Thursday, January 30, 2014

Seeking Alpha: Fenner's Slide Starting To Look Interesting

Much as analysts may talk about Fenner's (OTCPK:FNERF) business being more stable than commonly believed, the market is voting with its dollars (or pounds) - sending the shares on a choppy ride over the past three years as the coal market has had its own spasms. Fenner's leading share in mining conveyor belts ought to hold solid value over the long term, while the more idiosyncratic Advanced Engineered Products (or AEP) business looks to find more growth in markets like energy and healthcare.

Growth expectations for Fenner aren't particularly strong, and that is making this extended year-to-date slide more interesting from a value perspective. Although the coal sector has a long way to go to get healthy again, these shares are getting more interesting for value-inclined investors.

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Fenner's Slide Starting To Look Interesting

Seeking Alpha: Hikma Has Strong Growth Potential, But High Expectations

Anglo-Jordanian Hikma Pharmaceuticals plc (OTCPK:HKMPY) has had some curious ups and downs over the past two years. The company contemplated selling its injectables business (and got bids) only to decide to keep it, and the company's U.S. oral generics business was hurt by a warning letter in 2012 only to see a shortage of doxycycline in the U.S. lead to significant revenue and profit growth.

Hikma is going to be hard-pressed to maintain that momentum in doxycycline, but this remains a business with some strong growth potential. Not only is Hikma looking to leverage its position as the leading local manufacturer of branded generics for the Middle East and North African markets, but the company has begun to expand into other emerging markets. Although the stock carries an EV/EBITDA multiple that is demanding but not unreasonable, the price looks a little steeper on a discounted cash flow basis. Growth-oriented investors may find something to like here, but I suspect most value-oriented investors will give this one a pass.

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Hikma Has Strong Growth Potential, But High Expectations

Seeking Alpha: Hexagon Looks To Find New Applications For Market-Leading Technologies

Positioning and measurement technologies don't often get all that much attention, even though they're essential to a wide range of industries. With that, Sweden's Hexagon AB (OTCPK:HXGBY) may be one of the more obscure $10 billion-plus companies out there. Even so, this company is leader across its markets and is in the early stages of a transition from a hardware-centric capital good company to a software-driven technology company that can offer integrated positioning, measurement, design, and planning products to a wide range of industries.

It's hard to call Hexagon AB cheap right now, but then none of its peers really are either. Hexagon's core markets often long-term growth rates in the mid to high single digits, with significant margin leverage potential with the shift towards more software and services in the mix. Given growth potential well above the norm, I don't think Hexagon is overpriced today and I believe these shares offer attractive leverage to markets like smart agriculture, energy, construction, emerging market manufacturing, and 3D printing.

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Hexagon Looks To Find New Applications For Market-Leading Technologies

Seeking Alpha: Oshkosh's Self-Improvement Efforts Moving The Needle

Couple improving conditions in the largest-end market and solid progress with internal self-improvement efforts, and you have Oshkosh (OSK) handily beating the Street's fiscal first quarter estimates and sitting close to a 52-week high. With the shares having doubled the return of the S&P 500 over the past year, it's hard to say that Oshkosh's performance has gone unnoticed, but if construction really is turning the corner and the company's MOVE plan stays on track, these shares should continue to beat the market.

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Oshkosh's Self-Improvement Efforts Moving The Needle

Seeking Alpha: Will Aquarius Platinum's Best Efforts Come Up Short?

I have a lot of sympathy for the current management team at Aquarius Platinum (OTCPK:AQPTY). Management has made some significant strides in rationalizing the cost structure of this PGM miner and overcoming the poor capital and strategic decisions made by prior management. Unfortunately, the geology of the company's mines works against the company, and there are significant risks with the company's Zimbabwe asset. Although extensive miner strikes in South Africa could improve conditions enough that Aquarius generates the cash it needs to manage a bond maturity, this company is in precarious shape and the stock is really only suitable for very risk-tolerant investors.

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Will Aquarius Platinum's Best Efforts Come Up Short?

Wednesday, January 29, 2014

The Motley Fool: Pfizer Inc. Treading Water Ahead Of Clinical Data

The Street almost seems to be processing the quarterly reports from Big Pharma companies like Bristol-Myers Squibb and Pfizer (NYSE: PFE  ) as annoying opening acts that just have to be tolerated before the headliner goes on stage. With that in mind, Pfizer's decent fourth quarter results aren't likely to matter as much as upcoming clinical trial results from studies of palbociclib ("palbo"), Prevnar, and Xeljanz that could collectively point the way toward over $10 billion in long-term revenue.

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Pfizer Inc. Treading Water Ahead Of Clinical Data

Seeking Alpha: Under Fire On All Sides, First Cash Financial Slides Back Toward Value

As I warned the last time I wrote on First Cash Financial Services (FCFS), I thought the stock was expensive and the risk/reward balance wasn't so favorable to new investors. Although I didn't expect First Cash to get hit as hard as it did in the fourth quarter, disappointing results (and an even more disappointed market) have taken a sizable chunk of the excess enthusiasm out of these shares. First Cash still isn't what you might call a screaming bargain, but I believe its one of the best-run companies in consumer finance and I believe the company's long runway of growth in Mexico (and other Latin American countries) and consolidation opportunities in the U.S. make it a stock to consider on this pullback.

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Under Fire On All Sides, First Cash Financial Slides Back Toward Value

Seeking Alpha: Wilshire Bancorp Offers Growth In A Growth-Starved Market

There aren't a lot of bargains left in banking. Investors have largely bid up the credit-improvement stories and the "risk-on" trade has led to lower implied costs of equity and improving expectations for returns on capital in the coming years. Wilshire Bancorp (WIBC) isn't hugely cheap today, but the expectations here seem to be closer to rational, and Wilshire has the added benefit of showing solid growth at a time when many other banks are struggling to do so. Investors need to be aware of the risks of the company's lending book and that management may not achieve the targeted cost savings from its mergers, but I wouldn't be in a big hurry to take profits here yet.

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Wilshire Bancorp Offers Growth In A Growth-Starved Market

Seeking Alpha: Despite Soft Orders, Crane Looking For Market Recoveries In 2014

Like so many other industrial names, Crane (CR) ended up having a pretty good 2013 from a stock performance perspective. Orders weakened around mid-year, leading to three straight book-to-bills below 1.0, but the Street stayed optimistic on the prospect for better sales in 2014, and the benefits to be had from the MEI acquisition. Not unlike many other companies with exposure to fluid handling and aerospace, Crane doesn't jump out as cheap based upon trailing ratios, though the cash flow picture is a little more encouraging.

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Despite Soft Orders, Crane Looking For Market Recoveries In 2014

Seeking Alpha: GN Store Nord Using New Models To Gain Share

Hearing aids are an unusual category within med-tech or medical devices, as five of the six leading companies in the space are not American companies and reimbursement is inconsistent at best. It is still a market worth around $7 billion, though, and that makes GN Store Nord's (OTCPK:GNNDY) market share gains worth watching. With new products translating directly into better organic sales growth and restructuring efforts leading to better margins, GN Store Nord is now on a considerably more attractive trajectory.

