Thursday, October 30, 2014

Seeking Alpha: Did Wright Medical Make The Right Move?

Four months ago, I fretted that Stryker's (NYSE:SYK) acquisition of SBi reduced the pool of eligible buyers to acquire Wright Medical Group (NASDAQ:WMGI) and/or Tornier (NASDAQ:TRNX). A lot of bullishness on these companies was based on their attractiveness as M&A targets for larger ortho companies, but the two companies have instead decided to come together to create a leading enterprise in the fast-growing extremities segment.

I have mixed feelings on this move as a Wright Medical Group shareholder. Wright Medical's somewhat disappointing third quarter sales result suggests that there's still more self-improvement to be done and Tornier has been working through sales restructuring efforts of its own. That said, Wright Medical CEO Bob Palmisano is a proven leader in the med-tech space and the prospects of a company with leading technology in both upper and lower extremities is appealing, not to mention the fact that the impending approval of Augment brings hundreds of millions of potential revenue into play.

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Did Wright Medical Make The Right Move?

Thursday, October 16, 2014

Seeking Alpha: Neenah Paper Continues To Execute

I've had my issues with the valuation at Neenah Paper (NYSE:NP), but this specialty paper company continues to execute at a high level and the market has continued to reward that performance. While the shares have been basically flat since my last update, that performance is still quite a bit better than those of comps like Glatfelter (NYSE:GLT), Wausau Paper (NYSE:WPP), and Ahlstrom.

Sluggish European markets should be a challenge for the company's Technical Products segment, but filtration and specialty products continue to drive market-beating volume growth, while the fine paper business remains a very profitable business. With the balance sheet flexibility to add more revenue through M&A, I'm not worried about the company's ability to continue generating value-added growth. I'm still not overly excited about the valuation, with a DCF-based and EV/EBITDA-based approach bracketing about (5%)-15% potential, but I'd keep an eye on this name in the event that the market pullback takes these shares back to a more interesting price.

Continue reading here:
Neenah Paper Continues To Execute

Update On The Fight

I've received a couple of notes asking how things were going with me and Christina (my partner), so I thought I'd write a quick update.

Christina had surgery nine days ago and the surgeon thought it went well (pretty much went as he expected). She is now healing/recovering and will be progressing on to radiation and chemo in due course.

She's still looking at a long, tough battle, but we have a great team of doctors and a network of friends who have been fantastic through this process.

Wednesday, October 15, 2014

Seeking Alpha: OM Group Hasn't Transformed Fast Enough

It wasn't supposed to be this way for OM Group (NYSE:OMG). Selling its cobalt and ultra-pure chemicals businesses and acquiring an advanced magnets business was supposed to transform this company from a cyclical commodity business to a growth-oriented specialty materials business. As it happens, though, the company has seen a much weaker recovery in Europe than hoped, not to mention lower demand in renewable energy, medical batteries, and electronics.

Management meaningfully lowered full-year EBITDA expectations after the second-quarter report, and more recently, laid out a medium-term growth outlook that calls for just 2%-3% annual revenue growth through 2017. The combination of relatively low expected growth and investors allocating away from specialty materials stocks has led to a one-third drop in OM Group's share price from the time of my last update in April.

Continue here:
OM Group Hasn't Transformed Fast Enough

Seeking Alpha: Sluggish European Demand May Be Opening A Window Into Innospec

I've liked specialty chemical company Innospec (NASDAQ:IOSP) as an operating entity for some time, but I've been less excited about the stock given its valuation. The shares are now down more than 20% from my initial write up and down a similar amount since my last write up, though, and that makes the risk-reward balance more interesting. While I do have some concerns that demand in Europe for the company's fuel additives will weaken further, I like the long-term outlook for the company's oilfield chemical and personal care performance chemical operations.

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Sluggish European Demand May Be Opening A Window Into Innospec

Tuesday, October 14, 2014

Seeking Alpha: The Frustrating Wait For Value Realization At PCTEL

It is not too hard to see how PCTEL (NASDAQ:PCTI) could parlay billions of dollars of end-market potential in markets like smart grids, process automation, enterprise WLAN, precision agriculture, train control, and fleet management into potentially hundreds of millions of dollars of revenue. "Potential" is always a tricky word when it comes to small cap companies, though, and PCTEL doesn't have the best track record when it comes to delivering on its potential at any given point in its past.

