number of stocks which involved investment themes, as well as divulging my extensive investments in Chinese stocks. Further, the next article will examine a "perfect storm" which lead to a windfall in the refined sugar business. Last of all, I will reveal an extremely damaging investment which severely compromised my long term returns.
The pursuit of value is an eclectic process; it is also highly subjective and it rarely fits into a tidy framework or is unveiled through the use of rigid formulas. Value is frequently revealed to the investor in tiny bits and pieces almost as if a person is peering through binoculars and struggling to get them into focus. Above all, successful value investors must be adaptable and their thought process must never become dogmatic. Such were the lessons I was beginning to learn as I entered into the next phrase of my investing journey.
I resume the story in early August of 2001, about one month prior to one of the saddest days in American history, Sept. 11, 2001. For some reason I had suddenly become very apprehensive about the market and for one of the few times in my investing career, I acted completely on impulse. I sold out of about 60 percent of my stock positions. I simply called up my broker one morning (I was not doing my transactions on line at that point) and read off the list companies which I wanted to delete from my investment portfolios.
I recall one thing in particular about going to such a heavy position in cash: It made my life extremely boring for the next few weeks. Still, I held tight to my resolution that I would not make any further investments until the market corrected and I temporarily quit doing stock research altogether. The decision was extremely foolish since it was based upon pure speculation rather than any analysis about the valuations of my holdings. As things would turn out, I did not have to wait before the market corrected.
Like most Americans, I remember exactly what I was doing on Sept. 11, 2001; I was watching CNBC as the horrific drama unfolded. I will never forget watching the backdrop of the Twin Towers when the second plane hit; at that point it was evident to all Americans that their country was under siege from terrorists. Mark Haynes navigated! the viewing audience through the terrible ordeal with exquisite poise, never cracking or wavering as Americans sat mesmerized in front of their television sets, watching the shocking developments in stunned silence.
September 11 had a profound effect on the psyche of Americans and without question it had a dramatic influence on their buying and spending patterns. About a month after the attack I attended the Fall Home Show in Omaha and almost none of the vendors did any significant business with one notable exception. The man who sold America flags and retractable flag poles sold out his entire inventory quickly. Many of his customers were forced to endure back order periods of several months before they were able to openly display their love for the United States.
The tragedy had reawakened the patriotic spirit of the American people, drawing its citizens closer together; although it also triggered some temporary changes in their behavior. Americans became much less apt to travel long distances for an extended period, following the tragedy. Airplane traffic dropped dramatically and the following year, businesses which relied upon tourist traffic during the summer months would suffer mightily. It appeared that September 11 had significantly reduced the desire of many Americans to spend their money on things pertaining to leisure and entertainment or much of anything else that did not reflect upon their basic needs. Fortunately, the effects of the attack on the American economy would be temporary in duration.
After the shock and sadness of September 11 began to wane a few days later, I resolved that I was going to spend all my available doing stock research. Free time had become an abundant commodity as my business phone had gone silence following the attack. I began purchasing stocks a few weeks following the tragedy, and within about a month, I was once again fully invested. I would remain fully invested in equities for longer than a decade.
Camtek: An Education in the AOI! Sector
One of first investment ideas which I had uncovered during my post 9-11 stock search was Camtek, a small Israeli technology company, ticker symbol CAMT. Camtek had come public a few years prior and had fallen to about $2 a share in the late summer of 2001.
Camtek was an automated optical inspection (AOI) company that designed and manufactured inspection systems for printed circuit boards (PCB). Further, they were in the process of designing systems to inspect semiconductors as well. The logic for investing in AOI companies was simple: Many circuit boards still employed visual inspection and circuits were getting smaller every year.
This miniaturization process was rendering visual inspection obsolete and creating a need for AOI systems. Additionally, semiconductors were becoming ubiquitous in electronic equipment. Flaws in tiny semiconductors were virtually impossible to detect without the aid of an AOI system. Electronic companies would need to purchase the systems to protect against massive recalls which would do substantial damage to their profits as well as their reputations.
AOI companies had little in the way of competition since they held a specialty niche and their systems were protected by patents. Years of R&D would be required to unseat them by way of technological superiority; therefore it made more sense for a larger company to assimilate them should they wish to enter the AOI sector. That said, CAMT was much smaller than its archrival Orbitech (ORBK) in the PCB AOI sector; thus their key to long term growth lied in their penetration into the rapidly expanding semiconductor AOI sector. In that area, their main completion was August Semiconductor.
I originally purchased shares of CAMT at 2.05 in September of 2001; the shares quickly rose to the $4.00 range by the end of the year. At that point, I did not comprehend the extreme cyclicality of the AOI market but it would not be long before I would witness the extreme volatility of these equities first hand! . When th! eir revenues and profits began to turn downward, their stock prices would fall off a cliff.
By early 2003, Camtek had lost over 90 percent of its market cap and my original investment had been whittled down by roughly 85%. That was the bad news; the good news was that CAMT was now trading at a large discount to its net current assets. Its market cap was now only about 8 million but the company held net current assets in excess of 30 million. In other words, it was selling for about 25% of its net current assets with its fixed assets and R&D available at no extra charge.
I had never witnessed a net/net proposition before and I started buying, filling limit order after limit order at 30 cents a share. I even filled a few hundred shares for as low as 25 cents. Finally, after I had added about 15,000 shares to my account, my ability to purchase shares at 30 cents subsided. All those shares had cost me well under $5,000.
Camtek stock eventually ascended in price to over seven dollars a share; however, I never sold a share. I can vividly recall proudly viewing the breakdown of my gain/loss statement on one of my monthly statements and becoming awe struck. One 200 share lot that I purchased for $50 was worth over $1,400 at that point. I was particularly enamored with a 4,500 share lot that I had purchased for $1,350 (30 cents a share); it showed a value in excess of $31,000 on my statement. I should have framed that statement and hung it on the wall. To reference the old statement about money: "That statement was what dreams are made of."
In case you are wondering, I only made peanuts on what should have been a monumental success. You see I never sold a share of Camtek until the autumn of 2008. I exchanged them for shares in their arch rivals Orbitech (OBRK) and Rudolph (RTEC) which had become large net/net propositions (more on those purchases of ORBK and RTEC later in the series).
I even recorded a tax loss carry-forward on my original purchase of CAMT for which I ha! d paid $2! .05 per share. It seems that I was a slow learner in regard to the necessity of selling AOI companies long before they entered a cyclical trough in their earnings. Happily, I have since remedied that problem. For informational purposes I must disclose that in the spring, I repurchased shares of CAMT and made a larger purchase in a Cyberoptics (CYBE) another AOI company, which was near a multiyear low at the time.
