Tuesday, January 27, 2015

Seeking Alpha: Reality Has (Slowly) Caught Up With First Horizon Shares

I liked First Horizon (NYSE:FHN) about three and a half years ago and again a year ago, and though the stock has lagged Regions Financial (NYSE:RF) and SunTrust (NYSE:STI) since October of 2011, it has been a relative outperformer over the last year. First Horizon continues to make credible progress on running off its non-strategic loan book and reducing operating expenses while also slowly moving back to a growth footing.

The odds may still favor First Horizon becoming an acquisition target in a few years, but in the here and now, the company still has significant scope to improve its efficiency ratio and perhaps take advantage of higher rates. I think First Horizon is more or less fairly valued now, but I still see opportunities for the bank to outperform and start earning a bigger benefit of the doubt in analyst models.

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Reality Has (Slowly) Caught Up With First Horizon Shares

Seeking Alpha: Energy's Fall Creates An Opportunity At Prosperity Bancshares

Wall Street may not be a zero-sum game at all times, but I think it happens often enough to say that bad news in one spot is usually good news somewhere else. I'm not remotely happy that oil's freefall has created a crater in the energy portion of my portfolio, but that drop has taken down the shares of many Texas banks, including Prosperity Bancshares (NYSE:PB).

While an ongoing energy rout would eventually damage Prosperity's loan growth and credit quality, direct energy lending is less than 10% of the loan book and Prosperity has exceptionally clean credit metrics. I would expect Prosperity to return to its M&A ways at some point this year and although not a screaming bargain by conventional metrics, the value in these shares is getting interesting.

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Energy's Fall Creates An Opportunity At Prosperity Bancshares

Seeking Alpha: Is The Latest Stumble An Opportunity At Altera?

Altera (NASDAQ:ALTR) shares have gone nowhere fast. After a run that saw the shares double from May of 2010 to May of 2011, the shares have spent most of the following four years chopping around between $30 and $40. It hasn't really gone all that much better for Altera's chief rival, Xilinx (NASDAQ:XLNX), either - the shares haven't shown the same choppiness, but the five-year returns are almost identical.

I liked the shares around $34 back in June of 2014 and they did reach $38 before disappointing guidance and growing concerns about the health of the telecom/wireless business sent them back below the $35 midline. While I do think the shares are undervalued today, investors need to appreciate that the competitive dance with Xilinx is unlikely to ever result in a clear winner and that new entrants into the market could eventually chip away at market share and margins. I still like Altera relative to a lot of the analog players, but the stock likely needs the company to post strong margins in the second half of 2015 and no further pushouts of the 14nm plans to break out above the high $30's.

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Is The Latest Stumble An Opportunity At Altera?

Seeking Alpha: Without A Bigger Discount, Maxim Not So Interesting Today

Six months ago, I thought the Street had overreacted to disappointing results at Maxim Integrated Products (NASDAQ:MXIM) to such an extent that the stock looked like a good relative value in the space. Since then, the shares have done pretty well relative to its peer group - up about 15% while Linear (NASDAQ:LLTC) and Analog Devices (NASDAQ:ADI) were up in the single-digits and a stock I liked better, ON Semiconductor (NASDAQ:ONNN) rose about 16%.

Maxim is still facing the same basic set of challenges - finding new sources of growth now that Samsung is no longer likely to be a significant growth driver in the coming years. Maxim is saying and doing some of the right things, including getting out of low-margin businesses like consumer MEMS and touch and focusing on higher-growth opportunities in industrial and auto, but I'm concerned about the company's ability to truly differentiate itself. With the valuation looking pretty fair today, I don't dislike the stock but can't work up a lot of excitement to buy in today.

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Without A Bigger Discount, Maxim Not So Interesting Today

Monday, January 26, 2015

Seeking Alpha: Intuitive Surgical Set To Regain Momentum In 2015

With the exception of a run in the first quarter of 2014, the space between mid-2013 and mid-2014 was a dead zone for Intuitive Surgical (NASDAQ:ISRG) shares as it became clear that growth at this traditionally high-growth med-tech was slowing. System placements declined sequentially for five of six quarters starting in the first quarter of 2013 and procedure growth slowed as the medical community became less aggressive with prostatectomy procedures and daVinci penetration topped out.

Sentiment has been improving since mid-2014, though, helped by growing penetration in general surgery and optimism that the new Xi and Sp platforms and greater overseas sales efforts will reignite system placements on an extended basis. Although Intuitive will likely start seeing real competition relatively soon, this remains a pretty special company within the med-tech space. The trouble is how much to pay for those special qualities, as the Street is already back to expecting quite a lot of growth from this company.

