Friday, August 29, 2014

Seeking Alpha: Order Growth Starting To Support The MTS Systems Story

MTS Systems (NASDAQ:MTSC) is not at all a well-known company - just two analysts follow this manufacturer of industrial testing systems and sensors - but what it lacks in popularity may not matter to patient investors. The company is well-placed to take advantage of growth in the Chinese auto OEM sector, as well the ongoing trend across multiple industries to make greater use of composite materials, and is supplementing its traditional strength in testing systems with a growing higher-margin sensor business and an increased focus on service.

These shares have more or less tracked the S&P 500 since my initial write-up in September, but better things could be in store relatively soon. Order levels have accelerated recently and the company should be nearing the end of margin pressures tied to upfront spending meant to grow the service business. Although I still do not believe the company will hit management's ambitious revenue growth targets over the next few years, the shares do appear undervalued and hitting those targets could be an invaluable source of upside.

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Order Growth Starting To Support The MTS Systems Story

Seeking Alpha: Rofin-Sinar Still Not Up To Speed

Rofin-Sinar Technologies (NASDAQ:RSTI) remains frustratingly stuck in "muddle through" mode as waiting for a return to growth has sometimes felt like waiting for Godot. The company's performance in fiber lasers continues to be erratic and while management has made some progress with underlying manufacturing margins, improvements in demand from machine tool and semiconductor customers haven't offset weakness in consumer electronics and solar markets.

What to do about the shares, then? I still like IPG Photonics (NASDAQ:IPGP) better as a business, but back in February/March I thought that Rofin-Sinar looked a little undervalued on a relative basis. Since my last Rofin-Sinar piece, Rofin-Sinar shares have risen about five percent and outperformed its peer group (except for GSI Group (NASDAQ:GSIG)), but not by a lot. I still think these shares are undervalued on a long-term basis (assuming mid-single digit revenue and FCF growth), but the combined impact of high-end fiber laser competition from IPG Photonics and low-end competition from Chinese manufacturers is a real risk to consider.

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Rofin-Sinar Still Not Up To Speed

Seeking Alpha: XPO Logistics Sticking To Its Guns

XPO Logistics (NYSE:XPO) is quite possibly one of the most controversial names I follow, with every article I write seemingly bringing more than its share of "I'll believe it if/when I see it" skepticism on the company's growth-by-acquisition plans. There is no doubt that management's strategy is exceptionally aggressive and the company has shifted (or perhaps broadened) its strategy from asset-light truck brokerage to a more comprehensive third-party logistics (or 3PL) portfolio.

There are good reasons to be skeptical of stories like XPO Logistics. Rampant M&A makes it harder to suss out the real underlying performance of the business and creates opportunities for accounting that runs from ambitious to aggressive to outright wrong. On the other hand, the shares are up more than 80% from when I first wrote on them and the 3PL sector not only offers good underlying growth but numerous consolidation opportunities. I won't dismiss the risk that this is a big game of musical chairs, but I know that Wall Street can't help itself when it comes to growth and XPO Logistics could have a great deal more of that in store in the coming years.

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XPO Logistics Sticking To Its Guns

Thursday, August 28, 2014

Seeking Alpha: Hollysys Offsetting Weak IA With Strong Rail

Chinese automation and control systems developer HollySys Automation Technologies (NASDAQ:HOLI) continues to come along nicely. The shares are up more than 100% from when I first mentioned them on Seeking Alpha, and up more than 20% since my last write-up, as the company continues to gain share in the Chinese industrial automation sector and leverage growth in train infrastructure. Although the shares are not extremely cheap (at least not on the basis of my current assumptions), the opportunity to leverage double-digit underlying growth in rail infrastructure and take more share in the industrial automation market, all while growing its ex-China business, is still pretty significant and I wouldn't be in a hurry to exit or dismiss this story.

