Thursday, May 30, 2013

Investopedia: Sanderson Farms Riding Investor Enthusiasm For Protein

Investors are certainly feeling a little more carnivorous these days, as optimism over improving prices and margins has pushed the shares of companies like Tyson (NYSE:TSN) to all-time highs. It certainly has hurt matters even slightly that Smithfield (NYSE:SFD) just bagged a takeout offer at a premium price as well. That leaves investors with a tough choice with the country's third-largest poultry producer Sanderson Farms (Nasdaq:SAFM). It's very difficult to goose the numbers high enough to make this stock look cheap on a long-term basis, but the near-term momentum could make selling today look like a chicken move.

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Investopedia: Joy Global's Qualty Not The Issue, But The Mining Capex Recovery Is

To its credit, Joy Global (NYSE:JOY) has done nothing during this cyclical mining equipment decline to shake investor confidence in the quality of the company or its management. Margins have held up surprisingly well, and new product development could help compensate for some of the weakness in the market. What's more, I don't think there's much doubt that coal demand will continue to increase around the world for at least the next decade or two. The question for investors, though, is the timing and magnitude of the upturn in equipment demand and how much of that is already incorporated into the shares.

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Investopedia: Uncertainties Keep UnitedHealth In Value Territory

Leave aside the political debates about the Affordable Care Act (aka “ObamaCare”), and it's still very clear that a huge change is coming for the U.S. health insurance market. As the largest player in that market, that means huge change is coming for UnitedHealth (NYSE:UNH) as well. While the company's incredible operating scale, PBM and healthcare IT operations, and overseas expansion do mitigate some of the risk, the sizable uncertainties regarding how these changes will impact real profits have kept these shares in value territory.

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Investopedia: EMC Opening Its Wallet And Bracing For The Next Evolution Of The Market

These are busy times for EMC (NYSE:EMC). It may not look like it, given the sleepy state of the IT hardware market, but like a duck moving across a pond there is a lot of activity going on below the surface. EMC is looking to position itself to not just withstand but prosper from changes in its core storage business, while also sharing more capital with its shareholders. Although big capital returns are often a sign of fading prospects in the tech space, I do believe EMC is undervalued on its long-term prospects.

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Investopedia: Avago's Beat-And-Raise Speaks To A Strong Story

There aren't too many beat-and-raise earnings stories in the semiconductor space these days, so Avago's (Nasdaq:AVGO) fiscal second quarter report is all the more impressive. Better still, the company not only has a strong position in next-gen smartphones (through its dominance of the FBAR market), but can look forward to recoveries in networking and industrial demand over the coming year. While Avago isn't a shockingly cheap stock today, it looks like a good mix of growth, quality, and value.

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Wednesday, May 29, 2013

Investopedia: Will Improving Thermal Coal Markets Boost Arch Coal?

Until very recently, it seemed like thermal coal producers couldn't buy a break. Utility inventories were well above historical averages, prices were barely sufficient to break even, and demand continued to decline (as seen in the traffic numbers for major railroads). That's taken the price of Arch Coal (NYSE:ACI), the country's second-largest coal producer) down more than 90% over the past five years. Now it seems like there are some signs of life in the thermal coal market, but will the recovery be strong enough to meaningfully improve the fundamentals for this struggling coal producer?

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Investopedia: Familiar Challenges, Familiar Opportunities At Chico's

It doesn't really seem to matter what customer or socioeconomic group a retailer targets, it's hard to bring customers in through the doors (and/or get them to leave with full bags). Between weak teen retailers like American Eagle (NYSE:AEO) and Abercrombie & Fitch (NYSE:ANF), stagnant-to-down discount retailers like Kohl's (NYSE:KSS) and Target (NYSE:TGT), and the flat results at upper-end retailer Nordstrom (NYSE:JWN), Chico's (NYSE:CHS) is in familiar company. While I do have my concerns about mall-based retailers in the face of competition from companies like H&M (OTC:HNNMY), I do believe the Street is underestimating the long-term value of the Chico's business.

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Investopedia: Smithfield Gets Its Deal, But From A Surprising Bidder

Investors had been agitating for Smithfield (NYSE:SFD) management to “do something” to increase the value of their shares, and their wishes were answered in spades on Wednesday. The largest pork producer in the U.S. announced that it had accepted a bid to be acquired by China's Shanghui International in an all-cash deal that awards a pretty hefty multiple to this protein producer.

The Deal To Be...
If the deal goes through as announced, Smithfield investors will receive $34 in cash for each share they own. That works out to a 31% premium relative to Tuesday's close and just barely less than the all-time high for the stock.

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Investopedia: Strong Growth Can Help United Natural Foods Grow Into Its Multiple

United Natural Foods (Nasdaq:UNFI) offers an interesting test-case for two conflicting realities of Wall Street. On one hand, investors frequently pay up for above-average growth stories, and particularly those with strong market share and/or barriers to entry. On the other hand, margins are an under-appreciated driver of investment performance and investors seldom pay high multiples for weak margin stories. While these shares have underperformed in a hot market for packaged food stocks, the market continues to assign a pretty rich value to this natural foods distribution company.

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Investopedia: Brown Shoe Continues Its Turnaround With Sharper Execution

Fairness demands that I open this article on Brown Shoe (NYSE:BWS) with an admission and an apology – I was wrong about the company's decision to name Diane Sullivan CEO back in May of 2011. While I had thought the company numerous operational missteps during her tenure as COO boded poorly for her future as CEO, the fact is that her strategy of weeding out underperformance at Famous Footwear and selling off unpromising wholesale brands has led to some meaningful operational improvements. There are still challenges for the company to address, but I can no longer cite questions about management as a credible source of concern.

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Investopedia: The Fresh Market Facing Its First Real Challenge

Every company has growing pains, and what separates the long-term winners from the flash-in-the-pans is how management responds to those challenges. The Fresh Market (NYSE:TFM) continues to post very strong returns on capital and has a sound business plan that looks to exploit more affluent shoppers' desire for high-quality produce that they cannot find in conventional supermarkets. For now, though, the company's comps growth appears to have stalled and a renewed emphasis on produce from major competitors threatens the company's value proposition to the customer.

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Tuesday, May 28, 2013

Investopedia: A Summer Window Of Opportunity For Altera

With chip companies in the analog (like Analog Devices (NYSE:ADI), wireless (like Broadcom (Nasdaq:BRCM), and other spaces reporting relatively unspectacular near-term demand, it's no great surprise or disgrace that Altera (Nasdaq:ALTR) finds itself in the same boat. While the idea that the programmable logic device (PLD) market should be growing about twice as fast as the overall chip market has been flogged for years (probably nearly to the point of death), it's not sparing Altera from the sluggish conditions in the wireless capex, industrial/auto, or networking verticals. Even so, for a stock that has often seemed expensive to me, this could be an interesting window of opportunity.