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Intuitive Surgical Set To Regain Momentum In 2015

Sunday, January 25, 2015

Performance - A Lousy, Mixed Up, No Good Year


Last year was a lousy year for a lousy reason … and that reason is part of why it took me almost four weeks into this month to get this post written. My wife/partner of 22 years was diagnosed with advanced cancer in 2014 and suffice it to say that helping and supporting her took precedence for the last third of the year as she went through surgery, radiation, and chemo. For the last three months of the year, I wrote fewer pieces in each month than I typically do in two or three days, so you can imagine how much time I was spending paying close attention to the markets.

Anyways, on with the show...

I maintain two separate portfolios (“A” and “B”). Portfolio A is supposed to be a more actively managed portfolio with a greater focus on year-to-year returns. Portfolio B is supposed to be more about long-term opportunities; I don't care so much about the year-to-year performance of holdings so much as the potential/performance over three or more years.

Portfolio A did okay in 2014, beating the S&P 500 and Russell 3000 but lagging the Nasdaq. The biggest positive contributors were Alnylam (ALNY) and Neurocrine Biosciences (NBIX), followed by Multi-Color (LABL). Hurco (HURC) and the Wright Medical Group CVRs (WMGIZ) both did well but make up a relatively small part of the assets. ABB (ABB), First Cash Financial (FCFS) and FEMSA (FMX) were the biggest drags on performance; Cameron (CAM), Lundbeck (HLUYY), Weatherford (WFT), and Ultratech (UTEK) were all laggards, but less meaningful given their smaller allocation.

Portfolio B was a total mess, lagging all of the indexes I care about and doing just generally rotten on its own. I suppose I could blame some of it on a lack of attention in the last third of the year, but the numbers are what they are. Alnylam, Broadcom (BRCM), and EMC (EMC) were the most meaningful positive contributors, while Statoil (STO), Triangle Petroleum (TPLM), and FEMSA were the biggest losers in the mix.

On a combined basis, the results weren't nearly good enough. The three-year and five-year numbers are still decent, but hopefully I can get back to the sort of performance I expect on a year-in/year-out basis.

2014 Returns

Portfolio A: +14.2%
Portfolio B: + 11.5%
Combined Portfolios: +13.53%

S&P 500: +13.69%
Nasdaq: + 14.75%
Russell 3000: + 12.56%

Three-Year Returns (annualized)

Portfolio A: +24.1%
Portfolio B: +16.9%
Combined Portfolios: +21.3%

S&P 500: +20.4%Nasdaq: +23.6%Russell 3000: +20.5%


Seeking Alpha: Good Execution Continuing To Boost UnitedHealth

UnitedHealth (NYSE:UNH) is the biggest player in managed care and, in my opinion, the best-run. Management has not only established a long history of "under-promise, over-deliver", but has built up a strong technology infrastructure that allows the company to price risk better, coordinate care more efficiently, and drive consumer behavior. Optum remains a real growth opportunity, as does international expansion.

The entire managed care space had a pretty good 2014, with stocks like Anthem (NYSE:ANTM) up more than 60%, Humana (NYSE:HUM) up nearly 60%, and Health Net (NYSE:HNT) up 65%. Only in that context is UnitedHealth's 50% appreciation over the past year something that might rankle investors. Health care, and by extension managed care, is likely to remain a controversial political topic in the years to come and UnitedHealth isn't particularly cheap right now, but I wouldn't be in a big rush to sell.

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Good Execution Continuing To Boost UnitedHealth

Seeking Alpha: Despite Some Challenging Markets, Microsemi Continues To Move Forward

This is starting to shape up as a disappointing quarter for semiconductor companies (Maxim (NASDAQ:MXIM), Linear (NASDAQ:LLTC), and Skyworks (NASDAQ:SWKS) not withstanding), so I suppose that ought to temper some of the disappointment with Microsemi's (NASDAQ:MSCC) in-line December quarter and soft guidance for the next quarter. On a more positive note, management is starting to see restructuring/cost reduction efforts pay off in margin leverage and the company's book-to-bill remains above 1.0x.

I continue to believe that Microsemi remains overlooked and undervalued. The company is looking to farm its legacy discrete business for margins and cash flow, while driving growth from newer businesses like timing and FPGA where the company's addressable markets and market share appear to be growing. I continue to believe that fair value on Microsemi shares lies above $30 and that they remain a good buy within the chip space.

The full article can be read here:
Despite Some Challenging Markets, Microsemi Continues To Move Forward

Seeking Alpha: BB&T Breaks From The Pack Again

I've said before that North Carolina-based super-regional bank BB&T (NYSE:BBT) seems to have a knack for moving against the tides in banking. When other banks are reporting good quarters, BB&T disappoints and when its super-regional peers report lackluster quarters it seems to do better. So I suppose it shouldn't really be a surprise that BB&T offered up a pretty solid set of results in a reporting season where most of its peers haven't impressed the Street.

