Friday, August 30, 2013

Seeking Alpha: Mattson Technology: A High-Beta Play On 20nm And Below

Fellow Seeking Alpha contributor Ashraf Eassa and I have both written previously about Ultratech (UTEK), a semiconductor equipment company that we both like for its innovative positions in laser spike annealing (LSA) and advanced packaging lithography ("flip chips"), as well as the potential of its steppers in LED manufacturing. In particular, we have both made the case that advanced annealing technologies are likely to be a critical factor in the move to sub-20nm processes.

Ultratech isn't the only game in town, though, and there are multiple technologies and process steps that are going to play significant roles in the production of FinFETs and 3D circuits. With that, I would take a look at Mattson Technologies (MTSN), as this company has already accomplished the not-so-easy task of gaining meaningful share in the dry strip, rapid thermal processing (RTP), and etch markets despite competing with giants like Lam Research (LRCX), Applied Materials (AMAT), and Tokyo Electron (TOELY.PK).

While 2013 has proven to be a very disappointing year for semiconductor equipment orders (and much like waiting for Godot), I don't believe this stagnation is sustainable. Foundries and chip companies can only delay orders and repurpose older equipment for so long. With that, I believe orders will begin to recover in late 2013/early 2014 and bring Wall Street back to the view that Mattson has the collection of tools and technology to challenge its prior record revenue levels - an achievement that I believe could take the shares to $3 or above.

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Mattson Technology: A High-Beta Play On 20nm And Below

Investopedia: It's No Accident That Drugs Are Expensive

The cost of prescription drugs is a perennial subject of heated debate, as advocates on one side argue that drug companies make windfall profits and overcharge health care systems and advocates on the other side argue that higher drug prices simply reflect a higher cost of doing business and a need for companies to make a return commensurate with the risks they take on. Although I have no delusions that I'll change the minds of those who believe drugs are too expensive and that drug companies are abusing patients and insurance companies, the impact of rising costs of drug development can't be ignored.

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Investopedia: OmniVision Technologies - The Beat(ing) Goes On

I've followed OmniVision Technologies (Nasdaq:OVTI) for quite a while now, but I've never owned the shares. In a nutshell, OmniVision seems to fit into that “it's more trouble than it's worth” category of stocks where severe operational volatility (that I don't believe the company really can or could do much to control) leads to big swings in the price. That may be fine for investors/traders who like active names that produce multiple trading opportunities for buy/sell moves within a year, but it is much less attractive to those of us who pursue an investment path of “enlightened torpor”.

With that, OmniVision's fiscal first quarter (and guidance for the second quarter) was really just more of what I've learned to expect from this company. While I do believe OmniVision has good technology and a solid market position relative to the likes of Sony (NYSE:SNE) and Samsung, it's just such a difficult market to prosper in, particularly with the turbulence in the handset market right now.

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Investopedia: Apache Makes Nother Move To Reduce Business Risk

Investors are getting even more of what they say they want from Apache (NYSE:APA), as this large independent oil and gas producer has reached an agreement to sell down its stake in Egypt. Due in no small part to the significant increase in political/operating risk in Egypt, many shareholders and analysts had been vocal in calling for Apache to reduce its exposure to the country. Although it sounds like Apache got a reasonable deal, I am skeptical that it's really going to change opinions on this company as it goes through a restructuring of its operations.

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Investopedia: Vodafone, Verizon (And AT&T?) Go Once More Unto The Breach

Good ideas have a way of hanging around and figuring out a way to unwind the split ownership of Verizon Wireless is a good idea. With that, Verizon (NYSE:VZ) and Vodafone (NYSE:VOD) are back at work on a way to forge a mutually beneficial arrangement to bring Verizon Wireless fully under the ownership and control of Verizon. If reports of Verizon being more flexible on price and Vodafone being more flexible on deal structure are true, there's a good chance this deal gets done, but I still wouldn't rule out the possibility of AT&T (NYSE:T) having a role to play before it's all said and done.

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Investopedia: Shows Some Reacceleration

I seriously doubt anything will ever quell the heated arguments over (NYSE:CRM), it's future prospects, and its valuation, but the company's fiscal second quarter earnings are likely to give the bulls a little extra ammo for the time being. remains an expensive stock with questionable operating leverage, but it also remains a share gainer in a large market. Moreover, while stocks like and Workday (Nasdaq: WDAY) aren't my cup of tea at all as an investor, I know better than to play chicken with a freight train.

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Now on Twitter

Finally broke down and joined Twitter (@ Kratisto_Invest). No idea how active I will be, but we'll see what happens...

Thursday, August 29, 2013

Seeking Alpha: Utah Medical Has Appealing Quality, But Needs Growth

I love sifting through micro-caps in the hunt for under-followed companies that have a lot to offer to patient investors. Unfortunately, I think I'm late to the party with Utah Medical (UTMD) as although this company is not followed by the sell-side, the shares are up more than 50% over the past year and nearly 100% over the past two years.

Utah Medical has a long history of excellent margins and free cash flow generation (better, even, that established giants like Bard (BCR) and Medtronic (MDT)), but not a lot in the way of revenue growth. While an acquisition a little while ago gave the company a great growth product, it looks like management needs to consider going back to the M&A well to take this business to another level.

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Utah Medical Has Appealing Quality, But Needs Growth

Seeking Alpha: Looking At AVEO With Fresh Eyes

It's been a horrible year for AVEO Pharmaceuticals (AVEO), and arguably a lot of the damage has been self-inflicted. Others have written at length about the FDA's decision to reject the company's application for tivozanib in renal cell carcinoma(RCC), as well as the deficiencies in the design of the pivotal trial, the company's apparent tone-deafness towards the FDA, and the lack of disclosure to shareholders regarding interactions with the agency.

I'm not here to rehash all of that. For better or worse, tivozanib is effectively dead in RCC for the time being. What I am interested in doing, though, is trying to approach the company with as close to a clean slate and fresh eyes as I can. After all, tivozanib is still in two other Phase II studies and AVEO could certainly follow in the tracks of other biotechs who faced crushing rejections only to come back later with approvable drugs or indications.

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Looking At AVEO With Fresh Eyes

Investopedia: Can LEDs Brighten Investor Portfolios?

Goldman Sachs recently highlighted LED lighting as a top “disruptive” theme over the next decade. While I'm often inclined to believe that these sell-side "theme pieces" are designed more towards generating attention during stretches of slow company news, I have little doubt that the penetration rate of LEDs in the lighting market is going to increase significantly over the next decade. That is going to fuel significant demand for LED-making equipment, LED packaging, and finished lighting fixtures for companies like Aixtron (Nasdaq:AIXG), Cree (Nasdaq:CREE), Philips (NYSE:PHG), and Osram What is less clear to me is the extent to which investors can expect to see huge gains at this point – the “LED revolution” has been long in coming and while there are certainly going to be trading opportunities come and go, the idea of “buy and hold” in this sector seems optimistic at best.

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Investopedia: Pall Always Gets The Benefit Of The Doubt

I'd hate to be short Pall (NYSE:PLL), as large companies in the filtration space often seem as close to bulletproof as you can find in the market. So even though sell-side analysts chronically overestimate Pall's free cash flow, investors remain happy with a company that admittedly enjoys strong share and a very lucrative channel of repeat business. While I think Pall's shares remain overvalued, I don't have any particular reason to believe that the shares will sell off dramatically, as the life sciences business should be stable and the industrial business should start improving next year.