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Investopedia: Alnylam Basking In Orphan Drug Attention

It's been a pretty wild ride for Alnylam (Nasdaq:ALNY) shareholders, even by the elevated standards of biotechnology. Once thought to have the IP keys to one of the next great platform technologies (RNA interference), the stock was hammered down over several years as multiple Big Pharma companies chose to back away from the technology and partnerships with Alnylam. Since late 2011, though, it's been a return to investor love for Alnylam as positive clinical data and a bull market in biotech has fueled a fourfold rise in the shares.

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Investopedia: Tiffany Logs A Big Beat, But Fiscal 2014 Still A Work In Progress

I suspect that Tiffany (NYSE:TIF) is over-hyped as a bellwether for the consumer confidence of the well-to-do, but the reality is that it's still a large and well-followed retailer. To that end, the strong comp growth here this quarter was a welcome change of pace for what has been a relatively unimpressive run in retail.

First Quarter Results Come In Strong
Tiffany certainly did better than Wall Street's sell-side expected this quarter. Even so, management kept a lid on guidance – likely a prudent move given a spate of disappointing recent guide-downs and uncertainties over product repositionings.

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Investopedia: Scotiabank's Balanced Model Continues To Deliver

Each of the Canadian Big Five banks has its own strategy to diversify its growth outside of the Canadian banking market. In the case of Bank Of Nova Scotia (“Scotiabank”) (NYSE:BNS), that strategy revolves around building its high-growth Latin American banking business and it's less appreciated (but still lucrative) wealth management operations. Although investors should not underestimate the risk of a banking slowdown in Canada nor the inherent risks of emerging market banking, Scotiabank looks as though it may be a relative bargain in the banking sector.

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Investopedia: Seadrill Still In Motion, But Delivering Better Utilization And Dividends

Although I've had some issues with Seadrill's (Nasdaq:SDRL) aggressive (and highly levered) business plan, one thing really hasn't changed about this company – if you believe that various oil and gas majors are serious and committed to growing their production over the next five years, Seadrill is going to be a significant beneficiary. I sometimes wonder if Seadrill management is playing out some sort of deep-seated desire to be investment bankers with all of the elaborate deals and transactions they conduct, but the reality is that they are doing well in terms of contract coverage and dividend payments, and that counts for a lot.

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Investopedia: AstraZeneca Looks To Fish Oil To Round Out Its Cardio Portfolio

Investors waiting for M&A activity in the controversial purified pharma-grade fish oil market got some Tuesday morning, but probably not with the company they were expecting. AstraZeneca (NYSE:AZN) announced the acquisition of third-in-line pharma-grade fish oil company Omthera (Nasdaq:OMTH) for up to $443 million in total consideration. Although the deal offers a significant premium to where Omthera was trading and makes sense as a platform/portfolio addition, it's not exactly a risky high-value deal for AstraZeneca.

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Investopedia: Cost Discipline Driving The Story At PNC Financial

Sometimes it seems like the markets are against you as an investor. While PNC Financial (NYSE:PNC) issued a strong first quarter report, one of the best among banks for the past earnings, a pretty grim day in the overall market buried the news and kept on a lid on the stock. Since then, the stock has enjoyed a better performance and one consistent with the better-performing regional banks. If PNC can keep up the expense discipline, an eventual recovery in lending activity should bode well for the long-term performance and value of the shares.

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Monday, May 27, 2013

Investopedia: Lenovo Still Far From Getting Its Due

Every investor knows that China has seen a significant economic slowdown over the past year or so. Likewise, the ongoing struggles of the PC market (and, to a much lesser extent, the high-end smartphone market), have been amply reported in the financial press. As a manufacturer of predominantly PCs with a major portion of business coming from China, that would seem to spell bad things for Lenovo (OTC:LNVGY). While it's true that growth did slow noticeably in the fourth quarter, I continue to believe that Lenovo is significantly underestimated and undervalued by the market.

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Investopedia: Pandora Goes Up To 11

Seeing the performance of internet stocks like Facebook (NYSE:FB) and Pandora (NYSE:P), I really need to remember to eat my own cooking and actually buy those stocks that I think are undervalued. Since my last writeup in December of 2012, Pandora shares have jumped over 150% as investor worries about monetizing mobile users and staving off competition have eased considerably. For better or worse, there's still enormous uncertainty about the eventual business model for Pandora – meaning that bears can credibly argue that Pandora is overpriced now just as bulls make the case that Pandora is still a buy.

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Investopedia: Still Growing And Still Expensive

Cloud software and services continues to take share in the enterprise IT market, and (NYSE:CRM) remains a major player within that trend. Even so, growth is slowing and the company has yet to make a convincing case that there is all that much latent margin leverage in the business model. With attractive top-line growth and a “clean” play on the growth of SaaS/PaaS, I expect to remain a relatively popular software stock, but I likewise expect bears to continue complaining (loudly) about the valuation, particularly given the weak margin leverage and an underlying growth rate that may be weaker than it first appears.

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Investopedia: Marvell Unloved, But Does That Mean Undervalued?

It's hardly news to say that Wall Street plays favorites and in doing so sometimes goes well past the bounds of reality with respect to a company's real underlying value. For every ARM Holdings (Nasdaq:ARMH) or Analog Devices (NYSE:ADI), there seems to be at least one undervalued company. The question for shareholders is whether Marvell (Nasdaq:MRVL) deserves to be included in that latter group. While the valuation seems quite undemanding, this company still has a ways to go to convince investors that it still has the competitiveness and the business model to drive better long-term results.

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Investopedia: If Investors Won't Buy Retailers, Private Equity Will!

While 2013 has been a very strong year for many consumer stocks, retailers have quite noticeably not gone along for the ride. Just as nature abhors a vacuum, private equity won't let bargains hang around for long and the sudden interest of these investment groups in the retailing sector ought to have investors reconsidering their own feelings about the sector. Although it is certainly true that private equity investors make mistakes and overpay, acquisition interest could help the sector attract a little interest nevertheless.

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Thursday, May 23, 2013

Investopedia: Hormel Transforming, But Valuation Already Ahead Of It

Within the food and beverage sector there are certain stocks that just never get all that cheap, leaving investors with the uncomfortable choice of paying up (and hoping that the growth expectations come through) or waiting for the rare sell-off. In addition to companies like Nestle (OTC:NSRGY) and Coca-Cola (NYSE:KO), Hormel (NYSE:HRL) deserves a place on that list as the company has long combined good growth, improving margins, and strong returns on capital and delivered good stock market returns (more than tripling the return of the S&P 500 since the early 1990's).