BB&T isn't particularly asset-sensitive and it looks like next year will be another "muddle through" unless/until rates start moving up. Management is going to be busy, though, as it has three significant acquisitions to integrate, including the largest acquisition announced/attempted since the new regulatory system was put in place.

BB&T shares still look undervalued to me and the bank still has the capacity to do additional deals and increase its exposure to commercial lending.

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BB&T Breaks From The Pack Again

Seeking Alpha: Fifth Third Looks Undervalued, But Not Without Some Reasons

I've seen a quote attributed to Warren Buffett that goes "price is what you pay and value is what you get". With that in mind, Fifth Third (NASDAQ:FITB) does indeed look undervalued today but there are reasons why the stock has been weak over the last year (down almost 18%) and a real laggard next to peers like U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), and Huntington Bancshares (NASDAQ:HBAN).

From the sounds of it, 2015 is going to be a challenging year for Fifth Third. Management's loan growth guidance doesn't compare well to what other banks in overlapping regions are seeing and the wind down of a consumer advance product is going to create a significant headwind. Amidst all that, management is not looking for any positive operating leverage.

Why be positive? A bad year (or two) doesn't make a bad bank and Fifth Third shares are priced for virtually no improvement in ROE over the coming years. Fifth Third has a good collection of fee-generating operations and relatively good exposure to growing banking markets. Fifth Third isn't going to appeal to investors that prize quality in banking stocks, but there is enough upside here to make a closer look worth the effort.

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Fifth Third Looks Undervalued, But Not Without Some Reasons

Seeking Alpha: U.S. Bancorp's Steady Excellence Worth A Premium

Exciting is usually a bad thing in banking, and U.S. Bancorp (NYSE:USB) makes steady high-quality execution look pretty good. Not surprisingly, U.S. Bancorp isn't particularly levered to a quick turnaround in interest rates and management is not going to compromise underwriting discipline just to boost loan growth.

That said, U.S. Bancorp maintains one of the best net interest margins of its peer group, has kept pace with loan growth, is far more efficient with expenses, and has several lucrative fee-generating businesses. U.S. Bancorp looks as though it's priced only a bit below fair value, but that should be enough for long-term investors who want a cornerstone holding in financial services.

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U.S. Bancorp's Steady Excellence Worth A Premium

Seeking Alpha: F5 Shares Spin Out On Weakness In Product Sales

I liked F5 (NASDAQ:FFIV) back in September, but had some concerns about the valuation and the company's history of volatility around earnings. While the shares of this technology company did rise in the months after that piece (topping out at an 8% gain), the volatility I mentioned as a big concern has returned with a vengeance after the company's fiscal first quarter report.

There have been longstanding concerns about F5's ability to offset slowing growth in the legacy ADC market with a host of product enhancements (especially security) and the weakness in this quarter and guidance has given them new life. I'm still a long-term bull on F5, though, and I think this might be one of those "buy the dip" opportunities for adventurous investors who can handle the risk that additional weakness in product revenue pushes the shares down even further as the year develops.

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F5 Shares Spin Out On Weakness In Product Sales

Thursday, January 22, 2015

Seeking Alpha: PNC Financial Running A More Cautious, Steady Long-Term Plan

I liked PNC Financial (NYSE:PNC) about six months ago and while the banking sector hasn't performed well since that time, PNC has shown better relative performance - PNC shares have dropped about 3% and lagged Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC), while U.S. Bancorp (NYSE:USB), Fifth Third Bancorp (NASDAQ:FITB), BB&T Corp. (NYSE:BBT), and KeyCorp (NYSE:KEY) have declined 4% to 15%. Nothing has really gone wrong with PNC Financial per se since last summer, but with pretty scant prospects for the much-needed rise in rates that would spur the sector, investors have turned their attention to more promising sectors.

I still like PNC Financial, but I'm not going to argue that anybody has to own a bank stock. PNC doesn't offer the kind of leverage to higher rates that Wells Fargo or Bank of America offer, but this is a pretty solid, conservatively run bank that is focusing on sustainable loan growth, improving fee businesses, and operating expense control. The near-term upside for PNC isn't spectacular, but it remains a solid stock to consider for investors looking for a long-term holding in the banking sector.

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PNC Financial Running A More Cautious, Steady Long-Term Plan

Seeking Alpha: Johnson & Johnson Finding Growth A Little Harder Now

The health care sector has staged a strong multiyear recovery, and Johnson & Johnson (NYSE:JNJ) has more than just gone along for the ride. Although the company has had to deal with major recalls in the consumer business and unimpressive growth in the device business, the pharmaceutical business has emerged as a real star with six blockbusters introduced in the last five years.