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Hollysys Offsetting Weak IA With Strong Rail

Seeking Alpha: Taminco Should Be Switching Over To Cash Generation

The ag chemical market has slowed, as seen recently at FMC (NYSE:FMC) and DuPont (NYSE:DD), but Taminco's (NYSE:TAM) strong market share and diverse end markets for its alkylamine products are serving the company pretty well. The shares have done okay since my mid-February write-up, rising about 10% and doing pretty well relative to direct rivals like DuPont and BASF (OTCQX:BASFY) and the Dow Jones Specialty Chemicals Index. I continue to believe that Taminco is a solid specialty chemical company with better growth and return on capital prospects than its peers, not to mention deleveraging potential, but the valuation is creeping up a bit and this looks more like a "buy on weakness" than outright buy right now.

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Taminco Should Be Switching Over To Cash Generation

Seeking Alpha: Chart Industries Has Deflated On A Slower LNG Buildout

It's been a rough year for companies tied to the LNG infrastructure market, as once-rich valuations continue to smack into the reality that development of the U.S. market remains frustratingly slow and China continues to be consistently inconsistent. Chart Industries (NASDAQ:GTLS) is down another 15% or so from when I last wrote about the company but still sports a double-digit trailing EBITDA, while Westport (NASDAQ:WPRT), Clean Energy (NASDAQ:CLNE), Linde (OTCPK:LNEGY), and CBI (NYSE:CBI) are likewise all down on a year-to-date basis.

The arguments for an LNG capacity build out still make sense - the U.S. has extensive natural gas reserves and LNG offers not only an alternative to oil-based fuels but also a way for countries like China to address air quality issues. Chart Industries addresses those opportunities with leading technologies in heat exchangers, storage, and distribution, but even after a 40% pullback the expectations built into the valuation don't exactly seem undemanding.

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Chart Industries Has Deflated On A Slower LNG Buildout

Seeking Alpha: Can DigitalGlobe Relaunch After A Reset To Expectations?

Overheated expectations for DigitalGlobe's (NYSE:DGI) commercial business came home to roost earlier this year, when weak guidance after fourth quarter earnings sent the shares down 30%. Since then, management has seen a successful satellite launch and the U.S. government agree to allow them to sell higher-resolution images to its customers, as well as announcing a share buyback. Although the commercial opportunity is still a "show me story", DigitalGlobe does have the advantage of offering the best quality images in the market. Revised expectations still offer upside, but the company would probably serve its interests more effectvely by better managing analyst expectations.

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Can DigitalGlobe Relaunch After A Reset To Expectations?

Wednesday, August 27, 2014

Seeking Alpha: Thompson Creek Not Yet Past The Point Of Hard Decisions

This has been a pretty good year for a number of Canadian base metal miners, with First Quantum (OTCPK:FQVLF), HudBay (NYSE:HBM), Copper Mountain (OTCPK:CPPMF), and Thompson Creek (NYSE:TC) all doing pretty well since the start of the year. Thompson Creek's path to this point hasn't exactly been smooth (the shares are down about 25% over the past 12 months), and there are still quite a few uncertainties with respect to the company's plans for its molybdenum operations, as well as it how will resolve ongoing ore hardness issues at Mt. Milligan.

The company seems to be past the worst of its liquidity pressures, though, and should be free cash flow-positive from 2014 forward (unless base metal prices get very weak). Future decisions on how to proceed at the Thompson Creek mine and whether to add a second crusher to Mt. Milligan could have material impacts on the net asset value, but as things stand today, I believe the shares are still undervalued.

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Thompson Creek Not Yet Past The Point Of Hard Decisions

Seeking Alpha: Alaska Air Continues To Hold Its Own

Airlines are making the most of an atypical outbreak of sane, responsible management across the industry, and Alaska Air Group (NYSE:ALK) has certainly been among the beneficiaries. While the company has done pretty well for itself (and its shareholders) over the last few years, the stock has been a relative underperformer more recently on worries that Delta Air Lines' (NYSE:DAL) aggressive expansion into Seattle will start to impact the company's performance. Trading below industry-average multiples and doing better than the bears predicted, Alaska Air still appears to offer some upside but readers may want to note that the airline rally could be getting a little long in the tooth.