The Investing Climate in 2002 and 2003
After reinvesting all my funds back into stocks shortly after September 11, I enjoyed a stellar performance until the market engaged in a severe correction in the late summer and early fall of 2002. Following September 11, my portfolios advanced about 25% by year end and by the mid summer of 2002, they had advanced by over 55 percent. Bear in mind that I had never enjoyed any real success in investing prior to that point; therefore I was developing a bit of a "Messiah Complex." Legendary turf writer Andrew Beyer coined that term to describe the tendency of a horse player to become overconfident following a successful run of luck at the race track.
The late summer of 2002 quickly destroyed any personal delusions I held about shutting down my business and living off my investments. I lost every cent of the 55% in paper gains which I had recorded following September 11 in approximately two months.
Another problem presented itself: My wife was now in full scale panic mode and she was putting me under extreme pressure to sell out of all our equities "while we still had something left." It seems that she had been talking with one of her friends who had recently gone to cash in her 401-K after knuckling under to the pressure of a rapidly dropping market. My wife thought it would be much more prudent to buy a larger house than to invest our life savings in the market.
Fortunately for us, I refused to knuckle under and resolved not to sell any of our positions. The process was greatly aided by the fact that the market tur! ned almos! t exactly at the point of my wife's heaviest insistence to liquidate our positions. In the future, I would use her as a "contrarian indicator" and I made a special point to remind her of her wholesale panic whenever she became nervous in regard to a falling market. The experience became extremely important about six years later when the credit crisis developed and our portfolios would lose well over half of their value in a few short months. To her credit, she weathered that storm extremely well.
After the market reversed in the early fall of 2002, our portfolios began an unprecedented run of good fortune. In 2003, the portfolios were up in excess of 80% and by October of 2007 they had more than quadrupled from their trough, around early October of 2002. It was a great five year run; although I never anticipated that approximately that one year later, the majority of those gains would be sacrificed in merely a few short months. But that is a story to be told later in the series.
NDS Group: Making a Bundle in the Smart Card Business
Sometime in 2002, I developed an interest in NDS Group, formerly ticker symbol NNDS. The main business of NDS was designing and manufacturing the smart cards which are installed in every satellite receiver to prevent the unauthorized use of their signal. The business also had developed some other interesting products (such as digital video recorders (DVR)); however at that time Tivo was dominating the sector.
NDS Group had become highly profitable by 2001 and it appeared that the company had excellent growth possibilities. Satellite TV was still in its early stages and possessed outstanding growth potential. Furthermore, the necessity of protecting satellite signals against piracy virtually insured that the company's products would continue to flourish.
At the time, NDS Group was 80% owned by News Corp (NWSA) and they were providing the smart cards for all Direct TV (DTV) receivers. Further, they were one of only three smart card! provider! s and one of their competitors, Canal Plus a Vivendi subsidiary, was struggling with maintaining the security of their smart card systems which they were providing to non-News Corp television companies throughout Europe. It seems that the access codes on their systems were turning up on the internet and bootleggers were stealing the signals. EcoStar, which would later be spun off by DISH, was making the same claims back in the 1990s. Both companies maintained that News Corp, acting through its subsidiary NDS Group, was the culprit. To make a long story short, Canal Plus filed a multi-billion dollar lawsuit against News Corp and later on EcoStar would follow suit.
The Canal Plus lawsuit roiled the price of NNDS and when it dropped to around 12 dollars a share, I decided to buy into the stock. At that time, I was much more apt to invest in businesses where the stock dropped as a result of potential litigation. I simply blocked out the risk angle, assuming that powerful New Corp would eventually prevail. Fortunately for me that turned out to be the case since Vivendi (who controlled Canal Plus) was struggling financially at the time. They agreed to drop the lawsuit when News Corp consented to purchase one of Canal Plus's struggling Italian operations. I figured that settlement would stop the precipitous drop in NNDS; that assumption proved to be incorrect.
One of my major assumptions in the investment was grounded in the belief that News Corp would maintain their alliance with Direct TV and continue to furnish them with their smart cards. Losing that account would severely damage the profits of NNDS and when I entered the investment I believed that News Corp would eventually assimilate Direct TV. Whatever companies that News Corp acquired would obviously use all of the NDS products, insuring sort of a monopoly on their products.
In the fall of 2002, things got worse for NDS Group; EcoStar and Direct TV had attempted to merge and now Direct TV was joining their new alliance in filing ! a lawsuit! against NNDS. It now appeared that NDS Group might be sued out of existence, in addition to losing their smart card account with Direct TV; their contract was set to expire in 2003.
Following the new developments, the stock of NNDS tanked. I believe at one point it fell under five dollars a share. I recall adding considerably to my position at around 7 dollars a share; I nearly tripled my position in the stock. In retrospect, it was a decision that I would not make today; although I probably would have continued to hold on to my original position. At that point in my investing career, I was extremely stubborn about acknowledging that I might have made a mistake in selecting an equity.
As the story unfolded, the merger between DISH and DTV was blocked by the US government and in 2004 NNDS signed a new six year agreement with Direct TV to supply them with smart cards. From that point on the stock rose steadily. I ended up selling all my shares for over 30 dollars a share and recorded my largest long term capital gain to date. The whole scenario took several years to unfold but in the end, my stubbornness had prevailed. Later on I will discuss how my refusal to change my opinion resulted in a financial disaster. Since that time I have become much more conservative and much more apt to change my opinion as the facts and my assumptions of the future profitability a company change. It would seem that I have learned a great deal about managing risk as time has passed.
The story culminated long after I sold my shares in NNDS. The company was eventually taken private for 63 dollars a share in 2008 by News Corp and Permira. In early 2012 Cisco purchased the company; I am unaware of the amount which they paid.
Learning to Love Microcap Stocks
I will conclude Part one of Reflections from 20 Years of Investing (2001- 2008) with the discussion of three more sizable winners: Forward Industries (FORD), Lake Gaming (LACO) and Fairchild (FA).
By 2003 I was developing quit an af! finity fo! r purchasing microcap stocks. Apparently, my early experience with Camtek had not destroyed my interest in investing in tiny companies. I decided that I would start investing significant capital in microcap stocks for the following reasons: They were largely under appreciated and under followed by the investing community, and they were more apt to be mispriced than their larger brethren.
