Monday, March 31, 2014

The Motley Fool: What You Need to Know About the Agilent Technologies Split

There is no shortage of data, analysis, and opinion out there about the virtues (or lack thereof) of spinoffs and corporate splits. They don't always work, but I do believe that Agilent (NYSE: A  ) will be one of those companies that benefits, as there really never were meaningful synergies or counter-cyclical offsets between the test and measurement operations and the life science tools and diagnostics operations. Agilent still looks a little undervalued today and even with the added cost burden of the split, the life science and diagnostic operations in particular look well worth following.

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What You Need to Know About the Agilent Technologies Split

Seeking Alpha: Low Visibility Forces A Big Reset At Itron

Smart metering company Itron (ITRI) is making it harder and harder to justify sticking one's neck out in the hopes of a turnaround. The company is an overall share leader in utility meters, but deployments haven't lived up to expectation and the company's electricity meter margins are pretty bleak. The sell-side has definitely turned on this name, slashing its revenue growth expectations by about half over the last six months. With so much skepticism, a few good quarters would likely lead to a big move in the stock, but I'm not sure there are any particular reasons to expect that any time soon.

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Low Visibility Forces A Big Reset At Itron

Saturday, March 29, 2014

Seeking Alpha: Calpine Offers Some Upside To More Realistic Power Pricing

The regional markets for electricity in the U.S. are more messed up than many readers probably realize. Although the power stays on, the incentives and pricing structures have led to capacity imbalances and the prospects for more problems down the line. That's a good news / bad news situation for an independent producer like Calpine (CPN) - the good news is that this company's very efficient gas-fired generation fleet can generate attractive cash flows when pricing gets better, but the bad news is that there is little visibility on those price improvements and regulators keep trying to postpone the day of reckoning.

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Calpine Offers Some Upside To More Realistic Power Pricing

Seeking Alpha: Marvell Shares May Not Be Done Yet

The last few months have been kind to many chip stocks, with Maxim (MXIM), Marvell (MRVL), and Nvidia (NVDA) all logging double-digit returns. Marvell's run actually goes quite a bit further back, as the shares have more than doubled from their late 2012 lows. As Marvell has grown share in the hard drive controller space and announced LTE wins in China, investors have returned to the shares despite worries about a looming patent infringement award and the prospects of competing with Qualcomm (QCOM).

The sell-side seems to be getting more cautious about suppliers to the high-end smartphone market, but that's not really Marvell's core market. Although I own and prefer Broadcom (BRCM), Marvell may be undervalued enough to be worth a closer look even after this long run. Most chip stocks are bought to be sold, though, so investors shouldn't assume that this is a buy-and-forget opportunity.

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Marvell Shares May Not Be Done Yet

Seeking Alpha: Can Turnaround Efforts Put Farmer Brothers' Problems In The Past?

Right off the bat, I think it's important to note that Farmer Brothers (FARM) is riskier than average. There was an accounting restatement, the founding family has significant involvement in the firm (and not always for the best), and the company's financials do not impress whether you look at EPS, free cash flow, or book value. Fellow Seeking Alpha contributor Richard Pearson did a very thorough job of covering many of the problems of Farmer Brothers back in January ("Trouble Is Brewing At Farmer Brothers Coffee"), and though I don't agree with every point he made, I'd still suggest investors read it carefully as background material.

I am not as bearish as Mr. Pearson, but I would hardly call myself a strong bull on these shares. Reducing SKUs, improving inventory management, and more closely monitoring individual route/customer profitability should help margins. Unfortunately, a large part of this business is basically a low-margin distribution operation with few obvious competitive advantages over companies like Sysco (SYY) and with a heavy reliance upon small independent foodservice operators. Excluding the company's pension and workers comp liabilities, or offsetting them with its real estate value, the shares could trade to the mid-$20's, but this is one of those situations where I have to wonder if the hassles and risks are worth the potential rewards.

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Can Turnaround Efforts Put Farmer Brothers' Problems In The Past?

Seeking Alpha: Maxim Has Room To Run A Little Further, But Long-Term Concerns Remain

The market is telegraphing quite a bit of optimism about the chip sector for the start of 2014. Better demand from industrial and auto customers ought to help, as should a comms market driven by China's 4G rollout. As Maxim (MXIM) has exposure to all of those markets, this could be a good first half of the year for this analog chip company and the company's valuation looks a little low relative to its peer group. This may be more of a date than a long-term commitment, though, as the company's outsized exposure to Samsung and high-end smartphones are still causes for concern.

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Maxim Has Room To Run A Little Further, But Long-Term Concerns Remain

Friday, March 28, 2014

The Motley Fool: Exelixis Inc's Comet Fails To Dazzle

Astronomers have grown very cautious over the years about predicting which comets will brighten the night skies, as all too many have failed to live up to expectation. Small biotech Exelixis'  (NASDAQ: EXEL  ) own comet, the COMET-1 study of cabozantinib in metastatic castration-resistant prostate cancer, likewise has failed to live up to the most optimistic hopes. Although the stock's 25% drop on Wednesday may seem like an overreaction, the reality is that the company badly needed a winner and the absence of an early halt due to efficacy suggests that the company could face a tough battle in getting market share in the prostate cancer space.

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Exelixis Inc's Comet Fails To Dazzle

Seeking Alpha: Patience Will Pay With Brookfield Infrastructure

Brookfield Infrastructure Partners L.P. (BIP) is not for the investor looking for the quick three-bagger, nor the investor who wants a lot of flashy activity. What Brookfield Infrastructure is about is the patient allocation and investment of capital into protected businesses at prices that allow for superior long-term returns. There's a very large global base of potential assets out there, and I would look for 8% to 10% long-term annual returns from this level.

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Patience Will Pay With Brookfield Infrastructure

Seeking Alpha: Millicom Needs To Improve Margins To Unlock Value

The glory days of wireless service growth appear to be over. Most markets have at least three competing companies, and even those few remaining virgin markets have been demanding expensive concessions from operators. In the case of Millicom (OTCPK:MIICF), then, the question is whether or not the company can use better margins as a driver of shareholder value. Though the company has the opportunity to grow its cable and multi-play services in Latin America and benefit from underpenetration in Africa, management will likely find it easier to deliver incremental growth through cost containment.

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Millicom Needs To Improve Margins To Unlock Value

Seeking Alpha: Is The Medifast Model Built To Last?