PCTEL doesn't trade at particularly ambitious multiples, but then why would it? The company has been free cash flow positive for some time, but doesn't have any real record of attractive margins or returns on capital. I do believe that investors need to focus on where a company is going more than where it has been ("skate to where the puck is going to be"), but I have questions about PCTEL's ability to truly differentiate itself as a component supplier. I ultimately come down favorably inclined toward PCTEL, but near-term headwinds in wireless infrastructure spending could stretch out what has already been an extended wait for market-beating performance.

Read the full article here:
The Frustrating Wait For Value Realization At PCTEL

Seeking Alpha: WESCO Still Waiting

WESCO (NYSE:WCC) hasn't exactly distinguished itself in the six months since I last wrote about the company. Admittedly, not many distributors have done well over that time, as HD Supply (NASDAQ:HDS), Grainger (NYSE:GWW), Fastenal (NASDAQ:FAST) and several others are in the red, but it is nevertheless frustrating that WESCO has paired a frustratingly slow recovery in key markets with shortfalls in its reported margins.

Pushing out some of the expected improvements in financial performance does take some upside out of my price target, but with a fair value in the mid-$80s, I still believe WESCO is a worthwhile name to consider as a play on a non-residential construction recovery. Management needs to show that it can deliver real results from its "One WESCO" strategy, but I do see a path for the company to generate better margins and asset turnover as it continues to integrate acquisitions and leverage end-market recoveries.

Continue reading here:
WESCO Still Waiting

Friday, October 3, 2014

Seeking Alpha: Maxwell Down On Power, But Still Promising

Six months ago, I thought that the hoopla over Maxwell Technologies' (NASDAQ:MXWL) prospects of securing an ultracapacitor order from Tesla (NASDAQ:TSLA) (in addition to or along with other auto OEM orders) had taken the shares a little too far for my comfort, and that it was better to wait for a pullback. The shares proceeded to climb another 25% from that point, but have been cut down by more than half on a guidance reset following second-quarter numbers and the perception that management has backed away from its guidance for multiple automotive design wins in 2014.

All in all, while the this sharp decline from the late May highs has to be painful for Maxwell shareholders, the story has really changed all that much. The company's ultracapacitors continue to look like an interesting solution for a variety of applications in transport and energy, while the company's manufacturing approach should support attractive margins. Order timing is a major unknown, and these shares are vulnerable to the vagaries of the market's appetite for risky stories, but this seems like a good time for risk-tolerant investors to take a closer look.

Continue here:
Maxwell Down On Power, But Still Promising

Seeking Alpha: Cemig's Wild Ride Continues

Brazilian utility Cemig (NYSE:CIG) is a good case in point that emerging market utilities don't always offer that higher growth/lower volatility mix that investors often seem to expect. There are certainly a lot of company-specific challenges for Cemig, including an ongoing fight over retaining concessions to three sizable hydropower generating assets, aggressive cost reduction guidance, and worries that management is pursuing low-return investments. On top of those, Cemig faces hydrology risks, political uncertainty, and economic risks in Brazil.

Since my last piece on March 20, these shares have been pretty volatile - jumping almost 50% (for the local shares) before a nearly 25% sell-off. There would be further upside from here if Cemig's legal efforts to retain its hydropower concessions prevail and the company does have additional spot exposure to the Brazilian electricity market, but with the valuation close to a weighted average base case scenario I'm not thrilled about the risk-reward balance.

Read more here:
Cemig's Wild Ride Continues

Sunday, September 28, 2014

Seeking Alpha: LipoScience Rescues Some Value For Shareholders In A Sale To LabCorp

When I last wrote about LipoScience (NASDAQ:LPDX) in May, I pointed out that there was a reasonable chance that LabCorp (NYSE:LH) could acquire the company. LipoScience has struggled mightily as a public company, but the struggles have been related more to the company's limited resources and not the value or quality of the LipoProfile test. That prediction has come home to roost now, as LabCorp announced that it will in fact be acquiring LipoScience.