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Investopedia: It's Still Miller Time In The Emerging Markets

A wide range of consumer stocks have enjoyed very strong runs in the market, and alcoholic beverage companies like Diageo (NYSE:DEO), Anheuser-Busch InBev (NYSE:BUD), and SABMiller (Nasdaq:SBMRY) have been among the strongest performers. Valuations are starting to look pretty overheated, even allowing for improving global consumer incomes, easing input costs, low rates, and so on. Even so, investors looking for relatively liquid plays on the ongoing growth of emerging economies may want to consider SABMiller for its broad exposure to markets like Africa, Latin America, and China.

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Investopedia: After Some Preening, American Eagle Could Fly Again

A retailer's work is never done. Even if a company has the store footprint it needs and has its brand identity/merchandising dialed in, there's often the need to refresh the stores, upgrade logistics systems, and so on. While all of that goes on, there's still the matter of weather, fashion, and competition-related volatility in comp store growth to consider.

American Eagle (NYSE:AEO) looks like it has a little more work to do before really getting going again. The company is in better shape than just a couple of years ago (when the stock traded in the low teens and “Can AEO ever be relevant again?” stories were more prevalent), but sizable cash investments and some sluggishness in sales could leave the stocky chopping around a bit before resuming a more positive trajectory.

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Investopedia: Cost Improvements Are Good, But Hewlett-Packard Needs Revenue Growth

With Hewlett-Packard (NYSE:HPQ) shares up almost 100% from the November 2012 lows, it seems pretty clear that Wall Street has bought into the company's plans to cut costs and enhance free cash flow (FCF). Moreover, investors are clearly happy to see HP emerge as one of the very few tech companies to not only meet (or exceed) estimates but actually raise guidance for the next quarter. While that's certainly all positive, HP still has significant issues with competitiveness that must be favorably resolved before the true underlying value in these shares comes to fruition.

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Investopedia: Ultratech Knocked Back, Not Knocked Out

For all of the times I lament stocks that got away, I've been lucky enough over the years to benefit from second chances as well. Semiconductor equipment supplier Ultratech (Nasdaq:UTEK) appears to be offering just such a chance right now. While there are certainly risks regarding the adoption of the company's advanced packaging and laser annealing technologies, to say nothing of competition from much larger companies, Ultratech's strong position at leading chip manufacturers like Intel (Nasdaq:INTC) and Taiwan Semiconductor (NYSE:TSM) argues that this company is still in the early stages of a significant revenue ramp.

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Wednesday, May 22, 2013

Investopedia: Lowe's Had Better Start Improving

It seems like a fuzzy memory now, but Lowe's (NYSE:LOW) was once seen as the superior operator to Home Depot (NYSE:HD) on the big-box home improvement battleground. Times have definitely changed, though, as Home Depot has gained an edge not only with its store locations (more stores in or near urban centers), but also with its merchandising. Making matters worse, Home Depot has significantly closed the gap (if not leapfrogged) Lowe's in an area where Lowe's once dominated – back-office logistics and cost management.

Even if Home Depot has been operationally de-pantsing Lowe's recently, it doesn't show up in the stocks over the last year – they both have nearly equal 60%-plus gains to their credit. Look at the two-year, five-year, or 10-year comparisons, though, and you see a wide gap between the performance of Home Depot and Lowe's (in favor of Home Depot). While there is a lot that Lowe's could do to close the gap and be a relative out-performer, the real question has to be “will they?”

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Investopedia: Can Intuit Get Back Into Wall Street's Good Graces?

For a company to not be taking part in this strong bull market, particularly when its revenue and earnings are growing, tells you something about how the Street views the company. Intuit (Nasdaq:INTU) may have once been a growth stock darling, but those days are past, as investors and analysts appear much more concerned about the company's consumer tax business than its long-term growth potential in small business services. I continue to believe that these shares are undervalued, but investors may have to wait a bit for that value to develop.

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Investopedia: The Recovery Proving Slow To Arrive For Analog Devices

Since Analog Devices (NYSE:ADI) reports off the normal calendar cycle, the company's earnings reports can serve as a sort of “mid-quarter” update on the analog sector. To that end, what Analog Devices had to say wasn't terribly encouraging. While there are seasonal recoveries underway in the industrial and auto sectors, signs of a big recovery are still lacking. With many players in the analog sector already having traded up on recovery expectations, value investors may find this stock a little lacking in appeal.

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Investopedia: NetApp Is Probably Cheap, But The Headwinds Aren't Going Away

Tech is in the dumps. That's not really new or controversial, as even Cisco's (Nasdaq:CSCO) report was not all that strong in absolute terms. To that end, it's not entirely surprising that NetApp (Nasdaq:NTAP) reported results that were a bit weak and guidance that wasn't terribly impressive either. I don't believe that NetApp is closing the gap with EMC (NYSE:EMC), nor will in the foreseeable future, but I believe there's plenty of money to be made as the #2 storage company, and I believe these shares continue to look meaningfully undervalued.

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Investopedia: Medtronic Still Reporting Weak Growth, But A Relatively Rare Bargain

Bargains are getting harder and harder to find in the med-tech sector these days, and with Medtronic (NYSE:MDT) sporting a double-digit EV/EBITDA ratio and a 35% gain in the share price over the last year, it doesn't necessarily jump out as a bargain. Nevertheless, with signs of stabilization evident in CRM and spine and some high profile products coming out in a couple of years, Medtronic is still worth considering even at this 52-week high.

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Investopedia: After A Big Rally, It's Up To Renew Blue For Best Buy

It wasn't so long again when the buy/avoid decision on Best Buy (NYSE:BBY) came down to the relatively simple discussion of whether you thought the company would be able to stabilize and continue on (with zero growth) or perpetually decline. With the shares up almost 50% from last year and 100% from the late December 2012 lows, now the question has shifted to how much growth the company's restructuring efforts will produce.

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Tuesday, May 21, 2013

Investopedia: Home Depot Continues To Rack Up Impressive Numbers

When a company finally gets its operational ducks in a row, the performance can be impressive. Couple that with a rising tide of improving underlying conditions, and the performance can be exceptional. That's the basic thesis on Home Depot (NYSE:HD) these days, as operational improvements started years ago are really bearing fruit and the company is starting to see the positive impact of improving housing markets.

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Investopedia: Roche, Reloaded

There's a saying that you'll hear used with perennially successful sports franchises – they don't rebuild, they reload. That could apply to Swiss drug giant Roche (OTC:RHHBY) as well, as the company appears to be well on its way with a second generation of top-end oncology drugs, supplemented with promising new drugs in CNS, metabolic disease, and other high-potential treatment areas. While Roche has questions to answer in its diagnostics and life science businesses, as well as its capital priorities, the business looks to be on solid footing for years to come.

