Tuesday, December 30, 2014

Seeking Alpha: Tiny Aptose Biosciences Looks Worth A Closer Look

Right off the bat, Aptose Biosciences (NASDAQ:APTO) triggers a few warning signals. The company has been around a long time (since 1986), has had two name changes, and really hasn't accomplished much of anything. Now this biotech is targeting one of the more under-served areas of oncology and one that has seen many flame-outs (most recently Cyclacel (NASDAQ:CYCC). Coupled with a sub-$100 million market cap and a recent reverse stock split, a lot of the "beware of" biotech boxes are already checked.

One of the most dangerous phrases in investing is "it's different this time", but perhaps in the case of Aptose that is true. This company cleaned house a while back and brought in credible new senior management, naming the founder of Achillion (NASDAQ:ACHN) as its new CEO. The company also raised money and listed itself on the NASDAQ. Most importantly, though, the company has a drug in its pipeline that at least appears to have a credible mechanism of action in treating acute myeloid leukemia - a relatively common type of leukemia, but one that often has poor expected survival outcomes.

Continue reading here:
Tiny Aptose Biosciences Looks Worth A Closer Look

Sunday, December 21, 2014

Seeking Alpha: Roche Loses A Little Luster Before Year-End

Even good drug companies have to cope with the fact that drug development is difficult and negative outcomes are more likely than clinical successes. Roche (OTCQX:RHHBY) has had plenty of wins over the year, and the company's presentations at September's ESMO meetings included some fantastic results, but the news on Friday was decidedly more negative for Roche as it reported surprisingly disappointing data from its MARIANNE front-line breast cancer study and saw yet another clinical failure in its non-oncology pipeline.

The disappointment of the MARIANNE study is tempered by the company's robust portfolio and deep immuno-oncology pipeline. Even so, the setback to Kadcyla takes some upside out of the story and the shares appear more or less fully valued at this point in time. I believe that the quality of Roche makes holding it still a worthwhile proposition, but investors with new funds to deploy should look around the space a bit first.

Read the full article here:
Roche Loses A Little Luster Before Year-End

Seeking Alpha: Alnylam Pharmaceuticals Continues To Post Encouraging Results

Having written about Alnylam Pharmaceuticals (NASDAQ:ALNY) in early November, I thought I'd be done with covering the stock for a few months. Alnylam likes to make its analysts and shareholders work, though, and the updates from the company since then do merit further discussion.

Fortunately for shareholders, the updates are universally positive. Revusiran appears to be safe and while efficacy remains unknown, the company has launched the Phase III ENDEAVOUR study. Alnylam has also reported encouraging early-stage data on its ALN-AT3 hemophilia treatment, started a Phase I/II study for ALN-CC5, and has seen partner The Medicines Company (NASDAQ:MDCO) start clinical studies of ALN-PCSsc. Last and not least, the company has shifted its strategic and research priorities a bit, with three large areas of focus.

Much as I don't like the well-trod path on the sell-side of "the stock has reached my price target, so I'll raise my target", the changes in just the last month do prompt me to bump my fair value estimate higher.

Read more here:
Alnylam Pharmaceuticals Continues To Post Encouraging Results

Saturday, December 20, 2014

Seeking Alpha: Economic Worries Weigh On FEMSA

Mexican consumer conglomerate FEMSA (NYSE:FMX) hasn't had a great 2014, as analysts and investors have continued to worry about the impact of new taxes and a sluggish economic recovery on Mexican consumers. Insofar as the things under FEMSA management's control go, however, 2014 has been a decent year and the company continues to offer a solid investment case as a good play on Mexico's economy and a long-term profitable redeployment of capital.

Continue here:
Economic Worries Weigh On FEMSA

Seeking Alpha: Despite A Reminder Of The Risks, Senomyx Still Has Appealing Potential

Wall Street can be a harsh teacher (I have the grey hairs to prove it), so it's best to learn certain lessons with a minimal number of repetitions. One of those lessons is that it almost always pays to be skeptical when it comes to small development-stage companies that depend upon commercial launches controlled by larger companies.

Senomyx (NASDAQ:SNMX) has an interesting IP and technology portfolio for taste receptor-based food additives and a high-profile partnership with PepsiCo (NYSE:PEP). Optimism over the commercialization potential of an additive designed to reduce the sugar/HFCS content of sodas and other beverages sent these shares close to $13 this year, but then the market swept the legs out from under the stock on worries about a later-than-guided commercial launch from Pepsi and lackluster self-directed sales efforts.

I had been less bullish on Senomyx's near-term prospects than at least some of the sell-side, so the consequences of this six-to-nine month delay aren't as bad to my valuation. I still believe this is a high-risk/high-reward situation, but the commercial potential of products that can reduce the sugar or salt content of food and beverages, or enhance their savory characteristics is such that this is still a stock for aggressive investors to consider as a 2015 breakout story.

To read more, follow this link:
Despite A Reminder Of The Risks, Senomyx Still Has Appealing Potential

Seeking Alpha: The Going's Getting Tougher, But ABB Is Still Going

Swiss industrial conglomerate ABB (NYSE:ABB) largely did what it needed to with its September capital markets day, reassuring investors that management is moving to fix the problems in the Power businesses, that automation remains in good health, and that capital returns to shareholders were a priority.