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Alaska Air Continues To Hold Its Own

Seeking Alpha: GenMark Diagnostics Hoping To Make Its Mark In Clinical MDx

Molecular diagnostics is still a relatively new opportunity in the clinical diagnostics space - about $4 billion/year if Roche's (OTCQX:RHHBY) estimates of its market share are accurate. It remains a good growth opportunity, though, as molecular diagnostic technologies can in many cases offer faster and more accurate results for healthcare providers. GenMark Diagnostics (NASDAQ:GNMK) is looking to emerge as a leader in hospital/lab-based multiplex molecular diagnostics with a new system (ePlex) designed to deliver fast and accurate results with good throughput.

GenMark's existing business isn't going to take the business very far, so a great deal is riding on that new system. The performance specs look very competitive, but rivals aren't going to back it in and give up. This remains an exceptionally speculative story, but one with worthwhile upside from here if the 2015 launch goes well. While the stock has been weak since my last article (along with many other riskier med-tech stories), I think the name is still worth consideration.

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GenMark Diagnostics Hoping To Make Its Mark In Clinical MDx

Seeking Alpha: Quebecor Has A Big Decision To Make In Wireless

These are interesting days for Quebecor (OTCPK:QBCRF) (QBR-B.TO). The Canadian government has made it clear that they'd like a fourth national wireless service provider, but Quebecor has been cagey about how it will approach this opportunity - leaving a lot of speculation and concern in the market as to the company's plans. In the meantime, the newly restructured media assets business seem to be doing better, while the company's Videostron operation is trying to balance weak subs with better margins.

I liked Qubecor in early February, thinking that the market was underestimating what the company could do with its margins and applying too much of a discount to the wireless operations. The shares are up more than 15% since then, beating the S&P 500 and keeping pace with the TSX. Quebecor has also done quite a bit better than BCE (NYSE:BCE) and Telus (NYSE:TU) over that stretch. I still think there's double-digit potential in these shares, but readers considering them should recognize that greater clarity on the company's wireless plans may be a key in getting more value into the stock price.

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Quebecor Has A Big Decision To Make In Wireless

Tuesday, August 26, 2014

Seeking Alpha: With An Iffy Non-Oncology Pipeline, Roche Pays Up For InterMune

Roche (OTCQX:RHHBY) does a lot of things well. It is one of the largest players in oncology and markets three of the top ten best-selling drugs in the world. It also has a strong diagnostics business and a deep immuno-oncology platform. What Roche has not done so well, though, is develop new drugs outside of oncology, with notable recent failures in cardiology, diabetes, and CNS disease. Given those failures, and perhaps seeing an opportunity to leverage existing efforts in pulmonary/respiratory disease, Roche has stepped up with an expensive bid for InterMune (NASDAQ:ITMN).

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With An Iffy Non-Oncology Pipeline, Roche Pays Up For InterMune

Seeking Alpha: Synergy Resources Offers Strong Production Growth And Drilling Upside

Wattenberg operators have done pretty well this year, and results from the Niobrara and Codell formations continue to support solid IRRs on these wells. Since I wrote about Synergy Resources (NYSEMKT:SYRG) in late January, the shares are up about 44% - a little better than Bonanza Creek (NYSE:BCEI) and about double the return of PDC Energy (NASDAQ:PDCE) over that period. Synergy's quarterly production numbers have come in a little soft relative to expectations, but the company's drilling results have offset this with solid IP rates and good well cost controls. The shares do not look cheap on the basis of peer-level EBITDA multiples, but I would argue that Synergy's triple-digit oil growth deserves a premium and the company's core Wattenberg drilling inventory supports a mid-teens fair value.