I started following a rather sleazy microcap tout service which was later exposed by Barron's; the service was Ceocast.com. The newsletter did not charge its reading audience a fee; rather they billed the companies which they promoted in the form of cash and shares of their stock. The "pump sheet" was full of extremely low-grade companies which typically traded on the Bulletin Board; however occasionally they would promote a real "diamond-in-the-rough" which traded on a reputable exchange.
Lake Gaming (LACO)
I originally discovered Lake Gaming in the Ceocast newsletter and I eventually purchased shares in the stock, but not for the reasons which the newsletter discussed. Upon reviewing the company, I noticed that Mario Gabelli held a significant position in the stock and it was trading at less than 50% of its tangible book value.
As it turned out, one the major assets the company held, was land on the far south portion of Las Vegas, in close proximity to the airport; they were in the process of monetizing that interest by selling the property to time-share companies. The scenario was reminiscent of Aztar. Furthermore, their balance sheet held significant cash and large amounts of money which was owed to them by certain Indian tribes.
At the end of 2002 the company had a book value in excess of 15 dollars per share. I bought my original position for around 7 dollars a share and following the announcement of non-cash accounting restatement, which had no effect on the book value; the stock dipped to about 4 dollars a share. I doubled my position at around $4.25 per share.
Fate! was on my side in the case of LACO; although their Indian Gaming business would not drive their earnings in the near term, another catalyst was about to emerge in early 2003. Lyle Berman, the CEO of LACO was an avid poker player and he had an idea that provided the impetus for the stock to move forward.
Berman pioneered the idea of the World Poker Tour (WPT) and sold the concept to the Travel Channel. Watching poker on television had always been boring since the viewing audience could not see the down cards which the players held. Berman remedied that problem by allowing a camera to expose the down cards to the TV audience. That idea suddenly transformed Texas Holdem into a fascinating spectator's sport. By the end of 2003 the stock had reached its book value of 15 dollars a share and I decided to take my profits, perhaps a bit prematurely. The stock quickly climbed to about 30 dollars a share on sheer momentum.
In the longer term, the decision to sell turned out to be prudent since the TV success of the WPT never translated into significant profits. The idea may have revolutionized the TV viewing of poker events but it never turned LACO into a cash cow.
Forward Industries (FORD)
Another interesting stock that Ceocast promoted was Forward Industries, a tiny distributor of cell phone covers. What made FORD interesting was a promotion from Nokia which supplied anyone who purchased a new Nokia phone with a free cell phone cover. The cover was included in the box of each new cell phone. As it turned out, FORD was supplying the majority of these cell phone covers for US customers.
The company reported in a quarterly filing in late 2004, that US sales of Nokia phones were accelerating and each unit sold would result in the sale of a Forward-produced cell phone cover. However, it seemed that no one was reading the company's 10Q. I immediately purchased a substantial position in FORD and waited for the company to announce the impending earnings explosion. Ford obliged ! its share! holders by announcing earnings in the middle of the day. The stock exploded shortly after the announcement and quickly attracted the usual momentum traders who follow the day's largest gainers list.
When tiny stocks, with extremely low floats announce an earnings explosion, the result is invariably a rapid multibagger. Unfortunately, such parabolic moves upward generally result in a rapid downward descent as well. Therefore, it is prudent to put in a limit sell order at a price well under the likely apex of the upward movement. In other words, what starts off as a buy generally becomes a short candidate in a matter of days or weeks.
In the case of FORD that is exactly what happened; although the apex of the stock explosion was much higher than I could have imagined and the duration of the move defied logic. I sold out following a quick triple in the mid 6 dollar range, only to watch the stock ascend to the high twenties.
The stock continued to ascend for weeks, while all the time the management continued to exercise options and sell their shares as quickly as possible. The buying frenzy lasted much longer than I anticipated and the management had quickly become multimillionaires by exercising exorbitant option package.
When the promotion ended, FORD quickly returned to a price which better reflected its intrinsic value. Unfortunately, none of the temporary windfall was returned to the shareholders in the form of a special dividend. The only real beneficiaries were the management and the shareholders who recognized their capital gains by selling their shares following the large run up in the share price.
Fairchild (FA)
I will conclude today's discussion with another balance sheet play that resulted in my largest gain at that point in my investing career. The company was Fairchild and I had started accumulating shares in the company, following my reentry to the stock market in the fall of 2001.
It was another company in which Mario Gabelli held a sig! nificant ! position.. I can not recall for certain, but I believe the stock was mentioned by Gabelli on CNBC. As is typical with a Gabelli holding, the stock held real estate which was understated on the balance sheet. Specifically, the company owned a large shopping center in Long Island which was almost fully occupied and provided the heavily debt-burdened company with a steady cash flow.
Fairchild held another asset which was extremely undervalued and held a much high intrinsic net worth than the shopping center. More specifically, Fairchild owned a large airplane fastener company which had recorded well over a half a billion dollars in sales in fiscal year 2002 and was returning the company over 70 million a year in EBITDA.
One of the reasons Gabelli liked Fairchild was due to the fact they were extremely overleveraged. That may sound strange but "The Chairman" believed that the CEO and controlling shareholder, Jeffrey Steiner, would be required to do a deal to prevent the holding company from being forced into bankruptcy proceedings.
Steiner had a reputation for several things: Most importantly, he could be described as a very successful wheeler/dealer that was known for buying businesses and later selling them for a tidy profit. Secondly, he was one of the most notoriously overcompensated CEOs on Wall Street and he controlled the board of directors at Fairchild.
When he made a successful deal he was handsomely rewarded in the form of a bonus as well as drawing an excessive base salary. Steiner's legendary greed was profiled in newspaper articles, business magazines and was even the subject of an entire chapter from the book: "In Search of Excess: The Overcompensation of American Executives".
I bought a large position in Fairchild at around three dollars and when the company dropped to slightly over $2 a share I bought considerably more stock. At that point in my investing career is seems that I was fearless. I as recall, the company represented nearly 20% of my enti! re holding! s when I was finished purchasing the stock. Never before had I taken such a large position as a percentage of my entire portfolios.
In mid July of 2002, I awoke and turned on my living room television set; scrolling across the bottom of the CNBC ticker was the following headline: Alcoa buys Fairchild's fastener division for 657 million in cash. I jumped so high that I almost hit the 8-foot ceiling in my living room. It seems I had hit the mother lode on Fairchild in less than a year's time.