This deal by no means rescues the call I made on LipoScience back in my first piece on the company for Seeking Alpha, as the premium paid by LabCorp only makes it an incrementally less-lousy call. For LabCorp, though, this is a solid (albeit small) tuck-in deal and the sort of acquisition that could produce some worthwhile value down the road.

Please read more here:
LipoScience Rescues Some Value For Shareholders In A Sale To LabCorp

Seeking Alpha: Everest Re Managing Through A Tough Environment

The reinsurance markets remain quite challenging today, as companies like Everest Re (NYSE:RE) find themselves sandwiched between double-digit price declines in many reinsurance lines and low rates of return on their investment portfolio. Everest Re has been doing a good job of managing through this tough period, using new products and revised strategies to grow despite the pricing pressures and maintaining a solid balance sheet.

I liked Everest Re six months ago as something of a relative value play in the sector and the shares have done alright since then. I do still think that there are opportunities for Everest Re to turn the changes in the industry to its favor (including managing/advising third-party capital), but rate pressure is going to take a toll on returns and the shares aren't quite as interesting to me now. I still like Everest Re as a company, but I just happen to think that there are more interesting risk-reward opportunities in areas like life and P&C insurance.

Read more here:
Everest Re Managing Through A Tough Environment

Friday, September 19, 2014

Seeking Alpha: Arch Coal Still Looking For Light At The End Of The Tunnel

Badly beaten-down stocks can often look quite tempting to investors who appreciate how often the Street overshoots both during good times and bad. In the case of coal, though, that remains a difficult trade. Asian producers like China Shenhua (OTCPK:CSUAY) and PT Bukit Asam (OTCPK:TBNGY) continue to perform relatively well (as I've written here and here), but weak met coal pricing and ongoing rail disruptions in the Powder River Basin are bedeviling Arch Coal's (NYSE:ACI) operations.

Very few analysts are willing to stick their necks out for Arch Coal at this point, with five Strong Buy/Buy ratings matching the Underperform/Sell ratings (and 11 in the middle at "Hold"), and the short interest is around 15%. There is certainly still a real risk that met coal prices don't recover as expected (or should I say hoped?) in 2015 and beyond, and likewise a risk that domestic thermal demand declines further.

It's also very difficult to construct a model wherein these shares look truly cheap. All of that said, Arch Coal has about $1.25 billion in liquidity today, no major maturities until 2018, and may be able to limit the cash burn to $500 million between now and a return to positive free cash flow in 2017 or 2018. I'd much rather own China Shenhua, PT Bukit Asam, Peabody (NYSE:BTU), or Cloud Peak (NYSE:CLD) from a safety/certainty standpoint, and I still think Arch Coal is looking at a very difficult road, but I suppose there's a play here for investors who think that coal pessimism could bottom.

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Arch Coal Still Looking For Light At The End Of The Tunnel

Seeking Alpha: Amidst Some Market Concerns, Brookfield Infrastructure Keeps On Keeping On

If you've been waiting for a better price on Brookfield Infrastructure Partners LP (NYSE:BIP), you really haven't missed much. Between some lackluster reported results in the second quarter and more general concerns that BIP is facing a much more competitive bidding environment for assets, the shares haven't really gone anywhere this year - up about 2% on a year-to-date basis (excluding distributions) and up a similar amount from my last piece.

I still like Brookfield Infrastructure as a well-run long-term play on global infrastructure assets that range from coal terminals to railroads to electrical transmission to ports and toll roads. I can understand why the Street may worry that management's commitment to 8%-11% annual FFO growth will push them to overpay for assets, but I think that underrates their capabilities when it comes to recycling capital as well as the inherent advantages of being able to look at (and acquire) a wide range of asset types.