When I last wrote about Medifast (MED) ("Medifast May Be The Best House On A Scary Street"), I thought that the shares certainly looked cheap, but that the risks of the weight loss industry and the company's model made it a less desirable choice. Since then, the shares are up about 13% even with two quarterly misses on revenue and more weakness than expected from weather and a challenging consumer retail environment.

As the shares have risen but the business really has not improved all that much, I find less value in the stock today. I may well be too bearish on the company's plans to franchise its Weight Control Centers, but I don't like the apparent sensitivity of revenue to promotional spending. Medifast does not seem too expensive on standard valuation metrics, but I just don't see enough momentum in the business to be all that excited by the potential.

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Is The Medifast Model Built To Last?

Thursday, March 27, 2014

The Motley Fool: Is Teva Pharmaceutical Industries Ltd Turning a Corner?

Once a darling of the health care space (and a frequent member of "buy and hold forever" lists), Teva Pharmaceuticals (NYSE: TEVA  ) spent about three and a half years in the market's doghouse. Investors bailed out due to worries about competition in the company's lucrative MS franchise, the perception of a dwindling pipeline for major generics, and turmoil in executive leadership. Now it looks as though the company has shored up its MS franchise, rejuvenated its R&D efforts, and become more serious about driving better value in/from the business.

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Is Teva Pharmaceutical Industries Ltd Turning a Corner?

The Motley Fool: Will Baxter International Inc's Split Unlock Shareholder Value?

If a strategy has worked before, try it again. Baxter (NYSE: BAX  ) has never been shy about identifying businesses that lie outside its core operating focus and being willing to set them free. Edwards Lifesciences, Caremark, and Allegiance Healthcare (now part of Cardinal Health) were all once under the Baxter umbrella, and arguably did better on their own than they would have as parts of Baxter.

Now the company is doing it again, choosing to spin off its biopharmaceuticals business as an independent publicly traded company. Investors cheered the move, as it does remove some issues that were clouding the value of the company's other operations.

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Will Baxter International Inc's Split Unlock Shareholder Value?

Seeking Alpha: Francesca's Floundering, But The Model Can Still Work

The list of disappointing specialty retailers is getting longer, but Francesca's (FRAN) has really gotten on the bad side of Wall Street with a series of weak quarters. Some of the more bearish analysts are claiming that Francesca's model is fundamentally broken, and that the company's differentiated store concept just doesn't work.

With seven straight quarters of weakening sequential comps, not to mention weak merchandise margins and inventories that go against the supposed virtues of the model, it's difficult to say that the bears don't have a point. Even so, I believe it is hard to fairly judge any retail concept when miserable weather is shutting stores and keeping shoppers at home. I'd also point out that even in a disappointing year, Francesca's FCF generation was better than many retailers. If management can turn this around and resume a path to mid-teens long-term FCF growth, there is enough upside here to be worth a second look but there are many beaten-down retailers to choose from today.

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Francesca's Floundering, But The Model Can Still Work

Seeking Alpha: CapitaLand's Valuation Looks Too Low

Even though CapitaLand (OTCPK:CLLDY) (CATL.SI) has established a reputation for itself as a quality property developer in Singapore and China, investors seem to be more scared of the near-term risks in Singapore and China than attracted to the long-term potential. Trading well below its average and median price/book and price/RNAV ratios, investors seem to be incorporating pretty pessimistic expectations for the business both in 2014 and beyond. Readers considering these shares today need to appreciate the risks of swimming against the tide, but patience could pay off given the company's leverage to China's growth and management's commitment to streamline and improve operations.

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CapitaLand's Valuation Looks Too Low

Seeking Alpha: For SL Green Realty, A Rich Premium Is Richly Deserved

It's probably not accurate to say that SL Green Realty (SLG) is a universally liked office REIT, but it does seem to be the case that the objections raised by sell-side analysts are more often about value and market/concentration risk as opposed to management's plans or performance. I won't argue that SL Green is cheap right now, but the company does offer some upside to ongoing improvements in the NYC office market and from its investment portfolio.

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For SL Green Realty, A Rich Premium Is Richly Deserved

Seeking Alpha: Gordmans Stores' Merchandising Problems Linger

Discount retailer Gordmans Stores (GMAN) has been a falling knife since the fall of 2013, as the company has exacerbated a weak underlying retailing environment with poor merchandising decisions that have hit same-store sales hard and depressed margins. Although Gordmans' results weren't out of line with expectations for the quarter, they were still weak and the company announced that the CEO had elected to retire.

Gordmans Stores may benefit from a new vision or voice at the top, as the company's robust store growth of recent years is not producing compelling comp-growth. The good news here is that even in a tough quarter the company was still profitable and it does not take particularly aggressive model assumptions to suggest value in the shares. This is a speculative call, and the sell-side has slashed its price targets by almost half in the last four months, but simply stabilizing the comps could a make a significant difference.

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Gordmans Stores' Merchandising Problems Linger

Wednesday, March 26, 2014

The Motley Fool: Will Shire PLC Build Or Buy Its Future?

The ideal in the biotech and pharma world may be for a company to develop a strong internal R&D engine that regularly churns out potential blockbuster compounds, but the reality is that most companies have to turn to partnerships and acquisitions to manage risk and maintain growth. Shire (NASDAQ: SHPG  ) built itself into a significant biotech/pharma company on the basis of strong internal CNS and rare disease R&D efforts, but has more recently turned to M&A to improve its prospects. With Shire likely to generate considerable cash flow in the coming years, the question stands as to whether investors would be better-served with additional M&A transactions or a reinvestment into its own internal R&D capabilities.

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Will Shire PLC Build Or Buy Its Future?

Seeking Alpha: HD Supply Seeing A Turn In Non-Residential Construction

It may yet be early for all-clear on HD Supply (HDS), as "green shoots" could easily get trampled, but the company does seem to have its guidance dialed in better and underlying results are looking better. There's still some comp-group noise that has me questioning the sell-side's apparent love for this stock, but the valuation and opportunity seem in reasonable alignment these days.

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HD Supply Seeing A Turn In Non-Residential Construction

Seeking Alpha: McCormick Spanks The Skeptics, But Not Exactly A Bargain

Spice, seasoning, and packaged food giant McCormick (MKC) has long enjoyed a privileged position in the food sector, as investors have been willing to pay a premium for shares in a company that holds uncommonly high market share and ups its dividend like clockwork. The shares were caught in the downdraft that saw other food stocks trailing the S&P 500 after mid-2013, but took an even steeper move down when management handed out weak 2014 guidance at the end of January.