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GN Store Nord Using New Models To Gain Share

Tuesday, January 28, 2014

The Motley Fool: The Bristol-Myers Squibb Co. Overreaction Highlights The Dependence On Oncology

After years of the big pharma industry pushing diversification as the solution to its woes, at least one major player is breaking from the pack. Bristol-Myers Squibb (NYSE: BMY  ) is prioritizing its oncology and virology assets, and the company has already staked out some attractive real estate in the immuno-oncology space. While the appeal and potential of immuno-oncology is legitimate, the valuation is already generous and the company's lead on Merck and Roche may not be as strong as the bulls hope.

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The Bristol-Myers Squibb Co. Overreaction Highlights The Dependence On Oncology

Seeking Alpha: Synergy Resources Offering A Lot Of Exploration Upside

This has been a winter of discontent for many energy companies operating in the Bakken and Wattenberg regions, as well as for their shareholders, as operational challenges like floods and high gathering line pressures coupled with wider differentials have hit the stocks. Against that backdrop, small Synergy Resources (SYRG) has been showing some pretty impressive well costs and production rates on its core Wattenberg acreage. With an aggressive drilling program for 2014, a drilling inventory of over 10 years in the Wattenberg, and assets in other areas, Synergy is worth a closer look today.

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Synergy Resources Offering A Lot Of Exploration Upside

Seeking Alpha: Rayonier Switching It Up As Its Prospects Diverge

Just as some companies manage to build value through acquisitions where "1+1" equals more than two, investors apparently think that the two major halves of Rayonier (RYN) are worth more apart than together. Seeing as how there really never were the hoped-for synergies between the company's timber assets and its Performance Fibers business, the split likely won't do either much harm, and it does give investors the opportunity to invest in a much "purer" timber REIT after the split is finalized.

Together or apart, I think Rayonier is worth about $46 to $47 today on a sum-of-the-parts basis. With an EV/EBITDA approach using next year's expected EBITDA showing a fair value of only about $35, it's clear to me that much of the value proposition here depends upon a housing recovery in the U.S. driving improved demand for timber and higher valuations for timberlands. Assuming that debt would be apportioned proportionately (and factoring in some asynergies from duplicated corporate expenses), I would estimate that about one-third of the stock's value can be attributed to the Performance Fibers business today.

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Rayonier Switching It Up As Its Prospects Diverge

Seeking Alpha: Good Or Bad, PBF Energy Won't Be Boring

At what point to a company's misses say more about the characteristics of an industry and those analysts who cover it rather than the company itself? I ask that question at the beginning, as it seems to really apply to PBF Energy (PBF). PBF has a lot of things that ought to work in its favor, including good exposure to differentials in Bakken and Western Canadian crude, relatively complex refineries in the East, and value-adding rail logistics assets. Yet, PBF Energy has been scolded repeatedly by analysts for missing their estimates, with each of the company's three reported quarters to date for 2013 coming in below expectations.

I think the reality is that the refinery industry is a difficult one to forecast, particularly given the volatility in the differentials that underpin so much of the investment thesis for PBF Energy. I do believe that that company's ability to take crude from Western Canada and the Bakken and transport it to its East Coast refineries at very competitive costs is an advantage, and I'm skeptical that pipelines are a high-probability near-term threat to the crude-by-rail thesis. On balance, I think PBF is undervalued today, but readers considering these shares have to realize how the volatility of differentials, logistics capacity on the supply side, renewable fuel policies, and basic economic conditions feed into the above-average volatility of these shares.

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Good Or Bad, PBF Energy Won't Be Boring

Seeking Alpha: For Meridian Biosciences, Living Up To The Past Could Prove Challenging

Small-cap diagnostics company Meridian Bioscience (VIVO) is a curious study in quality and growth and how Wall Street processes those attributes. Meridian has built up a very strong testing business, with high-quality rapid point of care tests and a very cost-effective molecular diagnostics platform. Moreover, this company has posted a trailing compound annual revenue growth rate of 10% with returns on invested capital often above 20%. Yet, the stock has had some pronounced choppiness and is only up about 16% over the past five years - significantly lagging rivals like Cepheid (CPHD) and Quidel (QDEL).

I am concerned that there may be too much optimism baked into current expectations. I believe that Meridian is seeing more competition in its core C.dif and flu franchises than many sell-side analysts want to acknowledge and I am worried about the company's rivals launching additional automated platforms that can compete in Meridian's core market. Current expectations seem to be pricing in forward revenue growth of 9% per year, and I think that may be too demanding for this company.

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For Meridian Biosciences, Living Up To The Past Could Prove Challenging

Monday, January 27, 2014

The Motley Fool: Intuitive Surgical, Inc.'s Growing Pains Still Painful

There's a lot about the Intuitive Surgical (NASDAQ: ISRG  ) story that feels familiar. Whether you look at recent examples, like transcatheter heart valves and left ventricular assist devices, or more distant historical examples, like stents, Intuitive Surgical has followed that familiar pattern of "you don't get it ... this changes everything and valuations don't matter" to "oh no! It's not growing to infinity!"

I don't mean to flippant about what has surely been a harrowing couple of years for Intuitive Surgical shareholders. The good news is that clinical data continue to support the argument that robotic surgery deserves its place at the table and has value to offer alongside the minimally invasive tools and approaches advanced by Johnson & Johnson (NYSE: JNJ  ) and Covidien (NYSE: COV  ) . The bad news is that the stock gets whipsawed as short term-focused analysts and institutions obsess over the next year or the next quarter and cannot look at the longer term.
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Intuitive Surgical, Inc.'s Growing Pains Still Painful

Seeking Alpha: Without A Buyer, TomTom's Route Is Unclear

When the best exit strategy for a stock is a buyout from a company that may not actually need the products or technology involved, it's tough for me to get all that excited. Be that as it may, the potential of a buyout has been the strongest bull argument for TomTom (OTCPK:TMOAY) (TOM2.AS) for over a year, as many have argued that Apple (AAPL) needs to, or at least should, acquire TomTom to secure its position in mapping and location technology.

There's little argument that mapping/location/navigation technology is important for smartphone manufacturers, and increasingly for automobile manufacturers as well. Whether its important enough for another company to shell out the more than the $1.6 billion it would likely take to acquire TomTom is debatable. The rise of "social mapping" is creating more technology options and the sale of Nokia's (NOK) handset business to Microsoft makes Nokia a more viable licensing partner. I'm not going to rule out the possibility of a company buying TomTom for its map assets, but the stock appears about 20% overvalued on its own independent merits and that makes this more of a binary story than I prefer.

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Without A Buyer, TomTom's Route Is Unclear

Seeking Alpha: Arrowhead Research - Ground-Floor Opportunity Or Biotech Bubble Baby?

Valuing a biotech, particularly one with no commercial products, is always going to be a controversial exercise. Having written on stocks for a public audience for over a decade (and for institutions before that), I'm still surprised at the number of people who will make comments like "that biotech has no earnings, it's worthless!"

It's an even more challenging exercise with a stock like Arrowhead Research (ARWR), though, as so much of the value of this company lies in its basic technology - technology that will really only show its worth over many years of clinical development work. It's dangerous to say that Arrowhead will be just like Alnylam Pharmaceuticals (ALNY) in a few years, so it deserves a similar valuation. I do believe that you can attribute almost half of the company's value today to its lead clinical compound and that leaves what I think is a pretty modest valuation for the company's overall technology platform.

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Arrowhead Research - Ground-Floor Opportunity Or Biotech Bubble Baby?