Follow this link to the full article:
Amidst Some Market Concerns, Brookfield Infrastructure Keeps On Keeping On

Seeking Alpha: SL Green Realty Keeps Producing Value In A Hot Market

I still like NYC office real estate specialist SL Green (NYSE:SLG), as I have for some time now. Even amidst a pretty warm REIT market (up about 17% year-to-date), SL Green continues to do well, rising more than 6% since my last article and slightly outperforming Boston Properties (NYSE:BXP) and Kilroy (NYSE:KRC), while keeping pace with Vornado (NYSE:VNO). Even with high occupancy rates and an a real estate cycle that many believe is getting long in the tooth, SL Green is still looking for ways to add value, including recycling its capital and expanding outside of its core focus in office property.

I'm reluctant to abandon a good company/stock only because of valuation; I think it's easier to have certainty that you've found a good company than it is that you have the valuation perfectly dialed in. Be that as it may, I'd probably be more cautious about entering these shares now, particularly when there are cheaper-looking Asian property developers out there, as well as other financials and REITs that seem to offer more upside.

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SL Green Realty Keeps Producing Value In A Hot Market

A word from management

For those who regularly read my writing through this blog... 

You're going to be noticing that my writing is much less consistent (in frequency) going forward and for an unknown length of time. My partner of 20+ years is about to start a fight for her life against cancer and her needs are going to come first, second, and every other slot on the board. Some days I'll probably want to be doing investment analysis/writing ("work therapy" and all that) and other days I'll be too busy with other things or just not feeling it.

I appreciate your patience through this process.

Stephen S.

Thursday, September 18, 2014

Seeking Alpha: CapitaLand Remains Undervalued Amidst Challenging Property Markets

I previously thought that CapitaLand (OTCPK:CLLDY) looked like an undervalued property developer with balanced exposure to Singapore and China and strong portfolio diversification. The markets appear to have agreed, with CapitaLand's shares rising about 15% over the past six months - outperforming comps and peers like City Developments (OTCPK:CDEVY), Keppel Land (OTCPK:KPPLY), Global Logistics Properties (OTCPK:GBTZY), and Cheung Kong (OTCPK:CHEUY) (which I also liked and is up more than 10% over the past six months).

I believe that CapitaLand's decision to reacquire all of CapitaMalls Asia played a meaningful role in this outperformance, but I don't think that is the only trick up management's sleeve. Although the property markets in Singapore and China are in rougher shape now, I don't believe the company has much value at risk and there are attractive opportunities on the way to re-price below-market leases in its Chinese mall business. The key question is still whether or not management can lift ROEs back into the high single-digits or low double-digits, but I still believe that they can (and will) and that these shares have value to around $6.50/ADR.

I should also note here that CapitaLand is not particularly liquid as ADRs go. Investors should be careful when buying (limit orders are a good idea) or try to buy the much more liquid Singapore-listed shares, as most large brokers now make international trading available to retail investors at affordable commissions.

Follow this link to the full article:
CapitaLand Remains Undervalued Amidst Challenging Property Markets

Seeking Alpha: Endo's Bid For Auxilium Makes Sense

Endo International (NASDAQ:ENDP) has been very acquisitive over the past couple of years, using deals to not only leverage its tax-advantaged Irish domicile but bulk up what I believe is an underrated generics business. Tuesday's announcement of an offer to buy Auxilium (NASDAQ:AUXL) makes quite a bit of sense; not only is their potential tax leverage here, but Endo's strong legacy position in urology could improve uptake of Auxilium's key drug Xiaflex and recharge Endo's branded drug business.

Continue reading here:
Endo's Bid For Auxilium Makes Sense

Seekng Alpha: Gordmans Stores Has Better Management, Will Results Reflect It?

Six months ago I described Gordmans Stores (NASDAQ:GMAN) as a "falling knife", but since then the shares have acted more like a sharknado. The stock's 45% drop since then can't be explained away by a difficult environment - stocks like Stein Mart (NASDAQ:SMRT), TJX (NYSE:TJX), and Ross Stores (NASDAQ:ROST) haven't been ripping higher, but they haven't been nearly as weak as Gordmans. Despite better inventory management, Gordmans can't seem to get its merchandising/assortments right and the comps and margins are suffering as a result.