Nothing lasts forever, though, and 2015 is shaping up as a more challenging year. Headwinds in the pharmaceutical business appear to be coinciding with forex-related pressure and the device business is unlikely to accelerate enough to make up the difference. None of this makes Johnson & Johnson a bad company, though, and investors may want to keep an eye on these shares for the opportunity to pick up a potential long-term holding at an attractive price.

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Johnson & Johnson Finding Growth A Little Harder Now

Seeking Alpha: PrivateBancorp Already Priced For Big Things

If you want a good growth story in banking, you're going to have to pay for it. Like Bank of the Ozarks (NASDAQ:OZRK), PrivateBancorp (NASDAQ:PVTB) is showing uncommonly good loan growth and has a large addressable opportunity supporting many years of growth. But like Bank of the Ozarks, that growth potential doesn't come with a bargain price.

I like PrivateBancorp's leverage to higher rates and its leverage to economically sensitive loan growth. I also think that the company has made excellent progress in working off legacy assets and fundamentally altering its business mix. If you want a bargain in banking, you're going to have to shop amongst banks well off the beaten path or with significant ongoing concerns/risks regarding asset growth, expense leverage, and regulatory/legal issues (names like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) come to mind). PrivateBancorp doesn't look like a bargain, but if you want to ride along with a rate-sensitive growth story, there may be something here for you.

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PrivateBancorp Already Priced For Big Things

Wednesday, January 21, 2015

Seeking Alpha: Amicus Therapeutics Has Driven Value Through The Clinic

In prior articles on Amicus Therapeutics (NASDAQ:FOLD) I spoke of the significant value creation potential of successful clinical trials. If Amicus could show investors that its lead drug migalastat was both safe and effective as a treatment for Fabry disease, the market would reward the company with a substantially higher valuation.

That has happened. Data from the '012 study and additional extension data from the '011 study have established that migalastat offers comparable efficacy to enzyme replacement therapy (or ERT) and meaningful benefits to cardiac and renal function. While the path to FDA approval is still a little murky, investors should have more information relatively soon and I believe the odds now favor approval and commercial success - at least in a subset of patients with amenable mutations. Migalastat's future as a part of combo therapy is still uncertain, but offers further upside, as do clinical programs in Pompe's disease and MPS-1.

Amicus Therapeutics has risen more than 160% over the past year, but still looks undervalued on the basis of its market potential in Fabry disease. With a more convenient administration (it's an oral medication) and a potential safety benefit, there could be still more upside from pricing and/or market share. Value creation through de-risking the Pompe and MPS-1 programs is certainly still possible (positive data will support higher odds of regulatory/commercial success), but those events are further off.

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Amicus Therapeutics Has Driven Value Through The Clinic

Seeking Alpha: Trial Data Add Little Clarity And Much Confusion To Conatus

Biotech investors can typically process positive and negative clinical trial results, but when the data are mixed and/or there are no simple conclusions it becomes more difficult to price the risk. I believe that is at least part of what's going on with Conatus Pharmaceuticals (NASDAQ:CNAT) in the wake of its confusing, and ultimately disappointing, Phase II trial data on emricasan in acute-on-chronic liver failure (or ACLF).

I think it's too early to say that emricasan is an ineffective drug and unworthy of further clinical development. The highest dose of the drug did suggest a benefit and it is worth the company's time to further refine the dosing and trial design. Unfortunately, the issues with trial enrollment and completion raise pertinent questions about the difficulty of future ACLF studies and whether management can find a clinical pathway to get this drug to market.

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Trial Data Add Little Clarity And Much Confusion To Conatus

Seeking Alpha: Bank Of America's Core Ops Showing Some Progress

The long road back for the U.S. money-center banks hasn't flattened out a bit. Absent higher rates, Bank Of America (NYSE:BAC) is going to have its work cut out growing net assets as it works down its run-off portfolio, but core expenses are coming down and if those rates to move up this bank should be ready. Declining litigation risk ought to help sentiment and economic growth should be good for loan growth, but I do have some concerns that trimming expenses could make the bank more vulnerable to market share losses to harder-charging rivals.

Bank of America was one of the stronger performers among the large banks over the past year but there's still enough potential here to merit a closer look, particularly for investors who believe that interest rates will rise higher and/or faster than the Street expects.

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Bank Of America's Core Ops Showing Some Progress

Tuesday, January 20, 2015

Seeking Alpha: Citigroup On The Right Track, But It's Not A Fast Lane

I haven't always been Citigroup's (NYSE:C) biggest fan, as I thought investors had gotten a little carried away with the stock. With the shares down 9% over the past year (although up more than 3% for 2014), Citi has emerged as a relative laggard among the big banks. At the same time, there has been ongoing improvement in the underlying fundamentals and I think the dichotomy between price and value now favors a more bullish slant on the shares.