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Investopedia: A Good Deal For Actavis, But Warner Chilcott Goes A Little Cheap

Confirming a pretty active recent rumor mill in the generic and specialty drug space, Actavis (NYSE:ACT) announced on Monday that it had reached an agreement to acquire Warner Chilcott (Nasdaq:WCRX) in an all-stock deal. This deal should bring real long-term value for Actavis, while giving the owners of long-struggling Warner Chilcott an honorable exit.

The Deal To Be
Assuming that the deal gets the request approvals and a rival suitor doesn't break things up, Actavis will acquire Warner Chilcott in an $8.5 billion all-stock deal that values Warner Chilcott at $20.08 a share – a roughly 5% premium to Friday's close, but closer to a 50% premium relative to where the shares were trading before spiking on M&A rumors.

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Investopedia: Strategically-Challenged Websense Gets A Fair Deal

For a company that has been struggling with a multi-year identity crisis, Websense (Nasdaq:WBSN) got a pretty good deal Monday morning. While the company's bid from Vista Equity Partners won't be setting new records in the tech space for deal multiples, it's a good deal for a growth-challenged company with iffy margins and a very uncertain long-term strategic place.

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Investopedia: Elan Continues To Make Baffling Strategic Decisions

When Elan (NYSE:ELN) announced back in February that it was selling its interests in Tysabri to Biogen Idec (Nasdaq:BIIB) my biggest concern was that Elan management would waste the proceeds. Elan management had made a series of questionable (if not bizarre) decisions prior to the Tysabri announcement, and I had minimal confidence that they would do the right thing – which, in my opinion, was simply to sell off the remaining assets and write a check to shareholders. Since then, the company's two major strategic decisions only reinforce my worries that Elan shareholders are not going to be well-served by management in the deployment of this cash.

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Investopedia: Campbell Soup Shows That Shoppers Are More Price-Sensitive Than Investors

This has been a banner year for investors in consumer product companies, particularly staples like packaged foods and beverages. What makes that interesting is that the backdrop hasn't been quite that strong – organic revenue growth has been hard to come by and margin leverage is not exactly plentiful. And yet, despite worries about sustainable growth in the soups business and the weakness in the beverage business, Campbell Soup (NYSE:CPB) has seen its stock outperform the likes of Nestle (OTC:NSRGY), Kellogg (NYSE:K), General Mills (NYSE:GIS), and Coca-Cola (NYSE:KO).

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Investopedia: After A Big Rally, Pfizer Might Need Some Rest

Big Pharma has enjoyed an exceptional stretch of performance lately, reversing what had been a relatively rare period of underperformance brought on by overdone fears over this sector's ability to continue to grow. While the recovery in Pfizer's (NYSE:PFE) valuation was valid, the question now is whether the shares have significant room left to move. Given a relatively weak growth profile, investors shouldn't expect these strong returns to continue on all that much longer.

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Investopedia: Yahoo! Adds Tumblr, But Is This Another Underpants Gnome Deal?

Whether it's because of my Wall Street background or it's just legitimately funny on its own, the Underpants Gnome episode of South Park is one of my all-time favorites. I particularly love the explanation of the business plan – Step One: Collect Underpants, Step Two: ?, Step Three: Profit – as it so well captured the silliness of tech bubbles and pilloried the ridiculousness of the CEOs and corporate boards of the era.

I'm not sure Yahoo! (Nasdaq:YHOO) shareholders see quite the same humor in it, though, as the company's past acquisitions of GeoCities, HotJobs, AltaVista fit that model pretty well. Now we have Yahoo! spending over $1 billion of shareholders' money on Tumblr. Management promises that this time will be different, and how this deal goes over the next couple of years will say a lot about whether new management will produce different results for this long-struggling internet company.

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Monday, May 20, 2013

Investopedia: Kohl's Could Work For A Trade, But It's In A Brutal Business

Retailers have to try to pick winners, and whenever a company builds its model upon picking winners it's just a matter of “when” (not “if”) the company stumbles. Kohl's (NYSE:KSS) did a lot of things right in building up its 1,150-store chain of value-oriented specialty department stores, but execution has been more problematic recently. Conventional valuation metrics suggest Kohl's could have further to run if/when the reported numbers improve, but investors thinking long term should be wary of the cash flow model and the ability of any company to establish long-term competitive edges in retailing.

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Investopedia: Brocade's Uncertain New Direction

As Brocade (Nasdaq:BRCD) struggles to go anywhere, new management realizes that the company can't simply operate as it always has. But a new direction isn't particularly helpful if it is the wrong one, and I have real doubts about the company doubling-down and looking to compete with Cisco (Nasdaq:CSCO) in markets like data centers. While expectations for Brocade are shockingly low, it's hard to see this stock going anywhere without a real improvement in sales growth.

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Investopedia: How Much Further Can Value Carry Autodesk?

I've been a little surprised by Autodesk's (Nasdaq:ADSK) performance over the past nine months or so. While I've long liked this company and thought it was significantly undervalued on a cash flow basis, I've been surprised that worries about macroeconomic conditions, the switch to a cloud/subscription model, and generally unimpressive top-line growth didn't overshadow that underlying value. With another disappointing quarter in hand and estimates heading lower, though, it may be a little harder for the value trade to support these shares in the short term.

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Investopedia: Should Investors Hang Around For More From Applied Materials

From the fall of 2012 until very recently, my bullish call on Applied Materials (Nasdaq:AMAT) finally started to pay. Shares rose nearly 50% in six months as investors finally started to believe that NAND capex spending was going to improve and that the flat panel business had likely bottomed, not to mention some confidence that the company would see better results with different leadership. Although these shares are not overpriced on a free cash flow basis, investors who want to stay exposed to semiconductor equipment may want to think about switching over to the stocks of companies with better individual growth stories.

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Investopedia: Frear Of Cisco Leads The Market To Abandon Aruba Networks

It was only nine days ago that investors were left speculating as to whether Aruba's (Nasdaq:ARUN) weak fiscal third quarter meant that the WLAN market was slowing or that rival Cisco (Nasdaq:CSCO) was gaining share. With Cisco's earnings in hand and Aruba management's own post-earnings comments, it's clear that Cisco now looms large as a major disruptive force.

A more aggressive (and successful) Cisco is a multi-faceted threat to Aruba, and investors aren't hanging around to see how this plays out – sending the shares down more than one-quarter Friday morning. Although I continue to believe that there's long-term value in Aruba Networks shares, investors approaching this stock today have to treat it like nitroglycerine – be gentle and have a backup plan if and when things go badly wrong.