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Investopedia: The Fresh Market Can't Put Margin Worries To Bed

As I wrote a quarter ago, The Fresh Market (NYSE:TFM) is a highly-valued growth stock in the food retail space, and one where the company is starting to see some real pushback from the market as to the company's margin structure and competitiveness. I didn't expect all of the concerns to get resolved in one quarter, but the company's willingness to increase promotions and accelerate store builds seems to be exactly what the Street does not want to hear right now. As I suspect there's a good chance of these shares getting even cheaper, investors may want to keep on eye on this name as a growth stock increasingly trading at a reasonable valuation.

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Investopedia: Campbell Soup Doesn't Seem To Be Prioritizing The Right Things

It's hard to run too hot or cold on Campbell Soup (NYSE:CPB). It has typically been a pretty conservatively-run company and many of its brands are virtually iconic. That said, management has been making some unusual decisions of late – promotional spend has seemed erratic, the company does not appear to be supporting Pepperidge Farms enough, and acquisitions of organic baby food and retail carrots are head-scratchers. Campbell Soup isn't unusual in being a somewhat expensive-looking packaged food stock, but this isn't a stock I'd pay up to own.

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Investopedia: Guess May Be Getting Its House In Order

Apparel and accessory designer and retailer Guess? (NYSE:GES) has been on a wild ride for the past couple of years as weakness in North American merchandising and operating performance, not to mention macroeonomic weakness in Europe, squared off with lucrative licensing income and the growth potential of an ongoing expansion into Asia. While Guess shares look set to jump on very encouraging fiscal second quarter earnings, the level of competition in apparel retailing in North America, Europe, and Asia makes it difficult to have a lot of confidence in the long-term outlook.

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Wednesday, August 28, 2013

Seeking Alpha: Accuray Continues To Turn It Around

As the distant #3 in the radiation oncology market, Accuray (ARAY) already has a tough row to hoe and past issues with product reliability and present-day concerns about the cost effectiveness of its systems don't help matters. Even so, it looks like the new CyberKnife M6 and Tomo H products, coupled with operating cost improvements, are giving this company another chance at making a real go of it. The stock's nearly 20% jump since my last update has certainly taken some urgency out of the relative value call, but the pace of order improvements and the extent of skepticism about the company still offer arguments for a long position.

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Accuray Continues To Turn It Around

Seeking Alpha: Digital Cinema A Tricky Mix Of Opportunity, Risks, And Uncertainty

Once you've been active in the markets for a while, you'll notice that certain business models are used over and over again. One of the more common ones is the roll-up model where a company executes multiple M&A acquisition transactions (typically of much smaller companies) to consolidate a market and achieve meaningful benefits of scale. Provided that the multiples paid stay under control (particularly relative to the cost of capital) and management doesn't lose sight of expenses, this strategy can produce some pretty significant growth.

That brings me to Digital Cinema Destinations (DCIN) - a small, but growing, operator of all-digital movie theaters. On one hand, I really like the company's strategy of acquiring small independents and trying to boost full-week revenue through alternative programming. On the flip side, I'm concerned about how much capital the company will need to reach its goals, the compensation promised to the CEO, and the absence (so far, at least) of any institutional investors on my short list of savvy micro-cap investors. I do think these shares are undervalued and waiting for these risks to abate could lead to surrendering a lot of upside, but this is definitely only a stock for "consenting adults."

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Digital Cinema A Tricky Mix Of Opportunity, Risks, And Uncertainty

Seeking Alpha: Cyan Looks To Bring The Green

Talking about increasing carrier network traffic may border on the cliché at this point, but it's a real problem for network operators. If Cisco's (CSCO) prior estimates of compound annual traffic growth of 23% between 2012 and 2017 are even close to accurate, carriers badly need new strategies for coping with traffic growth, as boosting capex by 23% a year for five years isn't much of an option.

This is where Cyan (CYNI) comes into the picture. Cyan is unproven (less than $100 million in revenue), but the company has two separate approaches to help carriers meet their network needs - packet-optical transport systems that can help manage traffic at the metro edge and reduce the need for expensive routers, and a purpose-built SDN solution for carriers that offers the promise of more efficient network utilization.

Cyan is going up against numerous well-established equipment vendors and alternative approaches to managing network traffic. What's more, I have some concerns that the company's position in carrier SDN isn't as unique as hoped. Even so, I believe there is an argument to be made that Cyan shares are trading meaningfully below fair value. While this is a company/stock with above-average risks, a fair value in the range of $12.00 seems reasonable and that range could expand well into the high teens.

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Cyan Looks To Bring The Green

Investopedia: Vertex Building A Fortress In Cystic Fibrosis

It's not too often that you see a biotech company establish a truly differentiated product portfolio with multi-billion dollar potential and minimal competition, but Vertex (Nasdaq:VRTX) seems to be doing exactly that. This one-time specialist in virology is already well on the way to more than $5 billion in potential revenue, and could ultimately see nearly double that amount if clinical trials go the right way. This may ultimately put the company in the “nice problem to have” category of figuring out how to reinvest the proceeds and determining whether or not further investments in the hepatitis C program are worthwhile.

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Investopedia: Winter Still Coming For Joy Global

Cyclical industries have a habit of answering the question “How much worse/better can things get?” in pretty dramatic fashion. With mining companies slashing capex budgets left and right, winter is definitely coming for leading mining equipment company Joy Global (NYSE:JOY). While management's success in streamlining operations, improving manufacturing yield, and reducing fixed costs should keep the company's head attached firmly to its body, there's a risk to shareholders that the market hasn't fully digested what weak orders today will mean for tomorrow's revenue. So although I believe Joy Global is undervalued on a long-term basis, investors buying or holding today have to be able to tolerate the thought that the shares could have further to fall before stabilizing.

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Investopedia: Workday Surfing The SaaS Wave

Emerging ERP vendor Workday (Nasdaq:WDAY) is one of the most expensive names in the software space today, as investors are seemingly happy to pay huge multiples for shares in a company that many believe can seriously challenge large incumbents like Oracle (Nasdaq:ORCL), SAP (NYSE:SAP), and Microsoft (Nasdaq:MSFT). So long as the company can continue to deliver growth ahead of demand expectations, the party will most likely continue and it won't surprise if Workday's shares hit three digits at some point in 2013. That said, this is a story where valuation leaves no margin for error, so investors should understand what they're getting into before buying shares.

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Investopedia: Another Beat And Raise Highlights Avago's Quality

One of the more common questions I get is “If you like 'X' so much, why don't you own it?” Sometimes the answer comes down to not wanting to sell stocks to raise cash, and sometimes it's a question of timing or portfolio allocation. In the case of Avago (Nasdaq:AVGO), a semiconductor stock I've liked for a little while now, it's a little bit of “all of the above”. In particular, though, the general malaise in anything tied to wireless had me cautious, as well as the company's high reliance on China for industrial segment growth.

As it turns out, I needn't have worried. Avago delivered another beat-and-raise quarter, which I argue once again highlights that the company's chips offer pretty compelling advantages that allow for market share gains even amidst challenging end-market conditions. Writing this in the pre-market hours, I don't know if the indicated gains will hold in the market, but while the stock is not the cheapest name around anymore, I think there's enough momentum and quality to the name to lean towards “benefit of the doubt” on value.