When I performed the calculations, I figured that the sale alone should be worth at least $6.50 a share to the Fairchild shareholders but the stock quickly settled under six dollars per share. I pondered the situation carefully and decided that Steiner would never return a dime to the Fairchild shareholders. I sold my entire position at around $5.50 a share, deciding to pay the short capital gains taxes on the shares in my taxable accounts.
The decision turned out to be prudent since Steiner eventually squandered the entire windfall without returning a dime to the shareholders. Of course he received a tens of millions as a finder's fee for executing the transaction. Gabelli on the other hand, decided to maintain his entire position. For once I had out thought "The Chairman."
Thereafter, Fairchild dropped slowly and steadily, never again reaching the five dollar range. Following the death of Jeffrey Steiner, the company was liquidated at a small percentage of its former price. As I recall it brought a little over a dollar a share.
In the second edition which covers the years between 2001 and 2008, I will profile a number of stocks which involved investment themes, as well as divulging my extensive investments in Chinese stocks. Further, the next article will examine a "perfect storm" which lead to a windfall in the refined sugar business. Last of all, I will reveal an extremely damaging investment which severely compromised my long term returns.
Tuesday, August 13, 2013
Is Seagate a Sensible Investment?
With shares of Seagate Technology Public Limited Company (NASDAQ:STX) trading at around $36.84, is STX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock's Movement
There's a lot of bullishness sentiment ahead of earnings. While it's definitely possible that all these optimists are correct, it's a bit frightening. However, it doesn't matter. The reason it doesn't matter will be explained in the Trends section. For now, here's a quick look at positives and negatives for the company.
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Positives:
4.20 percent yield (higher than peers) Beat expectations last quarter Strong cash flow Margins still strong despite recent contractions Dominant HDD position Strong storage demand from enterprisesNegatives:
Analysts don't favor the stock: 3 Buy, 18 Hold, 4 Sell Average selling price declines Subpar debt management Slowdown in desktop and notebook computersThe chart below compares fundamentals for Seagate, SanDisk (NASDAQ:SNDK), and Western Digital Corporation (NYSE:WDC). Seagate has a market cap of $13.17 billion, SanDisk has a market cap of $12.72 billion, and Western Digital has a market cap of $13.21 billion.
| STX | SNDK | WDC | |
| Trailing P/E | 4.76 | 27.31 | 6.97 |
| Forward P/E | 6.70 | 11.13 | 6.98 |
| Profit Margin | 19.80% | 9.05% | 12.15% |
| ROE | 101.19% | 6.54% | 25.13% |
| Operating Cash Flow | $4.36 Billion | $936.33 Million | $3.56 Billion |
| Dividend Yield | 4.20% | N/A | 1.90% |
| Short Position | 8.40% | N/A | 2.80% |
Let's take a look at some more important numbers prior to forming an opinion on this stock.
E = Equity to Debt Ratio Is Weak
The debt-to-equity ratio for Seagate is weaker than the industry average of 0.20.
| Debt-To-Equity | Cash | Long-Term Debt | |
| STX | Best Value Stocks To Own Right Now0.96 | $1.87 Billion | $2.82 Billion |
| SNDK | 0.24 | $3.31 Billion | $1.72 Billion |
| WDC | 0.24 | $4.06 Billion | $2.01 Billion |
T = Technicals Are Strong
Seagate has outperformed its peers over a three-year time frame. This is in addition to offering the highest yield.
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| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| STX | 0.37% | 20.61% | 29.39% | 109.10% |
| SNDK | -4.60% | 20.53% | 39.52% | 24.77% |
| WDC | 9.92% | 30.79% | 48.41% | 31.13% |
At $36.84, Seagate is trading above all its averages.
| 50-Day SMA | 34.64 |
| 100-Day SMA | 33.49 |
| 200-Day SMA | 31.57 |
E = Earnings Have Been Inconsistent
Seagate's annual earnings have been up and down over the past several years. Revenue has been just as inconsistent.
| 2008 | 2009 | 2010 | 2011 | 2012 | |
| Revenue ($)in billions | 12.71 | 9.81 | 11.40 | 10.97 | 14.94 |
| Diluted EPS ($) | 2.36 | -6.40 | 3.14 | 1.09 | 6.49 |
When we look at the previous quarter on a year-over-year basis, we see improvements in revenue and earnings. However, revenue and earnings both declined on a sequential basis.
| 12/2011 | 3/2012 | 6/2012 | 9/2012 | 12/2012 | |
| Revenue ($)in billions | 3.20 | 4.45 | 4.48 | 3.73 | 3.67 |
| Diluted EPS ($) | 1.28 | 2.48 | 2.36 | 1.42 | 1.30 |
Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
T = Trends Might Support the Industry
The good news is that there has been increased usage in digital content. The bad news is that the U.S. consumer is weak and there has been slowing demand in emerging markets. However, the scariest factor, and the reason earnings don't matter, goes deeper.
Some people believe in the current stock market rally while others feel it's unsustainable. While the rally has potential to continue, it would be difficult to make a solid argument that it's sustainable. Taxes have increased, employment is weak, and deleveraging is imminent. Many companies throughout the broader market are improving earnings by cutting costs. They're not growing. The big problem here is the first thing they cut is employees. If that's the case, then employment weakens further, which then leads to a reduction in consumer spending.
Once again, the market has the potential to continue its momentum as long as Ben continues to be as creative as Oscar Wilde. However, if the market begins to unwind, then this industry, and Seagate in particular, is a dangerous place to be. There is no resiliency. For example, on Jan 2, 2008, Seagate's adjusted close was $17.89. On December 1, 2008, Seagate's adjusted close was $3.78. Those who bought at or near such levels made a bold and superb move. Though there is still room to the upside, greed can lead to trouble.
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Conclusion
Seagate is a good company. On a company-specific basis, it simply needs to catch up a little on the technological end. Seagate is likely to figure out solutions if it finds itself behind the pack. The real concern is the industry's extreme sensitivity to a steep market correction. Since capital preservation is always the priority here, Seagate is a STAY AWAY.
Saturday, August 10, 2013
Is J.C. Penney a Steal at These Prices?
With shares of J.C. Penney (NYSE:JCP) trading around $18, is the company an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
J.C. Penney is a retailer operating 1,102 department stores in 49 states and Puerto Rico. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet website at jcp.com. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside J.C. Penney, and home furnishings. The company has not done too well in recent years but is doing what it can to be a top provider of apparel and related products. The products J.C. Penney is able to produce and market can take the company to rising profits, but it would need to see a change of approach soon.