Seeking Alpha: Manitou Getting Its House In Order

I wrote on Manitou (OTC:MAOIF) (MTU.PA) as a Top Idea back in September, thinking that the market was far too pessimistic on a company that had built strong market share in forklift trucks, telehandlers, and similar equipment through strong engineering and product design. What's more, I thought the company had the opportunity to benefit from improving market demand and drive improved margins with better manufacturing and supply chain efficiency.

The company has not only started logging some improved revenue and orders, but named a new CEO. I believe Michel Denis is the sort of operations-focused executive that the company needs right now, but he has yet to lay out his plans for Manitou. The shares are up about 20% since my initial writeup, but I continue to believe there is worthwhile upside in the stock.

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Manitou Getting Its House In Order

Sunday, January 26, 2014

Seeking Alpha: Can Yamaha Motor Reverse Its Skid?

Japan's Yamaha Motor (OTCPK:YAMHF) has some work to do. Yamaha Motor is the second-largest motorcycle manufacturer in the world, and the largest manufacturer of outboard marine motors, but the company has been struggling to generate profits in the developed world while seeing its primary rival Honda Motor (HMC) grab share in key emerging markets.

Yamaha Motor isn't giving up without a fight. The company has been aggressively refreshing its product lineup in both North America and the emerging markets, and is intensifying its marketing efforts in key areas like Indonesia and India. If Yamaha Motor can reverse its share losses and shore up profitability in the developed world, the shares could post some very solid gains from here.

Readers should note that the Yamaha Motor ADR isn't as liquid as investors might like. I would advise those interested in buying the shares to buy the Japanese shares if possible, or at least use limit orders if going with the ADRs.

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Can Yamaha Motor Reverse Its Skid?

Seeking Alpha: Can The Roll-Up Strategy At MDC Partners Keep Rolling?

If you snooze in a bull market, you lose. I had intended to look into MDC Partners (MDCA) back in the summer and didn't get around to it. The stock is up about 100% since then, which makes that a pretty expensive delay.

Although I don't think MDC Partners is going to double again over the next six months, I do think this stock has room to rise from here. I expect the company to continue to post organic growth well ahead of the industry average and identify acquisition opportunities outside North America that can expand the business further. The advertising industry has its ups and downs and this company remains on the outside of the ruling oligarchy, but competitive wins and a focus on interactive marketing could make it a more serious challenger in the coming years.

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Can The Roll-Up Strategy At MDC Partners Keep Rolling?

Seeking Alpha: First Horizon Still Muddling, But Still Holding Upside Too

It has been quite a while since I've written about First Horizon (FHN), but this Tennessee-based regional bank continues to operate under a cloud. The market remains concerned about the impact of the company running off its non-strategic loan book and its as-of-yet-unresolved mortgage repurchase liabilities. With that, the shares have nearly doubled since late 2011, but still significantly lagged regional peers/comps like Regions (RF) and SunTrust (STI).

There aren't a lot of clear bargains left in the banking sector, but I believe First Horizon could be an outperformer as it continues to clean up its business. Not only does First Horizon have additional cost-cutting leverage, but the bank's trading operations and core lending are still in doldrums that I do not believe will persist indefinitely. Moreover, I think the quality of the company's past mortgage loans will serve it well in repurchase settlements. All told, while the performance over the next year is not likely to be scintillating, I'll argue that fair value is around $13 today on the basis of the company's long-term profitability potentia
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First Horizon Still Muddling, But Still Holding Upside Too

Seeking Alpha: Microsemi Boosts Guidance And Has Some Bold Ambitions

In the "follow the bouncing ball" world of mid-cap semiconductor company Microsemi's (MSCC) quarterly performance, things appear to be heading up again. A beat-and-raise quarter should be constructive for the stock, and management had some fairly bold things to say about the company's future on the conference call.

A lot of things seem to be lining up favorably for Microsemi right now. The new federal budget should ease the logjam in defense spending and 2014 is shaping up to be a better year for commercial aerospace. Key medical device markets like ICDs are showing improving volume, and other chip companies like Linear Technology (LLTC) are sounding more optimistic about conditions in the industrial end markets. With that, I continue to believe that Microsemi is undervalued, though this is very much a "show me" stock with respect to organic growth and margin improvements.

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Microsemi Boosts Guidance And Has Some Bold Ambitions

Seeking Alpha: Vocus May Struggle To Exceed Even Modest Expectations

A lot of companies are trying to build models around enterprise SaaS, but talking about "the next" (CRM), NetSuite (N), or Marketo (MKTO) is a lot easier than living up to it. That brings me to Vocus (VOCS), a small-cap SaaS public relations and marketing company that has been having a rough go of it.

I decided to look into Vocus to see if the Street's opinion of the company was too bearish. Given the weak trends in bookings and revenue and the uncertain value proposition that the company offers, not to mention its weakening legacy PR business, I'm not sure that's the case. It doesn't take all that much growth to drive a much higher fair value than today's price, but I'm not sure the company can manage all that much growth without some extensive changes.

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Vocus May Struggle To Exceed Even Modest Expectations

Seeking Alpha: A Remodeling Recovery Has Sent Universal Forest To Multi-Year Highs

The residential and commercial construction markets still have a long way to go before they can be called "healthy", but Universal Forest Products (UFPI) is already well ahead of the curve. With strong unit growth and improved margins in the third quarter, growing expectations, and strong margin leverage to a construction recovery, I can understand the enthusiasm for this wood products company.

Although I understand, I'm not looking to join in with my own cash. Trying to forecast the pace and magnitude of residential and commercial construction recoveries is just asking to be wrong, and I won't argue with more momentum-oriented investors who look at this as a directional play on construction activity. I try to invest with a margin of safety whenever possible, though, and I think a stock like Louisiana-Pacific (LPX) may offer a little more of that right now.

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A Remodeling Recovery Has Sent Universal Forest To Multi-Year Highs

Friday, January 24, 2014

The Motley Fool: Is Bank of America Getting More Credit Than It Deserves?

Wall Street is usually a forward-looking sort of place, but investors may be taking it a bit far with Bank of America (NYSE: BAC  ) .

While the bank does indeed have substantial scope for improving its costs and taking advantage of higher rates, current valuations seem to factor in almost no risk that the bank won't succeed -- a rather high amount of faith in a company that really hasn't done a lot to earn it yet.

Bank of America definitely has more to gain from higher rates than Citigroup, JPMorgan, Wells Fargo, or U.S. Bancorp, but investors have to assume that they will manage to cut costs and maintain credit discipline should they arrive. With that, JPMorgan and Wells Fargo continue to offer more upside in a "base case" scenario, but if everything goes right, Bank of America could continue to tick higher.

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Is Bank of America Getting More Credit Than It Deserves?

The Motley Fool: Covidien plc. Delivers Yet Again

About two weeks ago, I wondered whether the Street had caught up to Covidien (NYSE: COV  ) . Apparently the answer is "no", as the company once again beat expectations with strong sales growth and particularly strong performance in its core surgical business.

I still don't think Covidien is particularly cheap, but that's a complaint I make a lot these days in the health care sector. On a relative basis, I think Covidien, Johnson & Johnson (NYSE: JNJ  ) , and Stryker (NYSE: SYK  ) are above-average calls on a relative basis, as they're exposed to improving procedural growth across multiple markets.

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Covidien plc. Delivers Yet Again

Seeking Alpha: Fracking Will Recover, But Can Twin Disc Achieve Better Margins?

I really want to like Twin Disc (TWIN). Not only does this small and almost unfollowed company make the sort of heavy industrial gear that I like, it's a good play on multiple markets that I believe are due to recover. Twin Disc also offers a level of information available to investors that companies 10 times or 100 times larger often fail to offer.