Analysts suddenly started worrying about valuation on stock where valuation really hadn't mattered before, but then first quarter earnings came in higher than expected and sent the shares up more than 5%. McCormick is still expensive, but bulls can build a credible argument that the company's consistent double-digit ROICs and dividend hikes merit a much lower discount rate and that the shares are still a worthwhile holding for long-term investors.

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McCormick Spanks The Skeptics, But Not Exactly A Bargain

Seeking Alpha: Neogen Priced Like The Excellent Company It Is

Following Neogen (NEOG) is frustrating, as there really isn't all that much to say from quarter to quarter. Neogen continues to acquire attractive niche businesses to augment its revenue and continues to build an appealing food safety business that goes from the farm to the factory. Neogen also continues to look shockingly expensive or, at a minimum, incorporates demanding expectations that few companies could hope to attain.

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Neogen Priced Like The Excellent Company It Is

Seeking Alpha: Gerdau's Correction Seems Overdone

Numerous Brazilian industrial companies, not to mention the Bovespa as a whole, have gotten hit hard since the start of 2014. The prior year was a volatile one as investors became more concerned about slowing growth in Brazil and difficult choices for the government regarding inflation, fiscal stimulus, and infrastructure inadequacies. Weak rainfall has exacerbated the problem, raising the prospect of electricity rationing that could lead to a meaningful decline in industrial output.

The Brazilian steel sector has gotten hit hard, with Gerdau (GGB), CSN (SID), and Usiminas (OTC:USNMY) down 25% to 40% before a recent bounce. Electricity rationing would be bad news for an already-stressed Brazilian economy, but there is more to Gerdau than just one year of performance in Brazil. As non-residential construction picks up in the U.S., Gerdau should see shipments, utilization, and margins improve, and there is at least the possibility that investors have overreacted to the potential downside in Brazil. Assuming that Gerdau deserves a multiple in line with the global average for steel, the shares look about 20% undervalued today.

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Gerdau's Correction Seems Overdone

Seeking Alpha: Fear Driving The Braskem Trading And Obscuring The Value

Chemical stocks can be volatile enough in their own right, as they are sensitive to the prices of key inputs like oil (naphtha) and natural gas and demand is typically tied to economic growth. Braskem (BAK) seems to offer additional risks, as investors worry about the impact of electricity rationing on the Brazilian economy and the company's competitiveness with gas-based cracking capacity.

Questions about the health of the Brazilian economy are valid, as the company has about two-thirds share in Brazil and over half of its sales go into this economy. Even so, the market appears to be overdoing it and the discount to other chemical companies seems to wide to ignore. I believe that fair value for Braskem starts around $20 today, making this is a notably undervalued play on Brazil's underlying economic growth as well as operational improvements that could improve the company's product portfolio and cost structure in the coming years.

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Fear Driving The Braskem Trading And Obscuring The Value

Tuesday, March 25, 2014

The Motley Fool: Is This Overlooked Stock Primed for More Growth?

Blood products really don't get that much attention in the health care space, but it's a market worth more than $10 billion a year excluding hemophilia products and growing around 6% to 8% a year as indications and patient identification expand. Baxter (NYSE: BAX  ) , one of the largest players in the market, is reasonably well-known to investors, but Grifols (NASDAQ: GRFS  ) is more obscure despite being one of the three largest players in the world and the largest in the U.S. As Grifols looks to leverage good underlying market growth through more efficient operations, the growth potential looks impressive.

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Is This Overlooked Stock Primed for More Growth?

The Motley Fool: Is Incyte Corporation Overvalued?

One of the secrets to successful stockpicking in the biotech sector is adequately valuing and pricing the risk/reward profile of a company's pipeline. Almost every biotech looks cheap if an investor just assumes that everything will work as planned, but the reality is that only a small percentage of pipeline prospects live up to their potential. In the case of Incyte (NASDAQ: INCY  ) , this company does have a solid product in Jakafi, but it seems as though the Street is already factoring in a fair bit of success for the company's early stage pipeline.

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Is Incyte Corporation Overvalued?

Seeking Alpha: Fears About Argentina And Mexico Have Ternium Looking Cheap

Argentina is a mess right now, and the companies with ties to that country are paying the price - some deserved, some not so much. I would place Ternium (TX) in the "not so much" camp, as although the company does generate a substantial amount of EBITDA in Argentina, the business isn't as vulnerable as valuation would suggest. More to the point, this is a well-run and growing Mexico-based steel company with some measure of influence over its input costs.

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Fears About Argentina And Mexico Have Ternium Looking Cheap

Seeking Alpha: Plum Creek Timber Biding Time

The wait for Plum Creek Timber's (PCL) realization of value from its timber assets drags on. These shares bounced up for a little while after my Top Idea write-up in September 2013 ("Patient Investors Get A Crack At Plum Creek Timber"), but declined sharply on the announcement of the acquisition of MeadWestvaco's (MWV) timberland and the concomitant equity offering. Matters were helped little when the company followed that up in January of 2014 with a weak guide for 2014 EPS on lower land sales.

Plum Creek shares have long traded at premiums to Weyerhaeuser (WY) and Rayonier (RYN) (at least on an EBITDA basis), but investors seem to be tiring of the wait for a sustained recovery in housing construction and demand for sawlogs in the southern U.S. For what small consolation it offers, it doesn't appear that Plum Creek's issues are all company-centric, as Rayonier and Potlatch (PCH) have declined by similar amounts since September and Weyerhaeuser is also in the red for that period.

I remain bullish on the long-term value of these shares, but I realize that a "be patient, it gets better" call is not the most compelling call to make, particularly with the shares trading around 19x 2014 EBITDA. A clean 2014, with higher harvest volumes and better prices, would be welcome, but patient investors can still find a lot of value in the company's substantial timberland holdings, real estate development potential, and possible biomass energy play.

The complete article is here at Seeking Alpha:
Plum Creek Timber Biding Time

Seeking Alpha: IPG Photonics Continuing To Expand Its Fiber Laser Opportunity

In the six months since I wrote on IPG Photonics (IPGP) as a Top Idea ("IPG Photonics Looking To Innovation And Integration") the shares have registered a solid 26% gain. In that time, whatever changes have come have largely been to IPG Photonics' credit - the company maintains a significant lead over the likes of Rofin-Sinar (RSTI) and the company's aggressive product development efforts continue to expand the company's addressable market and long-term revenue potential.