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Citigroup On The Right Track, But It's Not A Fast Lane

Seeking Alpha: Growth Still The Heart Of Middleby's Story

For an investor who sees himself as more value-oriented than growth-oriented, Middleby (NASDAQ:MIDD) is always challenging and frustrating. Built largely through acquisitions, the company has nevertheless posted revenue growth in the vicinity of 20% a year (annualized) over the past decade, with a doubling of FCF margins supporting even better FCF growth. What's more, it arguably doesn't get enough credit for growing and improving those assets it acquires.

Middleby remains a stretch from a DCF valuation perspective, or at least unless you're willing to assume double-digit revenue growth and FCF productivity well above the norms of the industry. That said, the price isn't so unreasonable from an EV/EBITDA standpoint, and the company is working on commercializing several concepts with significant revenue and margin potential.

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Growth Still The Heart Of Middleby's Story

Seeking Alpha: Bank Of The Ozarks Continues To Execute

Even allowing for the fact that growth becomes more difficult as a company get bigger, if Bank of the Ozarks (NASDAQ:OZRK) continues to execute like this it is not going to be a small bank for long. This Arkansas-bank remains heavily weighted to real estate-based commercial lending, but continues to use disciplined underwriting to control risk while leveraging a very low-cost deposit base. The shares don't look cheap by most of the bank valuation metrics I like, but quality growth doesn't come cheap and I still see opportunities for outperformance and value-building acquisitions.

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Bank Of The Ozarks Continues To Execute

Friday, January 16, 2015

Seeking Alpha: Look Past A Sales Transition To Novadaq's Future

Emerging med-tech Novadaq Technologies (NASDAQ:NVDQ) is now entering a new phase of its corporate life. The soured relationship with LifeCell is now in the company's past, and Novadaq is moving forward with a suite of products that offered demonstrated clinical benefits. Transitioning back from LifeCell is going to have a near-term impact on sales, though, and not for the good. Longer-term, I continue to believe that Novadaq can generate more than $1 billion in annual revenue with a portfolio of products that drive better outcomes in open surgery, minimally invasive surgery, and wound care.

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Look Past A Sales Transition To Novadaq's Future

Seeking Alpha: Is It Time To Start Thinking Recovery For Komatsu?

The outlook for the construction and mining industries hasn't gotten much better, and with that both Caterpillar (NYSE:CAT) and Komatsu (OTCPK:KMTUY) have posted pretty uninspiring performances. While the environment for mining equipment is still under pressure from weak prices and shrinking capex budgets, and the construction market in key Komatsu markets like China and Japan is hardly great, Komatsu is investing in long-term innovation, maintaining a focus on margins, and positioning itself for the eventual recovery.

Since my last piece on Komtasu, these shares have outperformed Caterpillar, Joy Global (NYSE:JOY) and Terex (NYSE:TEX) by a pretty healthy margin. Although Komatsu isn't particularly well-positioned for a construction recovery in North America (or Europe), a turnaround in the emerging markets would be a different story. I don't think investors need to rush to buy this stock, but the valuation isn't too bad and I think the company's emphasis on its more lucrative parts/service operations and long-term innovation could pay dividends down the road.

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Is It Time To Start Thinking Recovery For Komatsu?

Seeking Alpha: Wells Fargo Still Delivering Some Growth

Wells Fargo (NYSE:WFC) was the best performer of the seven largest U.S. banks last year, and it's hard to argue that the bank didn't earn that Wall Street love. The earnings quality here is relatively high, the net interest margin is solid, and loan growth has been pretty good. Add in solid returns on capital and Wells Fargo is definitely a solid bank.

The only real nit for me to pick is valuation. I think Wells Fargo still has a good opportunity to cross-sell more products to its retail and commercial customers, grow loans at a rate greater than GDP, and bolster businesses like cards and asset management. With its returns on capital supporting a fair value range between $51 and $54, though, I'm not so sure of Wells Fargo's ability to maintain that peer-beating stock market performance.

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Wells Fargo Still Delivering Some Growth

Seeking Alpha: Clouds Still Mar Sunshine Heart's Outlook

Development-stage med-tech Sunshine Heart (NASDAQ:SSH) has had a good run up from its mid-December lows, and the company continues to move forward with the clinical development of a device-based approach for congestive heart failure that could mark a real improvement in quality of care. That said, the company continues to see frustratingly slow enrollment and pushback on reimbursement.

Unfortunately, there don't appear to be easy solutions to Sunshine Heart's primary problem - it lacks the resources of major cardiology companies like Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT), or St. Jude Medical (NYSE:STJ) that could otherwise support and encourage enrollment. Getting the FDA's permission to run an interim analysis would certainly help, and the shares do appear undervalued, but the company is climbing a steep hill and investors shouldn't kid themselves into thinking that the need for a better treatment for heart failure and the apparent efficacy of Sunshine's C-Pulse system will, on their own, ensure a successful outcome.