Since then, though, ABB has seen some adverse developments. Europe's economy, as reflected by metrics like Germany's PMI, has been looking soft and tumbling oil prices threaten a sizable end-market for the Process Automation business. Add to that that ABB was already being somewhat bold in projecting market-beating growth, and it is perhaps not so surprising that a lot of sell-side analysts have cooled on the shares.

There are certainly risks in front of ABB, but that is always going to be true for an international industrial conglomerate. ABB's plans to turn around the Power operations still appear credible and while automation orders from the oil/gas sector are at risk, lower oil prices could stimulate more capex investment and demand from customers in other end markets. All told, ABB still looks like a credible stock to own today for investors looking to gain international and industrial exposure.

Read the full article here:
The Going's Getting Tougher, But ABB Is Still Going

Seeking Alpha: Despite A Share Price Slide, Commercial Vehicle's Plan Remains On Track

Institutional investors can be a notoriously fickle and impatient lot and Commercial Vehicle (NASDAQ:CVGI) shares have certainly fallen out of favor since the summer of 2014. Commercial Vehicle wasn't the only commercial vehicle-exposed company to see its stock slide, Cummins (NYSE:CMI) and Allison (NYSE:ALSN) also saw declines (albeit not as steep), but it looks as though the Street was unimpressed with Commercial Vehicle's mid-September Analyst Day and is less bullish on the long-term self-improvement prospects.

Admittedly, management's guidance that 2015 and 2016 will be years of investment instead of significant margin improvement was a little sobering. Likewise, I can understand if investors are worried that management is banking on agriculture equipment, a sector that many now expect to be in a multiyear bear market, as a major source of future growth. All things considered, though, not a lot has changed in my long-term fundamental outlook for the company and I continue to believe that $10 is a credible medium-range destination for the shares.

Click here for more:
Despite A Share Price Slide, Commercial Vehicle's Plan Remains On Track

Seeking Alpha: Philips Looks To Long-Time Laggard Volcano To Perk Up Its Healthcare Biz

It took a long time, but Volcano (NASDAQ:VOLC) finally found its buyer. Now the question is whether Philips (NYSE:PHG) can generate the growth and profits from Volcano's platform of technologies in intravascular imaging and therapeutics that Volcano's management never could. Investing more resources into image-guided therapeutics is not a bad call on the surface, but Philips must prove that it has moved past its legacy of below-average (if not outright poor) deal integration and must prove that the potential synergies between these two cath lab companies can win out over competitive threats from the likes of Boston Scientific (NYSE:BSX) and St. Jude Medical (NYSE:STJ).

Continue reading here:
Philips Looks To Long-Time Laggard Volcano To Perk Up Its Healthcare Biz

Thursday, December 18, 2014

Seeking Alpha: Better Priorities Leading To Better Outcomes For Broadcom

Broadcom (NASDAQ:BRCM) has had to learn some hard lessons about growth for growth's sake. Chasing revenue growth for its own sake led the company to two sizable ill-fated (and overpriced) acquisitions, not to mention the fruitless investment of substantial monetary resources into the uncompetitive broadband business.

Chastened by its failures, Broadcom management has retrenched around its established strengths and reprioritized profitable growth. Lost, or at least obscured, in the fuss over baseband and the lingering concerns about wireless connectivity is a very strong business in switching and broadband, not to mention upside from IoT-oriented connectivity products. Broadcom isn't obviously cheap from a FCF perspective, but if Broadcom can deliver the margin improvements its management projects and if the company can stick to a Texas Instruments-like (NASDAQ:TXN) transformation, there could be long-term upside beyond $50.

Read more here:
Better Priorities Leading To Better Outcomes For Broadcom

Seeking Alpha: Lundbeck Continues To Fight To Stand Out

The Danish pharmaceutical company H Lundbeck A/S (OTCPK:HLUYY) (LUN.CO) isn't going to resolve its challenges quickly. While I continue to believe there is a strong argument to be made that Lundbeck has developed a roster of differentiated CNS products that can stand apart from branded and generic competitors, the fact remains that the Street has yet to be convinced and the company is still facing significant near-term profit erosion from lost patent coverage on key drugs and significant investments to support drug launches.

Buying Lundbeck now remains a bet on the prospects that better clinical data for key products like Brintellix, Abilify Maintena, and brexpiprazole will translate into major sales and that compounds like Selincro and Northera will emerge as significant contributors in their own right. With base-case upside of around 25% and bull-case upside of more than 40%, I continue to believe it's a bet worth making for more aggressive investors.

Click here for the full article:
Lundbeck Continues To Fight To Stand Out

Wednesday, December 17, 2014

Seeking Alpha: Cyclacel Now An Exercise In Futility

If there's any lesson worth learning about biotech - other than that, somehow, Hemispherx (NYSEMKT:HEB) will manage to convince a new crop of investors that its experimental compound Ampligen actually has some use - it's that trying to play long odds with micro-cap oncology biotechs rarely works out. Cyclacel (NASDAQ:CYCC) shares had already been pricing in a much lower than normal expectation of success for a Phase III cancer drug, but even those expectations have proven too optimistic.

With Tuesday's announcement that sapacitabine is unlikely to meet its primary endpoint in the Phase III SEAMLESS study of the drug as treatment for newly-diagnosed acute myelogenous leukemia (or AML) in elderly patients, there is little reason for investors to hold on to hope. While it may technically be possible (as in the odds are not 0%) for the final results to look a little better, that seems exceptionally unlikely and investors should resist the temptation to believe that other applications like MDS will save the day. Cancer biotechs rarely ever go away entirely and these shares could be a speculative playtoy for traders, but investors looking for biotechs with a real future in oncology should move along.