Maybe, just maybe, things might be looking up. Gordmans recently named Andy Hall as the new CEO, replacing interim CEO T. Scott King who took over when Jeff Gordman announced his retirement earlier in the year. Hall brings good experience as the former CEO of Stage Stores (NYSE:SSI) and has already laid out some common sense near-term initiatives. Gordmans is still looking at a long road back to growth, and I wouldn't dismiss the competitive threat of the likes of TJX's T.J. Maxx and Marshalls, Kohl's (NYSE:KSS), or Wal-Mart (NYSE:WMT), but the absolute pounding that this stock has seen (down 75% over the past year) has already washed out a lot of expectations.

Read the full article here:
Gordmans Stores Has Better Management, Will Results Reflect It?

Seeking Alpha: A Few Flickers From Torchmark

Until September began, my March call that Torchmark (NYSE:TMK) still offered some upside was looking okay, as the stock was doing a little better than other insurance names like Prudential (NYSE:PRU), MetLife (NYSE:MET), and Lincoln National (NYSE:LNC). After the S&P revised its outlook lower, though, the shares have shed a few percentage points on worries that management may have to pull back a bit on buybacks.

I suspect that the S&P action was less relevant from a fundamental perspective and more likely a good excuse for managers to take some gains on an insurance stock that had risen close to 60% over the past two years. What's more, there are a few suggestions in recent earnings reports that growth may be a little harder to come by in the short-to-medium term. While I still like the fundamentals here, and the shares haven't exactly shot through my prior target, this may be a case where investors want to shop around a bit.

Read the full article here:
A Few Flickers From Torchmark

Wednesday, September 17, 2014

Seeking Alpha: Is It Time To Bottom-Fish For Vale SA?

If your company produces significant quantities of iron, you've had a tough year in the stock market. If your company only produces iron, it's been a pretty ugly year. Diversification has helped Rio Tinto (NYSE:RIO), BHP Billiton (NYSE:BHP), and Anglo American (OTCPK:AAUKY), but Vale (NYSE:VALE) and Fortescue (OTCQX:FSUGY) have seen their shares weaken significantly (down about 19% over the past twelve months) as iron prices continue to test predictions of just how low prices can fall before finding a floor.

It's dangerous to assume that commodity prices can't continue to fall once they've crossed the threshold where many/most producers operate at a loss (ask investors in met coal or uranium mining companies), but Vale is one of the rare iron ore miners that can still make money at current prices. With low prices starting to lead to production cutbacks and deferred mine expansion plans in various parts of the world, maybe this is a time to consider Vale shares. Brazil's election cycle still represents a risk, as does China's economy and the significant amount of low-cost iron supply available in Australia, but these shares do seem to hold some upside here.

Please read the full article here:
Is It Time To Bottom-Fish For Vale SA?

Seeking Alpha: Braskem Hamstrung By Brazil's Industrial Malaise

Continuing my run through Brazilian commodity companies that have had disappointing results this year, I come to Braskem (NYSE:BAK) - Brazil's large polyolefin and PVC producer. Like the steel companies Gerdau (NYSE:GGB) and CSN (NYSE:SID), Braskem has underperformed in the face of weakening domestic demand and fears that the Brazilian national election could bring in a government less supportive of the structural barriers that allow them to charge higher prices in Brazil.

I liked Braskem six months ago and I still believe the shares are undervalued. Even amidst an underwhelming domestic market, the general expectation is that Braskem will still see year-on-year EBITDA growth in the high single-digits for 2014 and double-digit growth in 2015. What's more, I think Braskem is looking at a window of opportunity (before major cracker project start-ups in the U.S.) where its naptha-based production can still be quite profitable. There's a not-so-fine line between being patient and being wrong, though, and these shares could still disappoint further.

Continue here:
Braskem Hamstrung By Brazil's Industrial Malaise

Seeking Alpha: CSN's Highly Leveraged To Recoveries In Brazil's Economy And Global Iron Prices

Take all of the issues with the Brazilian steel industry, weakening domestic demand and increasing import competition in particular, and add on weakness in the iron ore market and a lot of leverage and you have the challenges facing Companhia Siderurgica Nacional (or CSN) (NYSE:SID) today. CSN does have some definite positives working in its favor, including strong share in the higher-value Brazilian galvanized steel market, high domestic prices, and low-cost iron operations, but plunging iron ore prices and a weak domestic steel market have largely overshadowed them.