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Tuesday, August 27, 2013

Seeking Alpha: Approval In Peyronie's Only Part Of The Auxilium Story

With the FDA's decision date on the approval of Xiaflex for the treatment of Peyronie's disease looming (September 6), considerable attention has come to Auxilium Pharmaceuticals (AUXL) in recent weeks. While the FDA's decision is absolutely a significant event for the company, investors shouldn't overlook the company's challenges in its existing specialty pharmaceuticals business, as well as the efforts that will have to go into making Xiaflex a winner in Peyronie's assuming approval.

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Approval In Peyronie's Only Part Of The Auxilium Story

Seeking Alpha: IPG Photonics Looking To Innovation And Integration

It's still pretty tough out there if you're in the laser business. While Newport (NEWP) and II-VI (IIVI) have come alive in the last three months and Coherent (COHR) and Rofin-Sinar (RSTI) are both in the green for the full year, only Newport has kept pace with the S&P 500. Even so, IPG Photonics (IPGP) has done even worse, as wobbly quarterly performance and weak end markets like industrial welding and automotive have discouraged investors in this volatile laser company.

Still, I think there are better days ahead for this leading fiber laser company. Fiber lasers continue to gain share in the growing laser market, and the number of applications for fiber lasers has only been increasing. Not only does IPG Photonics enjoy a strong IP position and a good reputation for innovation, but the company's vertical integration allows it to produce lasers at considerably lower costs than its rivals - leaving the company free to compete on features when it can, and price when it must.

On a cash flow basis, I believe these shares are about 25% undervalued today, and I do expect rather aggressive adoption and growth for the company over the next five and ten years. EV/EBITDA also supports the notion that these shares are undervalued, and though global industrial capex spending remains a major unknown, I believe the success of IPG Photonics is more weighted toward "when" than "if".

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IPG Photonics Looking To Innovation And Integration

Seeking Alpha: Esprit Holdings Already Priced For A Very Uncertain Recovery

Readers with a little gray at the temples may fondly remember back to a time when Esprit was a popular, or at least relevant, apparel brand in the U.S. A lot has changed since then, and Esprit Holdings (NASDAQ: ESPGY.PK) is now a global wholesale and retail apparel brand with a major presence in Europe and the hope of riding China's middle class to another era of growth. Unfortunately, Esprit has been in a five-year tailspin that has seen serious revenue, margin, and cash flow erosion, as well as the rise of numerous very competitive global retailing concepts. While there is a major discrepancy between the sell-side and buy-side of the Street regarding Esprit's future prospects, it's difficult to make the case that there's enough value here to speculate on a recovery.

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Esprit Holdings Already Priced For A Very Uncertain Recovery

Investopedia: Has The Street Finally Overshot Brown Shoe?

It can take a few quarters for Wall Street to dial in its expectations when a company has started out/underperforming, and that's particularly true in cases of turnarounds. Brown Shoe (NYSE:BWS) enjoyed a good two-year run in the market as the company's turnaround/restructuring efforts paid off and as the company's outperformance reset the bar for expectations. While the company's second quarter results and guidance weren't bad as such, they would suggest that maybe the Street has finally caught up to the story and the momentum angle of outperforming expectations is no longer in play.

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Investopedia: Tiffany Continues To Execute At A Higher Level

As premier jewelery retailer Tiffany (NYSE:TIF) continues to beat expectations, it's getting harder to argue that the Street overvalues the company's brand and future cash flows. Not only is the company outperforming in difficult markets like Europe, but efforts to improve operating performance seem to already be delivering results. Factor in an eventual improvement in the Americas and future growth in businesses like watches, and I can understand why Tiffany is a popular pick. I'm personally not willing to chase Tiffany up at these levels (particularly when it seems like 20% to 30% pullbacks are routine), but it's hard to argue with a company that is performing at a pretty high level despite what should be a tough global environment.

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Investopedia: Akorn Scores A Rare Win-Win Acquisition

The world of generics and specialty pharmaceuticals includes many companies that fly below the radar of most investors, but Akorn (Nasdaq:AKRX) may be worth the time it takes to know it better. Not only is Akorn a leading player in generic ophthalmology drugs, but the company's acquisition of Hi-Tech Pharmacal (Nasdaq:HITK) looks like an all-too-rare case where both parties in the deal come out ahead.

Investors who took my advice regarding Hi-Tech a year ago are sitting on gains of nearly 50% (though the intervening 14 months was not smooth), but I'm not sure I'd rush to reinvest the proceeds into Akorn. Although I do like Akron and I believe this deal strengthens the company, the valuation there doesn't leave a lot of upside unless Akorn can drive even better synergies than its guidance suggests.

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Investopedia: The Market Already Convinced Colfax Will Meet Or Beat Its Goals

It's an underappreciated fact of investing in industrial companies, but margin performance goes a long way toward explaining stock performance. With the market basically sold on the ability of Colfax (NYSE:CFX) management to turn around the ESAB welding business (now part of Fabrication Technology), the shares have done well this year and sit just below a 52-week high despite ongoing wobbles in industrial orders and soft welding demand. Although I don't doubt management's ability to drive better-than-expected margins, it's getting harder to justify the stock's premium.

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Monday, August 26, 2013

Investopedia: Yet Another Failure Has Rigel Pharmaceuticals Almost Back To Square One

The news from long-suffering biotech Rigel Pharmaceuticals (Nasdaq:RIGL) just continues to get worse. Rigel has already seen AstraZeneca (NYSE: AZN) return the rights to R788, its Syk kinase inhibitor for rheumatoid arthritis, and with Monday's announcement of the failure of R343 in allergic asthma, it's worth asking whether there's any real value left in the company's Syk inhibitor program. Although the company still has a couple of clinical trials ongoing, as well as $250 million in cash, these shares are looking more and more like a spin of the roulette wheel than any sort of real investment opportunity.

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Investopedia: AstraZeneca Goes Back To The M&A Well Yet Again

AstraZeneca (NYSE:AZN) CEO Pascal Soriot is pulling out all the stops, and repeatedly pulling out the checkbook, to rebuild the future prospects of this lagging Big Pharma company. Having spent nearly $1 billion on Omthera and Pearl Therapeutics earlier this year, AstraZeneca has announced yet another deal – this time a potentially $500 million deal for an early-stage company in the hot oncology immunotherapy space.

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Investopedia: Is Improving IT Demand Enough To Maintain Teradata's Rebound?

The rise and fall of Teradata (NYSE:TDC) over the past two years is a good lesson in the pitfalls of theme investing in tech. Teradata enjoyed a great run on the back of “Big Data” hype and shares of this data analytics company definitely overshot fair value. Once IT budgets came under pressure, though, Teradata's reported results showed just how sensitive the company remains to on-the-ground IT demand. While the shares have bounced off their 52-week lows and the company is a credible player in an important market (the collection and analysis of enterprise data), it's hard to call this stock a bargain today.