I believe IPG Photonics remains a quality name in this space, but the shares are not as obviously cheap as they once were. I still expect long-term revenue growth in the neighborhood of 12% and I am still willing to project long-term FCF margins in the low 20%'s. There is upside to those numbers if the company's addressable markets (and/or share within them) expand even faster, but these shares look more like a "bullish hold" than a strong buy today.

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IPG Photonics Continuing To Expand Its Fiber Laser Opportunity

Seeking Alpha: Everest Re Looks To Surmount A More Competitive Environment

The talk in insurance and reinsurance these days is almost always about pricing. A lack of major catastrophes, higher retention rates from insurance companies, and an influx of new capital has led to a lot of money chasing the business that's out there, leading to double-digit declines in prices. Everest Re (RE) seemed to withstand that in 2013, in part through new products and expanding outside peak areas.

Investors seem to doubt that the company will be able to keep up double-digit premium growth and double-digit returns on equity. It is probably true that the rate of premium increases in areas like workers comp has to slow, and likewise true that pricing will remain soft in reinsurance without an event that destroys capital. Even so, the company's underwriting history is pretty good and a long-term ROE of 11% suggests a fair value close to $175, or roughly 15% above today's price.

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Everest Re Looks To Surmount A More Competitive Environment

Seeking Alpha: As Power Markets Improve, NRG Energy Can Better Leverage Its Assets

There is a chance that independent power producer NRG Energy (NRG) can offer investors the best of both worlds. NRG's management quality has served it well through tough market periods, as the company has executed good deals to improve its market positioning and capital structure. Now, it may be approaching a period where its operating assets can outperform on the back of higher gas prices and tight capacity in key markets like Texas.

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As Power Markets Improve, NRG Energy Can Better Leverage Its Assets

Monday, March 24, 2014

The Motley Fool: Cancer Vaccines: Doomed to Fail?

Some ideas sound good in theory but just never manage to work out in real-world experience, and cancer vaccines are on their way to that destination. Following the failures of Vical and Merck KGaA with their respective cancer vaccines, GlaxoSmithKline (NYSE: GSK  ) has announced the second pivotal trial failure for its MAGE-A3 cancer vaccine. Glaxo will continue to try to identify patient sub-populations in both melanoma and lung cancer that could/do respond to a clinically significant degree, but the odds are good that this high-risk/high-reward program is on its last legs.

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Cancer Vaccines: Doomed to Fail?

Seeking Alpha: Huntington Ingalls Needs A New Driver

Since it spun out from Northrop Grumman (NOC), Huntington Ingalls (HII) has done pretty well. Shares of this pure-play Navy shipbuilder have risen about 150% in its time as a publicly-traded company, handily beating other defense and shipbuilding companies like General Dynamics (GD) and Lockheed Martin (LMT).

At least some of Huntington Ingalls' performance can be tied to its progress in improving margins, moving through an order book that included some very low-margin business and putting its 9% margin targets very much into play. The question investors should probably ask now is how the company continues to improve its results. Projecting defense spending down the line is tricky, but major projects like carriers, submarines, and destroyers could fare better. I like the prospects for Huntington Ingalls continuing to improve its profitability and free cash flow generation, but the shares seem to already reflect continuing improvement here.

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Huntington Ingalls Needs A New Driver

Sunday, March 23, 2014

Seeking Alpha: Sentiment May Be Gaining On Allison Transmission

I was bullish on Allison Transmission (ALSN) in early October ("Allison Transmission A Stand-Out In Multiple Ways"), and I cannot complain about the 18% move since then as it has outpaced the S&P 500 and other truck component companies like Cummins (CMI) and Dana (DAN). Management has recently confirmed that improving North American truck orders are starting to flow through to their order books and that the fracking market is coming back to life.

I still really like the long-term idea of Allison as a share-gainer in the commercial vehicle transmission market, but I am a little concerned that analyst and investor enthusiasm is running ahead of the underlying vehicle markets. A 12x EBITDA multiple only gets the stock to about $30 and that's a pretty strong multiple relative to the company's likely growth rate. There is certainly a chance that the recoveries in Allison's markets will lead to outperformance and/or that the company will gain share in OUS markets faster than expected, but I don't see Allison as quite the bargain it was about six months ago.

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Sentiment May Be Gaining On Allison Transmission

Seeking Alpha: Isn't Torchmark Supposed To Be Defensive?

Life and supplemental health insurance company Torchmark (TMK) is unusual in a lot of ways. Not only does the company have a pretty exceptional history of returns on equity, those returns have been remarkably consistent. The company's underwriting risk is low and not many companies can compete in its core life insurance markets. What's perhaps even stranger is that this supposedly defensive insurance stock is doing quite well in a market where conditions are seen as improving for the sector.

Even though Torchmark would normally have less to gain from the improving economy and rising rates, these shares may yet be undervalued. Torchmark's different model makes P/TBV valuation almost useless, but the shares look surprisingly cheap on the basis of an excess return model. I don't normally think to look at the 52-week high list for bargains, but Torchmark could still offer some meaningful upside from today's level.

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Isn't Torchmark Supposed To Be Defensive?

Seeking Alpha: TIBCO Beats, But There's A Lot Left To Prove

Investors waiting for the "all clear" on TIBCO (TIBX) continue to get mixed messages. The company certainly had one of the strongest quarters for infrastructure and billings in many quarters, but the easy year-ago comp mutes some of the enthusiasm, particularly when it is clear that the key analytics business Spotfire continues to decelerate. A recent change in executive incentives could mark a shift toward a more margin-centric approach, but it remains to be seen whether growth in areas like analytics, ESB, and cloud can offset what looks like a slowing core business.

Talking about value is tricky in tech, as investors so often reward growth irrespective of value. Provided that TIBCO can improve margins, a high single-digit FCF growth rate seems plausible and both a DCF and EV/rev approach suggest these shares remain undervalued.

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TIBCO Beats, But There's A Lot Left To Prove

Seeking Alpha: Macro Events Buffeting Adecoagro

Farming is hard enough without the added issues of questionable government actions, but that's the reality of the operating environment for Adecoagro (AGRO). This large South American sugar, ethanol, farming, and land company has had to deal with the "known unknowns" of uncertainties in sugar, ethanol, crop, and land prices, but also the ongoing problems in the Argentine economy, the risk of larger harvests in North America, and now the geopolitical issues between Ukraine and Russia.