T = Technicals on the Stock Chart are Weak
J.C. Penney stock has seen a disastrous downtrend fueled by extreme selling pressure over the last few years. The stock is now trading at lows not seen since the 2008 financial crisis. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, J.C. Penney is trading around its flat to declining key averages which signal neutral to bearish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of J.C. Penney options may help determine if investors are bullish, neutral, or bearish.
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| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| J.C. Penney Options | 53.97% | 0% | 2% |
What does this mean? This means that investors or traders are buying a very low amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Steep | Average |
| July Options | Steep | Average |
As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very low amount of call and put option contracts and are leaning neutral to bearish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Decreaseing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on J.C. Penney’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for J.C. Penney look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -110.67% | -518.09% | 16.42% | -1057.14% |
| Revenue Growth (Y-O-Y) | -16.40% | -28.41% | -26.57% | -22.63% |
| Earnings Reaction | -4.15% | 7.37% | -16.96% | -4.84% |
J.C. Penney has seen decreasing earnings and revenue figures over the last four quarters. From these figures, the markets have been very disappointed with J.C. Penney’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has J.C. Penney stock done relative to its peers, Kohl’s (NYSE:KSS), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and the sector?
| J.C. Penney | Kohl’s | Macy’s | Sears | Sector | |
| Year-to-Date Return | -5.02% | 20.13% | 26.68% | 18.45% | 18.24% |
J.C. Penney has been a poor relative performer, year-to-date.
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Conclusion
J.C. Penney provides apparel and related products to consumers across the nation utilizing its website and over a thousand retail stores. The stock has been the subject of increased selling over the last few years, which has taken it to prices not seen since the 2008 financial crisis. Over the last four quarters, earnings and revenue figures have decreased, which has led to disappointed investors. Relative to its peers and sector, J.C. Penney has been a poor year-to-date performer. STAY AWAY from J.C. Penney stock for now.
Thursday, August 8, 2013
3 Numbers That Will Drive Stocks in June
U.S. stock markets have had a strong start to 2013, with both the Dow Jones Industrial Average (DJINDICES: ^DJI ) and S&P 500 (SNPINDEX: ^GSPC ) gaining more than 15% in the first five months of the year. Consumers have shrugged off higher payroll taxes and confidence has risen to a six0year high while budget cuts have led to a falling federal deficit and even surpluses in state and local governments. This have given investors enough confidence to bet that the second half of 2013 will be driven by GDP growth and falling unemployment.
Add it all up, and despite a bad hour of trading on Friday, the markets are having a great year.
^DJITR data by YCharts
What will continue to fuel this run are a falling unemployment rate, continued low interest rates, and low energy costs.
Unemployment
On Friday, the Department of Labor releases nonfarm payrolls for May and the unemployment rate. Economists expect a slight increase in hiring to 170,000 workers for the month and a steady unemployment rate of 7.5%.
Within those numbers we should watch for trends in government hiring and whether or not people are entering or leaving the workforce. Over the past two years, cuts at state, local, and federal governments have been a huge drag on employment, but with budgets improving, the negative trends should begin to subside. The labor force participation rate is also important, so look for any uptick in people entering the workforce. That would indicate that people feel more positive about job their prospects than they were last year.
Interest rates
We've enjoyed historically low interest rates since the financial crisis, a trend that needs to end someday. Last week, comments from the Federal Reserve indicated that the central bank may see an end to its bond-buying program, and mortgage rates shot up as a result.
US 30 Year Mortgage Rate data by YCharts
Since housing has helped fuel the recovery in the past two years, mortgage rates are a key input into the economy. If rates rise too far, too fast, it could stall homebuying and homebuilding, putting a drag on the economy. I don't think Ben Bernanke and his friends at the Fed will let that happen, but the big jump last week is worth keeping an eye on this month.
Ironically, these rising rates are actually good for big banks, and both Bank of America (NYSE: BAC ) and JPMorgan Chase (NYSE: JPM ) were beneficiaries of higher rates last week. That's because they can borrow money short-term at near 0% interest and lend it out in the form of mortgages or business loans at higher rates. If long-term rates go up and short-term rates stay low, it's great for bank profits.
The cost of a tank of gas
The third figure to watch this month is the cost to fill your tank with gas. We have an abundance of oil in the U.S,. with inventories near all-time highs, but the price of gas is still up 11% in the past year.
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US Retail Gas Price data by YCharts
The good news is that production from shale is increasing supply and more efficient vehicles are keeping demand flat. If those two trends continue and refineries increase utilization heading into summer, we could see gas prices fall. That would be great news for the economy and could help fuel growth in the second half of the year. According to Gas Buddy, the average gallon of gas costs $3.64 in the U.S., so keep an eye on that figure during June.
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Wednesday, August 7, 2013
Why I Own Netflix Stock
Netflix (NASDAQ: NFLX ) shares have more than quadrupled in value from last summer's 52-week lows, but the stock is as controversial as ever. A long-term content deal with Walt Disney (NYSE: DIS ) may set the company apart from a rising tide of competition -- but the deal doesn't take effect for another couple of years. Why would anybody buy Netflix stock at today's rapidly rising prices, and what would it take to make a long-term shareholder sell? Shouldn't shareholders worry about rising content costs?
In the video below, Fool contributor Anders Bylund answers these key questions from his own Netflix-owning perspective.
Can Netflix fend off burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.
Tuesday, August 6, 2013
These 3 Stocks Made the Dow Soar for Decades
Yesterday, the Dow Jones Industrials (DJINDICES: ^DJI ) set yet another all-time record high, the latest in a string of more than 20 new records so far this year. But for long-term investors, it's far more important to focus on the long haul than to get carried away in the bull market of the moment.
In order to get you thinking more about the long run, I did some digging around to look for stocks that have contributed the most to the gains in the Dow not just in 2013 but over the course of nearly a century of stock market ups and downs. With some help from S&P Dow Jones Indices, here are three stocks that dramatically outperformed the Dow during their tenure as components of the Industrial Average.
3. Procter & Gamble (NYSE: PG )
Consumer giant P&G has been in the Dow since 1932, and since then, the stock has posted a total return of more than 61,000%, nearly tripling the Dow's 21,600% gain over the same time period. Yet P&G had been around for nearly a century before joining the Dow, as the fledgling soap and candle business started operating in 1837 and hit sales of $1 million by 1859. From early products like Ivory soap and Crisco shortening to more recent innovations like Tide laundry detergent, Procter & Gamble has anticipated the needs of consumers and made household products to meet those needs. With annual income going from just over $9 million in the year it joined the Dow to $10.8 billion last year, P&G has delivered the fundamentals that have supported its big share-price run-up.