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Investopedia: Amgen Sweetens The Bid And Secures Onyx

As it turns out, Amgen (Nasdaq:AMGN) didn't have to stretch too far to seal the deal for oncology biotech company Onyx Pharmaceuticals (Nasdaq:ONXX). While Amgen's initial bid of $120 per Onyx share set off a nearly two-month auction process, in the end it took only an extra $5 per share to complete the deal as there was apparently only passing interest from other Big Pharma players to pay up for Onyx's portfolio of oncology drugs. All in all, while it's a worthwhile deal that helps patch over some near-term growth concerns for Amgen, it's unlikely to be a transformative deal.

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Friday, August 23, 2013

Investopedia: Yahoo! Reclaims Traffic Leadership, But Can It Turn It Into Cash?

A curious thing happened in internet-land in July. According to comScore, Yahoo! (Nasdaq:YHOO) surpassed Google (Nasdaq:GOOG) to take the top spot in web traffic for July 2013, the first time in more than two years. Yahoo! edged out Google with 197 million unique visitors against Google's 192 million. As always, though, the devil is in the details. It remains to be seen whether Yahoo! can leverage its position into revenue and profits.

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Investopedia: Aruba Networks Dig In For The Long War

When Cisco (Nasdaq:CSCO) decides that your particular market is an important one to its long-term goals, you're in for some challenging times (unless you're one of the companies that Cisco chooses to acquire). That's the reality that Aruba Networks (Nasdaq:ARUN) is facing right now, and it has consequences for the bottom line. While I continue to believe that Aruba has the technology and product quality to be a strong #2 in the growing WLAN market, the need to spend more on marketing and sacrifice margins to shore up growth adds another headwind for the stock.

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Investopedia: Pandora Progressing, But Still Tinkering

Like most growth stories, Pandora (NYSE:P) is a work in progress. While that can sometimes make it appear that management doesn't really know its market or have a solid plan, I believe changes to policies like the listening cap have more to do with the ongoing evolution of ad revenue and user monetization. With Pandora continuing to grow its users, hours, and ad revenue at rates well above the market, I continue to believe this is an exciting, albeit volatile, growth story.

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Investopedia: Marvell - Unicorn Of The Chip Space?

Reading sell-side research on Marvell (Nasdaq:MRVL), you might come away not thinking too highly of the company or its decisions to grow the business in areas like Chinese mobile and wireless. On the other hand, look at the company's actual market share gains, financial performance, and the market's opinion on the company and you come away with a much different opinion. So far, the bulls in that argument are winning the day, as Marvell has been outperforming names like Qualcomm (Nasdaq:QCOM), Broadcom (Nasdaq:BRCM), and Nvidia (Nasdaq:NVDA).

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Investopedia: Autodesk A Little Undervalued, But Uncertainty Is Rising

It's interesting to see which excuses the Street willingly accepts when a company is struggling with guidance. In the case of Autodesk (Nasdaq:ADSK), the Street isn't too bothered by another round of lower guidance and ongoing economic uncertainties. Instead, investors seem excited about the potential of a more pronounced transition to a SaaS model. Although I think the Street may be a little too optimistic on that point, the shares do look a little undervalued and remain a volatile software play leveraged to improving economic activity.

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Investopedia: Microsoft Critics Get Their Way, As Ballmer Announces Impending Retirement

In all the time I've written on Microsoft (Nasdaq:MSFT) it seems like readers/investors always came together on at least one topic – they really didn't like CEO Steve Ballmer. While I think Ballmer has often gotten a bad rap and that Microsoft is better-positioned in enterprise software and services than commonly believed, trying to make that case is tantamount to spitting into the wind.

Under Ballmer's leadership, Microsoft has lost close to half of its value. Again, I think you could argue that almost anybody taking the job was going to preside over a significant erosion in market cap, as Ballmer took the CEO position of Microsoft just three months before the tech bubble peaked. In any case, I will side with the critics who feel that, whatever the quality of Ballmer's vision for Microsoft, he did a poor job of selling the Street on it.

Now they won't have Ballmer to kick around much longer. On Friday morning, Ballmer announced his intention to retire from the job within 12 months, with the exact timing tied to the search committee finding a new CEO for the company.

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Investopedia: Can E.On Maintain Its Fat Dividend Through A Difficult Restructuring?

Experienced dividend investors know better than to just take a fat dividend yield for granted. While there certainly are opportunities every so often to pluck an overlooked or underappreciated income story, oftentimes high yields are best read as a flashing “danger” sign.

That brings me to German utility company E.On (Nasdaq:EONGY). A dividend yield of nearly 9% is certainly attractive these days, but E.On is still in the early years of a difficult transition that is seeing the company cut costs and scale out of its traditional generation business in favor of newer opportunities like renewable generation, oil/gas exploration, and overseas generation. On balance I'm bullish on E.On's prospects for remaking itself over the next three years, but I would caution investors that the dividend could get cut, and possibly cut substantially, before the process is complete.

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Thursday, August 22, 2013

Investopedia: Easy To Like Everything About Kubota Except The Price

There's a lot working in Kubota's (OTC:KUBTY) favor these days. The lower value of the yen makes its products cheaper, while rising incomes across Asia make its agricultural equipment more attainable. Add to that a recovery in the U.S. housing market (where the company sells a lot of lawn equipment) and a stated goal to expand the dry land business, and there are multiple attractive growth drivers. The problem? It's just not possible to run an attractive valuation on a discounted cash flow basis, and I can't reconcile the idea of paying a 40% to 100% premium (in forward EV/EBITDA terms) for Kubota compared to Cummins (NYSE:CMI), Deere (NYSE:DE), AGCO (Nasdaq:AGCO), or CNH (NYSE:CNH).

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Investopedia: Waiting For Hormel To Get Cheaper Isn't Getting Any Easier

Once in a while even the best-loved food and beverage companies will sell off on concerns about organic growth trends or margin worries. So far, though, it looks like Hormel (NYSE:HRL) is largely immune, as although margins came up a little light this quarter, the Street seems willing to look past one quarter and remain focused on the attractive, higher-margin business management is building.

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Investopedia: Hain Celestial's Valuation Already Incorporates Strong Expectations

Even as someone who isn't all that interested in the “healthy lifestyle” trends of today, I find it interesting to see the sort of visceral reactions that stocks like Hain Celestial (Nasdaq:HAIN), White Wave (Nasdaq:WWAV), and Annie's (Nasdaq:BNNY) provoke in investors/readers. In particular, there appears to be a very vocal percentage out there that are just incensed over the valuation and attention these stocks get and absolutely insistent that healthy/organic eating is just a fad.

Whether it's a fad or not (I happen to lean toward “not”, even though I don't participate), there's no question that these stocks have generated some sizable expectations on the Street. As one of the veterans of the sector, Hain Celestial is a good case in point – today's valuation already more than incorporates assumptions that Hain will significantly outgrow the packaged food sector and generate above-average long-term profits. So much so, in fact, that I find it hard to see how the company can live up to (or grow into) these expectations.

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Investopedia: HP Still Looks Cheap, But Execution Issues Are Part Of The Reason Why

There's a big difference between “cheap” and “cheap for a good reason”, and it's not always easy to tell the two apart. While Hewlett-Packard (NYSE:HPQ) shares still appear to be undervalued on the expectation of any growth at all, the ongoing execution issues do mean that a return to growth shouldn't be taken for granted. At a minimum, there's still quite a lot of work for management to do make this turnaround a success, and I do have my concerns about the the effect of competition on those plans. On the other hand, today's valuation doesn't exactly presume that those efforts will end in major success.