Adecoagro remains a patience-testing play on the realization of the underlying value of its land holdings and its long-term expansion plans in sugarcane processing and ethanol production. Today's valuation continues to look well short of that implied by recent land transactions and Adecoagro looks like a good value option for investors who can sit patiently through the ups and downs.

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Macro Events Buffeting Adecoagro

Friday, March 21, 2014

Seeking Alpha: Can Investors Leverage Leftover Skepticism On Genworth To Their Advantage?

A few years ago investors were spoiled for choice when it came to insurance companies. Many of these companies have since repaired their balance sheets and returned to posting decent if not good returns. The markets have responded, leaving investors considering names like MetLife (MET) and Arch Capital (ACGL) in a position where they are looking at longer timelines for meaningful market-beating returns.

Genworth (GNW) is a different story. The stock has given investors a wild ride, but the last couple of years have been pretty solid. Even with new management and clear progress in improving its businesses, there's still some lingering skepticism regarding Genworth and the company's ability to return to high single-digit ROEs. Genworth has chosen to stay in businesses that many other insurance companies have left behind, but if Genworth's long-term ROE hits 8% or 9%, there's still upside for a stock at its highest point in four years.

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Can Investors Leverage Leftover Skepticism On Genworth To Their Advantage?

Seeking Alpha: The Market Seems To Believe Veolia Has Turned The Corner

France-based global utility Veolia Environnement (VE) has given investors a pretty wild ride. The company's excessive ambition for growth stoked a lot of bullish sentiment early in the decade, but the combination of Europe's deep recession and sloppy execution lead to disappointing margins, cash flows, and investors.

Veolia management started taking turnaround efforts seriously in 2013, pushing ahead with cost cuts, asset sales, and a restructuring of the company's operating priorities. The company still has a lot to do if its going to produce margins on par with its close peer Suez Environnement (OTCPK:SZEVY), let alone American comps like American States Water (AWR) or Waste Management (WM), but the better than 100% trough-to-peak move tells me that a lot of investors buy the self-improvement story and/or want to be positioned in basic services as Europe's economy turns around.

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The Market Seems To Believe Veolia Has Turned The Corner

Seeking Alpha: Pacific Biosciences Looking To Carve Out Its Niche

High-end sequencing company Pacific Biosciences (PACB) still has much left to prove. The company has done a good job of improving system performance and reliability, but the 800lb gorilla in the sequencing space, Illumina (ILMN), books more orders for both its HiSeq and MiSeq platforms in a quarter than PacBio has installed in the field. PacBio's alliance with Roche (OTCQX:RHHBY) provided a significant boost to the stock, but it has yet to be established that the company can develop systems and tests that will work in the clinical diagnostics setting.

I continue to believe that PacBio has a worthwhile future, as I believe the company can address a multibillion-dollar opportunity by targeting applications where Illumina's technology does not work as well. Microbial and plant genetics, so-called "platinum genomes", and epigenetics are all areas where PacBio's technology can play a long-term role. This is by no means a stock for the nervous or impatient investor, but I believe opportunity remains even after the large move in 2013.

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Pacific Biosciences Looking To Carve Out Its Niche

Seeking Alpha: CEMIG Walking A Fine Line In A Challenging Market

Older investors can likely remember a time when those who wanted to invest in emerging markets had few choices outside of telecom, bank, and utility companies. Nowadays there is a much larger menu of choices and sectors like utilities have had to do deal with the same sort of regulatory and growth issues that affect their developed market peers.

In the case of CEMIG (or "Cemig") (CIG), Brazil's second-largest utility has the advantage of a sizable distribution and transmission business to offset risks in the generation business, but the company is looking at the loss of sizable generating concessions and a much more aggressive regulatory environment. It also does not help matters that Brazil's electricity sector appears to be moving toward oversupply and that management is willing to allocate capital to projects with IRRs only basically in line with the company's cost of capital.

That said, the market's valuation of Cemig already reflects a lot of these challenges. Moreover, even if the future isn't likely to be as profitable as the past, this is a company with a good history of free cash flow generation and returns on capital relative to its sector. Management seems committed to paying a healthy dividend and these shares don't look very expensive today.

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CEMIG Walking A Fine Line In A Challenging Market

Thursday, March 20, 2014

The Motley Fool: Could Smith & Nephew Plc Be a Good Value?

Procedures volumes have started picking up and pricing pushbacks from payers has eased, leading many stocks in the orthopedics space to log good runs. Smith & Nephew plc (NYSE: SNN  ) has done better than peers/rivals like Stryker (NYSE: SYK  ) and Zimmer over the last twelve months, but oddly enough it may yet offer more value. The company's knee business appears to be regaining some share and the acquisition of Arthrocare (NASDAQ: ARTC  ) should be a highly synergistic opportunity to grow in a space that offers better prospects than major joint reconstruction.

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Could Smith & Nephew Plc Be a Good Value?

The Motley Fool: FEMSA Hopes to Put a Tough Year Behind It

The past year was not a particularly strong one in the consumer sectors of Latin American countries like Mexico and Brazil, and that was not good news for FEMSA (NYSE: FMX  ) . One of Mexico's largest corporations, FEMSA has a significant presence in the retail/consumer world with its stake in Coca-Cola FEMSA (NYSE: KOF  ) , a large Latin American Coca-Cola bottler, a 20% stake in brewer Heineken, and ownership of Oxxo, the third-largest retailer in Mexico.

The challenge for investors is weighing out the short-term challenges presented by a possibly improving (but not yet strong) Mexican economy, new taxes, economic problems in Argentina and Venezuela, and competition against the long-term opportunity of growing Coca-Cola FEMSA and leveraging the retail operations into new areas like pharmacies and fast food that are still underpenetrated in Mexico.

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FEMSA Hopes to Put a Tough Year Behind It

The Motley Fool: Can Regeneron Keep Churning Out Blockbusters?

Developing a great drug is hard enough, but developing an R&D platform that reliably churns out new high-quality experimental compounds is a rare feat in biotech. That Regeneron (NASDAQ: REGN  ) has managed to create one of the strongest platforms in antibodies is both a credit to its leadership and IP, as well as a strong generator of long-term value for shareholders. Regeneron's shares do not look particularly cheap today, but upside from products like Eylea and alirocumab and de-risking of the pipeline give shareholders some reason to stay engaged.