As operating companies, I like Ternium (NYSE:TX) and Gerdau (NYSE:GGB) better than CSN. Both are more geographically diversified and have yet to reap the full benefits from upgrading their production portfolio and integrating their inputs. That said, recoveries often benefit stressed companies more and CSN could outperform if Brazil's recovery comes sooner (and/or stronger) than expected or iron ore prices recover.

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CSN's Highly Leveraged To Recoveries In Brazil's Economy And Global Iron Prices

Seeking Alpha: Brazil's Malaise Drags Gerdau Down

I thought that Brazilian steel producers like Gerdau (NYSE:GGB) were beaten down badly enough earlier this year that they'd be better stocks for the remainder of the year. That was a big mistake, as the struggles of Brazil's economy have only gotten worse. With new construction activity slowing down and auto production down by double-digits, Chinese imports on the increase, and domestic prices weakening, Gerdau shares have fallen another 15% since that March piece.

Stubbornness can become very expensive in investing, but I do think Gerdau can do better. I don't see that improvement as being too likely this year though, and the company's North American operations aren't big enough to outweigh the weak results in Brazil. There's no reason to own Gerdau if you think 2014 results are more or less the "new normal", but if construction and industrial production recover after Brazil's election, Gerdau could be a prime beneficiary.

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Brazil's Malaise Drags Gerdau Down

Seeking Alpha: Skepticism Weighs Heavily On Ternium

This has been a doubly frustrating year for Ternium (NYSE:TX), as this Latin American steel company has languished alongside other steel producers like ArcelorMittal (NYSE:MT) and Gerdau (NYSE:GGB) while Nucor (NYSE:NUE) and U.S. Steel (NYSE:X) have enjoyed better years. I say doubly frustrating, as although many Latin American industrial companies have done fairly well, worries about the economic situations in Argentina and Brazil have sapped investor enthusiasm.

While I liked the shares six months ago, they have fallen another 10% since then and a sizable second quarter EBITDA miss did not help. I still believe that Ternium is well-placed to benefit from Mexico's growing auto sector and improving spending on construction and energy. Likewise, I believe the eventual exploitation of Argentina's sizable energy reserves will support steel demand there. That all sounds nice, but the "when" is very much in doubt and the prospect of weak steel prices fueled by low iron ore prices and weak Brazilian demand is real. Ternium seems undervalued on what I believe are trough multiples to 12-month EBITDA, but the prospect of further downward revisions cannot be ruled out.

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Skepticism Weighs Heavily On Ternium

Tuesday, September 16, 2014

Seeking Alpha: BB&T Buys Again And Restates Its Case

To its credit, BB&T (NYSE:BBT) continues to do what it needs to do. The company's management is looking to deploy capital that it can't use in its lending operations, and M&A is likely to remain a centerpiece of that strategy. Management is also remaining focused on reducing operating expenses - a key item on the to-do list for a company that otherwise generates a lot of positives from its asset base. Neither the recent Investor Day nor the acquisition of Bank of Kentucky (NASDAQ:BKYF) really change the long-term value to a significant extent, but they're positive incremental developments for a company/stock that remains undervalued.

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BB&T Buys Again And Restates Its Case

Seeking Alpha: Eastman Chemical's Taminco Deals Looks Solid

I had been bullish on Taminco (NYSE:TAM) for a little while, seeing it as an undervalued specialty chemical company with a strong foundation in functional amines, specialty amines, and crop chemicals. Eastman Chemical (NYSE:EMN) apparently shared my feelings, as the company announced an acquisition last Thursday at the $26 fair value I indicated in my last piece.

While there is a 30-day "go shop" period for Taminco, I'm not counting on a rival bidder to emerge (though Taminco is a relatively rare quality asset), and I look for Taminco to further Eastman's decade-long transition toward a specialty chemical focus. The immediate upside for Eastman looks relatively modest (around 5%), but I wouldn't underestimate the added diversity, specialty markets, and synergy potential that Taminco will bring with it.