Read the full article here:
Cyclacel Now An Exercise In Futility

Seeking Alpha: Ghosts Of Business Problems Past Visit Accuray Again

Since taking over Accuray (NASDAQ:ARAY) in October of 2012, Josh Levine has done a lot of good things at Accuray. Not that you'd know it by the stock performance (down about 3% over that stretch), but Levin has championed a reorganized sales force, reduced operating costs, and significant improvements in product quality and product development.

Unfortunately, there are still multiple issues bedeviling Accuray. Communication with the Street, long an issue of the prior management team, has emerged as an issue again as the company has failed to adequately communicate the impact of order age-outs to investors. There have also been challenges in getting the CyberKnife multi-leaf collimator to market, not to mention the challenges that go with competing against the 500lb gorilla that is Varian (NYSE:VAR).

Despite these rather sizable bumps in the road, I'm still bullish on Accuray. I've unfortunately gotten a much closer look at the realities of radiation oncology and I continue to believe that Accuray's technology and products can gain share in a changing radiation oncology market.

Continue reading here:
Ghosts Of Business Problems Past Visit Accuray Again

Seeking Alpha: Manitex Still Hopes To Grow Past The Crane Wreck

It's been a rough year for Manitex (NASDAQ:MNTX), as the hoped-for turnaround in crane demand failed to materialize. For what little it may comfort investors, Manitex hasn't fared much worse from a stock market perspective as Terex (NYSE:TEX), Manitowoc (NYSE:MTW), and Palfinger (OTCPK:PLFRY) have all been weak as well.

There are certainly still clouds on the horizon, as rental fleets likely do not need to refresh aging fleets on a one-to-one basis and housing/infrastructure spending hasn't caught fire. Even more concerning to Manitex, oil and gas spending is likely to drop meaningfully next year as energy companies respond to a sudden drop in oil prices that has pushed many drilling projects below breakeven.

Amidst the challenges, Manitex has continued to build its business toward a critical mass in specialty equipment and 2015 could see the company break out over $500 million in revenue. Pushing out my expectations for organic growth and margin improvement has dropped my fair value in the low-to-mid teens and the debt magnifies the risk, but Manitex is still targeting growth in recovering sectors like infrastructure and industrial capex.

Read the full article here:
Manitex Still Hopes To Grow Past The Crane Wreck

Friday, November 21, 2014

Seeking Alpha: Lexicon Pharmaceuticals Fights On

Nothing has ever been easy for Lexicon Pharmaceuticals (NASDAQ:LXRX). When the original plan to operate as a generator of knockout-based drug targets for other companies fell through, the company retrenched around the idea of developing its own drugs. After drugs targeted at rheumatoid arthritis and IBD fell through, the company found two much more promising candidates - telotristat etiprate for carcinoid syndrome and sotagliflozin (formerly LX 4211) for diabetes.

Here again, though, the company has encountered unexpected difficulties. Despite a strong profile in Type 2 diabetics with impaired renal function (a large piece of the market) and the possibility of strong efficacy in Type 1 diabetes, Lexicon has not been able to attract a partner to develop the Type 2 indication. This has left the company in a tough spot, forcing it to conserve resources and scramble for the cash it will need to develop the Type 1 diabetes indication on its own.

With the company's recent efforts to raise cash, it does look as though the company can make it through to pivotal data for both of its lead drugs. Whether the company can in fact market them on their own remains to be seen, but for now Lexicon remains what it has long been - a scrappy biotech with ugly financing and seemingly undervalued clinical assets.

Continue here:
Lexicon Pharmaceuticals Fights On

Seeking Alpha: Microsemi Chugging Along

Microsemi (NASDAQ:MSCC) has always been a different sort of semiconductor company. In an industry where investors pay a lot of attention to leading-edge technologies, Microsemi has historically been better known for less advanced high-reliability products that are often sole-sourced. Where many semiconductor companies are tied heavily to end markets like communications, industrials and consumer products, Microsemi has long been more leveraged to defense and aerospace.

The end result of all of this is that Microsemi shares often seem to zig when others zag. But with the defense, aerospace, and space markets looking stronger into 2015 and the company still building up its underrated FPGA business, Microsemi seems to me to be getting stronger at a time when many investors are worried about the semi space. As I continue to see fair value in the low-to-mid $30's, I continue to believe this is a stock well worth investors' due diligence efforts.

Read more here:
Microsemi Chugging Along

Thursday, November 20, 2014

Seeking Alpha: Multi-Color's One-Two Growth And Margin Punch

Multi-Color (NASDAQ:LABL) has been on a tear over the last year, up about 50%, and as a shareholder I can't really complain. Over the last few quarters the company has seen not only improving organic growth trends, but better than expected contributions from acquisitions and faster improvements in margins. I do have some concerns that valuation is getting stretched, but margin leverage can unlock additional value and the company has a deep pool of acquisition candidates to augment internal growth efforts.