The short-term question is timing - I am confident that fracking, off-highway vehicles, and marine markets will recover, but I'm not so confident about when. The longer-term question is one of margins and operating cash flow generation - if Twin Disc can't generate double-digit operating cash flow margins as a percentage of sales, it is hard to see how Twin Disc's probable streams of cash flow are undervalued today.

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Fracking Will Recover, But Can Twin Disc Achieve Better Margins?

Seeking Alpha: Stage Stores Needs To Regain Its Footing

Although investors seem to be largely inured to the idea of tough times in the retailing world, the actual numbers aren't as bad as you might expect. Stocks like J.C. Penney (JCP) and Sears (SHLD) have gotten thumped, but others like Kohl's (KSS) and Dillard's (DDS) are at least in the black for the past year, while Macy's (M) has actually been a market-beater. Stage Stores (SSI) has been part of the bad crowd, with the shares down 13% and within 10% of their 52-week low, as investors have grown disillusioned with comp growth misses and halting progress towards better margins.

I do worry that turning bullish on Stage Stores today is like reaching out to catch a falling knife, but I like the basic business model and I believe the company has a strategy in place that can drive better operating results. Stage Stores still serves an under-penetrated addressable market of smaller towns and better merchandising should ultimately lead to better margins. If the company can improve its bottom line profitability, a turnaround could take these shares into the mid-$20s while the current price already seems to discount the idea that management can't really do any better.

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Stage Stores Needs To Regain Its Footing

Seeking Alpha: It's Not Easy Being GreenHunter

Given the controversy over the pollution risks from the improper handling of wastewater produced from fracking operations, I looked into GreenHunter Resources (GRH) hoping that I might find an appealing small cap energy services play. I have to say that I came away disappointed and unimpressed.

I do believe that GreenHunter is addressing a large potential market opportunity. Although wells in the Marcellus and Utica shales do not typically require as much water as those in the Bakken, the lack of disposal capacity (including haulage) has led to strong pricing.

My problem is with GreenHunter's apparent operating plan and financing woes - although I understand it takes money to make money, I don't see enough upside in the shares right now to compensate me for the risk. Speculative investors who believe that GreenHunter can grow out of its funding problems may be proven right (and have sizable profits to show for it), but I'm willing to take the risk of missing out until I see more signs of capital stability in the business.

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It's Not Easy Being GreenHunter

Seeking Alpha: Amidst Huge Unknowns, Conatus Pharmaceuticals Worth A Closer Look

The unexpected success of Intercept Pharmaceuticals' (ICPT) Phase IIb trial in non-alcoholic steatohepatitis (also known as NASH) not only propelled those shares, it has brought more attention to liver disease as a therapeutic class and individual biotechs like Conatus Pharmaceuticals (CNAT).

Although Conatus is a one-drug stock at this point, it is pursuing multiple under-treated indications with its lead drug emricasan. Biotech investors can, and do, argue extensively about the odds that a particular drug will make it to market and what kind of revenue it will earn once it makes it there, but there's usually general agreement about pricing and likely dosing. Not so with Conatus, as nobody seems to know how long patients will take the drug the company is developing, nor what the market will bear for it.

Amidst that significant uncertainty, I still believe that Conatus is worth a closer look today. The liver failure market is significantly underserved today, with thousands of patients dying for lack of enough donor livers and adequate stabilization/supportive therapy. Should the company's efforts in NASH pan out, the market potential could be orders of magnitude higher, though again the question of pricing would become a large one. I currently estimate a fair value of $23, but this estimate is highly sensitive to changes in the drug price as well as the ultimate odds of approval.

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Amidst Huge Unknowns, Conatus Pharmaceuticals Worth A Closer Look

Seeking Alpha: Ipsen In Good Shape

Most American investors are familiar with large European drug companies like Sanofi and Novartis (NVS), but the mid-cap drugmakers like Ipsen (OTCPK:IPSEY) don't get as much attention. That's unfortunate, as Ipsen is one of several high-quality smaller European pharmaceutical companies.

Ipsen shares don't look significantly underpriced today, but there could some developments that could drive shares higher. Phase III data on tasquinimod could make this drug a viable alternative in the crowded prostate cancer space, and Ipsen may be on the prowl for licensing or acquisition opportunities to take advantage of a new U.S. oncology sales infrastructure. I'd more interested in these shares closer to EUR 30, but they look like a decent enough hold at today's level.

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Ipsen In Good Shape

Seeking Alpha: Imperva's Valuation May Not Be So Ridiculous

I'm no fan of overheated tech momentum stories, but even with Imperva's (IMPV) shares up almost 60% over the past year, I'm not convinced Imperva is overheated. Certainly these are early days for web application firewalls and database-oriented security solutions, but Imperva has already established itself as the only company to address web apps, databases, and file activity monitoring and with appliance, software, and cloud delivery models.

Looking at what companies like Fortinet (FTNT) and Check Point (CHKP) achieved in their early years and the opportunity in securing both structured and unstructured data (as opposed to networks), I'm optimistic that a long-term revenue growth forecast around 20% is not ridiculous. That doesn't make Imperva a notably cheap stock today, but it does make it worth a spot on a watch list given the freak-outs that can drive significant pullbacks in security and enterprise software stocks.

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Imperva's Valuation May Not Be So Ridiculous

Thursday, January 23, 2014

The Motley Fool: Baxter International, Inc. Will Be Nit-Picked, but The Quality Is There

Wall Street can be surprisingly stubborn at times. Right now, for instance, it appears that there's a deep commitment to like Abbott Labs as a recovery play in 2014, but an equal commitment to dump on Baxter (NYSE: BAX  ) and predict significant market share loss to Biogen Idec (NASDAQ: BIIB  ) in hemophilia coupled with other imagined disappointments.

To be sure, Baxter is not my favorite stock today, and the company did not provide a perfectly clean fourth quarter on Thursday morning. What Baxter did offer, however, was good enough; I think investors who can be patient with a pretty understated company can do well over the long term with Baxter.

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Baxter International, Inc. Will Be Nit-Picked, but The Quality Is There

The Motley Fool: Stryker Corporation Offering Some Of The Best Growth Prospects In Large Med-Tech

Growth may be starting to pick up in the med-tech world, but Stryker (NYSE: SYK  ) is still finding a way to stand out from the crowd. Stryker had a surprisingly strong quarter in its reconstructive products business, and the long-term outlook for instruments, endoscopy, and neuro/spine are all appealing. Add in upside from the MAKO Surgical acquisition and, while Stryker may not be a bargain-basement stock anymore, it still holds some appeal for long-term investors.

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Stryker Corporation Offering Some Of The Best Growth Prospects In Large Med-Tech

The Motley Fool: Wall Street Less Forgiving Toward Abbott Laboratories This Time

With stocks like St. Jude Medical, Boston Scientific, Medtronic (NYSE: MDT  ) , and Johnson & Johnson (NYSE: JNJ  ) so strong in 2013, Abbott Labs (NYSE: ABT  ) has been tapped by many sell-side analysts as a catch-up pick for 2014. For the second straight quarter, though, Abbott has come in a little shy of growth expectations. Although the excuse was reasonable (the ongoing impact of Fonterra recalls on nutrition), there's not a lot of tolerance in Abbott's valuation model for ongoing shortfalls.