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Investopedia: Abercrombie & Fitch The Latest To Get Trampled

This is turning out to be a cruel summer for teen retailers, with Abercombie & Fitch (NYSE:ANF) the latest to report very disappointing results and weak guidance. With the A-list retailers all struggling (ANF, American Eagle (NYSE:AEO), and Aeropostale (NYSE:ARO)), it's pretty clear that traffic and promotions are having a seriously adverse impact on many retailers. While the results from companies like Urban Outfitters (Nasdaq:URBN) and Buckle (NYSE:BKE) say that it's not a wholesale wipe-out in the sector, it's pretty clear that Abercrombie & Fitch continues to face some serious challenges in turning around its comps.

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Wednesday, August 21, 2013

Investopedia: American Eagle Hammered As Conditions Worsen

To me, the biggest question coming out of American Eagle's (NYSE:AEO) poor second quarter and weak guidance is whether or not there's an overall traffic problem at the malls. If traffic is down across the board (and there's some evidence that that may be the case), this is just another one of those bad stretches that every apparel retailer has to deal with now and then. If the traffic patterns are more inconsistent, though, and some really outperform, it sets up a whole new round of questions about merchandising, brand value, and long-term margins.

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Investopedia: History Suggests Street Will Get Over "Disappointing" Smucker Results

I don't want to spend too much time defending Smucker's (NYSE:SJM) fiscal first quarter results, as I thought they were fine. Still, the Street is likely to be concerned about the pace of growth in K-Cups and the question of whether the company can maintain its significant share in the retail coffee business against the likes of Kraft (Nasdaq:KRFT), Green Mountain (Nasdaq:GMCR), and Starbucks (Nasdaq:SBUX). To the extent that history is any indication, I expect Smucker shares will be fine, though the valuation has gotten a bit steep in a still-expensive packaged food sector.

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Investopedia: A Solid Beat-And-Raise As Lowe's Closes Some Of The Gap

While neither Home Depot (NYSE:HD) nor Lowe's (NYSE:LOW) were exactly what I thought of as “cheap” a quarter ago, I did think Lowe's looked like the better buy as I believed the Street would start factoring in improving operations and more HD-like performance. That call seems to have worked out, as Lowe's shares outperformed Home Depot by nearly 15% over the last quarter. As Lowe's still looks cheaper than Home Depot and has more upside to operational improvements/outperformance, I would probably stick with Lowe's over Home Depot, but almost anything house-related in retailing seems strong these days.

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Investopedia: Canadian Dilution And Sluggish U.S. Shopping Bring Target A Little Wide Of The Mark

When Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Costco (Nasdaq:COST) all see relatively uninspiring same-store sales growth trends, I think it's safe to say the U.S. retail market is not in the best of health. Although Target continues to take steps that should improve the company's long-term competitiveness and growth profile, Wall Street is generally very much focused on the now and underperformance creates some challenges for the shares.

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Investopedia: Intuit Refocusing On What It Does Best

A quarter ago, I thought that Intuit (Nasdaq:INTU) was underestimated and underappreciated by the Street. True, the company was (and is) facing challenges in getting the consumer tax business back to better growth and not all of the company's efforts to diversify and grow the business had worked out to plan. But Intuit still has a valuable business with strong market share that produces almost annuity-like cash flow streams. While the shares have outperformed the S&P 500 by about 10% since my last bullish call, I remain confident that there's more to be gained from the company's strategic readjustment.

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Investopedia: Analog Devices' Slow Walk To Better Days

The still-awaited semiconductor recovery is certainly taking its sweet time in getting here. In the meantime, Analog Devices (NYSE:ADI), one of the leaders in the analog space, remains in something of a holding pattern. Although the stock has done pretty well as investors look forward to better utilization driving higher margins and larger cash returns to shareholders, the business is still waiting to see sustained demand improvement in its end markets.

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Tuesday, August 20, 2013

Seeking Alpha: Even After A Big Run, The Housing Recovery Can Take Techtronic Higher

Plenty of stocks tied to housing in one form or another have enjoyed strong rebounds, and toolmaker Techtronic (NASDAQ: TTNDY.PK) is no exception, as the shares have climbed almost 60% this year and nearly 1,000% from the depths of the housing/credit crash. With the remodeling/renovation market only just recovering and new housing construction still to come back, Techtronic should be looking at several years of above-average growth just on the recovery trade.

There's more to Techtronic than just a U.S. housing recovery. Techtronic has started to show progress in dealing with lagging margins and the company has barely scratched the surface of its opportunity in markets like Europe. Although these shares can respond violently to updates on the U.S. housing market, another 25% in the shares seems to be attainable on only relative modest margin improvement assumptions and fully executing on the opportunities in margins and Europe could send the shares as much as 50% higher.

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Even After A Big Run, The Housing Recovery Can Take Techtronic Higher

Investopedia: Will Immunotherapy Disrupt The Oncology Market?

Goldman Sachs' recent list of eight "disruptive technologies" included new therapies to fight cancer, drugs that promise to upend the pharma industry in the next few decades. Most promising is immunotheraphy, an approach being researched and advanced by Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and Roche (Nasdaq:RHHBY), among others. While these drugs aren't cancer cures, they appear to be on pace to deliver significant improvements in the length of time cancer patients can expect to live, with a relatively tolerable side-effects.

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Investopedia: Home Depot Moves From Good To Great

While it shouldn't really surprise anybody if there's a little volatility or turbulence along the way, it looks like the long-awaited remodeling upturn is firmly in place now. Not only did Home Depot (NYSE:HD) trounce expectations for same-store sales growth, but companies like American Woodmark (Nasdaq: AMWD), RPM (NYSE:RPM), and Stanley Black & Decker (NYSE:SWK) are seeing improved prospects as well. While these shares didn't do much over the last three months and the valuation is not what I'd call “screaming bargain”, I wouldn't step in front of the momentum with my own money.

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Investopedia: Medtronic Marking Time

These aren't the glory days for med-tech giant Medtronic (NYSE:MDT), as fiscal 2014 will be a pretty weak year from a growth perspective ahead of some significant new product launches in 2015. Even with a high-quality name like Medtronic, that lack of growth can lead to shares languishing as investors are attracted to (or distracted by) more impressive-looking stories in the short term. Although I'm not a passionate bull on Medtronic shares by any stretch, the stock is pretty much what passes for a bargain these days in the larger segment of this industry and I think it's a respectable core holding.

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Investopedia: Plenty Left To Do, But Signs Of Progress At Best Buy

I know that the skeptics on Best Buy (NYSE:BBY) are going to look at Tuesday's results and ask “What recovery?” After all, comps are still declining and gross margins are still down on a year-over-year basis. What's more, the apparent erosion in high-end mobile demand is a sizable threat to a company that gets a lot of revenue from mobile devices. On the other hand, nobody should have believed that Rome would be rebuilt in a day, and Best Buy continues to deliver on multiple points of its recovery plan.

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Investopedia: International Rectifier Recovering, But Margins Need To Pick Up

Investors in semiconductor stocks have been waiting for almost two years for signs of sustained (or sustainable) improvements in the industry. Companies as varied as ON Semiconductor (Nasdaq:ONNN), Analog Devices (NYSE:ADI), and International Rectifier (NYSE:IRF) have been showing some signs of progress, though it seems like every quarter's guidance is fraught with uncertainty. While International Rectifier reported a quarter with strong sequential revenue growth and better margins, additional margin and cash flow generation improvement is necessary if this stock is going to continue its recovery.