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Synergy Resources Offers Strong Production Growth And Drilling Upside

Seeking Alpha: Bukit Asam's Production And Delivery Growth Offset Weak Pricing

The coal market has been lousy for most of the major U.S. and international producers, but PT Tambang Batubara Bukit Asam ("Bukit Asam") (OTCPK:TBNGY) has been a notable exception. Between organic production growth, strong domestic prices, and good cost control, Bukit Asam shares have jumped 50% since I wrote about the company in January, handily beating China Shenhua (OTCPK:CSUAY), Peabody (NYSE:BTU), and U.S. producers like Cloud Peak and Arch Coal (NYSE:ACI). I do see some long-term upside from the company's aggressive production growth plans and an eventual seaborne thermal coal price recovery, but I don't see as much near-term value in the shares right now.

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Bukit Asam's Production And Delivery Growth Offset Weak Pricing

Seeking Alpha: Mount Gibson Iron Still Needs To Buy Its Future

I wasn't overly fond of Mount Gibson Iron (OTC:MTGRF) back in January of this year, as I wasn't enamored of the company's production outlook, its corporate governance, or the need to redeploy cash on the balance sheet to improve its mining assets. The shares have underperformed Fortescue Metals (OTCQX:FSUGY) since then (by around 10%), and while I do think Mount Gibson could better withstand further weakness in iron ore prices (and deploy its capital to add reserves/resources), I'm not as bullish on the shares.

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Mount Gibson Iron Still Needs To Buy Its Future

Monday, August 25, 2014

Seeking Alpha: Wilshire Bancorp Lagging Despite Strong Loan Originations

With a few exceptions like U.S. Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC), this hasn't been a stellar year for commercial banks. The KBW Regional Banking ETF (NYSEARCA:KRE) is down about 4% year-to-date and Wilshire Bancorp (NASDAQ:WIBC) has lagged that by another 8%, performing a little worse than other California-based banks like CVB Financial (NASDAQ:CVBF) and PacWest (NASDAQ:PACW). Wilshire continues to post good loan origination numbers, but operating expenses have been running high and it may take higher rates to get investors interested in banks like Wilshire again.

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Wilshire Bancorp Lagging Despite Strong Loan Originations

Seeking Alpha: Conatus Pharmaceuticals Down On Low Enthusiasm For High Risk

Conatus Pharmaceuticals (NASDAQ:CNAT) has been a lousy pick. Since I last wrote on the company, the shares have dropped more than 40% as investors have fled higher-risk biotech stories. That fellow liver disease specialist Intercept Pharmaceuticals (NASDAQ:ICPT) was down just about as much before an encouraging mid-August trial update is cold comfort, and the company's recent habit of pushing back expected trial data read-outs doesn't help what is already a challenging situation.

Early-stage biotechs are volatile (that goes with the territory) and I'm still bullish on the company's prospects. The company will be announcing data from multiple studies later in 2014 through early/mid-2015 and those announcements could bring momentum back into the shares if the data look strong. I've lowered my expectations a bit (due to longer timelines), but Conatus still looks like it could double from here.

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Conatus Pharmaceuticals Down On Low Enthusiasm For High Risk

Seeking Alpha: PAX Global Technology - Exceptional Growth And Exceptional Performance

I liked PAX Global Technology (OTC:PXGYF) back in January, but I'm not going to pretend that I saw an 80% gain (for the Hong Kong shares) in the subsequent seven months as the expected outcome. Management has ramped up its distribution capabilities faster than I expected and is continuing to make the most of strong growth in the adoption of credit and debit cards in China and other emerging markets. With a significant focus on internal R&D and a stated goal of buying its way further into payment services and software, I believe investors can expect a long run of double digit free cash flow and good long-term stock performance.

Readers should note that buying these shares will take a little extra work. For liquidity reasons, I would encourage readers to buy the Hong Kong-listed shares (0327.HK) - most major U.S. brokerages now allow trading on major foreign markets and the commissions are not bad (though buying shares for a retirement account may not be allowed). I would be surprised if the company didn't ultimately pursue a sponsored ADR, but that may not happen for some time.