2. ExxonMobil (NYSE: XOM )
Joining the Dow as the Standard Oil Company of New Jersey, the company we know now as ExxonMobil is the product of some massive mergers over the years, with the most recent being the joinder of Exxon and Mobil that was completed in 1999. Since joining the Dow in 1928, Exxon has produced total returns of 109,000%, compared to just a 4,400% gain for the Dow, reflecting a much higher starting point from before the Crash of 1929.
10 Best Safest Stocks For 2014
Interestingly, though, Exxon could potentially have been larger still if it hadn't been for antitrust litigation against Standard Oil that broke up the company in 1911. Although Standard Oil of New York eventually became Mobil and therefore came back into the fold, Standard Oil of California later became the other major Dow energy component, Chevron (NYSE: CVX ) . Other parts of the company became parts of most of the other major oil companies in existence now, many of which have produced impressive returns of their own.
1. Sears, Roebuck
Sears isn't part of the Dow anymore, and the decision to eject Sears from Dow was one of the best timing decisions the average ever made. From 1924 to 1999, Sears produced returns of nearly 238,000%, crushing the Dow's return of less than 11,000% over the same period.
Known best for its pioneering catalog sales, Sears went on to become a big-box retail giant. Of course, shortly after its exit from the Dow, the company fell on hard times, eventually declaring bankruptcy and coming back as part of Sears Holdings (NASDAQ: SHLD ) . The company has never returned to its former glory, but those long-term investors who got out of the stock earned some of the best returns the Dow has ever known.
Sticking with winners
You won't often find stocks that perform this well even over the long haul, and most investors don't have a time horizon of 75 years or longer. But these examples show the effectiveness of long-term investing if you're fortunate enough to identify companies that have staying power to last for generations.
If you're looking for some more long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.
Monday, August 5, 2013
5 Tech Stocks Under $10 Triggering Breakouts
DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.
Stocks that are making large moves like these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.
Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.
With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside today.
Relm Wireless
Relm Wireless (RWC) is engaged in the designing, manufacturing and marketing wireless communications products consisting of two-way land mobile radios, repeaters, base stations and related components and subsystems. This stock closed up 2.8% to $3.58 in Tuesday's trading session.
Tuesday's Range: $3.40-$3.58
52-Week Range: $1.42-$3.74
Tuesday's Volume: 106,000
Three-Month Average Volume: 74,659
From a technical perspective, RWC trended higher here right above some near-term support levels at $3.20 to $3.10 with above-average volume. This stock has been uptrending for the last two months, with shares moving higher from its low of $2.62 to its intraday high of $3.58. During that move, shares of RWC have been making mostly higher lows and higher highs, which is bullish technical price action. That move is quickly pushing shares of RWC within range of triggering a major breakout trade. That trade will hit if RWC manages to take out its 52-week high at $3.74 with high volume.
Traders should now look for long-biased trades in RWC as long as it's trending above some near-term support levels at $3.20 or its 50-day at $3.10 and then once it sustains a move or close above $3.74 with volume that hits near or above 74,659 shares. If that breakout hits soon, then RWC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $4.50 to $5.
AudioCodes
AudioCodes (AUDC) designs, develops and sells products and services for voice and data over packet networks. This stock closed up 8.4% to $4.75 in Tuesday's trading session.
Tuesday's Range: $4.57-$4.86
52-Week Range: $1.20-$5.04
Tuesday's Volume: 493,000
Three-Month Average Volume: 108,175
From a technical perspective, AUDC gapped higher here right above its 50-day moving average of $4.43 with heavy upside volume. This move is quickly pushing shares of AUDC within range of triggering a major breakout trade. That trade will hit if AUDC manages to take out its 52-week high at $5.04 with high volume.
Traders should now look for long-biased trades in AUDC as long as it's trending above its 50-day at $4.43 or above more support at $4.29 and then once it sustains a move or close above its 52-week high at $5.04 with volume that hits near or above 108,175 shares. If that breakout hits soon, then AUDC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $5.75 to $6.50, or even $7.
Mattson Technology
Mattson Technology (MTSN) designs, manufactures and markets semiconductor wafer processing equipment used in the fabrication of integrated circuits. This stock closed up 5.1% to $2.25 in Tuesday's trading session.
Tuesday's Range: $2.15-$2.30
52-Week Range: $0.70-$2.55
Tuesday's Volume: 593,000
Three-Month Average Volume: 825,998
From a technical perspective, MTSN bounced higher here back above its 50-day moving average at $2.23 with lighter-than-average volume. It looks like MTSN has now put in a double bottom chart pattern, since the stock has found some buying interest over the last month at $2.05 to $2.07. If that bottom can hold, then shares of MTSN will not set up to trigger a major breakout trade. That trade will hit if MTSN manages to take out some near-term overhead resistance levels at $2.40 to $2.52 and then once it clears its 52-week high at $2.55 with high volume.
Traders should now look for long-biased trades in MTSN as long as it's trending above $2.07 to $2.05 and then once it sustains a move or close above those breakout levels with volume that hits near or above 825,998 shares. If that breakout hits soon, then MTSN will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are its next major overhead resistance levels at $3.17 to its three-year high at $3.30.
PCTEL
PCTEL (PCTI) designs and develops software-based radios for wireless network optimization and develops and distributes innovative antenna solutions. This stock closed up 1.1% to $9.83 in Tuesday's trading session.
Tuesday's Range: $9.70-$9.85
52-Week Range: $5.65-$10.00
Thursday's Volume: 77,000
Three-Month Average Volume: 80,200
From a technical perspective, PCTI bounced modestly higher here right above some near-term support at $9.50 with decent upside volume. This stock has been trending sideways in a consolidation pattern for the last month, with shares moving between $9.08 on the downside and $10 on the upside. Shares of PCTI are now quickly moving within range of triggering a major breakout trade. That trade will hit if PCTI manages to take out its 52-week high at $10 with high volume.
Traders should now look for long-biased trades in PCTI as long as it's trending above near-term support at $9.50 or above $9.08 and then once it sustains a move or close above $10 with volume that hits near or above 80,200 shares. If that breakout triggers soon, then PCTI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $12 to $13.
Windstream
Windstream (WIN) is a provider of advanced communications and technology solutions, including managed services and cloud computing, to businesses nationwide. It offers broadband, voice and video services to consumers in primarily rural markets. This stock closed up 1.2% to $8.38 in Tuesday's trading session.