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Wall Street Less Forgiving Toward Abbott Laboratories This Time

Seeking Alpha: African Bank Investments Looks To Rally From The Bottom

South Africa's African Bank Investments Ltd (OTCPK:AFRVY) is technically a bank, but it's nothing like what that word probably conjures up in most reader's minds. Tracing its history back to microlending, ABIL is Africa's largest provider of personal loans in South Africa and a specialist in unsecured lending. ABIL's unsecured personal lending business is not the same as the payday lending of American companies like Cash America (CSH), but it's also most definitely not the same as the secured lending operations of "regular" banks like Citigroup (C) or South Africa's Big Four banks (Standard Bank (OTCPK:SGBLY), FirstRand (OTCPK:FANDY), Nedbank (OTCPK:NDBKY), and Absa Group).

ABIL has gotten absolutely hammered over the past two years as market issues and challenges like over-indebted South African consumers and increasing regulation have combined with company-specific issues relating to provisioning to undermine earnings and investor confidence. Management believes it has shored up its capital and fixed its provisioning issues. Although the shares do appear priced to generate good returns if that is in fact the case, I believe the quality of management is a major risk factor here and one that makes these shares a real speculation even at these low levels.

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African Bank Investments Looks To Rally From The Bottom

Seeking Alpha: PAX Global Technology Looking To Disrupt The Point Of Sale Duopoly

In the U.S. and Europe, when it comes time to swipe your credit or debit card, the odds are very high that it is going to go through a machine made by either VeriFone (PAY) or Ingenico (OTCPK:INGIY). China's PAX Global Technology (OTC:PXGYF) (327.HK) is hoping to change that, though, and the company already boasts significant share in China and the wider Asia-Pacific region. As the U.S. approaches the adoption of EMV standards ("chip cards"), PAX Global could be approaching some significant share growth potential.

PAX Global is not a bargain basement stock, though. The stock is not widely covered by Western sell-side banks yet, but the stock sports a pretty healthy multiple and still has a lot of work to do in building out the software and service offerings it will need to compete in North America and Europe. With that, investors need to make sure they're comfortable that this company can continue to grow fast enough to outrun these concerns in the short run.

As a quick note, I would suggest investors try to buy the Hong Kong-listed shares (327.HK) if at all possible. Although PAX Global technically has a U.S. ticker symbol it appears to be effectively a dead ticker.

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PAX Global Technology Looking To Disrupt The Point Of Sale Duopoly

Wednesday, January 22, 2014

The Motley Fool: Are Lenovo And IBM Finally Close To Another Deal?

It has taken a long time, but Lenovo (NASDAQOTH: LNVGY  ) and IBM (NYSE: IBM  ) may be about to finally strike a bargain for IBM's x86 server business. Lenovo has openly acknowledged its interest in this business, but the companies have been at odds on deal terms. With ongoing share loss in the server business and a desire to reallocate capital to higher-returning businesses like software and services, IBM would do well to close this deal.

The good news for Lenovo is that it can do well with or without IBM's server business. The company has built the No. 1 PC business in the world and has already grown its tablet and smartphone business to be No. 4 in terms of market share, without aggressively targeting the U.S. Lenovo looks meaningfully undervalued, and sealing a deal with IBM would only help matters.

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The Motley Fool: St. Jude Medical Inc.'s Valuation Already Looking Pretty Racy

Having made a habit of defending St. Jude Medical (NYSE: STJ  ) as it navigated its way through a lull in growth, doubts about its clinical pipeline, and the controversy over its Riata leads, it feels a little strange to complain that the shares now appear to be overvalued. And yet, even though I'm bullish on the prospects for products like Portico, MediGuide, CardioMEMS, and Nanostim, it's hard to come up with a realistic set of growth expectations that suggest these shares are too cheap today.

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St. Jude Medical Inc.'s Valuation Already Looking Pretty Racy

The Motley Fool: Intercept's Thoughts Of Partnering NASH Make Sense

Intercept Pharmaceuticals (NASDAQ: ICPT  ) has had a wild ride to redefine all wild rides. While this biotech was definitely interesting and undervalued on the merits of its bile acid therapeutic OCA for primary biliary cirrhosis (PBC), the unexpected success of a Phase IIb study in nonalcoholic steatohepatitis (NASH) has sent the shares into a new orbit. While the company's recent presentation at the JPMorgan Healthcare Conference spooked investors with talk of possibly pursuing a partner for the NASH program, this may ultimately be the best way to maximize value for the application.

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Intercept's Thoughts Of Partnering NASH Make Sense

Seeking Alpha: KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

KMG Chemicals (KMG) is a small player in the specialty chemicals space, with only about $350 million in annualized revenue and about half that amount of market cap. Despite this limited scale, KMG is a significant player in parts of the electronic chemicals and wood treatments markets. Improvements in the consumer electronics market, coupled with synergies from the acquisition of a business from OM Group (OMG) should drive improving results in the coming years, and management is hoping to augment this with the acquisition of a third standalone unit.

KMG Chemicals has established sizable market positions in its targeted markets, but it is not so clear that those are valuable markets for the long term. With that, KMG's financial performance has been erratic and the stock is barely followed on Wall Street. I'm optimistic that a turnaround in the chip space, coupled with merger synergies, can drive better near-term performance but investors need to consider the ramifications of the company's preference to focus on established markets when evaluating this as a potential long-term holding.

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KMG Chemicals Hopes To Leverage Chip Turnaround And Synergies

Seeking Alpha: Rotork Has All The Quality You Could Want

I'm not sure how a reader could fault Rotork (OTC:RTOXY) on the basis of quality. This British industrial company has established leading market share in valve actuators (devices fitted to valves to control them, and the flow of fluid and gas), and actually grew through the 2009 downturn when most industrial companies were seeing significant pressure in their business. Rotork has not just grown, it has grown profitably, with a five-year average return on invested capital over 30%.

Quality isn't the issue with Rotork, but valuation might be. I readily admit that high-quality companies often get and hold a premium multiple. Rotork is also looking to redefine its business once again and expand its addressable market by about a third in the process. I'm not recommending betting against Rotork, but the market already seems to be counting on 10% annual free cash flow growth for the next decade and there are cheaper industrials out there right now.

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Rotork Has All The Quality You Could Want

Seeking Alpha: OMA Looking To Traffic And Non-Aeronautical To Drive Growth

Like Grupo Aeroportuario del Pacifico (PAC), Grupo Aeroportuario del Centro Norte (OMAB), also known as "OMA", operates airports in Mexico under long-term concessions from the government. While OMA should benefit from the same surge in low-cost airlines as PAC and Grupo Aeroportuario del Sureste (ASR), OMA is looking to non-aerospace opportunities like real estate development to help drive growth.

OMA may not look so interesting from the perspective of backwards-looking valuation metrics, but the potential cash flow growth here makes this an interesting name. OMA is more focused on domestic traffic than PAC, but if the company's attempts to develop properties like hotels and cargo facilities pan out, double-digit free cash flow growth and a fair value in mid-$30's both seem reasonable.

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OMA Looking To Traffic And Non-Aeronautical To Drive Growth

Seeking Alpha: Anhui Conch In The Right Markets And Using The Right Approach

Cement demand growth typically goes hand in hand with economic growth, and that has certainly been true in China. As the country's second-largest and most profitable cement maker, Anhui Conch Cement (OTCPK:AHCHY) is one of the best-positioned companies to take advantage of ongoing economic and infrastructure growth in China.