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Clouds Still Mar Sunshine Heart's Outlook

Seeking Alpha: Linear Technology's Opportunities, And Challenges, Remain The Same

Six months have passed since my last article and not too much has changed for Linear Technology (NASDAQ:LLTC) on a fundamental basis. The company still has some exciting opportunities in the industrial and automotive verticals, but is also facing serious competition from Texas Instruments (NASDAQ:TXN) and Analog Devices (NASDAQ:ADI) (among many others) and widespread doubts that the company can take industry-leading margins much higher.

I thought Linear was more or less fairly valued six months ago (the shares are up 2% since) and that is still my opinion. Improving growth in the U.S., particularly in the industrial vertical, ought to help but probably not enough to radically alter sentiment. The company does have a large amount of cash, though, so additional capital returns to shareholders and/or acquisitions cannot be ruled out.

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Linear Technology's Opportunities, And Challenges, Remain The Same

Seeking Alpha: JPMorgan Chase Once Again Fails To Inspire

Uninspiring core profits (usually referred to as pre-provision operating profit) has become a theme for JPMorgan Chase (NYSE:JPM), and once again, this giant U.S. bank delivered a result that was shy of analyst and investor expectations. Add in some concerns about potentially higher capital requirements and a 10-year interest rate back below 2%, and I don't blame investors for selling this bank.

That said, I am still holding on to these shares, and I continue to believe that the Street underestimates the core earnings potential of this bank. JPMorgan is definitely levered to higher interest rates, but management has its own internal levers to pull as well - particularly where it concerns ongoing expense reductions and growing its commercial bank operations. With the shares looking 15% to 20% undervalued, I continue to believe JPMorgan is one of the better alpha opportunities among the large banks.

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JPMorgan Chase Once Again Fails To Inspire

Seeking Alpha: AtriCure Is Successfully Using Marketing And Training To Drive Revenue

Small-cap cardiology med-tech AtriCure (NASDAQ:ATRC) did see its stock price momentum slow down from the 100%-plus pace between two of my prior pieces, but the better than 20% rise since late April of 2014 still isn't bad at all. This growth isn't just about the Street turning up a previously overlooked name; the company is delivering good beat-and-raise quarters and posting the sort of revenue growth that growth investors like to see from med-techs.

It looks as though growth is going to slow in the next year due to currency movements, but the underlying growth story at AtriCure remains intact. The company remains the only company with FDA-approved surgical ablation products and surgical ablation remain an underpenetrated option for treating a-fib and reducing stroke risk. Add in the potential of the AtriClip as another option in reducing stroke risk and management may not be overstating an annual blue-sky potential market of $1 billion a year. Against a market cap of less than $600 million, that argues that AtriCure's shares still have more to offer.

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AtriCure Is Successfully Using Marketing And Training To Drive Revenue

Seeking Alpha: Receptos Shopping For A Partner With Strong Data In Hand

Receptos (NASDAQ:RCPT) has come along quite nicely since I first wrote about it as a Top Idea in August of 2013. The shares' 150%-plus move has been fueled by strong clinical data, as lead drug RPC1063 ('1063) has shown solid efficacy and cleaner safety in relapsing multiple sclerosis and very encouraging data in ulcerative colitis. The latter has created a very real possibility that '1063 could be a multi-indication blockbuster, as an effective oral therapy for ulcerative colitis and Crohn's disease could be a real blockbuster.

Investors may feel a little starved for big catalysts in 2015. The Phase III RADIANCE and SUNBEAM studies in MS won't have data to show until 2017 and the expectations are already high for the company's expected release of 32-week data from the Phase II ulcerative colitis study. That said, the company may put a new diabetes drug into human studies in 2015 and the company has made no secret that it intends to find a partner for '1063.

These shares aren't nearly the bargain they once were, but there is still significant potential value locked in the MS, UC, and Crohn's programs. It is going to take time to produce the clinical data that it will take to unlock that value, but I'd be in no rush to sell these shares and I would consider them if this recent sell-off continues.

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Receptos Shopping For A Partner With Strong Data In Hand

Wednesday, January 14, 2015

Seeking Alpha: XenoPort Prepping For Key Data In 2015

Nine months ago, I thought XenoPort (NASDAQ:XNPT) had some appeal for very aggressive investors willing to play the odds that not only would the biotech sector recover, but that the Street would get more bullish on XenoPort's relaunch of Horizant and the prospects of XP23829 ('829) in multiple sclerosis and possibly psoriasis as well. Since then, the shares have risen almost 120%.