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Investopedia: Wal-Mart Uses Rigorous Cost Control To Offset Weaker Sales

It's no secret that a meaningful percentage of the country's retail business goes on under the roof of Wal-Mart's (NYSE:WMT) stores. To that end, when consumers are feeling pressure (particularly those on the less affluent side of the ledger) it shows up in Wal-Mart's numbers. This gigantic retailer didn't have a bad fiscal first quarter, and it sounds like the fiscal year ahead should get better, but once again Wal-Mart is having to turn to operating synergies to wring out some growth. This stock's status as a proxy for the U.S. retailing sector makes talk of value somewhat moot, but these shares don't look notably cheap on a long-term basis.

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Thursday, May 16, 2013

Investopedia: Cisco Comes Through, But Times Are Still Tough

With so many negative earnings reports for the first quarter, expectations for Cisco's (Nasdaq:CSCO) quarter were pretty modest. As a good company should, Cisco came through with a solid quarter and signs of share gain in multiple markets. That said, while I do believe Cisco is still undervalued, investors might want to exercise some caution before piling back into tech stocks.

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Investopedia: Kohl's Could Work For A Trade, But It's In A Brutal Business

Retailers have to try to pick winners, and whenever a company builds its model upon picking winners it's just a matter of “when” (not “if”) the company stumbles. Kohl's (NYSE:KSS) did a lot of things right in building up its 1,150-store chain of value-oriented specialty department stores, but execution has been more problematic recently. Conventional valuation metrics suggest Kohl's could have further to run if/when the reported numbers improve, but investors thinking long term should be wary of the cash flow model and the ability of any company to establish long-term competitive edges in retailing.

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Wednesday, May 15, 2013

Investopedia: If You Don't Mind Volatility, Deere Could Still Do Alright

Deere (NYSE:DE) is a curious stock. It seems all too common for investors to bid these shares up into earnings (up about 12% this time), only to be disappointed when management's guidance sounds more conservative than they wanted. And yet, more often than not, the company does fine (or better) the next time around. While this pattern can be frustrating for investors who get stomach aches over the week to week moves in their portfolio, it's an opportunity for investors to make entries (or exits) at better prices.

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Investopedia: Investors Already Thinking Recovery For Cummins

Seeing as it is no simple task to find a company with the right mix of good management, competitive products, and attractive long-term markets, I understand why investors are slow to give up on companies that feature these attributes. All the same, it looks like the Street has already looked past this lull in Cummins' (NYSE:CMI) business. Not only is the stock up about 15% over the past year and within 10% of its all-time high, but today's valuation already presumes a pretty solid future outlook with respect to growth.

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Investopedia: Agilent Isn't Making It Easy On Investors

It's getting harder for me not to view Agilent (NYSE:A) as something like the store-brand version of Danaher (NYSE:DHR). It's cheaper and pretty close to the real thing, but it's just not quite the same and sometimes those differences leave you walking away unsatisified. To be sure, I think Agilent could do a lot to close this gap, but I'm not sure they will. Consequently, while Agilent is a little bit undervalued, it's harder for me to be as enthusiastic about buying shares today – particularly when Danaher seems undervalued to a similar degree.

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Investopedia: BP Looks Cheap, But A Lot Of Improvements Have To Come Through

The energy sector has been in a rut for a while now. Despite some decent one-off performances, energy screens as one of the worst performers over the year-to-date, one-year, three-year, and five-year periods. With that sort of performance, it's not altogether surprising that many of the majors (Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), et al) look a little undervalued. BP (NYSE:BP) actually jumps out as one of the potentially cheapest names to consider, but there's still quite a bit of work that management has to do to get this one performing again.

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Investopedia: Waiting For Housing To Recover, Valspar's Recovery Already Arrived

Data on the residential housing market has been getting better. Prices and sales activity have both improved, and data from the major big-box home improvement stores Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) suggests that homeowners and contractors are back at work fixing up properties.

While the aforementioned data has been incremental, many housing-related stocks have already posted strong runs. One of them, paint and coatings manufacturer Valspar (NYSE:VAL) is already up 75% over the last two years and about 46% over the past year. While declining TiO2 prices and improving demand should both help results, as will a growing presence in emerging markets, the stock seems to already be testing the high end of its typical valuation range.

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Tuesday, May 14, 2013

Seeking Alpha: LipoScience Gives Its Shareholders Chest Pains

There's a good reason that I always include the warning that small-cap med-techs carry above average risks, and LipoScience (LPDX) dutifully provided an example last week. Due in part to system placement delays and delays in ramping up new sales reps, this emerging diagnostics company missed expectations for the first quarter and lowered guidance for the rest of the year.

Retribution was swift and severe - the shares tanked 25% in a single day. Now the question for investors is whether there is still an opportunity here and where it's worth the risks to buy shares in the hopes of realizing that opportunity.

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LipoScience Gives Its Shareholders Chest Pains

Investopedia: Chipotle Executing Well, But Valuation Leaves No Margin Of Error

Investors can be slow to abandon their favorite growth stocks, particularly when management has shown itself able to execute at a high level. Couple that with a very strong sector and you have a good recipe for Chipotle Mexican Grill (NYSE:CMG) to perform. While the shares are still down almost 10% from their year-ago level, they are up almost 60% from a late October bottom and investors seem to be willing once again to just look past challenging same-store traffic trends.

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Investopedia: Danaher Proves Even The Nimble Can Stumble

I don't want to sound like too much of a fan-boy when it comes to Danaher (NYSE:DHR) (many, if not most, sell-side analysts seem love it more than I do), but I do think it's fair to say that when even Danaher is struggling to put up a good quarter, you know the industrial sector is in a tough spot. With growth decelerating across the board, even Danaher's much-vaunted margin improvement has come up a little short. Even so, this is still a bull market and the shares are just shy of a 52-week high.

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Investopedia: Roper A LIttle Short On Growth, But A Proven Builder Of Value

As much as investors and analysts talk about growth, you'd think that would be the be-all end-all of stock selection. The data tells a different story, though, particularly in the industrial sector. When it comes to industrials, at least the diversified conglomerates, it would seem that margin leverage, improving ROICs, and active capital deployment are what really drive shares over the long term. To that end, Roper (NYSE:ROP) still looks like an interesting stock to watch.
Another Unimpressive Growth Story
The theme for the first quarter of 2013 has been disappointing and dreary industrial earnings reports, and Roper certainly fits that theme. While reported revenue rose 4%, organic revenue was down 3% on an identical decline in volume. That puts Roper behind other conglomerates like ABB (NYSE:ABB) and Danaher (NYSE:DHR), ahead of GE (NYSE:GE) and Illinois Tool Works (NYSE:ITW), and in basically the same boat as companies like Dover (NYSE:DOV) and Honeywell (NYSE:HON).
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Monday, May 13, 2013

Investopedia: BorgWarner Still In A Long-Term Growth Lane

It has been nearly a year since I last wrote on BorgWarner (NYSE:BWA), but in the intervening months a lot of my predictions seemed to come true. In particular, the stock faltered a couple of times on weakness in light vehicle production numbers and investors had the opportunity to buy shares of this high-quality auto components company in the $60s.