It is not as though investors have forgotten about Anhui Conch, though. The shares are about 10% undervalued on an EV/EBITDA basis, which may strike some readers as an insufficient margin of safety for a company that is highly dependent on economic policies it cannot control. Given its modern plants, cost advantages, and ability to act as a consolidator, though, investors with a longer-term outlook may yet like what Anhui Conch has to offer.

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Anhui Conch In The Right Markets And Using The Right Approach

Tuesday, January 21, 2014

The Motley Fool: Johnson & Johnson Still Driven By Drugs

As another solid quarter goes into the books, Johnson & Johnson (NYSE: JNJ  ) continues to be a med-tech story driven largely by the success of its drug platform. Given the growth potential of the company's platform in immunology, oncology, virology, and metabolic disease, that's not likely to change anytime soon.

Competition may not be the biggest issue for Johnson & Johnson today. While companies like Stryker (NYSE: SYK  ) and Covidien (NYSE: COV  ) are formidable in their own right, and drug companies like AstraZeneca won't just cede markets to the company, the bigger challenge for JNJ may be living up to Wall Street's enthusiasm for the company and meeting some pretty ambitious margin and free cash flow growth targets.

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Johnson & Johnson Still Driven By Drugs

The Motley Fool: Wall Street Has Taken A Sharp Turn Into Forest Laboratories, Inc.

Institutional investors and sell-side analysts are rather infamous for gnat-like attention spans and the capacity to dramatically change their opinions in relatively short periods of time. So, too, has it been with Forest Labs (NYSE: FRX  ) , though it certainly requires mentioning that Forest Labs has done a lot of work on its own to affect that change of opinion. Forest Labs announced a significant cost-cutting program and then followed it up with the nearly $3 billion purchase of Aptalis, both of which significantly impact the company's long term revenue and margin prospects.

I'm not totally sold on the company's "Project Rejuvenate", nor do I believe that all of the company's "Next Nine" products will live up to management's hopes. With that, I'm a little concerned that investor enthusiasm for the restructuring program at Forest Labs is getting caught up with excitement over similar programs at AstraZeneca, Valeant (NYSE: VRX  ) , Endo, and Amgen -- and perhaps overdoing things.

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Wall Street Has Taken A Sharp Turn Into Forest Laboratories, Inc.

Seeking Alpha: Tiny MOCON Worth A Little More Attention

I like under-followed companies, and it's hard to be much less followed than MOCON (MOCO). This small analytical/measurement tools company is passingly similar to larger scientific tools makers like Agilent (A), Thermo Fisher (TMO), and Waters (WAT), but MOCON is largely focused on gas/vapor permeation instruments and packaging testing for the food, beverage, pharmaceutical, and consumer goods sectors.

On first blush, MOCON may not seem to be worth the work. There are no sell-side analysts following the stock, and the low volume and float will have it stricken off the list of many would-be institutional holders. A trailing P/E of nearly 24 and EV/EBTIDA of more than 10 also don't look cheap at first glance, though I believe a free cash flow approach suggests a fair value north of $20. Provided the company can stay on track with its margin improvement efforts, I like the long-term outlook for this tiny instruments company.

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Tiny MOCON Worth A Little More Attention

Monday, January 20, 2014

The Motley Fool: The Chelsea Therapeutics International Drama Has At Least One More Act

Even by the liberal standards of biotech, Chelsea Therapeutics (NASDAQ: CHTP  ) has given its investors a wild ride as the stock has bounced around on exceptionally mixed data on lead drug Northera. Investors have already faced both the ecstasy of FDA panel approval, and the agony of FDA rejection. Now the shares are rocketing again, jumping almost 100% on Wednesday in the wake of a convincing panel vote in favor of Northera despite a decidedly negative FDA stance in its pre-meeting briefing.

What happens next is anybody's guess. The FDA approves almost 90% of the drugs that are recommended by its panels, and the 16-1 vote on Tuesday would normally be seen as a strong endorsement. Chelsea's data package is one of the messiest I've seen in a long time, but orthostatic hypotension is a significantly under-served market and it doesn't take particularly bold assumptions to derive an appealing target price.

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The Chelsea Therapeutics International Drama Has At Least One More Act

The Motley Fool: Wall Street Is Wrong About Wells Fargo. Here's Why It's a Good Buy Now

Wells Fargo (NYSE: WFC  ) is one of the four true megabanks of the United States, but it has generally steered clear of the proprietary trading, elaborate derivative books, and foreign operations of larger peers like JPMorgan Chase (NYSE: JPM  ) , Bank of America, and Citigroup. That leaves the bank considerably more dependent on consumer and business demand for loans and other services. While there are industrywide headwinds, the better loan growth and improving credit picture at Wells Fargo is encouraging.

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Wall Street Is Wrong About Wells Fargo. Here's Why It's a Good Buy Now

Seeking Alpha: Great Lakes Dredge And Dock Needs To Execute On Upcoming Opportunities

I'm skeptical of businesses that struggle (or fail) to earn their cost of capital over a sustained period of time. That makes Great Lakes Dredge & Dock (GLDD) a more challenging company for me. On one hand, I like the company's strong share in its core dredging operations, and I believe there will be significant port expansion projects in the years to come. Yet, even with over 100 years of experience, the company's wobbly cash flow, returns on capital, and book value growth doesn't give me a lot of confidence, and the company's quarterly reports have had a flair for the dramatic lately.

These shares have rallied a third since their lows of the fall, but I could see these shares heading higher as the company logs more port, waterway, and beach work. I'd be careful to make this relationship a casual one, though, and not expect to hold for long stretches of time as the underlying performance just doesn't seem to merit it.

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Great Lakes Dredge And Dock Needs To Execute On Upcoming Opportunities

Friday, January 17, 2014

Seeking Alpha: Interpump A Largely Unknown Italian Success Story

Outside of fashion brands like Gucci and perhaps sports cars like Ferrari, Italy really doesn't enjoy a particularly good reputation as a home to solid companies that are competitive on an international basis. Interpump Group S.p.A (OTC:IPGLF) (IP.MI) looks like a notable exception to me. Through both M&A and internal development, Interpump has emerged as a global leader in high/ultra-high pressure pumps and hydraulic components like power take-offs and cylinders.

Interpump's margins and returns on capital compare pretty well to better-known U.S. industrials like Eaton (ETN), Parker-Hannifin (PH), and Emerson (EMR), and many U.S. corporations could take a lesson from Interpump in terms of how it communicates and shares information with shareholders. These shares went up almost non-stop through 2013 and are not a screaming bargain today, but it's a company worth further due diligence and a spot on watch lists.

I also want to note that while Interpump technically has an ADR listing, I cannot confirm that shares have actually ever traded under that IPGLF ticker. Given that access to European markets has gotten better and better (and cheaper), I would definitely suggest buying the Italian shares over the ADRs.

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Interpump A Largely Unknown Italian Success Story

Seeking Alpha: Trinity Biotech Getting A Head-Of-The-Class Multiple

Fellow Seeking Alpha contributor Paul Nouri made a very solid call naming Trinity Biotech (TRIB) a Top Idea back in late June, as the shares have risen about 60% since then. While I do like this under-followed Irish diagnostics specialist, I have to wonder if the stock has gone too far too fast. Even if I assume uncommonly high free cash flow margins and that the company captures one-third of the troponin and BNP testing markets, the numbers just don't work for me right now.