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Investopedia: Workday Working Some Major Market Mojo

One way or another, Workday (Nasdaq:WDAY) is going to be a fun stock to watch. Investors angered by the rich valuations once awarded to (NYSE:CRM), and there certainly were plenty of them, are probably going to be apoplectic over the valuation on the shares of this fast-growing SaaS enterprise software vendor. Although I can't conceive of a credible scenario in which these shares look anything close to fairly valued, I do believe the company will be quite successful and the interplay between the company's rapid growth and share gains in the enterprise resource management/planning (ERM/ERP) market and its valuation in the stock market will be very interesting to watch over the next few years.

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Investopedia: NCR Transforming, But The Street Seems Up To Speed

NCR (NYSE:NCR) has already gone a long way toward transforming itself from a tired, slow-growing manufacturer of ATM and point of sale (POS) hardware to a more dynamic payments technology company. In addition to addressing client needs for more front-end productivity, NCR has really augmented its faster-growing software and service operations. The only downside to the story is valuation, as today's valuation already assumes that these moves will meaningfully upgrade the company's future cash flows.

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Investopedia: Veolia Offers A Decent Dividend, But Both Uncertainty And Upside

When last I wrote about European utility company Veolia (NYSE:VE) for Investopedia (back in March of 2012), I was cautious about the near-term prospects on the stock given the Street's likelihood of buying into (or rather, not buying into) the company's asset disposal and cost-cutting plans. The stock then proceeded to lose about one-third of its value over the next nine months, as worries about both management's ability to execute and the health of Western Europe's economy weighed on shares.

As this was happening, though, the company actually started making progress, and the shares have been moving up strongly since mid-summer as the Street has finally started buying the turnaround story. From where Veolia sits today, I see both opportunity and risk – I happen to side with the bulls who believe management will succeed in its cost-cutting targets, but I also have my worries about the extent to which the company may have to surrender these benefits to customers in order to maintain the business. All told, I see only modest upside to the shares right now, but the dividend isn't bad and I think the company can contain most of the risks it faces.

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Investopedia: Arcos Dorados Still Several Fries Short Of A Happy Meal

Investors who bought Arcos Dorados (Nasdaq:ARCO) thinking they were getting McDonald's-like (NYSE:MCD) consistency with a Latin American growth kicker have been badly surprised over the past year, as Arcos Dorados' performance has lagged its franchiser's performance by roughly 25%. A lot of what has hurt the company is arguably out of management's control, as weakening consumer conditions across much of Latin America (including Brazil and Mexico) and persistent inflation make operations much more challenging. Although these shares do appear undervalued relative to their long-term potential, management has a lot of work to do to realize that potential.

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Investopedia: Corning's Always-Frustating Mix Of Opportunity And Risk

I will always have a soft spot for companies like Corning (NYSE:GLW). I'm a science geek at heart, and what Corning has accomplished time and time again in materials science is impressive to say the very least. But then there's the other side of the equation – brutal competition and capital spending cycles that create boom/bust cash flows and returns on capital. Although I do see some risks to the handset and TV markets, and the free cash flow model doesn't scream “cheap”, I wouldn't bet against this stock for the long term.

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Monday, August 19, 2013

Seeking Alpha: OMV's Transformation Should Unlock Meaningful Value

One of the most rewarding things about writing about stocks is when you write a piece, make certain specific predictions, and then see those come to fruition. In contrast, one of the most frustrating things is to have a piece all lined up and ready to go and then see one of your big predictions come true before your piece gets published. That has happened to me now on OMV (OMVKY.PK), as the company announced Monday that the company had reached a potentially transformative $2.7 billion deal with Statoil (STO).

The good news is that my basic thesis on OMV still holds - OMV looks like a significantly undervalued European energy major with catalysts to drive better performance in the coming years. Not only does the acquisition of North Sea assets from Statoil significantly improve the odds that the company will meet its long-term production growth goals (something the Street was incredibly skeptical about), but OMV remains a strong free cash flow-generating major with a low breakeven price and capacity for additional farm-ins as circumstances allow. All told, I believe these shares should trade more than 30% higher than they do today.

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OMV's Transformation Should Unlock Meaningful Value

Investopedia: Nordstrom Shows That Even The Best Can Struggle A Bit

It's hard to find new positive things to say about Nordstrom (NYSE:JWN). This high-end retailer has long stood out from the crowd with its sharp-eyed merchandising, high inventory turns, flexible operating model, and above-average returns on capital. Couple that with a still-growing Rack store concept and e-commerce opportunities, and it's hard to ever get too negative on this company. On the other hand, Nordstrom's excellence has been well-known for years and this second quarter shows that even well-run retailers can struggle to make headway in the face of a tougher consumer spending environment.

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Investopedia: Applied Materials Still Waiting For Orders To Materialize

Applied Materials (Nasdaq:AMAT) is an interesting company (and stock) today. With 3D chips on the way, it looks like the semiconductor equipment industry is looking at both a large increase in orders and a change in the sort of equipment that chip companies will need to stay on the leading edge. With strong share in equipment categories that should be essential to FinFETs, Applied Materials should be looking some strong years. But as this quarter highlights pretty clearly, there are a lot of unknowns about timing and investors are still a little hesitant about bidding up these shares ahead of the next cycle.

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Investopedia: Dell Scratching And Clawing For Share

The situation around Dell (Nasdaq:DELL) continues to churn, as the company scratches, claws, and fights for market share and relevance in its end markets, with Carl Icahn spearheading efforts to disrupt the planned go-private transaction. While Dell has shown that it can improve revenue by trading margin for share, it's unclear to me that the company can win over the long-term with this strategy. As I think management overestimates the extent to which customers will stick with them, and that there are competitors better suited to win on both the price/margin and feature/performance ends of the spectrum, I see Dell stuck in a long-term squeeze play that makes value creation very difficult.

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Thursday, August 15, 2013

Seeking Alpha: Microsemi Not Quite To Plan, But Still Improving

Owning Microsemi (MSCC) is an interesting experience. For a company that is pretty small and obscure by most standards, there's a surprising number of people who want to bash the company and claim that its success is only due to the fact that it is, in many cases, the only approved supplier of a particular component.

Let the haters hate - I'm firmly in the black with these shares and the trailing performance compares quite nicely with the semiconductor sector as a whole, not to mention individual rivals like Silicon Labs (SLAB), Fairchild (FCS), and Semtech (SMTC). What's more, the company is built upon a continuous flow of new products, coupled with moves to unlock more operating leverage from the operations. Although these shares are close to my fair value, and I have considered selling them in favor of owning a more undervalued chip stock, a recovery in multiple end-markets could drive higher performance from here.

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Microsemi Not Quite To Plan, But Still Improving

Seeking Alpha: ON Semiconductor - If It Stops Getting Worse, It Could Get So Much Better

In Hollywood, asking "How can it get any worse?" aloud is a sure way to get either a comedic or horrific answer in the next scene. In the case of large chip maker ON Semiconductor (ONNN), a lot of things have gone wrong over the past couple of years. In addition to a deal for SANYO Semiconductor ("Sanyo") that just keeps looking worse and worse, ONNN has been hit by both the general slowdown in chip demand and the particularly weak conditions in computing and consumer electronics.