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Can Regeneron Keep Churning Out Blockbusters?

Seeking Alpha: F5 Networks Basking In Some Rebound Love

In a lot of ways, application and network traffic manager F5 (FFIV) is a quintessential tech stock. This company built a great little island for itself in Application Delivery Controllers (or ADCs), but has had some meaningful ups and downs in building/linking new, equally-valuable islands. F5 has also seen wild swings in its share price as investors wax and wane on its growth prospects; when investors like F5, they really like it, and when they don't like it, they really don't like it.

The stretch from early 2012 to about mid-2013 was a rough one, as the share price plunged about 50% on fears that the ADC market was slowing (and perhaps permanently so), virtual ADCs and competition from Citrix (CTXS) were chewing up F5's business, and that new growth platforms like security and diameter signaling couldn't fill the breach. Then, investors got more bullish on F5's ADC prospects, as well as its overall vision to become a comprehensive player in network orchestration, application control, and load balancing, and the stock has regained a lot of that lost value.

What now? I think F5 is fundamentally undervalued, but this is also a stock where momentum/sentiment plays a powerful role. I don't think the shares have topped out just yet, but anybody buying today has to be pretty nimble and/or have a good sense of where the Street's mood is on the shares from month-to-month or week-to-week.

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F5 Networks Basking In Some Rebound Love

Seeking Alpha: Actuant Could Use A Boost To Growth

As conglomerates go, Actuant (ATU) is more diverse than most and while it is often one of the largest/leading companies in the sectors in which it competes, it can be challenging to corroborate the company's performance with its peer group. Be that as it may, performance has been a little iffy lately relative to sell-side expectations and the stock has been stuck in a relatively narrow band for the past year.

Actuant isn't lacking in ambition, as management intends to use organic/internal development and M&A to push toward a doubling of the business in five years. That may well be attainable, but the company's poor history of ROIC generation lends itself to questions like "growth at what cost?" I do believe that Actuant is undervalued today, and I like its hydraulic tools and bolt tightening businesses, but I'd want to see a better path for margins and returns on capital before thinking of it as a potential core holding.

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Actuant Could Use A Boost To Growth

Seeking Alpha: Stronger Organic Growth Has Investors Excited About Colfax

There are definitely some valid reasons to like Colfax (CFX). Not only is this industrial conglomerate explicitly looking to replicate much of the successful Danaher model, the company has the highest leverage to emerging markets of almost any peer and is likewise leveraged to industries like power generation and oil/gas/petrochemicals where capital expenditures should be strong for several years.

There is a point where enough's enough, though. Colfax shares seem to be pricing in FCF growth of close to 16% (including the recent acquisition of Victor Technologies) and trade at more than 14x 2014 EBITDA estimates. Even allowing that Colfax can be a revenue and profit growth leader in the industrial sector over the next few years, that seems like a steep price to pay.

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Stronger Organic Growth Has Investors Excited About Colfax

Seeking Alpha: Global Brass And Copper Needs Some Polish

The theme of a recovery in U.S. housing demand and construction (as well as non-residential construction) is hardly "new news", but it is still quite relevant to the prospects of Global Brass and Copper (BRSS), the largest converter of copper and brass products in the U.S.. Global Brass has not been public all that long, but the stock has not been able to hold on to initial optimism, as volume growth, capacity utilization and EBITDA generation have all been trending below the bullish predictions of sell-side coverage initiation pieces.

The demand outlook for Global Brass is a little muddled in my view. Large markets like autos and industrial machinery have already largely recovered and while housing/construction may start providing a tailwind, there's a headwind to consider from lower munitions sales. I'm also not terribly impressed with Global Brass's EBITDA margin relative to other fabricator/converter comps. Even so, and even with a discounted multiple, these shares do look undervalued today and could offer some meaningful upside if or when volume and leverage start to materialize.

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Global Brass And Copper Needs Some Polish

Wednesday, March 19, 2014

The Motley Fool: Vertex Pharmacueticals Inc Approaching a Huge Fork in the Road

Orphan drugs are hot these days, so when an investor finds a biotech focused on orphan drugs that appears to be undervalued, it certainly merits further investigation. In the case of Vertex (NASDAQ: VRTX  ) , it all comes down to risk and a major upcoming clinical data release -- If Phase III studies reveal success for a new combination therapy for cystic fibrosis, these shares could easily head to $100 (or higher). If the trials are declared failures, though, the downside could be $25 per share or higher.

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Vertex Pharmacueticals Inc Approaching a Huge Fork in the Road

Seeking Alpha: Like The Black Knight, Societe Generale Isn't Dead Yet

French-based multinational bank Societe Generale (OTCPK:SCGLY) definitely got some parts lopped off during the credit crisis and European recession, but the bank has since proven that reports of its demise (or perpetual irrelevancy) were greatly exaggerated. The company's performance in 2013 was by no means flawless, and the company has much still to do, but patient shareholders have been rewarded with a nearly 70% rise over the past year and a 90% rise over the past two years.

Relative to distressed brethren like Citigroup (C), Bank of America (BAC), Santander (SAN), and HSBC (HSBC), Societe Generale has the best two-year performance of the lot, with only Bank of America coming close to challenging SocGen's return. Looking ahead, there is still a credible argument that SocGen can do better and see further re-rating. The company's ROE goal of 10% does not seem out of line and can underpin a $14 fair value, while outperformance in areas like Russia could offer some scope for upside.

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Like The Black Knight, Societe Generale Isn't Dead Yet

Seeking Alpha: Lynas Can't Afford Further Delays

I thought Lynas (OTCQX:LYSDY) looked like an interesting, albeit very risky, mining story back in December of 2013 ("Weak Prices Have Lynas Fighting An Undertow"). While the shares did participate a bit in the early 2014 run in mining companies, it didn't last and one of my biggest concerns (further issues ramping up the processing facility) seems to be coming home to roost.

Although management believes it could reach a 11ktpa production run-rate (a level where cash flow breakeven seems probable) in June of 2014, this is a company that has built a reputation for missing deadlines and coming in short of their own goals. What's more, the shortfalls in ramping up production have created the need for additional funding, as cash on hand won't be enough to keep up with annual costs and a debt repayment due in September. These shares may still offer a rich reward given the potential or theoretical net asset value, but funding terms are not going to be generous and it is hard to ignore the ongoing declines in near-term EBITDA expectations.