Continue reading here:
Multi-Color's One-Two Growth And Margin Punch

Seeking Alpha: Short-Term Concerns Stacking Up At MSC Industrial

One of the endless debates between investors is whether it is better to move in and out of positions in response to short-term trends or to identify well-run companies with long-term drivers and hold them through thick and thin. I'm generally in the latter camp, but even I will acknowledge that it is harder to argue that industrial distributor MSC Industrial (NYSE:MSM) is a must-buy today.

The fundamental bull theses for MSC Industrial still seem to be in place. MSC Industrial is a well-run distributor with a strong core in metalworking that is looking to leverage its CCSG business to address new industry verticals (beyond manufacturing) and to enter new adjacent markets (like fasteners). On the other hand, the company is seeing margin pressure as it spends on initiatives to drive future growth and sales growth targets may be pressured by weak pricing and increased competition from the likes of Fastenal (NASDAQ:FAST) and other distributors.

Read the full article here:
Short-Term Concerns Stacking Up At MSC Industrial

Friday, November 7, 2014

Seeking Alpha: Alnylam Pharmaceuticals Staying Ridiculously Busy

Investors who prefer biotechs with potential platform technologies that can support multiple drug candidates can still find a lot to like in Alnylam Pharmaceuticals (NASDAQ:ALNY). With the shares up about 60% over the past year, a $6.6 billion-plus market cap, and multiple analysts following the stock, this is no longer an under-the-radar play on RNA interference, but the company's preclinical research efforts continue to produce interesting new candidates while those already in the clinic are showing meaningful potential.

For a company with one late-stage program, it may seem hard to argue that Alnylam shares are seriously undervalued today. At the same time, I would note that trial read-outs later this year and in 2015 could add significant value as investors revise their projected odds of approval and revenue expectations. I continue to hold these shares myself and I certainly think they make sense in a portfolio for investors who are comfortable with the risks that attend biotech stocks.

Read more here:
Alnylam Pharmaceuticals Staying Ridiculously Busy

Thursday, November 6, 2014

Seeking Alpha: Neurocrine Biosciences Looking Forward To A Big Year

"Hurry up and wait" remains the order of the day for Neurocrine Biosciences (NASDAQ:NBIX). This research-stage biotech has a big year on the way in 2015, with key data expected on both Elagolix and the VMAT2 inhibitor NBI-98854 (or '854). Strong efficacy and safety data could add $7 to $10 per share in value, while disappointing results would certainly have a negative impact on the shares. These shares still look undervalued today, though, and the possibility of new clinical candidates and/or buyout rumors could add a little excitement before year-end.

Read more here:
Neurocrine Biosciences Looking Forward To A Big Year

Seeking Alpha: BRF's Operational Improvements Shining Through

Brazil's largest food company, BRF SA (NYSE:BRFS), continues to show progress with its self-improvement efforts. Although economic stress on Brazilian consumers has been leading to some trading-down in buying patterns, BRF has offset this with a more profitable SKU mix and an increased focus on operating efficiency. Despite an unexpected change in the company's leadership, the company looks on track with previously announced plans to shift more emphasis to higher-margin processed/packaged products and to prioritize margin and cash flow efficiency.

The biggest problem with BRF shares, apart from the volatility of the Brazilian economic and political environment, is valuation. I do believe that BRF has a plan that can lead the company into the ranks of the multinational packaged food giants, but the shares reflect a lot of optimism. I'm in no rush to sell just because of valuation, but new investors may find it wiser to wait for one of the seemingly inevitable corrections in the Brazilian stock market before stepping to the plate.

Continue reading here:
BRF's Operational Improvements Shining Through

Wednesday, November 5, 2014

Seeking Alpha: First Cash Continues To Invest For The Long Term

These still aren't the best of times for the pawn/payday lending segment of the specialty lending industry. Gold is setting multiyear lows, limiting jewelry-based pawn lending growth, while Mexico's economic recovery remains slow. First Cash Financial Services (NASDAQ:FCFS) has done alright since my last update, rising more than 2% and beating both the S&P 500 and EZCORP (NASDAQ:EZPW), but lagging Cash America (NYSE:CSH) and not exactly setting the world on fire.

The potential undervaluation here is not necessarily remarkable (in the neighborhood of 10%), but First Cash does appear poised to grow free cash flow at a double-digit rate for many years to come. What's more, management is making use of its cash flow and healthy balance sheet to acquire stores in the U.S. and Mexico at attractive multiples and is likely still considering expansion into additional markets. Weak gold prices and muted retail demand are near-term threats, but I believe First Cash is taking advantage of the present trying times to build its base and position itself for stronger growth down the road.

Read more here:
First Cash Continues To Invest For The Long Term

Thursday, October 30, 2014

Seeking Alpha: Did Wright Medical Make The Right Move?

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

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

Read more here:
Did Wright Medical Make The Right Move?