Is there still enough upside in XenoPort to make it worth holding these shares? The answer is a guarded "yes". The markets for both psoriasis and multiple sclerosis are each likely to be worth more than $15 billion a year by the time '829 achieves commercial sales, but the company is still facing comparatively long odds for commercial success. That makes the Phase II psoriasis data later this year very significant - a strong indication of efficacy should unlock significant value (by de-risking the outlook), but inadequate results will sap virtually all of the upside.

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XenoPort Prepping For Key Data In 2015

Seeking Alpha: Celldex Therapeutics Still Building Its Immuno-Oncology Story

Enthusiasm for immuno-oncology hasn't waned, and why should it? Companies like Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and Roche (OTCQX:RHHBY) have been producing clinical data from immuno-oncology drug trials showing real improvements in response rates and survival in a range of hard-to-treat cancer types. Although Celldex (NASDAQ:CLDX) doesn't have the flavor-of-the-moment focus on CAR-T therapies, I would argue that the company's collection of vaccines, ADCs, and targeted antibodies is well worth a closer look from biotech investors.

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Celldex Therapeutics Still Building Its Immuno-Oncology Story

Seeking Alpha: The New And Improved Alcoa Showing Its Mettle

"I guess what I'm trying to say is, if I can change, and you can change, everybody can change." Rocky IV

That is probably the first time I've quoted Rocky Balboa in an investment article, but in the case of Alcoa (NYSE:AA) it fits. A year and a half ago, you wouldn't have found many analysts who gave Alcoa much of a chance to meaningfully restructure and improve its business, even though management was already well underway with cost and productivity initiatives.

And yet here we are - Alcoa's shares are about 60% over the past year, 80% over the past two years. While 2014 revenue was only about 14% higher than the 2010 level, total segment ATOI was more than 40% higher, as the company has made real strides with cost reduction and a mix shift toward higher-value products.

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The New And Improved Alcoa Showing Its Mettle

Tuesday, January 13, 2015

Seeking Alpha: With The Tornier Deal On Track, Wright Medical Will Be Busy

Investors haven't been all that enthusiastic about Wright Medical (NASDAQ:WMGI) since its late October announcement of a merger with Tornier (NASDAQ:TRNX) and an approval letter from the FDA for its Augment biological product. The shares have fallen almost 20% since then, as I would imagine some investors who had held Wright Medical in anticipation of a favorable Augment outcome and/or a bid from a larger med-tech company might have decided to call it a day.

To be sure, Wright Medical's management is putting a lot on its plate. Integrating the two businesses is going to take quite a bit of energy and launching Augment will demand a high level of sales execution - it has all the hallmarks of a great product, but it won't sell itself. If Wright Medical can successfully meld the two businesses, deliver on the multi-hundred million dollar promise of Augment, and drive greater leverage in manufacturing, sales, and distribution, a fair value above $40 is possible. If management stumbles, or if the extremities market slows, the market will not be forgiving.

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With The Tornier Deal On Track, Wright Medical Will Be Busy

Seeking Alpha: Ultratech's Order Outlook Is Murky At Best

The past year was a miserable one for Ultratech (NASDAQ:UTEK) shareholders. The recurrent theme of the year was that weak 14nm/16nm yields weighed on orders for new LSA tools, leading to multiples "shifts to the right" in order and revenue expectations. Expectations for 2014 revenue fell from the range of $180 million to $200 million in late 2013 to $147 million as of this writing and now there is concern as to whether Ultratech has lost share to Screen Holdings (OTC:DINRY) and Mattson (NASDAQ:MTSN) and whether 10nm might sap the 14nm/16nm cycle altogether.

This certainly showed up in the stock's performance. Ultratech fell 37% last year, while Mattson rose more than 19% and Screen rose almost 13% (Applied Materials (NASDAQ:AMAT), which also sells thermal processing equipment rose more than 36%). It's not hopeless at Ultratech, and the company does have growth opportunities in advanced packaging, metrology, and atomic layer deposition, but 2015 is likely to be a long year for shareholders without some visibility and encouragement in LSA orders.

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Ultratech's Order Outlook Is Murky At Best

Seeking Alpha: M&A Could Add Even More Pop To SABMiller

Given the importance of scale and exposure to emerging market growth for global consumer businesses, it seems like a "when, not if" type of question regarding SABMiller's (OTCPK:SBMRY) future involvement in M&A. The key question, though, is whether SABMiller continues to play the role of acquirer and consolidator, or whether the company (likely grudgingly) finds itself scooped up.

Arguably SABMiller doesn't need to concern itself overly much with M&A. The company generates 70% of its profits from emerging markets, the highest such percentage among the major brewers, and is weighed to the lowest per-capita consumption markets (meaning that it can expect to benefit from rising incomes/consumption). Not only that, SABMiller is one of the largest Coca-Cola (NYSE:KO) bottlers and stands to benefit from a new JV in Africa as well as further potential expansion.