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Lynas Can't Afford Further Delays

Seeking Alpha: Allana Potash In Better Shape, But Nobody Cares

You would think that a significant strategic alliance that meaningfully lowers the long-term execution and financing risk for a junior mining company would mean big things for the stock of the junior miner in question. Unfortunately, that is not the case with Allana Potash (OTCPK:ALLRF) (AAA.TO), as these shares have gone nowhere on a net basis since I first wrote on them in January ("Allana Potash Offers Substantial Potential Rewards For Significant Risk").

Allana still offers a very high level of risk, but also a high potential reward should its Dallol potash mine move into production and live up to expectations. While the strategic alliance is definitely dilutive to shareholders, reduced risk offsets some of that, leaving an attractive fair value estimate of around C$0.85.

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Allana Potash In Better Shape, But Nobody Cares

Seeking Alpha: Challenging End Markets Weighing On Global Power Equipment

Roughly a year ago, I looked into Global Power Equipment (GLPW) ("Global Power Equipment Is Either A Big Value Or A Trap") and came away thinking that although 2013 would be a challenging year, there was a good risk-reward profile overall. The performance since then has reflected that to some extent, as the shares are up about 15% since then, but have been relatively volatile.

Demand in the nuclear power service market has remained weak, and the company's efforts to build out its products/solutions business are going to take time to bear fruit. Long term, it makes sense to get involved in areas like pipelines, distributed generation, and LNG, but plenty of companies with ties to the natural gas/LNG equipment space (like Chart Industries (GTLS) and Dresser-Rand (DRC)) can attest to the challenging demand environment right now. Sluggish guidance doesn't help near-term prospects, but Global Power's shares still look interesting for patient investors wanting to be long on natural gas, LNG, and power gen infrastructure.

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Challenging End Markets Weighing On Global Power Equipment

Seeking Alpha: Gamesa Continues To Run On Its Second Wind

Spanish wind turbine manufacturer Gamesa (OTCPK:GCTAY) (GAM.MC) has continued to face quite a bit of skepticism from analysts regarding its turnaround prospects, but the company continues to execute on its turnaround plan. That plan has led to high single-digit order growth for 2013 and a return to double-digit growth in the fourth quarter, and the stock has continued to recover with the shares up about 250% over the past year and another 60% since my write-up in September ("The Street Still Doubts Gamesa Has A Business For The Long Term").

There is always a risk with turnaround stocks that investors will push their luck and hold on too long. To that end, Gamesa is not out of the woods. The company is still looking up at the global market shares held by Vestas (OTCPK:VWDRY), General Electric (GE), and Siemens (SI), and moving into the offshore market (where Siemens and Vestas hold more than 80% share) with Areva (OTCPK:ARVCY) could prove tantamount to a bunny jumping in a wood chipper. Should Gamesa manage mid-single digit revenue growth and additional margin improvements, these shares could have another 10% or so left in them before settling in to market-par return.

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Gamesa Continues To Run On Its Second Wind

Tuesday, March 18, 2014

The Motley Fool: Is Intercept Pharmaceuticals, Inc. Overvalued?

With a $9 billion market cap and a stock that has shot up 1,167% over the past twelve months, it is not too surprising that expectations are high for Intercept Pharmaceuticals (NASDAQ: ICPT  ) and investors are nervous about even the slightest hint of trouble in the clinical pipeline. To that end, it would seem that investors are more nervous about the prospect of a cardiovascular safety issue in the Phase II study of lead compound obeticholic acid (or OCA) than cheered by another strong trial outcome in primary biliary cirrhosis.

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Is Intercept Pharmaceuticals, Inc. Overvalued?

Seeking Alpha: Wabtec Remains A Frustrating Mix Of Quality, Opportunity, And Expectations

Locomotive and train car components manufacturer Wabtec (WAB) has missed revenue expectations for four straight quarters, but it hasn't done any harm to the sentiment on the stock. These shares are up more than 60% for the past year and over 100% over the past two years, as investors continue to play their enthusiasm for a rail infrastructure build-out in the U.S. and the potential for Wabtec to replicate its "components on almost every car" market share in North America, in Europe and Asia.

Wabtec also remains a frustrating company to evaluate from a valuation perspective. If Wabtec could hold 20% overseas market share by 2023 in those areas, where it has roughly 50% share in North America, a fair value above $100 is definitely reasonable. On the other hand, these shares already trade with significant near-term expectations, and it could take more than a decade to build significant share in markets like Russia or China.

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Wabtec Remains A Frustrating Mix Of Quality, Opportunity, And Expectations

Seeking Alpha: Arch Capital Seldom Looks Cheap, But Mortgage Insurance Should Spur Growth

I've never made any secrets of the respect I have for Arch Capital (ACGL) management. Many company executives talk about the importance of creating shareholder value and making decisions to maximize value, but it is my opinion that Arch Capital lives up to that to a much higher degree than most other companies. When the management sees attractive return-generating opportunities, they deploy capital. When management does not see those opportunities, they conserve and/or return capital.

Investors had a rare opportunity to acquire Arch Capital shares at attractive valuations, but only when it seemed like the U.S. financial system was melting down. Since then, the shares have regained their luster and their high-end multiples. I do believe that Arch Capital's foray into mortgage insurance will prove a good move, and quality companies have a knack for exceeding long-term expectations (and price targets), but the short-term opportunity is not to compelling.

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Arch Capital Seldom Looks Cheap, But Mortgage Insurance Should Spur Growth

Seeking Alpha: Hoya's Prospects Brightened By Life Care

As the computer and display-weighted technology businesses stabilize and the life care/health care businesses grow, Hoya's (OTCPK:HOCPY) prospects have improved. Sell-side analysts still seem to have relatively restrained revenue growth expectations, despite double-digit growth in life care today, significant untapped potential in emerging markets, and both a balance sheet and cash flow profile that could support acquisitions to drive further growth.

Valuation is a little more complicated. With the shares up almost 70% over the past year (the Tokyo-listed shares, that is), the valuation is not quite so compelling but I wouldn't say the shares are overvalued. Consistently solid returns on capital would argue for an attractive discount rate, and the sell-side may well be underestimating the company's ability to grow both sales and profits.

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Hoya's Prospects Brightened By Life Care

Monday, March 17, 2014

The Motley Fool: Will Pfizer Inc's Vaccine Strategy Pay Off?