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PAX Global Technology - Exceptional Growth And Exceptional Performance

Seeking Alpha: KMG Chemicals Really Needs That New Leg Of Growth Now

I had mixed feelings about KMG Chemicals (NYSE:KMG) back in January and the shares have chopped around quite a bit since then, though they're up about 8% from that January starting point. Seven months later, I still can't get all that bullish (or bearish) about these shares.

I know many sell-side analysts are cooling on the semiconductor space (and the company generates about 60% of segment profits from high-purity chemicals) and I am concerned about the likely shrinkage in the wood treatment business. On the other hand, the company seems to be producing pretty good synergies from the UPC acquisition (which it acquired from OM Group (NYSE:OMG)) and I think management will be able to harvest cash from the wood treatment business for some time yet. The real key for me, then, is what the company does to augment its revenue - management has talked about adding a third business for some time now and I don't think there should be a shortage of opportunities. KMG Chemicals looks undervalued already and with the right deal, maybe more of that value makes it into the share price.

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KMG Chemicals Really Needs That New Leg Of Growth Now

Saturday, August 23, 2014

Seeking Alpha: Mocon Has An Interesting Energy Angle, But Watch The Margins

Micro-cap measurement and analytical tools company Mocon (NASDAQ:MOCO) hasn't done all that well since I wrote about the company in January of this year. It's always hard to know what moves trading on illiquid stocks that are not followed by analysts (seriously, no sell-side analyst follows Mocon), but relative to my own model the company has been disappointing with respect to sales growth, gross margin, and operating margin.

I'm still bullish on this company. The company has been communicating more clearly about its opportunities in energy and other "industrial" markets like water and air quality, and food contamination issues have stayed in the news. It takes patience and a larger appetite for risk to hold stocks like Mocon, but between its standalone prospects and potential appeal to an acquirer I think this is still a company worth a reader's time and due diligence.

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Mocon Has An Interesting Energy Angle, But Watch The Margins

Seeking Alpha: With Cyclacel, The Waiting Is The Hardest Part

This has been a tough year to hold riskier biotechs, and Cyclacel (NASDAQ:CYCC) has been no exception as the shares have fallen by about a third since my last write-up on the company and more than 20% year-to-date. Some investors were definitely angered by the company's decision to launch another Phase II study in MDS instead of the expected pivotal Phase III study, but the shares were weak before that announcement. More likely, Cyclacel has found itself caught up in a "risk-off" move out of biotech and perhaps an increasing obsession with all things immuno-oncology.

Some readers will scoff at what I'm about to say, but I've always pursued Cyclacel from the value/expectation angle. I'm not all that positive on the company's odds of success (not many sub-$100 million market cap biotechs with Phase III oncology drugs see success), but the implied odds of success are indeed quite low and there are data to suggest that lead drug sapacitabine just may show a sufficient survival benefit in elderly AML and MDS patients to merit approval and use. Truing up my fair value estimate pushes my target down to $5 (from $6.50), but that still leaves considerable upside if the company's late-stage trials go well.

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With Cyclacel, The Waiting Is The Hardest Part

Seeking Alpha: Can 'Blocking And Tackling' Lead Accuray Higher?

The good news at Accuray (NASDAQ:ARAY) is that management has established a good track record for doing what they say they are going to do - the service operations are running much better, the multileaf collimator (or MLC) is on track, and the company's efforts to improve its sales strategy appear to be translating into orders. The only "but" is that none of this is all that flashy and the Street has a habit of getting bored with stories like this. I do think there is some upside to orders in CY 2015 if the MLC is released on schedule, but this remains an execution story driven by blocking and tackling and one where the realization of value could still take some time.

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Can 'Blocking And Tackling' Lead Accuray Higher?