Thursday, October 16, 2014

Seeking Alpha: Neenah Paper Continues To Execute

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

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

Continue reading here:
Neenah Paper Continues To Execute

Update On The Fight

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

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

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

Wednesday, October 15, 2014

Seeking Alpha: OM Group Hasn't Transformed Fast Enough

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

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

Continue here:
OM Group Hasn't Transformed Fast Enough

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

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

Click the link to continue:
Sluggish European Demand May Be Opening A Window Into Innospec

Tuesday, October 14, 2014

Seeking Alpha: The Frustrating Wait For Value Realization At PCTEL

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

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

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

Seeking Alpha: WESCO Still Waiting

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

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

Continue reading here:
WESCO Still Waiting

Friday, October 3, 2014

Seeking Alpha: Maxwell Down On Power, But Still Promising

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

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

Continue here:
Maxwell Down On Power, But Still Promising

Seeking Alpha: Cemig's Wild Ride Continues

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

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

Read more here:
Cemig's Wild Ride Continues

Sunday, September 28, 2014

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

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

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

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

Seeking Alpha: Everest Re Managing Through A Tough Environment

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

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

Read more here:
Everest Re Managing Through A Tough Environment

Friday, September 19, 2014

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

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

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

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

Read more here:
Arch Coal Still Looking For Light At The End Of The Tunnel

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

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

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

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

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

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

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

Continue reading here:
SL Green Realty Keeps Producing Value In A Hot Market

A word from management

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

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

I appreciate your patience through this process.

Stephen S.

Thursday, September 18, 2014

Seeking Alpha: CapitaLand Remains Undervalued Amidst Challenging Property Markets

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

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

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

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

Seeking Alpha: Endo's Bid For Auxilium Makes Sense

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

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

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

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

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

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

Seeking Alpha: A Few Flickers From Torchmark

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

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

Read the full article here:
A Few Flickers From Torchmark

Wednesday, September 17, 2014

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

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

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

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

Seeking Alpha: Braskem Hamstrung By Brazil's Industrial Malaise

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

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

Continue here:
Braskem Hamstrung By Brazil's Industrial Malaise

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

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

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

Read more here:
CSN's Highly Leveraged To Recoveries In Brazil's Economy And Global Iron Prices

Seeking Alpha: Brazil's Malaise Drags Gerdau Down

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

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

Read more here:
Brazil's Malaise Drags Gerdau Down

Seeking Alpha: Skepticism Weighs Heavily On Ternium

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

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

Follow this link to the full article:
Skepticism Weighs Heavily On Ternium

Tuesday, September 16, 2014

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

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

Read more here:
BB&T Buys Again And Restates Its Case

Seeking Alpha: Eastman Chemical's Taminco Deals Looks Solid

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Seeking Alpha: Applied Optoelectronics Looking To Two Primary Growth Drivers

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

Follow this link to the full article:
Applied Optoelectronics Looking To Two Primary Growth Drivers

Monday, September 15, 2014

Seeking Alpha: Is Intercept Pharmaceuticals Building The Next Great Specialty Franchise?

As great as Alexion (NASDAQ:ALXN) has shown itself to be with its orphan drug Soliris for rare kidney ailments, Intercept Pharmaceuticals (NASDAQ:ICPT) may be establishing a similar path in the until-recently overlooked world of liver disease outside of hepatitis C. Intercept's lead compound OCA appears to have broad utility as an anti-inflammatory, anti-fibrotic liver treatment and the efficacy in nonalcoholic steatohepatitis (or NASH) may unlock potential akin to that of new HCV treatments.

It is important to point out, though, that there is a lot of risk in biotech investing and particularly in companies where the expectations are almost solely built around a single product. Making matters worse, there is considerable uncertainty as to the true number of potential patients for many of the diseases Intercept is targeting, to say nothing of uncertainty regarding competition, pricing, and clinical endpoints for clinical trials. Despite these risks, I believe Intercept ought to be trading closer to $420 today and even then I consider the underlying assumptions to be quite conservative.

Continue reading here:
Is Intercept Pharmaceuticals Building The Next Great Specialty Franchise?

Saturday, September 13, 2014

Seeking Alpha: Allana Potash Continues To Drift Amidst Ag Malaise

The bloom is definitely off of the ag bull market, as lower crop prices have soured investors on seed, ag equipment, and fertilizer companies. None of that is positive for Allana Potash (OTCPK:OTCPK:ALLRF, (AAA.TO)), nor is the fact that potash pricing remains stuck around $350 per ton. These shares have continued to weaken since the company announced a major tie-up with Israel Chemicals (OTCPK:ISCHY) and since my last piece. While the Global X Fertilizers/Potash ETF (NYSEARCA:SOIL) is down about 2% since my mid-March update on Allana, the company's shares themselves are down another 20% or so.

Granting that investors were disappointed in the terms of alliance with ICL, and granting that there is still more dilution likely on the way (as the company still needs to raise debt, and probably equity, to fund its Danakhil project), I continue to believe these shares are undervalued. By no means is Allana anything other than a high-risk investment, but ICL appears committed to the project, and I believe the current price doesn't give much credit to the value of the project.

While I generally recommend avoiding "F-type" ADRs and buying shares on local exchanges when possible, Allana's ADRs are more liquid than most unsponsored ADRs. Even so, I'd advise owning the Toronto-listed shares when/where that is an option.

Read the full article here:
Allana Potash Continues To Drift Amidst Ag Malaise

Seeking Alpha: Vectura Group Following A Familiar Path

Investors who like Nektar Therapeutics (NASDAQ:NKTR) or Alkermes (NASDAQ:ALKS) may want to take a look at Britain's Vectura Group plc (OTC:VEGPF) (VEC.L). Although not a household name, Vectura has established itself as a technology leader in the formulation and manufacture of inhaled drugs and devices to administer these drugs. Vectura boasts a key partnership with Novartis (NYSE:NVS) for potential blockbuster Ultibro as well as Seebri, as well as a diverse pipeline of generic and branded respiratory drugs.