With all of the bad news and adverse developments, it's easy to overlook some positives that could start working in the company's favor and relatively soon at that. ONNN is a top four/top five player in multiple large markets (transistors, diodes, analog), and the company is actively working to move up the value chain. Given the company's low utilization rate and stabilizing Sanyo performance, the company would seem to have significant margin leverage potential - potential that generate free cash flow growth way ahead of revenue growth and support a fair value of $10 or higher.

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ON Semiconductor - If It Stops Getting Worse, It Could Get So Much Better

Investopedia: Consumer Spending Looking Bleaker For Wal-Mart

It seems like hopes for a strong back-to-school season (not to mention a more general spending recovery overall) are fading away for Wal-Mart (NYSE: WMT). Weak consumer spending may not be a huge surprise this quarter, but I found it interesting that the company also lost some operating leverage. In any case, while Wal-Mart really isn't the sort of stock to buy or sell on the basis of one quarter, but I find the valuation and potential here to be pretty underwhelming on the whole.

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Investopedia: NetApp Underwhelms, But Still Looks Undervalued

There is a risk that investors and analysts are going to start viewing NetApp (Nasdaq:NTAP) less as an undervalued tech stock in an attractive market and more of a “cheap for a reason” underperformer that has gone about as far as it can against its major rival EMC (NYSE:EMC). I don't really share that view per se, but it's harder to argue for the bull case on NetApp when the company continues to leave the Street wanting more.

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Investopedia: Agilent Grinding Through Challenging Market Conditions

It may not look like it on the basis of the last few quarters, but Agilent (NYSE:A) is getting better. Weakness in multiple test and measurement end-markets and lower government spending are generating stiff headwinds, but the company continues to roll out strong new products, and the long-term potential in chemical analysis and diagnostics remains impressive. Even though Agilent is near a 52-week high, I believe shareholders could still do reasonably well with this stock, particularly if their investment horizon is more than just a quarter or two.

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Investopedia: The Market's Panic On Cisco Seems Overdone

Over time you eventually get used to the idea that the market seldom looks past one or two quarters (except, of course, when it's convenient to do so). So insofar as that goes, I can see how some investors may have listened to the Cisco (Nasdaq:CSCO) conference call, thought they heard a sniffle or two, and rushed to hit the panic button. Though I'm not going to say that Cisco is fully out of the woods and everything is wonderful again in IT-land, I think the long-term valuation on Cisco is getting pretty interesting now.

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Investopedia: Deere May Be Getting Too Little Credit

The ways things are in the market today, whenever I see an industrial stock that seems to be undervalued by 15% or more, I start wondering what I missed or did wrong in my modeling. While I do believe the North American ag equipment market may well go negative next year, I think the Street may be too down on Deere (NYSE:DE) shares. A combination of weak ag next year and no real construction recovery in sight is grim, yes, but it seems as though investors have been a little gentler with Caterpillar (NYSE:CAT) and Cummins (NYSE:CMI) through their downturns. I'm hesitant to buy into what looks like a bearish and skeptical tape, but Deere is starting to creep up the ranks of my list of value-priced quality stocks.

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Investopedia: Pricing Still A Long-Term Risk, But Illumina Continues To Build A Sequencing Fortress

Between the disruptions created by Thermo Fisher's (NYSE:TMO) acquisition of Life Technologies, Roche (Nasdaq:RHHBY) all but raising the white flag in sequencing, and Oxford Nanopore's ongoing commercialization challenges, Illumina (Nasdaq:ILMN) continues to build on its already considerable lead in the sequencing space. I do maintain my concerns about the company's ability to maintain pricing on a long-term basis, as well as reimbursement pressures in diagnostics, but it's hard to find much fault with a business that can be driven by ongoing sales of high-margin reagents and consumables.

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Investopedia: Expectations, Not Performance, Eclipse Cree

It's pretty rare for a company at the leading edge of an emerging technology to have a smooth growth trajectory, and LED leader Cree (Nasdaq:CREE) has certainly had a few wobbles over the years. That said, Cree has established itself as one of the “Big Five” LED chip companies, one of the three major integrated LED lighting companies, and a leader in patents and technologies. Couple that with a greater than 10-year run of positive free cash flow and it's not hard to see why Cree is a go-to name for growth investors.

That popularity comes with a cost, though. It's exceedingly rare to see a company's stock rise more than 150% in 12 months and still have modest expectations and/or an undemanding valuation attached. Given that margins are a pressing concern with Cree and the company's guidance for the next quarter looked light, it's not too surprising to see the shares indicated down in pre-market trading.

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Investopedia: JDSU's Results Highlight The Volatility Of The Telco Capex Recovery

Happy days are here again in the telecom capex market, right? After all, companies like Juniper (Nasdaq:JNPR), Ciena (Nasdaq:CIEN), and Finisar (Nasdaq:FNSR) have seen their stocks shoot up over the last three months, and even Alcatel-Lucent (NYSE:ALU) is looking viable again. Certainly if Alcatel looks like it could make it, the market must be improving, right?

Well, yes and no. Spending is still lumpy and idiosyncratic, and there are gaps between what companies are saying about orders (and what analysts/investors are projecting for 2013/2014) and what's actually happening in the here and now. And that's where JDSU's (Nasdaq:JDSU) earnings come into play – JDSU didn't have a bad quarter and management sounds optimistic about the recovery, but the actual business still needs time to come around. Of course, those investors who think they can just wait until they see the recovery in the financials before they buy the shares may well find that most of the gains have already gone to others by then.

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Wednesday, August 14, 2013

Seeking Alpha: A Beat's A Beat, But Brocade Still Needs More Growth

Tuesday night had to be satisfying for Brocade (BRCD) shareholders. The stock has been strong over the past three months (up almost 40%) despite a twitchy Nasdaq and at least two downgrades to "Underperform," and Brocade topped that off with a beat-and-raise fiscal third quarter.

Brocade is already making clear progress on its efforts to restructure and reduce operating costs. What's less clear is the growth trajectory of its storage and IP networking businesses. Better than expected performance in storage is encouraging, and predictions of the rapid demise of this business are likely premature, but the IP networking business still has a ways to go. All of that said, Brocade shares still appear quite cheap on a discounted cash flow basis - if the company can preserve or rejuvenate the storage business and find a better match between its IP networking technology and its targeted customer verticals, these shares could still do quite well from here.

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A Beat's A Beat, But Brocade Still Needs More Growth

Seeking Alpha: Tullow Hasn't Forgotten How To Find Oil, And The Shares Look Too Cheap

Exploration-focused oil and gas companies can give investors a wild ride. That has definitely been the case at Britain's Tullow Oil (TUWOY.PK), as uncommon drilling success built the company into Europe's largest independent, only to see the shares fall more than 20% over the past year on multiple poor results of its exploration program.

I believe that while finding oil is a "win some, lose some" sort of game, Tullow has proven over the years that it will win more than its share. With a strong core expertise in petroleum geology and demonstrated discipline in license acquisition, coupled with a rich portfolio of exploration assets, I believe that Tullow can regain some of its luster and that the shares are 30% to 40% too cheap even if future drilling success rates can't match the company's past levels.