Since the late 2012 swoon, though, these shares have rebounded by a third even though European vehicle production remains weak. While liking these shares in the $60s was easy, buying in in the $80s takes a little more faith in an aggressive long-term growth story that isn't often seen in the auto components sector.

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Investopedia: ABB Performing Well, But A Big Change Is Coming

This earnings season had been setting up quite well for ABB (NYSE:ABB). Though there was some consternation that the company had overpaid and bought unwelcome volatility with Power-One (Nasdaq:PWER), the company's earnings compared quite favorably to its peer group. With news now that CEO Joe Hogan is resigning, though, investors are right to question whether the company will be able to continue what has been a quite successful run under Hogan's leadership.

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Investopedia: Advanced Energy Industries Hanging On For The Turn

There's a quote you will hear once in a while around racing tracks that goes “to finish first, first you have to finish”. Given the nasty cyclical decline in semiconductor and flat panel manufacturing, and the near-death spiral of solar power, that seems like a relevant starting point for a discussion of Advanced Energy Industries (Nasdaq:AEIS). While conditions look pretty uninspiring today, AEIS has maintained solid market share through this downturn, has a liquid balance sheet, and should be poised to benefit when its core markets ultimately turn around.

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Investopedia: It Should Be Up From Here For Eaton

The whole point of equity investment to assess, and discount, the value of tomorrow's earnings into today's dollars. To that end, Eaton (NYSE:ETN) is an interesting story. I believe the company is getting through the worst in the hydraulics and vehicle businesses, and that the electrical business should see many years of solid growth. On the other hand, the market already likes this stock quite a bit, and it looks like investors need to go elsewhere for a bargain.

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Investopedia: The Market Seems Unwilling To Let Yum! Brands Stay Cheap For Long

When I last wrote on Yum! Brands (NYSE:YUM) in early February, I thought the shares were cheap relative to the long-term value but likely wouldn't stay cheap for very long. With the shares already up 10% since then, it looks like that call is working out. It's true that the news from the company's large China operations remains weak, but I believe the worst has passed and the company still has a global growth story to drive the stock.

China Is Still Bad, But Maybe Not As Bad As Feared
China has been a major source of growth and profits for Yum! Brands for quite some time now, but that growth has gone sharply the other way lately on a one-two punch of supplier quality problems and the avian flu. While I don't want to soft-peddle this development, I think it's hasty to assume that the company's KFC brand has really lost any real long-term value in this huge market.

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Saturday, May 11, 2013

Investopedia: Middleby Keeps Sticking To A Successful Recipe

Remaining faithful to a value-oriented philosophy sometimes leaves you feeling like you're rooting for certain companies to stumble. Take the case of Middleby (Nasdaq:MIDD). While acquisitions have clearly played a major role in building the company, management has done pretty well in sustaining that growth on an organic basis and developing new equipment to improve the efficiency and profitability of restaurants. Unfortunately, as a very good growth stock, these shares seldom get to a valuation where value or GARP investors can feel comfortable loading up.

With another quarter in the books, Middleby continues to grow at a rate well above its peers and the industry as a whole. What's more, with the restaurant industry apparently feeling more comfortable about near-term trends, it doesn't sound like a stumble in demand is coming. Nevertheless, Middleby is a good stock to keep on watchlists just in case, and more growth-oriented (and less valuation-sensitive) investors may find there's nothing wrong with buying in today.

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Investopedia: ArcelorMittal Looks Like A Good House In A Really Tough Neighborhood

Although the U.S. mini-mill companies Nucor (NYSE:NUE) and Steel Dynamics (Nasdaq:STLD) have beaten the market over the past year, these are still tough times in steel, as stocks like U.S. Steel (NYSE:X), POSCO (NYSE:PKX), and ThyssenKrupp really have not been strong. Even though it may enjoy the reputation of being the best integrated steel company out there, that reputation hasn't helped ArcelorMittal (NYSE:MT) that much, as the stock has languished in a tough steel market. These shares do seem undervalued, but it's probably going to take more optimism about the global economy for shareholders to see the benefits.

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Investopedia: Little Left To Dendreon But The Hope Trade

Biotech investors are a stubborn and hopeful lot, and many of them will never give up the ship. While confidence and patience are admirable traits up to a point, it sometimes feels like some biotech investors would spin the sun going dark as a positive, as it means no more skin cancer. In the case of Dendreon (Nasdaq:DNDN), it's only the true believers and traders who have any confidence that this company has much of a future. With another very disappointing quarter in the books, I think the only real debate left to have is whether the company can survive.

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Investopedia: Nvidia Still Too Cheap And Still Very Controversial

At the risk of sounding like a Dos Equis commercial, I don't always write about Nvidia (Nasdaq:NVDA), but when I do, I'm usually pretty bullish on the company's long-term prospects. At the same time, though, I realize that Wall Street is firmly in the “show me” camp on this company and does not believe that it will succeed with its ventures into mobile devices and mobile gaming. This skepticism is why I've held off buying in so far (owning a stock that Wall Street wants to hate is fruitless and frustrating), but it's getting more and more tempting.

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Thursday, May 9, 2013

Investopedia: Adasuve Deal Is Very Good For Alexza, But What About Teva?

It was just a week when I wrote that Teva Pharmaceutical (NYSE:TEVA) seemed undervalued on the basis of its probable free cash flow (FCF) trajectory, but that a host of uncertainties (including its strategic direction/priorities) made it a tough stock to love. Wednesday's announcement of a U.S. marketing partnership with Alexza (Nasdaq:ALXA) for the controversial inhaled acute agitation therapy Adusave is a good case-in-point. While Teva may see a diamond in the rough here, a lot of investors and analysts are going to look at this as a sign that the company is flailing around in search of a new direction and embracing longshots as a strategy.

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Investopedia: Overheated Expectations Send Rackspace Investors To The Torture Chamber

Successful investing demands a careful balance between confidence in your own subjective analysis and a willingness to acknowledge that you may be wrong. When I last wrote on Rackspace (NYSE:RAX) back in February of 2012, I thought the stock looked overpriced and was trading far more on the mania over all things “cloud” than on credible projected cash flow streams.

What I didn't mention at the time was that my fair value was less than half of the current stock price. Such a dramatic difference of opinion with the market led me to revisit the numbers repeatedly, and things didn't look so good for that call as the stock climbed into the high $50s, came back down into the $40s, and then rocketed up to the high $70s earlier this year. Then the worries about growth, competition and margins started to take hold – leading to a nearly 50% drop to today's price just below $40 (as of this writing).