Seeking Alpha: Concerns About The Utica Weighing On PDC Energy's Share Price

PDC Energy (NASDAQ:PDCE) has done alright since January of this year, even though concerns remain about the quality of the company's acreage and opportunity in the Utica. These shares have risen about 15% over that span - not bad relative to the group (as measured by the EPX), but inferior to other Wattenberg operators like Bonanza Creek Energy (NYSE:BCEI) and Synergy Resources (NYSEMKT:SYRG) and more diversified operators like Whiting (NYSE:WLL). While these shares still appear to be undervalued, concerns about rising unit LOEs, litigation, and inconsistent Utica drilling results may all remain as headwinds and/or risk factors for the shares.

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Concerns About The Utica Weighing On PDC Energy's Share Price

Seeking Alpha: Competition And Momentum Weighing On Clovis Oncology

The last year hasn't actually been all that bad for biotech, as the S&P Biotech ETF (NYSEARCA:XBI) has outperformed the S&P 500 by about six or seven points. Whether or not the XBI is a great benchmark for the biotech industry is beside the point, though; by any standard Clovis Oncology (NASDAQ:CLVS) has done poorly since I wrote about it in late December of 2013. Down almost 30% since then, some of the weakness may be due to less risk appetite from biotech investors, but I think it has more to do with growing concerns over competition for the company's lead drug CO-1686 (or rociletinib).

I don't take it lightly when any stock I recommend is down 30%, but I also acknowledge that that can be the way it goes in biotech - in the absence of solid data to go on, investors obsess over the tea leaves and can run hot or cold on a stock to dramatic effect. I was concerned in December that analysts were already too aggressive with their assumptions about market share and odds of approval, but my own numbers haven't changed that much. With a fair value of $75 and several news events on the way, Clovis shares could turn the tide over the next six to 12 months (or smash on the rocks).

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Competition And Momentum Weighing On Clovis Oncology

Friday, August 22, 2014

Seeking Alpha: It's Getting Harder To Give Axiall The Benefit Of The Doubt

At some point a company's problems cease to be cyclical and start looking increasingly structural. I'm getting close to that point with Axiall (NYSE:AXLL). Six consecutive earnings misses may say more about the analysts following the stock than the quality of the company, but management's own missteps and changes in the chloralkali space have more concerned about the prospects for this company. I do still believe that the company can leverage positives like an improving U.S. construction market (whenever that arrives...) and increasing shale gas production, but I'm not convinced that the value is so compelling as to be worth the risk anymore.

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It's Getting Harder To Give Axiall The Benefit Of The Doubt

Seeking Alpha: Abraxas Petroleum Running All-Out

Although the EPX Index has had a so-so run since late December of 2013 (up around 6%), plenty of individual plays have outperformed, but few have done so to the same extent as Abraxas Petroleum (NASDAQ:AXAS). Back in late December, I thought Abraxas was a good candidate to pick up if it traded down closer to $3, which it did within the next month or so, but I didn't think that it was going to shoot through $4.50, $5, and eventually $6. Granted, a lot happened between then and now to help the shares along the way and management has been active in selling non-core assets and picking up new acreage to enhance value.

The acreage Abraxas holds in the Williston Basin (the Bakken) is pretty mature, but there is quite a bit of growth potential via the drill bit in the Eagle Ford acreage, not to mention the possibility that the company will continue to acquire when and where it can. Strong production growth and a pretty clean balance sheet support a fair value range around $6 to $7 per share and I wouldn't underestimate management's ability to execute more value-creating transactions.

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Abraxas Petroleum Running All-Out

Seeking Alpha: A New Rayonier, But The Same Old Problem

For the major publicly-traded timberland owners - a list that includes Rayonier (NYSE:RYN), Plum Creek (NYSE:PCL), Weyerhaeuser (NYSE:WY), Pope Resources (NASDAQ:POPE), and Potlatch (NASDAQ:PCH) - the frustrating wait for a housing-led recovery goes on. Although Rayonier does have a relative advantage to Plum Creek with its larger (as a percentage) weighting to the Pacific Northwest and its New Zealand joint venture, not to mention the absence of wood products operations, the company can do relatively little in the face of persistent weakness in stumpage prices and sluggish demand for HBU real estate. While I like Plum Creek as a play on an eventual recovery in timberland value, and Weyerhaeuser for its weighting to more valuable Pacific Northwest acreage and value-added wood products, the new post-spin off Rayonier just doesn't look like much of an opportunity at today's prices.