Continue reading here:
Eastman Chemical's Taminco Deal Looks Solid

Seeking Alpha: Siemens Has Changed The Tone, But Can It Deliver?

For quite some time, the story on Siemens (OTCPK:SIEGY) was one of almost perpetual disappointment and questions as to when management would get it together and deliver on the underlying potential of a business that has leadership in multiple attractive markets. With management's strategy update in May, though, it seems like a lot of sell-side analysts have come back on side with Siemens and are looking for good revenue and margin progression as management takes a more realistic view of costs and its true core markets.

I'm still a bit more skeptical. The shares of Siemens have kept up with peers like General Electric (NYSE:GE) and Rockwell Automation (NYSE:ROK) over the past year, while outdistancing those of ABB (NYSE:ABB) and Schneider (OTCPK:SBGSY) as most of the whole sector trails Honeywell (NYSE:HON). I do like Siemens' focus on electrification, automation, and digitalization, but it takes some pretty ambitious assumptions to get near the price targets floated by bullish sell-side analysts. While I'm no Siemens-hater by any stretch, I just don't see the great bargain that others seem to feel is available today.

Read the full article at Seeking Alpha:
Siemens Has Changed The Tone, But Can It Deliver?

Seeking Alpha: Allison Transmission Still Looking At A Multiyear Sales Effort Outside The U.S.

Orders continue to roll in pretty nicely for large commercial trucks, but major suppliers like Cummins (NYSE:CMI), Tenneco (NYSE:TEN), and Allison (NYSE:ALSN) haven't really been showing it in their share prices. Whether it is concerns about weak conditions in Latin America or valuations that got a little overheated earlier in the year, these shares haven't done much since I last wrote about Allison in March.

I thought back in March that valuation might be getting a little stretched, but with this stretch of relative underperformance, I'm getting more positive on Allison. The company will likely see some headwinds created by Ford (NYSE:F) and Volvo (OTCPK:VOLVY), but I like the company's opportunity to leverage its new TC-10 transmission into greater metro Class 8 share. Longer term, the key question remains whether or not the company can coax companies in Europe, Latin America, and Asia to adopt automatic transmissions despite the greater success. I think the process will take some time, but in the meantime Allison offers attractive margins and cash flow leverage, though the valuation is still not an obvious "gimme".

To read more, please click here:
Allison Transmission Still Looking At A Multiyear Sales Effort Outside The U.S.

Seeking Alpha: IPG Photonics Continues To Grow, While Growing Its Addressable Markets

Fiber laser pioneer IPG Photonics (NASDAQ:IPGP) continues to execute pretty well, though you may not know it from the reaction of the market. I still liked the long-term fundamental story back in March, but thought the valuation was getting a little steep. Since then, the shares have gone almost nowhere (while large laser rival Rofin-Sinar (NASDAQ:RSTI) has declined a few percentage points).

I think the last six months or so may be an example of a pause that refreshes. Fiber lasers continue to gain share in core markets like cutting, welding, and marketing, and IPG Photonics continues to develop products for multi-hundred million dollar applications like UV microprocessing, aluminum and high-strength steel welding, and sapphire glass cutting. IPG Photonics continues to leverage its cost and manufacturing advantages and hasn't seen a particularly deleterious impact from Chinese competition yet. With the shares looking about 10% undervalued, I'm warming up to IPG Photonics as a stock to acquire at these prices.

Continue here:
IPG Photonics Continues To Grow, While Growing Its Addressable Markets

Seeking Alpha: Applied Optoelectronics Looking To Two Primary Growth Drivers

Ideas tend to breed other ideas - doing my regular and routine due diligence on component and subsystem companies like Finisar (NASDAQ:FNSR), Avago (NASDAQ:AVGO), and JDS Uniphase (NASDAQ:JDSU) has led me to dig deeper into Applied Optoelectronics (NASDAQ:AAOI). This company looks like an interesting play on the 10G/40G data center upgrade cycle, as well as fiber to the home, with a strong core competency in lasers. This is a highly competitive space, though, and I think readers may do well going into it with the assumption that any investment relationship is likely not to be of the long-term variety.

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Applied Optoelectronics Looking To Two Primary Growth Drivers