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Trinity Biotech Getting A Head-Of-The-Class Multiple

Seeking Alpha: XPO Logistics Sticking To An Aggressive Growth Plan

Every time I've written about XPO Logistics (XPO), I've heard from readers who simply do not believe that the company will succeed in its goal of buying or building its way into a leading spot in third-party logistics by 2016. Yet, the company continues to post strong organic growth and negotiate multiple M&A transactions, the latest being the acquisition of Pacer International (PACR).

Whether it's the bull market in general or a buy-in from institutional investors, the shares of XPO Logistics had a good 2013 and sit just below a 52-week high. Even with that strong performance, they don't appear to me to be unreasonably valued today.

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XPO Logistics Sticking To An Aggressive Growth Plan

Seeking Alpha: Bonanza Creek Another Interesting Second-Chance Story

Investors are getting a little spoiled for choice when it comes to E&P companies with impressive production growth outlooks, attractive internal economics, and discounted valuations. The same sector-wide pullback that has hit names like PDC Energy (PDCE) and Noble (NBL) has also taken Bonanza Creek (BCEI) with it. While the possibility of lower oil prices or regulations that impact fracking are a sector-wide risk, Bonanza looks pretty appealing at today's prices.

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Bonanza Creek Another Interesting Second-Chance Story

Thursday, January 16, 2014

The Motley Fool: Humana Inc.: The Way To Play Medicare Advantage

If you want to play the graying of America, Humana (NYSE: HUM  ) is a name to consider. This managed care provider may be as close as you can find to a pure play on Medicare Advantage, as this program is more than two-thirds of the company's earnings base. At the same time, Humana has joined Aetna (NYSE: AET  ) and WellPoint (NYSE: WLP  ) as the most aggressive participants in the new public exchanges.

Humana apparently isn't afraid to take on risk, as Medicare Advantage rates have become a great deal more uncertain and nobody really knows how the new Obamacare-mandated exchanges are going to work out. Humana looks about as undervalued as Aetna or Cigna (NYSE: CI  ) and could be priced to generate some solid long-term returns, but investors have to be comfortable with the risks and uncertainties that go with such a large commitment to the Medicare Advantage program.

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Humana Inc.: The Way To Play Medicare Advantage

The Motley Fool: JPMorgan Chase & Co. Is Ready to Go Back to Business As Usual

American megabank JPMorgan Chase  (NYSE: JPM  ) has spent a great deal of time and money trying to patch up credit, legal, and business problems -- many of which were self-inflicted. While JPMorgan emerged from the banking crisis with better capital and a stronger business than Citigroup (NYSE: C  ) or Bank of America (NYSE: BAC  ) , the shares have actually underperformed those peers over the last two years as investors have been more intrigued by the self-improvement potential of Citigroup and Bank of America than the stronger underlying operating performance of JPMorgan.

Looking out, though, JPMorgan may be the better investment. Not only is the company a very strong player in trading and investment banking, it's near the top of the charts in mortgage lending, card lending, and retail lending, as well as sporting a large branch footprint. With the possibility of double-digit cash earnings and ongoing dividends hikes (and/or buybacks), JPMorgan looks more than 10% undervalued today.

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JPMorgan Chase & Co. Is Ready to Go Back to Business As Usual

Seeking Alpha: For Pinnacle Foods, Slowly Does It

If you're looking for a dynamic revenue growth story, you probably want to look somewhere other than at Pinnacle Foods (PF). Pinnacle's management is realistic, looking for growth in line with the industry categories and focusing instead on optimizing cost and operating leverage. With several other brands and food businesses likely up for sale and opportunities for additional gross margin improvements, Pinnacle Foods still offers some respectable upside for patient investors.

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For Pinnacle Foods, Slowly Does It

Seeking Alpha: Arcos Dorados Stronger Than Its Stock

It's cold comfort for shareholders, but it seems like Arcos Dorados (ARCO) has gotten sucked into the same "anti-polar" vortex as many other consumer-oriented Latin American stocks. With the USD/BRL exchange rate moving from 2.03 to 2.37 over the past year and the USD / MXN rate moving from 12.67 to 13.08, worries about consumer spending trends in markets like Brazil and Mexico and the economies of Argentina and Venezuela are almost secondary.

The good news is that, as an operating company, Arcos Dorados is still doing pretty well. Sluggish comp growth in Brazil is a worry, but comps have generally been picking up and margins seem to have stabilized. I'm looking for strong comp growth and unit expansion to drive revenue growth, and I believe the shares are meaningfully undervalued today. All of that said, investors are going to have to be able to deal patiently with the ups and downs of currency movements or take a more aggressive view towards entering, exiting, and re-entering the shares.

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Arcos Dorados Stronger Than Its Stock

Seeking Alpha: Middleby Has Lots Of "Guh", Not So Much "Arp"

Institutional investors have a knack for taking a page out of Wile E. Coyote's book when it comes to growth stocks - chasing them right off the edge of the cliff and into valuations based on thin air. This is in no sense meant as an indictment of the quality food equipment manufacturer Middleby (MIDD), as I believe this company is highly innovative and has numerous opportunities to grow its business over the next decade. At some point, though, even GARP investors have to acknowledge that this stock is trading a great deal more on the "Guh" part of the story than "a reasonable price".

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Middleby Has Lots Of "Guh", Not So Much "Arp"

Wednesday, January 15, 2014

The Motley Fool: Linear Technology: Love the Story, But Not the Price

You can fill a lot of pages with what is right about Linear Technology (NASDAQ: LLTC  ) . Not only is Linear among the leaders in the analog chip space, but it has a long history of excellent profitability. In fact, profitability is so important to the company that it let go of Apple's business when the margins no longer met management's standards.

Looking ahead, there's real growth potential for Linear in the industrial and auto markets in the coming years. Linear isn't the only company prioritizing these markets, as ON Semiconductor Analog Devices, and Texas Instruments are there too, but the potential of grabbing a larger share of auto OEM content and leveraging the Dust acquisition in factory automation is compelling. Alas, the price is not so compelling and investors need to really be sure that Linear is going to continue topping estimates for the stock to work at this price level.
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Linear Technology: Love the Story, But Not the Price

Seeking Alpha: Tekmira Rides A Big Day In RNAi

It was only the day after Christmas when I mentioned that Tekmira (TKMR) was a name that investors should think about investigating as a potentially cheaper play on RNA interference (RNAi) than better-known representatives of the class like Alnylam Pharmaceuticals (ALNY) and Isis Pharmaceuticals (ISIS). The stock had done pretty well since then (up about 20% in two weeks), but news of a deal with Monsanto (MON) gave another boost to the shares.

Now I'm starting to wonder if things are getting a little too crazy in RNAi-land. Alnylam was up very strongly on news of its partnership with Sanofi (SNY) and Tekmira too was up more than one-third in the peak of excitement over the Monsanto deal. Don't get me wrong, I think the Monsanto agreement is a nice feather in the company's cap and something that could become meaningful in a couple of years. I just think it's a little bold for the Street to factor in 50% of the deal value as more or less a given.

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Tekmira Rides A Big Day In RNAi

Seeking Alpha: Higher Costs And Differentials Create A Second Chance In Triangle Petroleum

Investment writers will talk about buying good companies/stocks on dips or pullbacks, but often it seems that the fear that surrounds each particular pullback leads many investors to forget about buying then … only to chase the stock on the way back up. I mention this in the context of Triangle Petroleum (TPLM) as I believe higher expenses in the recent fiscal third quarter are more on the order of "growing pains", and I continue to believe this fast-growing Bakken driller has undervalued assets and opportunity.