With M&A likely to factor heavily in the company's future, a stand-alone valuation may be beside the point. That said, mid-single digit revenue growth and further incremental FCF margin potential do support the stock at this level, with M&A potentially adding revenue (if SABMiller buys) or margin synergy (if SABMiller is a seller) to the valuation.

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M&A Could Add Even More Pop To SABMiller

Seeking Alpha: Global Payments Continues To Acquire And Process Growth

The best tonic for a robust stock valuation is ongoing financial outperformance, and Global Payments (NYSE:GPN) has been delivering that over the past three quarters. Not only is Global Payments continuing to benefit from strong businesses in markets like Spain, but the company's direct efforts are offsetting the lower-margin ISO channel and management seems to be doing a good job of integrating and leveraging acquisitions.

I like the prospects for Global Payments to improve its margins in the coming years through more ex-US growth and the expansion of the higher-margin integrated payments business. I also believe there are several markets that the company could seek to enter by way of M&A that would also boost the sustainable growth rate. The only problem is that a lot of this seems to be worked into the stock price. I wouldn't argue against the idea that ongoing outperformance could continue to boost the shares from here, but I'd much rather buy on a dip if that were possible.

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Global Payments Continues To Acquire And Process Growth

Sunday, January 11, 2015

Quick Update On The Cancer Fight

My wife is doing well with her therapy. She finished the radiation portion of her clinical trial a little while ago and has her last chemo infusion in about 10 days. The side-effects have been quite mild (at least relative to our expectations), but they could still flare up after the next infusion.

In the meantime, her PT is going reasonably well. Her lymphedema has been under good control (less than 2% in the arm) and her range of motion is quite good.

After the last treatment it'll shift to the "watchful waiting" portion ... a part that I suspect may be quite challenging in its own right (the "doing something" aspect of radiation and chemo offers its own type of comfort).

Seeking Alpha: Orders, Revenue, And Margins Continue To Expand At Hurco

Investors continue to fret about the health of the manufacturing sector in the U.S. and Germany, but Hurco (NASDAQ:HURC) continues to follow its own successful path. This small manufacturer of precision machine tools has delivered another solid quarter, lifting its full-year revenue growth back into the mid-teens and starting off the next fiscal year with a good order book and margin strength.

Looking ahead, there are still solid reasons to be bullish. The company's efforts in additive manufacturing / 3D printing aren't likely to make a significant difference in the near term, but the introduction of new control technology very well might. Hurco is small enough that it can move independently of the larger machine tool industry, but if manufacturing activity in Germany and U.S. can expand in 2015 Hurco ought to do well.

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Orders, Revenue, And Margins Continue To Expand At Hurco

Seeking Alpha: AngioDynamics Still Looking For Inflection

What AngioDynamics (NASDAQ:ANGO) does is not easy. This small med-tech company competes with huge players like Bard (NYSE:BCR) and Covidien (NYSE:COV) (as well as Teleflex (NYSE:TFX)) in markets that are not growing all that fast and where a large sales/marketing effort and the ability to bundle can make a significant difference in closing sales. AngioDynamics hasn't always helped their own cause either, with issues in manufacturing, quality control (including a recent FDA Warning Letter), and financial reporting.

The company is making progress, though, and seems to be nearing a point where margins and profits could grow disproportionately to incremental revenue growth. The company has also managed to add several products to its portfolio that offer real benefits to health care professionals (and savings to the facilities) and their patients. I'm not so crazy about the valuation here, but if management could push revenue growth above 5% the shares could still do rather well.

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AngioDynamics Still Looking For Inflection

Seeking Alpha: Strong Soy And A Deep Pipeline Supports Monsanto

Investors have unquestionably grown more and more concerned about the ag sector over the past 12 months. Corn and soybean prices have rebounded from the end of September, but soy prices in particular are well below the year-ago levels. With less profitable insurance levels likely for 2015, planted acres may well come under pressure and some farmers may be tempted to skimp on seed traits as a way of saving money.

That's not a great backdrop for Monsanto (NYSE:MON), but I continue to believe that Monsanto will be hurt less than rivals like DuPont (NYSE:DD) and Syngenta (NYSE:SYT). Increasing competition is a risk, as the Chinese have approved traits from Syngenta, Bayer, and Dow's (NYSE:DOW) delayed launch of Enlist will most likely eventually become a full launch (albeit not until 2016).

What Monsanto continues to have in its favor is a meaningful yield advantage that supports its value proposition to farmers, not to mention a deep pipeline of traits targeting disease resistance, yield enhancement, and other productivity initiatives. Add in the potential of precision ag/analytics, biologicals, and RNAI-based products, and there is still a valid argument for Monsanto as a long-term holding even if the next year or two are more challenging.

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Strong Soy And A Deep Pipeline Supports Monsanto