As it sits today, my concerns about Raxspace really haven't changed. While I believe gross demand for managed hosting and cloud platform services will be strong, I believe Rackspace will be hard-pressed to create any sort of economic moat in this market or produce the sort of free cash flow necessary to validate even today's lower share price. I continue to appreciate why investors like Rackspace as a play on cloud and outsourced services, but I fear Rackspace will be laid low by commodity-like profitless prosperity.

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Investopedia: Groupon Shows Some Vigor, But Much Work Waits To Be Done

Everything is relative in the stock market, and it's important to keep Groupon's (Nasdaq:GRPN) performance in context. Yes, Groupon does seem to be doing better, but bears may well argue that means nothing more than Groupon is in a better state of certain death. Although I don't think Groupon is doomed, I do think there's a lot of work left to do, and Groupon still has a lot left to do before it convinces investors that this is a real business with real value for the long-term.

Some Improvements In The First Quarter
Expectations for Groupon have definitely seen downward revisions over the past year, but the company's first quarter results offer some optimism that management, sell-side analysts, and reality are all back on the same page.

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Investopedia: Is Microsoft Hitting Up Barnes & Noble For Some Nook(ie)?

Even though Barnes & Noble (NYSE:BKS) still sports a billion-dollar enterprise value, investors and analysts have hardly been bullish about its standalone prospects. Now it sounds as though its partner Microsoft (Nasdaq:MSFT) may be about to make a move that would significantly transform the company. While a deal for Nook Media would likely be a real positive for Barnes & Noble, I have a harder time seeing how Microsoft gets its money's worth with such a deal.

Just A Rumor … For Now
Barnes & Noble's Nook Media business (both the e-reader/tablet operations and digital media) has been the target of ample M&A speculation for quite some time, with Microsoft and Liberty Media (Nasdaq:LMCA) figuring prominently in the speculation. Now it sounds as though a real bid could be on the way.

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Investopedia: Another Negative Fish Oil Study Adds To Amarin's Marketing Challenges

Nothing has come easy for Amarin (Nasdaq: AMRN).

This manufacturer of the ultra-pure fish oil (EPA in particular) treatment Vascepa has garnered a devoted following of investors who believe that this is not just the next Lovaza (the purified fish oil treatment that Glaxo (NYSE:GSK) acquired in 2007 for $1.7 billion by buying Reliant Pharmaceuticals), but even more. Unfortunately for the bulls, Amarin has not yet garnered the new chemical entity (NCE) status from the FDA that would better shield it from competition, and interest in partnering or acquiring the company has been lackluster enough that the company has gone forward with its own marketing program.

Perhaps even worse, though, is the accumulation of data suggesting that fish oil may not be effective in reducing the risk of death from cardiovascular disease. On Wednesday, the New England Journal of Medicine reported results from the largest done to date on the efficacy of fish oil, and the results were not positive. The real questions for Amarin investors now are whether this trial is relevant to Vascepa and/or what impact it will have on real-world doctors.

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Investopedia: Better Margins Are Nice, But Are Green Mountain Investors Too Excited About The Starbucks Deal?

For better or worse, Green Mountain Coffee Roasters (Nasdaq:GMCR) is never a boring stock to watch. Caught in a tug-of-war between bulls and bears (the stock is up more than 100% over the past year, but over one third of the float is shorted), earnings reports always get more than their fair share of attention. This time around, the company made some respectable progress on margins, but investors may be getting a little too excited about the long-term implications of a new Starbucks (Nasdaq:SBUX) deal and a little too casual about unimpressive revenue growth trends.

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Investopedia: After The Hurricane, Is It Safe To Visit Aruba Networks?

There's a pretty good rule of thumb that applies to swimming and diving – if you can't see the bottom, don't dive in -- and think twice about swimming there. Likewise, jumping into a stock right after a significant revision to earnings expectation can be an invitation for successive disappointments, as companies don't often miss just one time.

With Aruba Networks (Nasdaq:ARUN), that leads to some tough choices for investors. While I definitely believe that the wireless networking (WLAN) is going to grow significantly, and that Aruba is well-positioned to take more share in the small/medium-sized business (SMB) space, I also acknowledge that WLAN spending is largely discretionary and this company could see further order/revenue disappointments if IT demand doesn't rebound during the summer.

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Wednesday, May 8, 2013

Investopedia: Whole Foods Back On Pace

There will come a time when this is no longer true, but it still seems to be the case that Whole Foods (NYSE:WFM) is a stock you want to buy when comps disappoint and sell-side analysts start collectively clutching their pearls and/or talking about slowing store expansion in favor of capital returns to shareholders. While consumer confidence is still pretty shaky, Whole Foods seems to be doing well with its value positioning and there's still ample store growth potential. Whole Foods isn't cheap today, but I'd be slow to part with these shares if I already owned them.

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Investopedia: Amgen Chased By The Bubble

There are two relatively heated debates that bear directly on Amgen (Nasdaq:AMGN) and its stock. First, is Amgen still really a biotech, or is it really more of a Big Pharma company? Second, is there a biotech/pharma bubble (and if so, how will valuations fare post-popping)? Investors' perspectives on these two issues likely have a lot to do with whether they see value in these shares, for while Amgen is certainly a well-run company looking to become an increasingly balanced advanced drug developer, the valuation is somewhat demanding unless the pipeline really delivers.

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Investopedia: Recent Financials May Not Be Entirely Fair To Hologic

I have no qualms with those who believe it is the responsibility of the management of public companies to communicate clearly and accurately with investors (and analysts) about the current state of the business and the likely near-term conditions. Likewise, I don't particularly object when the Street punishes those companies that come in short of expectations without having given suitable warning.

So I can understand some of the disappointment with Hologic (Nasdaq:HOLX) these days – the company arguably could have done a better job communicating (and adjusting expectations) in regards to the fall-off in 2D mammography, ThinPrep, and the Chinese business. At the same time, though, I see a lot of what's troubling Hologic as macro issues impacting the sector as a whole. As the company is continuing to execute reasonably well on costs and the Gen-Probe integration, today's share price may be something of an opportunity.

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Investopedia: Disney Does It Again

As I said in my last write-up of Disney (NYSE:DIS), there's an element of predictable unpredictability to this company and that came through again this quarter. Like so many other consumer-oriented stocks, though, Disney has been on an absolute tear – more than doubling the performance of the S&P 500 over the past year. While I wouldn't worry about that if I were a long-term holder of Disney (and still planning on being one), valuation is making it appear as though there's a housing bubble for the House of the Mouse.