Tuesday's Range: $8.25-$8.44
52-Week Range: $7.50-$11.04
Thursday's Volume: 10.29 million
Three-Month Average Volume: 7.64 million
From a technical perspective, WIN trended up modestly here back above its 200-day moving average at $8.32 with heavy upside volume. This move is quickly pushing shares of WIN within range of triggering a major breakout trade. That trade will hit if WIN manages to take out the upper-end of its recent trading range at $8.57 to $8.60 with high volume.
Traders should now look for long-biased trades in WIN as long as it's trending above its 50-day at $7.97 and then once it sustains a move or close above those breakout levels with volume that hits near or above 7.64 million shares. If that breakout triggers soon, then WIN will set up to re-fill its previous gap down zone from February that started near $9.25. Any high-volume move above $9.25 to $9.40 will then put $10 to $10.13 into range for shares of WIN.
To see more stocks that are making notable moves higher today, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
Sunday, August 4, 2013
Top 5 High Tech Companies To Own For 2014
Although business headlines still tout earnings numbers, many investors have moved past net earnings as a measure of a company's economic output. That's because earnings are very often less trustworthy than cash flow, since earnings are more open to manipulation based on dubious judgment calls.
Earnings' unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Healthways (Nasdaq: HWAY ) , whose recent revenue and earnings are plotted below.
Top 5 High Tech Companies To Own For 2014: lancashire hldgs com stk usd0(LRE.L)
Lancashire Holdings Limited, through its subsidiaries, provides specialty insurance and reinsurance products worldwide. The company underwrites risks within the property, energy, marine, and aviation segments, as well as terrorism, and political risks. It also provides coverage for natural catastrophes. The company is headquartered in Hamilton, Bermuda.
Top 5 High Tech Companies To Own For 2014: Hewlett-Packard Company(HPQ)
Hewlett-Packard Company and its subsidiaries provide products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Its Personal Systems Group segment offers commercial personal computers (PCs), consumer PCs, workstations, calculators and other related accessories, and software and services for the commercial and consumer markets. The company?s Services segment provides consulting, outsourcing, and technology services to infrastructure, applications, and business process domains. Its Imaging and Printing Group segment provides consumer and commercial printer hardware, supplies, media, and scanning devices, such as inkjet and Web solutions, laser jet and enterprise solutions, managed enterprise solutions, graphics solutions, and printer supplies. The company?s Enterprise Servers, Storage, and Networking segment offers industry standard s ervers, business critical systems, storage platforms, and networking products, including switches, routers, wireless LAN, and TippingPoint network security products. Its HP Software segment provides enterprise IT management software, information management solutions, and security intelligence/risk management solutions. The company?s HP Financial Services segment offers leasing, financing, utility programs, and asset recovery services; and financial asset management services for enterprise customers, as well as specialized financial services to SMBs, and educational and governmental entities. Hewlett-Packard Company also provides business intelligence solutions that enable businesses to standardize on consistent data management schemes, connect and share data across the enterprise, and apply analytics, as well as licenses its specific technology to third parties. The company was founded in 1939 and is headquartered in Palo Alto, California.
Advisors' Opinion:- [By Jim Cramer]
Nope, not the one to own in 2011. I think that HP has taken a step backward and is now ripe for the pickings of every other company in the space, whether it be . Accenture (ACN) on the consulting side or . EMC (EMC) on the server side or Oracle (ORCL) with Sun on the hardware and software side or Apple (AAPL) on the PC side. I just don't see this company doing anything this year, and I really don't understand the strategy or the vision, in part because of a new CEO who hasn't explained it yet and in part because of the old CEO who left on such a bad note. I don't see a pickup in earnings and I think that the stock could finish lower than it starts. Call it $40. I hope I am wrong because I think that 2011 will be a good year for tech in general, but not for this company.
- [By Smart Money]
Forward P/E: 9.2.
Five-year average forward P/E: 13.8.
Discount to five-year average: 33%.
As the world's biggest maker of personal computers and printers, Hewlett-Packard (HPQ) has two knocks against it -- neither of its major markets is particularly attractive these days, says Kim Caughey, senior analyst at Fort Pitt Capital Group in Pittsburgh.
"In the PC market, HP is fighting deflation," Caughey says. "Next year's hardware is always going to be faster, better, cheaper."
The Palo Alto, Calif., company's printer and printing business is suffering as companies downsize, she says; fewer workers translates into less printing.
Even worse is what could happen to HP's margins as demand grows for tiny, cheap netbook computers. "I'm looking into people's pockets and I believe they will be sending their kids back to school with netbooks," says Caughey. "The (profit) margin on netbooks is terrible."
That's part of the bigger problem with a company as consumer-focused as HP. If folks don't have the money, they can't spend it. For that reason, Caughey thinks Hewlett-Packard's shares, while valued at a low multiple, are unattractive.
- [By Jon C. Ogg]
Hewlett-Packard Co. (NYSE: HPQ) was the worst story of all 30 DJIA stocks in 2013. Unfortunately, what was bad is expected to get worse in 2013. With a downside price target of $13.53, HP shares are now expected to fall just over 5%, even with this yielding 3.5% now. HP’s woes do not stop with the Autonomy acquisition woes. Meg Whitman has fired many employees but warned that a real turnaround might not take hold until all the way into 2016. We expect more asset sales and ultimately more layoffs. HP’s position was not helped out after it became known that famous short sellers are continuing to bet against this PC and IT-services giant.
Best China Stocks For 2014: Key Tronic Corporation(KTCC)
Key Tronic Corporation, doing business as KeyTronicEMS Co., together with its subsidiaries, provides electronic manufacturing services (EMS) to original equipment manufacturers primarily in the United States, Mexico, and China. Its EMS services include product design, surface mount technologies for printed circuit board assembly, tool making, precision plastic molding, liquid injection molding, automated tape winding, prototype design, and full product builds. The company also manufactures keyboards and other input devices for personal computers. Key Tronic markets its products and services primarily through its direct sales department aided by field sales people and distributors. The company was founded in 1968 and is headquartered in Spokane Valley, Washington.
Top 5 High Tech Companies To Own For 2014: Tennant Creek Gold Ltd(TNG.AX)
TNG Limited engages in the exploration, evaluation, and development of mineral resource projects in the Northern Territory and Western Australia. The company explores for gold, zinc, lead, silver, vanadium, titanium, iron, nickel, cobalt, and copper. It principally holds 100% interest in the Mount Peake project located in the Arunta geological province; and the Manbarrum project located to the north-east of the township of Kununurra in the northern territory. The company is based in Subiaco, Australia.