Vectura Group has multiple avenues to growth. The company can continue its policy of being a partner of choice for companies that wish to enter the large (and still under-served) market for therapies for respiratory ailments like COPD and asthma, or the company can choose to start developing and commercializing drugs on its own - transitioning from earning mid-single digit to mid-teens royalties to being a more fully fledged specialty pharmaceutical company. While there are risks associated with the performance of its licensing partners, clinical development risks, and potential risks from a long-term change in strategy, I believe Vectura could be almost 50% undervalued today.

Readers considering these shares should note that the U.S. ADRs are of the "F-type" and not very liquid. The London-listed shares (VEC.L) are considering more liquid and most major brokerages will allow clients to trade on major foreign exchanges like the LSE.

Continue reading here:
Vectura Group Following A Familiar Path

Friday, September 12, 2014

Seeking Alpha: F5 Networks Executing Well And Building Out The TAM

A key item on F5's (NASDAQ:FFIV) management to-do list for 2014 was to make convincing progress with software and hardware offerings that continue to expand the company's total addressable market beyond its legacy application delivery controllers (or ADCs). So far, so good, as F5 has seen strong interest in its security offerings while continuing to build out a comprehensive array of offerings for the service provider market. I'm a little more cautious now given the valuation, but five straight beat-and-raise quarters shouldn't be overlooked and the valuation is not extreme or out of line relative to the opportunities.

Follow this link for more:
F5 Networks Executing Well And Building Out The TAM

Seeking Alpha: Colfax Still Enjoying The Fruits Of Superior Growth Potential

Not unlike Danaher (NYSE:DHR), the very successful conglomerate to which Colfax (NYSE:CFX) is so often compared, the problem with Colfax is not the quality of the businesses, the margin/growth potential, nor the quality of management or long-term opportunity. The issue is valuation. Colfax bulls seem to be so eager to find that next Danaher that they continue to award Colfax very generous multiples even despite multiple quarterly misses in the last two years. Much as I admire Colfax and find the growth opportunity to be compelling, I can't get comfortable with a take-no-prisoners valuation today.

Read more here:
Colfax Still Enjoying The Fruits Of Superior Growth Potential

Seeking Alpha: Microsemi Puts Cash To Work In M&A And Buybacks

Back on July 25, I predicted that Microsemi (NASDAQ:MSCC) would likely stay active in the M&A arena and less than two months later the company has delivered - announcing the acquisition of Centellax. Microsemi also took the opportunity to introduce a new share buyback program and to confirm its fourth quarter growth guidance. Although none of these announcements meaningfully change the near-term picture for Microsemi, they're the sort of incremental positive moves that I've come to expect from this company and the Centellax deal could follow in the footsteps of past deals like Actel that add meaningful value down the road.

Follow this link for more:
Microsemi Puts Cash To Work In M&A And Buybacks

Seeking Alpha: Will Gamesa Move From Survive To Thrive?

There has been plenty of skepticism regarding Spanish wind turbine company Gamesa's (OTCPK:GCTAY) ability to continue to compete in the volatile and very competitive global wind turbine market. While Gamesa has had past challenges with product quality, project financing, and its cost structure, management has been doing a good job of executing a turnaround plan based on better margins and a focus on growth markets like India, Brazil, and Mexico. I do think Gamesa can continue to outperform on volumes and margins, but a lot of this is in the share price now and I believe Gamesa management must begin convincing investors that it has a follow-on strategy in place to not just survive in the market but to thrive as a leading player.

Continue here:
Will Gamesa Move From Survive To Thrive?

Seeking Alpha: Layne Christensen Bumping Along The Bottom

Water infrastructure company Layne Christensen (NASDAQ:LAYN) has been a hurry-up-and-wait story for a while now, and while there have been some encouraging signs of life in parts of the business, there is still a lot work ahead of the company. I do believe the shares look undervalued on a long-term basis, but this company has disappointed a lot of investors over the years and the departure of the CEO, CFO, and chief accounting officer in quick succession make me nervous, as does the company's ongoing leverage to highly competitive, lower-margin businesses.

Follow this link to the full article:
Layne Christensen Bumping Along The Bottom

Thursday, September 11, 2014

Seeking Alpha: Arch Capital Getting Attractive As Its Markets Get Less So

Arch Capital (NASDAQ:ACGL) is often lauded as a well-run insurance and reinsurance company and a good stock to own for those seeking more defensive exposure to insurance. Interestingly, while Arch Capital may be labeled as defensive because of management's disciplined underwriting and strong capital management, Arch Capital's shares have underperformed peers like ACE Limited (NYSE:ACE), RenRe (NYSE:RNR), and XL Group (NYSE:XL) by more than 10% on a year-to-date basis.

I didn't like the valuation all that much six months ago, but down another 5% from then I'm starting to warm up to the stock. I like the potential for Arch to be a share-taker in the mortgage insurance industry, and I expect the company's specialty insurance business to be stickier through this tough pricing cycle than others apparently expect. The reinsurance business is a risk and I do worry about an overall downward shift in valuation and sentiment for insurance stocks, but these shares are starting to look tempting.