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Investopedia: Mondelez Isn't As Good As Nestle, But Priced Like It Is

While I realize that Wall Street typically prices stocks on the basis of what investors believe a company will look like in the future, I'm still surprised by the relative valuations that come out of the process. Take the case of Mondelez (Nasdaq:MDLZ). This company is focused on multiple growth areas in the packaged food space (and has a large developing market exposure) and does indeed post better growth than many of its peers, but the overall combination of growth and margins wouldn't normally seem to argue for valuation on par with Kellogg (NYSE:K) or Nestle (Nasdaq:NSRGY). Consequently, although I do expect Mondelez to do well relative to its sector in terms of reported growth, I continue to believe that valuation is already too steep.

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Investopedia: Emerson - More Realistic, But Not Necessarily Better

I've commented before that Emerson Electric (NYSE:EMR) is an “it's always something” company – there's always something going a little wrong with some part of the business and creating worries for long-term investors. To that end, while Emerson's reported sales growth was actually pretty good on a relative basis this quarter, the incoming orders look ugly, management sounds pessimistic about the second half, and there are still serious issues in network power. While I do believe Emerson would be worth more than today's share price if it could fix its persistent problems, I have incrementally less confidence that management can.

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Tuesday, May 7, 2013

Investopedia: Johnson Controls Has A Lot Of Improving Left To Do

One of the investment and corporate finance topics that has been getting more airtime recently is the notion of “peak margins” - the idea that many (if not most) companies have squeezed all they can from mass firings, IT investments, and other sorts of cost “rationalizations”. If this theory proves accurate, stocks could well be meaningfully overpriced on the basis of margin expansion expectations that just won't materialize.

That could be a relevant topic in the case of Johnson Controls (NYSE:JCI), as sell-side analysts continue to project margin improvements well ahead of historical experience. Certainly there are reasons to think that this company could be near a point of margin inflection – the building efficiency business should be close to turning and the company may be ready to start reaping better returns from batteries as well. That said, betting on a significant transformation at a company with a record of underwhelming performance could be a risky bet.

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Investopedia: Broadcom Has To Play Offense And Defense

Once a darling of the floundering chip space, smartphone chip stocks have had a rather rough time of it over the past year or so. Avago (Nasdaq:AVGO), Skyworks (Nasdaq:SWKS), Qualcomm (Nasdaq:QCOM), and Broadcom (Nasdaq:BRCM) have all notably lagged the market over the past year. While it's true that these one-time market-beaters may have overshot the mark and been due for a retrenchment, investors have nevertheless been worried about the pace of high-end smartphone demand and the risk of increased price-based competition from Asian suppliers.

Though I'd be very careful about simply plugging my ears and ignoring the threats to Broadcom's business, this stock continues to look like a solid name for the long term. That said, with the stock close to a 52-week high, the potential here isn't quite what it once was.

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Investopedia: Sysco's Reputation Seems More Durable Than Its Growth

When a stock holds enduring favor with a patient investor base and the stock is part of a sector that has enjoyed a big upswing in investor interest, that can be a powerful combination. That's about the only explanation that makes sense to me as to why Sysco (NYSE:SYY) shares are up more than 20% over the past year despite slowing sales and difficulties/delays in reducing operating costs. While Sysco remains a very good company, it's harder today for me to make the argument that it's an equally good stock.

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Investopedia: Ingersoll-Rand Improving, But Are Investors Already Too Optimistic?

I will say right from the beginning that I haven't been a fan of Ingersoll-Rand (NYSE:IR) for some time now. While the involvement of activist investors and a commitment to launch debt-funded share buybacks has helped the stock significantly since October of 2011, the next leg of improvement is going to have to come from better execution. This is where I'm not sure the company can deliver, and where I fear investors have given too much of a benefit of the doubt to management. That said, investors who have more faith in management could look to improving construction markets as a driver for the next move in the stock.

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Investopedia: BMC Software Shows Again That Getting Full Value Is Tough Without Growth

It's hard to call the last few years a nightmare for BMC Software (Nasdaq:BMC) shareholders, but dishwater-gray mediocrity doesn't seem so unfair. Against a nearly 20% return from the Nasdaq, BMC has actually declined about 10% over the past two years (though up almost 30% over five years, and closer to the Nasdaq return), and has trailed peers/comps like CA (NYSE:CA), Compuware (Nasdaq:CPWR), and ServiceNow (NYSE:NOW) by a meaningful margin too.

The problem here is one that I've lamented before in the tech sector. Although BMC converts a sizable percentage of its revenue into free cash flow (FCF) and sports solid margins and returns on capital, the company's growth has been lackluster due to an inability to change with the times and establish competitive positions in new markets.

Now the story seems to be all but over for BMC as a publicly-traded company. A consortium of private equity investors has put together a bid that gives investors only a modest premium over the 200-day moving average and would seem to undervalue the company's long-term cash streams. And yet, this very well may be the best deal that investors can hope for and a warning to investors in other cash-rich/growth-poor stories.

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Investopedia: Will Tyson Serve The Bulls Or Serve Up The Bulls?

It's really too bad that Tyson Foods (NYSE:TSN) doesn't offer a breaded or Buffalo-style crow, as I have to eat a plateful of it with this stock. I didn't like this stock back in the fall of 2012, and thought that the post-earnings reaction then was overdone. As it turns out, though, the stock had another 28% left to appreciate, making it a very solid performer in what has been a strong consumer sector overall.

At the risk of doubling down on a bad call, I'm still not very partial to this stock. Although I do believe that Tyson has the opportunity to grow its international and packaged foods businesses and generate meaningfully better margins, this quarter's margin under-performance highlights just how challenging it can be to deliver on a quarter-to-quarter basis. In the context of what increasingly looks like an overheated consumer sector, I'd be careful about piling into Tyson shares today.

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Investopedia: Zions Bancorp Will Likely Find It Harder From Here

One of the biggest trends in bank stocks over the past 18 months or so has been the relative outperformance of bank stocks where the predominant theme was cleaning up the balance sheet and simplifying the business. Investors in banks like Bank of America (NYSE:BAC), Synovus (Nasdaq:SNV), and Zions Bancorp (Nasdaq:ZION) have all beaten the market by a healthy margin over the past year, but the question is how much more juice there is to be squeezed from that orange. In the case of Zions, for instance, there's ample scope to reduce funding costs, but fierce competition in lending could delay the progression of real earnings and ROE improvement.

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Investopedia: Simpler Looks Better For First Horizon

It was all too common during the bubble years that began almost a decade ago to see quality community or regional banks de-prioritize their traditional businesses to reach for the fool’s gold offered by riskier lending. Very few of those stories had happy endings, and many ended like First Horizon National (NYSE:FHN), where the bank saw significant lending losses, putbacks, and the need to raise fresh capital to stay in business.

Now things are settling down and getting back closer to normal. First Horizon has retrenched around its core operations and is looking to reduce its non-strategic lending activity, while also looking to make the most of its sizable market share in Tennessee. The only real drawback to the story, aside from the risk of higher putbacks, is the fact that valuation already anticipates quite a lot of improvement.

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