Top 5 High Tech Companies To Own For 2014: FreeSeas Inc.(FREE)
FreeSeas Inc., through its subsidiaries, operates as a bulk transportation company. The company transports various drybulk commodities, including iron ore, grain, and coal, as well as bauxite, phosphate, fertilizers, steel products, cement, sugar, rice, and minor bulks. As of December 31, 2010, it owned and operated nine vessels, including seven Handysize and two Handymax dry bulk carriers. The company was formerly known as Adventure Holdings S.A. and changed its name to FreeSeas Inc. in April 2005. FreeSeas Inc. was incorporated in 2004 and is based in Piraeus, Greece.
Saturday, August 3, 2013
Best Warren Buffett Companies To Own For 2014
In this segment from Thursday's edition of The Motley Fool's everything-financials show, Where the Money Is, banking analysts Matt Koppenheffer and David Hanson discuss the growing concerns around former students being unable to repay loans and the potential reputational risk facing the big banks holding some of these loans.
While many of the biggest banks have scaled back student lending, some firms like Discover Financial Services have moved into the area more aggressively. Matt and David tell investors if they see this as a reason to be nervous about holding a big bank stock.
It's not just student loans...
Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's�new report. It's free, so click here to access it now.
Best Warren Buffett Companies To Own For 2014: Strategic Energy Resources Ltd (SER.AX)
Strategic Energy Resources Limited engages in the exploration for oil and gas, and mineral properties in Australia. It primarily explores for oil and gas, iron oxide, copper, gold, nickel, graphite, and other base metals. The company holds interests in offshore petroleum exploration permits in the Gippsland Basin, Victoria; and in onshore petroleum exploration block in the Cooper Basin, South Australia. It also has interests in the flake graphite deposit located in Uley, South Australia; and mineral exploration licenses for projects in South Australia and Western Australia. Strategic Energy Resources Limited is based in Melbourne, Australia.
Best Warren Buffett Companies To Own For 2014: Gaz Metro Ltd Partnership (VNR.TO)
Valener Inc. engages in the distribution of natural gas to residential and commercial customers in Canada. It holds a 29% interest in Gaz Metro Limited Partnership, which distributes natural gas to approximately 182,000 customers in Quebec and 138,000 customers in Vermont. The company also has a 24.5% indirect interest in the Seigneurie de Beaupr茅 wind power project located on the private lands of S茅minaire de Qu茅bec. The company was incorporated in 2010 and is headquartered in Montreal, Canada.
Top 5 Penny Stocks To Watch Right Now: Lihua International Inc.(LIWA)
Lihua International, Inc., through its subsidiaries, produces copper replacement products in the People?s Republic of China. It develops, designs, manufactures, markets, and distributes refined copper products, including copper anode, copper rod, pure superfine copper wire, and copper-clad aluminum superfine wire. The company offers its products in various diameters ranging from 0.03 mm to 0.18 mm. Its copper rod based wire products comprise cable products used for telephone drop wire and conductors; electric utilities; transmission lines, grid wire, fence, and structured grounds; industrial drop wire, magnet wire, battery cables, and automotive wiring harnesses; and radio frequency shielding, as well as magnet wire products used in electronic motors, transformers, water pumps, automobile meters, energy, industrial, commercial, and residential industries. It produces and distributes copper superfine wire in various forms, including fine wire to smaller wire manufacturers for further processing; magnet wire that is used for electrical conductivity in a range of motorized appliances; and tin plated wire for the transmission of audio and visual signals. Lihua International manufactures and sells copper anode to copper entities, which produce and sell copper cathode to copper products manufacturers. The company sells its products directly to manufacturers or through distributors in the wire and cable industries, as well as to manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications, and specialty cable industries. The company is headquartered in Danyang, the People?s Republic of China.
Best Warren Buffett Companies To Own For 2014: Savaria Corp Com Npv (SIS.TO)
Savaria Corporation designs, manufactures, and distributes accessibility equipment for people with mobility challenges; and elevators for commercial and residential applications. It offers home elevators, including infinity, eclipse, and telecab home elevators; commercial elevators, such as the Orion elevators; B.07 and SL-1000 stair lifts; wheelchair conversions for rear, side, and dual entry systems for personal and commercial needs; Roby mobile tracked systems and automatic sliding doors; and door and gate openers, swing doors, and powered scooters. The company also provides wheelchair lifts, such as multi lift, V-1504, and pro lift vertical platform lifts; and ES-125, delta, omega, S64, and C65 inclined platform lifts. In addition, it offers resources for assisting architects in home and commercial projects; lowered-floor minivans and other vehicles to accommodate wheelchairs; and converts automotive vehicles. The company sells its products through a network of retaile rs. Savaria Corporation was founded in 1979 and is headquartered in Laval, Canada.
Best Warren Buffett Companies To Own For 2014: Hancock Holding Company(HBHC)
Hancock Holding Company, a financial holding company, provides various banking and financial services in south Mississippi, Louisiana, South Alabama, and Florida. The company accepts various deposit products that include non-interest bearing demand deposits, NOW account deposits, money market deposits, savings deposits, and time deposits. Its loan portfolio comprises provision of commercial, consumer, commercial leasing, and real estate loans to consumers and small and middle market businesses. Hancock also offers various trust services that include operating as an executor, administrator, or guardian in administering estates; provision of investment custodial services for individuals, businesses, and charitable and religious organizations, as well as investment management services on an agency basis; and trustee services for pension plans, profit sharing plans, corporate and municipal bond issues, living trusts, life insurance trusts, and various other types of trusts cre ated for individuals, businesses, and charitable and religious organizations. In addition, it provides consumer financing services; owns, manages, and maintains real property; offers general insurance agency services; holds investment securities; markets credit life insurance; and engages in discount investment brokerage services, as well as owns approximately 3,700 acres of timber land in Hancock County, Mississippi. The company operates 182 banking and financial services offices and 161 automated teller machines. Hancock Holding Company was founded in 1899 and is headquartered in Gulfport, Mississippi.
Best Warren Buffett Companies To Own For 2014: United Fire & Casualty Company(UFCS)
United Fire Group, Inc. engages in the writing of property, casualty, and life insurances. It sells annuities through a network of independent agencies. The company?s property and casualty insurance segment comprises commercial lines insurance products, including surety bonds, personal lines insurance, and assumed insurance. Its life insurance segment consists of deferred and immediate annuities, universal life insurance products, and traditional life insurance products. The company was founded in 1946 and is headquartered in Cedar Rapids, Iowa.
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