Read the full article here:
Arch Capital Getting Attractive As Its Markets Get Less So

Seeking Alpha: Triangle Petroleum's Presentation, Not Performance, Seems To Be The Issue

Sometimes how you manage the Street matters almost as much to the performance of your stock as how you manage the business. At first glance, Triangle Petroleum's (NYSEMKT:TPLM) fiscal second quarter results should have pleased investors, and the stock was up prior to the company's conference call. Unfortunately, management didn't really address some questions about production with the specificity that investors would prefer and a longer timeline to potentially breaking up the business also seemed to discourage some investors.

Follow this link to the full article:
Triangle Petroleum's Presentation, Not Performance, Seems To Be The Issue

Seeking Alpha: 'Good Enough' Is Good Enough From ABB's Capital Markets Day

Investors who were expecting revolutionary changes from ABB (NYSE:ABB) at its Capital Markets Day, as opposed to evolutionary tweaking and fine-tuning, were setting themselves up for disappointment but ABB delivered a pretty positive message overall. Management sounds increasingly confident that the troublesome power business is under control, and also laid out some credible arguments as to why this is a worthwhile business for the long term. Some may be disappointed that ABB seems disinclined to pursue large M&A or a company-changing strategy shift, but I'd call this day a success and the shares look like one of the few bargains in the industrials space.

Continue reading here:
'Good Enough' Is Good Enough From ABB's Capital Markets Day

Wednesday, September 10, 2014

Seeking Alpha: HD Supply Outgrowing Its Markets At An Accelerating Rate

I liked HD Supply (NASDAQ:HDS) as a play on recovering construction and infrastructure markets back in March, but I wasn't expecting a nearly 25% move in the shares over the next six months. This was not just a "rising tide lifts all boats" sort of move either - industrial distributor MSC Industrial (NYSE:MSM) and electrical distributor WESCO (NYSE:WCC) are both up over that period as well, but only by about 3% and 5%, while Rexel (OTCPK:RXEEY), Wolseley (OTCQX:WOSYY), and Fastenal (NASDAQ:FAST) are in the red over that stretch. What has helped HD Supply greatly is that management is delivering on its guidance and establishing credibility with its plans to outgrow its underlying markets by a meaningful amount over the next few years.

I still believe that HD Supply is more of a momentum play than a value story. Even with expectations of a construction/infrastructure recovery and internal growth initiatives supporting double-digit growth over the next five years and long-term sales growth of 8%, I can't really get to an attractive discounted cash flow number. I don't expect that to matter much, though, so long as the company can continue to deliver above-market growth and ongoing margin leverage.

Read the full article here:
HD Supply Outgrowing Its Markets At An Accelerating Rate

Seeking Alpha: Hoya Corp Managing For Growth *And* Margins

Japan's Hoya Corp. (OTCPK:HOCPY) is what I think a lot of American investors wish more Japanese companies were like. Hoya focuses on markets where it has strong share (instead of operating numerous sub-scale businesses), continually looks to drive out costs and improve margins, and is comparatively eager to consider M&A and the return of capital to shareholders. It also happens to operate solid businesses, with the company's legacy electronics and imaging businesses producing good cash flow and the health care and medical businesses offering better long-term growth.

Where Hoya is more like typical Japanese equities is in valuation. Japanese equities frequently trade with lower implied discount rates, which can make it hard to find attractively-priced companies by DCF methodologies. I liked Hoya six months ago despite some reservations about valuation, and the shares have risen another 12% since then (about 16% for the Tokyo-listed 7741.T shares). Hoya doesn't look undervalued, but the company has an opportunity to make value-building acquisitions today and I'd at least consider keeping this name on a watch list.

Continue here:
Hoya Corp Managing For Growth *And* Margins

Seeking Alpha: MTN Group Doing Pretty Well Despite Operating Challenges

Up more than 30% over the past year and more than 10% since my last update, I can't really complain about MTN Group (OTCPK:MTNOY). Although the company still has a lot of work to do in South Africa, and maybe more work to do than is commonly appreciated in Nigeria, the company's overall trends in subscribers and margins are looking pretty good. 3G and data remain significant growth drivers, as does mobile money, but MTN Group's valuation seems to largely reflect those opportunities. I'm reluctant to sell a well-run and broad-based play on Africa that could generate double-digit long-term FCF growth, but I can't claim that today's price is a tremendous bargain for new investors.

Read more here:
MTN Group Doing Pretty Well Despite Operating Challenges

Seeking Alpha: Wabtec Is High-Priced And High-Quality In Equal Measure

Westinghouse Air Brake Technologies (NYSE:WAB), or Wabtec, is the sort of company that chronically only looks cheap in the rear view mirror. Wabtec has strong share in the relatively concentrated U.S. market for technologies and components that go into rail cars, locomotives, and transit cars/locomotives, and is moving to replicate that share overseas. Add in a willingness to acquire its way into new markets and an increasing mix of electronic components, and the basic market opportunity looks appealing.

Now, what do you want to pay for it? Wabtec already trades at more than 13x forward EBITDA and appears to price in mid-to-high teens annual FCF growth for the next decade. There's little argument that Wabtec is a leader in large markets and produces strong returns on capital, despite an aggressive ongoing M&A policy. For investors who can take a "don't worry, be happy" view on valuation and/or make a credible argument that Wabtec's growth rate will exceed that which is already implied in the valuation, Wabtec could still be a name to consider but value-focused investors may find it a harder case to make.