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A New Rayonier, But The Same Old Problem

Thursday, August 21, 2014

Seeking Alpha: Even In Sight Of The 52-Week High, Bonanza Creek Can Go Further

Small-cap oil and gas company Bonanza Creek Energy (NYSE:BCEI) has come back well from concerns over an insufficient drilling inventory and the departure of three founding executives. Since I last wrote about the company, the shares are up around 34% - more than tripling the return of the SIG Oil Exploration and Production Index and outdoing most of its Wattenberg peers except Whiting (NYSE:WLL). Bonanza Creek isn't as cheap as when I last wrote about the company (the shares looked about 30% undervalued in January), but good downspacing results and Codell tests can still take these shares far enough to be worth a look at today's level.

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Even In Sight Of The 52-Week High, Bonanza Creek Can Go Further

Seeking Alpha: ArcelorMittal Down, But Not Out

You'd be hard-pressed to find a steel stock that has done worse since my last favorable write-up on ArcelorMittal (NYSE:MT). The shares are down about 13% since then, about as much as Latin American steel companies Ternium (NYSE:TX) and Gerdau (NYSE:GGB), but worse than Nucor (NYSE:NUE) and much, much worse than Steel Dynamics (NASDAQ:STLD), AK Steel (NYSE:AKS), and U.S. Steel (NYSE:X).

That ArcelorMittal is underperforming AK Steel and U.S. Steel isn't shocking to me; less efficient players like U.S. Steel and AK Steel do better in recovering markets and both of those companies are more highly leveraged to the U.S. market (one of the stronger steel markets today). Some of the other relative performances are a little harder to explain; tempting as it may be to blame ArcelorMittal's woes on weak iron ore, even Vale (NYSE:VALE) and Fortescue (OTCQX:FSUGY) (both iron miners) have outperformed ArcelorMittal over the past three-plus months. With all of that said, I'm still bullish on ArcelorMittal as a play on better steel prices, production rationalizations, and a global construction recovery.

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ArcelorMittal Down, But Not Out

Seeking Alpha: Nektar Therapeutics Has More To Give

This year has seen biotechs on a rockier road, but those companies that have continued to develop broad pipelines have fared a little better. Nektar Therapeutics (NASDAQ:NKTR) belongs on that list, as the company continues to move forward with an array of late-stage assets and a deep pipeline based upon its PEGylation technology (a technology that alters pre-existing drugs to improve efficacy, tolerability, and so on). Not only does Nektar still look undervalued, I believe that the assumptions underlining that valuation are still conservative enough that de-risking events (namely clinical trial results) can add meaningful value.

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Nektar Therapeutics Has More To Give

Seeking Alpha: Should Investors Press Their Luck With Fortuna Silver?

Eight months ago I thought Fortuna Silver (NYSE:FSM) was one of the best plays on silver out there in the market, and the performance of the shares has backed up on that idea. Even with a recent pullback of more than 10%, these shares are up almost 90% from late December of 2013 and the comparisons with the likes of Silver Wheaton (NYSE:SLW), Pan American Silver (NASDAQ:PAAS), First Majestic (NYSE:AG), and Fresnillo (OTCPK:FNLPF) aren't even all that close.

So what now? I do like the significant improvements that the company has made in reducing costs - where I thought 20% reductions in cash operating costs were possible, management has delivered 30%. Better still, the company's drilling program at Trinidad North continues to suggest significant reserve expansion and mining potential here. I openly acknowledge that I underestimated management's cost-cutting abilities and may be doing so again, but I think valuation is less compelling today. If you believe that mining stocks can still support historical NAV premiums of 1.5x or more, the shares still offer upside (and on EV/EBITDA as well), but I take a more conservative approach and don't see nearly as much value remaining in these shares today.