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Tullow Hasn't Forgotten How To Find Oil, And The Shares Look Too Cheap

Investopedia: CA Getting Some Benefit Of The Doubt, But It Must Deliver Growth

I carried the “CA Technologies (NYSE:CA) is too cheap” torch for a while, and though the stock is up about 20% since my last article, better than IBM (NYSE: IBM) and in line with Oracle (Nasdaq:ORCL), the nearly 10% underperformance relative to the S&P 500 precludes any victory dance. On the other hand, the stock is well ahead of the S&P 500 on a year-to-date basis, and it sounds like the Street is increasingly on board with CEO Michael Gregoire's plans to reinvigorate growth at this large enterprise software company.

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Investopedia: BlackBerry Finally Looking For A Bidder, But Will A Real Buyer Bite?

It looks like an outbreak of rationality has hit BlackBerry (Nasdaq:BBRY), as the company announced on Monday that it had formed a special committee to “explore strategic alternatives” for the struggling handset company. While the company's announcement mentioned options like joint ventures, partnerships, and alliances, shareholders, analysts, and investors are are zeroing in almost exclusively on the possibility of a sale.

If BlackBerry is serious about a sale, it'll happen. I have no doubt that, at the right price, the company can find a buyer willing to take on the not-inconsiderable task of turning around this struggling high-end handset company. The trick is going to be that “at the right price” part. BlackBerry's enterprise value (that is, market capitalization net of cash and debt on the balance sheet) isn't very large, but any buyer is looking at a likely multi-year restructuring/turnaround program that will require capital, compress margins, and offer only uncertain payoffs.

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Investopedia: Danaher Could Be Loading Up For A Bigger 2014

In a pretty lackluster industrial environment, Danaher (NYSE:DHR) continues to hold its own. The company's organic revenue and segment profit growth are squarely in the middle of the pack, but that's fine – Danaher is almost always in the middle, while the leaders and laggards move all over the board through the economic cycle. More to the point for investors, Danaher seems pretty modest about the prospects for a second-half rebound, but a combination of reinvested expense restructuring and sizable potential M&A could leave Danaher in solid shape for a stronger 2014.

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Investopedia: With Scale, Flowers Foods Has Built A New Future For Itself

Tech investors may turn their noses up at consumer staples companies as hopelessly low-growth and boring, but Flowers Foods (NYSE:FLO) is a good example of what a prudently aggressive management team can accomplish. In 2000, the company served about one-third of the country; now that figure is up over 75% and the company has yet to focus on the Midwest and Pacific Northwest regions.

Along the way, Flowers blend of organic and acquired growth, scale, and operating leverage has produced nearly 9% compound revenue growth and almost 15% free cash flow growth. That, in turn, has fueled one-year, five-year, and 10-year stock appreciation of almost 70%, 100%, and 500%. While I'm not calling for an end to Flowers gaining share or growing its business, I do wonder if the shares aren't in need of a little rest, as the valuation no longer seems quite so compelling at these levels.

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Tuesday, August 13, 2013

Seeking Alpha: CRE Playing The Long Game In China, And Looks Significantly Undervalued

Investors know all too well how challenging it can be to generate long-term gains from Chinese equities. Leaving aside those companies that play fast and loose with accounting or pin their hopes on favored relationships with government officials, there are the rapidly-changing economic trends that may make long-term forecasting even more challenging.

All of that said, I think investors should give serious consideration to China Resources Enterprise (CRHKY.PK). While CRE carries the black mark against it of being a state-owned enterprise, the company has emerged as a leading retailer and brewer in this fast-growing economy, and is looking to invest more in its food processing and beverage businesses.

What's more, the company plays the long game - using JVs and foregoing quick near-term profits to build a larger, more profitable business down the road. All told, I believe a case can be made that CRE shares should appreciate 40% to 50% over the next 12 to 18 months as China recovers and investors return to names leveraged to Chinese consumer spending.

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CRE Playing The Long Game In China, And Looks Significantly Undervalued

Seeking Alpha: Receptos Could Meet With A More Positive Reception

Investors do well to be very skeptical of the biotech companies that go public in the late stages of a multi-year bull market. In many cases, bankers, executives, and insiders are looking to cash in on hope and hype and exploit a market that isn't too discriminating about the details. So while I went into researching Receptos (RCPT) with ample skepticism, I walk away more than a little intrigued.

Receptos seems like a pretty straightforward story - basically a "2.0" version of the already-successful oral multiple sclerosis drug Gilenya sold by Novartis (NVS), but one with a potentially much better tolerability profile. Add to that the possibility of clinically meaningful activity in ulcerative colitis and a "call option" drug for eosinophilic esophagitis, and Receptos shares may be as much as 50% undervalued even in this aging biotech bull market. What's more, investors won't have long to wait for significant news, as multiple trial read-outs in 2014 should further clarify the odds and opportunities.

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Receptos Could Meet With A More Positive Reception

Investopedia: Jive Software Worth A Closer Look?

I wouldn't say that the market's love affair with all things “cloud” or collaborative is over, but having the right buzzwords is no longer an express ticket to a high multiple. Due in part to self-inflicted wounds that management blames on execution and investor/analyst worries about competition, Jive Software (Nasdaq:JIVE) has dropped more than 10% over the past year and significantly underperformed its peer group.

It may be early to throw in the towel, though. The company's new sales approach, one based on establishing real-world value for clients, is still fresh and the company continues to have the opportunity to show that it can offer a better collaborative platform than less focused rivals like IBM (NYSE: IBM), Microsoft (Nasdaq:MSFT), and (NYSE:CRM). Although Jive's shares don't look very cheap on a discounted cash flow basis, that's nothing new in the world of growing software companies and other methodologies suggest more upside.

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Monday, August 12, 2013

Seeking Alpha: Middleby Not Giving Many 'Buy The Dip' Opportunities

When an investor is watching a great growth story from the wrong side of the glass, there's little to do but hope for the occasional stumble to create a buying opportunity. Fast-growing food service equipment company Middleby (MIDD) stubbornly refuses to cooperate, though, as management's consistent execution has created relatively few pullbacks in recent times. Given the company's dual focus on strong internal product development and strategic M&A, not to mention the large addressable markets left unexplored (both geographically and product-oriented), it's tempting to make a "forget the valuation" call with Middleby. At a minimum, this is a stock to monitor just in case one of those rare pullbacks comes.

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Middleby Not Giving Many 'Buy The Dip' Opportunities

Seeking Alpha: FDA Kicks Wright Medical In The Groin - What Now?

There are days when the news that comes out of the stock market makes you want to rip the router out of the wall and just forget about stocks for a couple of days. Thursday, August 8th was one of those days as the FDA delivered a sharp kick to the collective groins of Wright Medical (WMGI) shareholders with a nearly impossible-to-justify rejection of the company's application for the Augment orthobiologic product.

If there was any good news, and that's a big "if", it was that most analysts were not fully incorporating Augment into their numbers for Wright Medical. Consequently, the rejection is not devastating from a numbers perspective. Moreover, it's still at least theoretically possible that the company can find a way to get this product on the market eventually, where it could still be a multi-hundred million dollar product. For now, though, investors would do well to think about Augment on par with getting included in the will of a wealthy uncle you didn't even know you had - the FDA has made it clear that that Augment will reach the U.S. market more or less over its dead body.

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FDA Kicks Wright Medical In The Groin - What Now?