I'm not a huge fan of EV/EBITDA as an evaluation metric for oil and gas companies, and particularly in cases like Triangle where the next twelve months' results really don't reflect the development potential. In any case, both EV/EBITDA and NAV suggest that these shares are undervalued and worth consideration today from more aggressive risk-tolerant investors.

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Higher Costs And Differentials Create A Second Chance In Triangle Petroleum

Seeking Alpha: FLY Leasing Looking To Shrink Its Performance Gap

Even though the market may not always make the finest distinctions, there are some meaningful differences between the various aircraft leasing companies. Avolon has the youngest large fleet out there, while Air Lease's (AL) large commitment book will send its average age down in the years to come. Elsewhere, AerCap (AER) has taken on a big commitment in the acquisition of ILFC from AIG (NYSE: AIG).

That brings me to FLY Leasing (FLY). This company has largely focused on sale/leaseback opportunities, and sports a fleet with a larger weighting towards Europe as well as a higher overall average fleet age. Due in part to lower asset utilization, FLY Leasing has trailed its peers in adjusted ROE and that would seem to explain why the shares generally trade at a discount to those peers. Although I don't expect the gap to vanish overnight, the underlying growth in air traffic and FLY Leasing's dividend yield make this a name worth a little extra attention.

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FLY Leasing Looking To Shrink Its Performance Gap

Seeking Alpha: Waiting For That Next Chance On Lincoln Electric

Welding specialist Lincoln Electric (LECO) has been a great investment for the long term, even with an ugly 2008/2009, as the company has reliably produced solid growth, margins, and returns on capital despite serving a cyclical, economically-sensitive end market. Management is far from content to rest on its laurels, and is already targeting growth opportunities in emerging markets and applications like automation.

Lincoln Electric has a habit of offering double-digit pullbacks, and these have generally been good opportunities to buy the stock. While I'm not a market timer, these shares don't leap out as cheap right now, and major welding rivals like Colfax (CFX) and Illinois Tool Works (ITW) are both talking of mediocre overall market conditions for 2014. I'd keep my eyes open for the possibility of getting these shares in the low $60s, though today's price isn't terrible on a long-term basis.

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Waiting For That Next Chance On Lincoln Electric

Seeking Alpha: Lexicon's Long Shot Getting Even Longer

It has been a frustrating ride for Lexicon Pharmaceuticals (LXRX) shareholders. Between never-ending (and so far completely fruitless) talk of a diabetes partnership just around the corner and clinical failures in ulcerative colitis and irritable bowel, there hasn't been much good news in a while outside of steadily strong data from 4211 (the diabetes drug).

Now matters get even dicier. Lexicon announced Monday that it was shuttering its early/development-stage R&D efforts to focus on maximizing the value of telotristat etiprate (carcinoid) and LX4211 (diabetes). With this, half of the workforce is being fired and the CEO will also be leaving. While management continues to repeat the mantra that it is talking to partners about the diabetes program, it's harder and harder to have faith in this company or its prospects.

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Lexicon's Long Shot Getting Even Longer

Tuesday, January 14, 2014

The Motley Fool: CIGNA Corporation's Diversification Should Deliver Above-Average Growth

Cigna (NYSE: CI  ) is an odd duck in the managed care world. Managed care is certainly about managing costs, but it is also about pricing risk; Cigna's approach appears to be avoiding risk when possible, as the company has the smallest risk-based premium business of the major managed care companies. Not unlike UnitedHealth (NYSE: UNH  ) , Cigna is looking to a diversified array of businesses, including international expansion, to help fuel growth. Also, very much unlike Aetna (NYSE: AET  ) , WellPoint (NYSE: WLP  ) , and Humana (NYSE: HUM  ) , Cigna has chosen to be quite cautious with its initial forays into the Obamacare exchanges.

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CIGNA Corporation's Diversification Should Deliver Above-Average Growth

Seeking Alpha: Atmel Looks To Maintain Its Momentum Post-CES

Microcontroller and touch specialist Atmel (ATML) had a bumpy 2013, but rode a solid wave of enthusiasm into the recent Consumer Electronics Show that has the stock up more than 10% year-to-date. I see some solid reasons to be optimistic about the company's efforts in touch, as well as its underappreciated MCU business. The pace and magnitude of gross margin improvements are significant unknowns, though, and there is ample competition in the touch space.

Atmel is not the cheapest chip stock out there, but progress with touch control and sensor attach rates will likely be well-rewarded by the market. Double-digit free cash flow growth can support a fair value in the $9.50 to $10 range, and although I can't make as strong of a valuation-based call here as I might like, I think the set up for 2014 is attractive.

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Atmel Looks To Maintain Its Momentum Post-CES

Seeking Alpha: The Story Is Working For AngioDynamics

Investors who had been waiting patiently for AngioDynamics (ANGO) to get sentiment turned around should be happy with the better-than-50% return over the past year. The company still has work to do in taking share back from large rivals like Bard (BCR), but I think the company is on the right track. It also doesn't hurt that the company is getting more serious about restructuring operations with an eye towards better margins.

Valuation is a trickier question. On a cash flow basis, it's hard to get there even if you assume Bard or Covidien-like (COV) free cash flow margins. The good news is that med-tech stocks are seldom ever limited by DCF-based valuations and if you assign what would otherwise be a low med-tech multiple of 2x next year's sales, the stock would still be less than 10% undervalued.

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The Story Is Working For AngioDynamics

Seeking Alpha: LipoScience Facing A Long, Hard Slog

Writing anything positive about LipoScience (LPDX) was a losing move in 2013, as the stock moved steadily down throughout the year. Making matters worse, it wasn't just a "the market doesn't get it" phenomenon as the company logged three straight quarters with revenue year-on-year revenue declines - something nobody wants to see from a company that is supposed to be in the early days of a major product launch.

I continue to believe there's still hope here, even if that hope has been pushed out a few years. Clinical studies are backing up the validity and utility of the LDL particle assessment approach and I believe that there is a strong argument to make here for LipoScience's NMR LipoProfile test being a valuable behavior-changing test. The problem is that it's going to take time for the company to sell payers and doctors on that value. The potential value in the shares is great, but so too is the risk and there are no guarantees that LipoScience will make it to that critical inflection point where revenues and profits begin to flow into the company.

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LipoScience Facing A Long, Hard Slog

Seeking Alpha: Cyclacel Still Steeped In Doubt

Around five months ago, I thought Cyclacel Pharmaceuticals (CYCC) looked like an interesting speculative biotech play, as the market seemed to be hugely pessimistic on a drug (sapacitabine) that had shown encouraging evidence of efficacy in a seriously under-treated patient population. Since that report (and two by Seeking Alpha contributor Scrying Biotech), the shares are up about 50% and I would argue that these shares are still an interesting speculation for the risk-seeking biotech investor.

To be very clear, I'm still not unreservedly bullish on these shares. I think bears will remain fixated on the risks represented by running a Phase III trial with an unapproved drug as a control, not to mention the more typical risk that the drug doesn't work. Likewise, there are risks of competitive products from other oncology companies including Celgene (CELG) and Sunesis (SNSS). But even with what I consider to be conservative assumptions, it would seem that the shares are undervalued and worth a look for very aggressive biotech investors.

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Cyclacel Still Steeped In Doubt