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Should Investors Press Their Luck With Fortuna Silver?

Wednesday, August 20, 2014

Seeking Alpha: Some, But Not Enough, Progress At Kinross Gold

I wasn't overly fond of Kinross Gold (NYSE:KGC) in December of 2013, and the shares have definitely lagged the Market Vectors Gold Miners ETF (NYSEARCA:GDX) since - falling about 5%, while the GDX has risen more than 30%. I'm still not overly fond of Kinross today. The company is making progress with its operational turnaround efforts at Paracatu, Chirano, and Maricunga, and the market likely is overestimating the risks to the company's high-quality Russian assets, but Kinross remains what it was before - a relatively higher-cost miner with iffy production growth potential and a lot riding on higher gold prices.

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Some, But Not Enough, Progress At Kinross Gold

Tuesday, August 19, 2014

Seeking Alpha: Risk And Reward Seem Pretty Balanced At Seattle Genetics

Oncology biotech Seattle Genetics (NASDAQ:SGEN) has had a bit of an interesting ride since I reviewed the company's prospects and valuation back in December. The shares moved up about 40% through February of this year on optimism for the company's deep portfolio of antibody drug conjugate (or ADC) compounds, not to mention biotech enthusiasm in general, before getting caught up in the great biotech washout and fears tied to the safety of lead drug Adcetris and changes to clinical trials. Add in some concerns about competition from immuno-oncology drugs and there's a lot to digest. When it is all said and done, not all that much has changed on a "net basis" in my view - Seattle Genetics doesn't look as compelling on a value basis, but there's significant upside if clinical trial read-outs de-risk the pipeline.

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Risk And Reward Seem Pretty Balanced At Seattle Genetics

Seeking Alpha: 2 More Positive Steps For Cameron International

It's only been about a month since Cameron International (NYSE:CAM) posted a generally solid set of quarterly results, but the company has kept busy in the meantime. A new alliance between the Cameron-Schlumberger (NYSE:SLB) OneSubsea joint venture and Helix Energy Solutions (NYSE:HLX) looks like a good long-term opportunity, while the sale of the centrifugal compression business to Ingersoll Rand (NYSE:IR) largely completes the company's restructuring efforts and should allow a near-total focus on operations, not to mention bringing in capital for more buybacks. I don't think Cameron is cheap today, but I do like these steps forward and believe the company is well-placed to take advantage of a long offshore cycle.

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2 More Positive Steps For Cameron International

Seeking Alpha: CareFusion's Strong Share Isn't Quite Enough

CareFusion (NYSE:CFN) is an interesting company in several respects. A leader in important markets like drug dispensing, infusion, and respiratory care, the company's margins and returns on capital are nevertheless not really "leader-like". What's more, there are some reasonable concerns as to whether the company's business is skewed too heavily towards capital equipment to facilitate good long-term growth. I come down basically in the middle - I like CareFusion's business well enough, but the weak ROICs and explicit intentions to be active in the M&A market lead me to demand a bigger discount to fair value before buying with my own money.

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CareFusion's Strong Share Isn't Quite Enough

Seeking Alpha: Baytex Energy Is Following A Good Plan

Quite a bit has changed at Baytex Energy (NYSE:BTE) since I last wrote about the company in December of 2013. As I thought it might, the company did in fact agree to a sale of its North Dakota Bakken acreage and also acquired new acreage. The surprise was where the company bought - instead of expanding its high-return heavy oil acreage, the company acquired some very quality acreage in the Texas Eagle Ford. Although that Eagle Ford acreage didn't come cheap, Baytex has diversified its production base, acquired exposure to a high-quality growth play, and improved its overall position. Baytex still isn't the cheapest oil stock out there, but the company relatively lower-risk asset base and high yield still make it a name worth considering.

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Baytex Energy Is Following A Good Plan