Follow this link to the full article:
Wabtec Is High-Priced And High-Quality In Equal Measure

Tuesday, September 9, 2014

Seeking Alpha: Arcos Dorados Hits Bottom, Finds A Shovel

Arcos Dorados (NYSE:ARCO) has been every kind of lousy, falling another 28% since the last time I wrote about the stock. Since that last article, the situation in Venezuela has gotten worse and between Brazil, Argentina, Venezuela, and Mexico, Arcos Dorados has problems in markets that represent around 90% of the business. If that wasn't enough, I believe management's options to improve margins are more limited than I previously appreciated and the company is uncomfortably sandwiched between capex obligations to McDonald's (NYSE:MCD), violations of its debt covenants, and limited cash flow prospects.

Even with a hack-and-slash to growth expectations, shares could be more than 30% undervalued on a long-term cash flow basis but I have to admit less and less confidence in the long-term outlook for Arcos Dorados. Instead, I'm more willing to value the stock on 8x 12-month EBITDA, which works out to just $7/share. Maybe my capitulation here marks some sort of bottom, and I do still believe that the combination of McDonald's brand value and an under-penetrated fast food/quick service sector in Latin America can still produce value, but you have to have an iron-clad risk appetite to hold this name right now.

Read the full article here:
Arcos Dorados Hits Bottom, Finds A Shovel

Seeking Alpha: Copa Holdings Seeing Turbulence, But Still A Top-Notch Airline

Through the third week of July, my March call to not worry too much about the problems Copa Holdings (NYSE:CPA) was facing in Venezuela seemed like a good one - the shares were up 25% as the company continued to enjoy 20%-plus earnings growth on strong capacity growth and firm pricing. Unfortunately, Copa's second quarter report sourced investors on the shares as management increased its capacity reduction plans for Venezuela and lowered margin guidance as a result, leading to flat net performance relative to my last article.

I'm not sure why the guidance reduction was such a surprise. Avianca (NYSE:AVH) and Gol Linhas (NYSE:GOL) had been reducing exposure to Venezuela and Copa management indicated in May that they'd follow suit, and it was (or should have been) well-known that Venezuela was an uncommonly profitable market for Copa. Copa's update for July trends was not positive, though, and it is going to take some time to work past the Venezuela impact and reassure the Street that this is still a very profitable airline.

I believe Copa is still a good airline, a good growth story, and a good name to own for international diversification. GOL is probably an easier name to own right now (and undervalued in its own right), but I still see solid opportunity at Copa. Even I take a pretty conservative cut to my earlier numbers, I come up with a fair value of close to $140 and $150-plus is not that hard to support.

Read more here:
Copa Holdings Seeing Turbulence, But Still A Top-Notch Airline

Seeking Alpha: Belle International Fairly Popular Despite Some Core Weakness

It is certainly true that not all retail is the same and that has been quite clear over the last six months in China's retail sector. Food retailers like Sun Art (OTCPK:SURRY) and China Resources Enterprise (OTCPK:CRHKY) are struggling through weak same-store sales growth, but footwear and sportswear retailers like Belle (OTCPK:BELLY), Daphne (OTCPK:DPNEY), and ANTA Sports (OTCPK:ANPDY) are doing quite a bit better despite unimpressive same-store growth in the footwear business.

I have mixed feelings about Belle shares after this better than 10% move since my last update. I think Belle has a very good business (six of the top ten women's footwear brands in China and a long run of double-digit returns on capital), but management still has a lot of work to do with its online strategy. I'm also a little concerned about valuation, as the market seems to already be pricing in at least 8% annual free cash flow growth across the next decade.

Continue reading here:
Belle International Fairly Popular Despite Some Core Weakness

Seeking Alpha: China Resources Enterprise Languishing Over Short-Term Concerns

Another six months are in the books, and little has changed for the better at China Resources Enterprise (OTCPK:CRHKY). The Chinese food retail environment continues to be a tough one, with most of the major players seeing their comps turn negative. I believe CRE remains well-placed to benefit from growth in its beer JV and beverage business, and I continue to expect management to drive better long-term results from the Tesco (OTCPK:TSCDY) joint venture. In the meantime, though, it will be hard for these shares to get ahead while the Chinese food retailing market remains weak and while investors remain concerned over the near-term losses that CRE will absorb from the Tesco JV.

Follow this link to read the full article:
China Resources Enterprise Languishing Over Short-Term Concerns

Seeking Alpha: BB&T Makes A Solid Acquisition, Needs To Impress At Its Investor Day

Since missing sell-side estimates for the second quarter and guiding to slower loan growth and higher expenses, BB&T (NYSE:BBT) shares have had a rougher go of it. While the SPDR S&P Bank ETF (NYSEARCA:KBE) has climbed more than 1% since BB&T's report, and direct rivals like Wells Fargo (NYSE:WFC), PNC (NYSE:PNC), and Bank of America (NYSE:BAC) are all in the green, BB&T shares have fallen more than 3%.

I believe that BB&T still has a lot to offer investors. The company is continuing to build its franchise, as seen in a recent deal for Citi (NYSE:C) branches in Texas, and will be hosting its first Investor Day in six years on September 11. The branch acquisition is a good use of capital to grow the business and this Investor Day is a chance to convince the Street that the company has a good plan for cost reduction, loan growth, and capital deployment. I believe BB&T shares are about 10% undervalued today, making it one of the better risk/reward/quality trade-offs in the banking sector right now.

Read the full article here:
BB&T Makes A Solid Acquisition, Needs To Impress At Its Investor Day