Pfizer (NYSE: PFE  ) recently lost a battle to preserve its patent coverage on Celebrex, but it's not all bad news for this pharmaceutical giant. The company's Prevnar-13 pneumococcal vaccine is shaping up as a stronger-than-expected product, with comprehensive outcomes data potentially supporting much broader recommendations for use and a larger addressable market. Better still, it's not just Prevnar that could drive higher vaccine sales for Pfizer in the coming years.

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Will Pfizer Inc's Vaccine Strategy Pay Off?

Sunday, March 16, 2014

The Motley Fool: Is the Market Undervaluing Celgene?

Celgene (NASDAQ: CELG  ) admittedly does not leap off the page as a cheap stock, at least not with a cursory glance. The shares are up about 40% over the past year (and more than 100% over the past two years) and trade at more than nine times sales and 11 times book, not to mention more than 16 times forward earnings.

Look closer, though, as this oncology-focused bio/pharma not only has a deep early stage pipeline of oncology drugs, but meaningful label expansion opportunities for approved drugs. Celgene is also preparing to launch its first immunology drug and the Street's expectations are quite a bit lower than those of management. A patent challenge to the company's lead drug is definitely a serious matter, but the shares appear undervalued even amid an ongoing bull market in the health care space.

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Is the Market Undervaluing Celgene?

The Motley Fool: BRF SA Holds Impressive Long-Term Potential

Analysts and investors like to talk about "the next Apple" or "the next Microsoft," but they don't often talk about "the next Nestle (NASDAQOTH: NSRGY  ) ". That's a shame, as Brazil's BRF (NYSE: BRFS  ) , or Brasil Foods, has set that goal for itself; it has a long-term target of becoming a global packaged-foods leader with a particular focus on emerging markets. The path between here and there is not going to be smooth and setback-free, but BRF looks like a somewhat beaten-down name to consider in the emerging markets.

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BRF SA Holds Impressive Long-Term Potential

Seeking Alpha: Dresser-Rand Caught In A Move Toward More Capital Discipline

Whenever large energy companies like Exxon Mobil (XOM) start embracing the virtues of disciplined capital spending and managing for returns instead of growth, it's seldom good news for equipment providers. That may be oversimplifying the challenges that Dresser-Rand (DRC) is facing, but it looks as though delays in upstream projects are having a real impact on the business. This year may prove to be a year where large energy concerns "digest" what they already have in progress, but it is hard to call Dresser-Rand cheap, even if orders do start to pick up again later this year and into 2015.

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Dresser-Rand Caught In A Move Toward More Capital Discipline

Seeking Alpha: Weak Performance Continues To Plague Amedisys

If you can't beat 'em, give up. After several quarters where Amedisys (AMED) has missed analyst expectations, interim management has chosen to stop providing guidance for the timing being. Seeing as how the company needs to hire a new CEO (who likely will come in with a set of ideas about how to run/change the business) and is still in the midst of efforts to reduce costs and respond to reimbursement cuts, that's a reasonable move. Still, in the absence of information investors may choose to assume the worst.

It is difficult to feel all that cheerful or optimistic about this business. Costs per visit have been rising steadily, while revenue is pressured by reimbursement cuts and sluggish admissions. Amedisys is one of the largest operators in a fragmented industry likely to consolidate in response to ongoing reimbursement pressures, but a settlement with the government will stress the balance sheet and margins are very weak at present. The stock has been surprisingly strong for all of the company's travails, but I'd be hesitant to pay almost double the valuation (on a forward EV/EBITDA basis) for Amedisys over its peers even if this is a low period for the industry.

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Weak Performance Continues To Plague Amedisys

Thursday, March 13, 2014

Seeking Alpha: VeriFone Firmly Back In The Good Graces Of Growth Investors

Payment technology developer VeriFone (PAY) still has work to do in turning around actual reported growth numbers, but the market has fully re-embraced this stock as a growth story in the payments technology space. Rival Ingenico (OTCPK:INGIY) still appears to be growing faster and gaining share, but VeriFone seems to be getting its legs back underneath it and fixing the problems that hammered the company (and the stock) from early 2012 through mid-2013. Value investors are going to have a hard time with this one, but the EBITDA multiple does not seem out of line with near-term growth prospects.

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VeriFone Firmly Back In The Good Graces Of Growth Investors

Seeking Alpha: Arcos Dorados Still Several Fries Short Of A Happy Meal

It's tough to grow a business when two large markets are convulsing under the weight of horrible macroeconomic mismanagement, but Arcos Dorados (ARCO) isn't going to get a free pass just because the problems in Argentina and Venezuela are not its fault. Inflation, affordability, and competition remain challenges across the company's operations and I don't fault investors who want nothing to do with another Latin American consumer stock groaning under the weight of macroeconomic issues.

The shares of Arcos Dorados are down about 10% from when I last wrote, and the story remains frustratingly similar. There is significant growth potential in the business, as it could double the number of McDonald's (MCD) stores it operates over the next decade, but potential isn't worth much if the actual results don't get better.

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Arcos Dorados Still Several Fries Short Of A Happy Meal

Seeking Alpha: For Teleflex, Small Things Add Up

If companies like Intuitive Surgical and Heartware live on the "gee whiz" end of the med-tech spectrum, Teleflex (TFX) is on the other end. That is not to say that there isn't meaningful R&D and engineering going into the company's products, but categories like central venous catheters, PICCs, Foley catheters, and endotracheal tubes just don't tend to get growth-oriented med-tech investors all that excited.

Even so, Teleflex has a lot going for it. The company has been a very willing acquirer and increased investments in R&D should lead the way to more innovative new products and market share growth. In the meantime, management is focused on operating improvements that should support double-digit earnings growth. While Teleflex does not look all that cheap on a discounted cash flow basis, the company's above-average growth prospects could maintain healthy valuation multiples.

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For Teleflex, Small Things Add Up

Wednesday, March 12, 2014

The Motley Fool: Statoil ASA's Focus on Returns and Higher-Grade Assets Should Pay Off

This year has already started off on a much better foot for Statoil (NYSE: STO  ) than its recent stock market experience. Maligned for its high finding and development costs, its dependence on high oil prices, and its weaker near-term production growth, Statoil investors had to endure a frustrating stretch where the short term-obsessed market wasn't willing to give the company its due.

Now, though, the market appears to be taking a more optimistic view. The turbulence in Ukraine has drawn attention back to Statoil's position as the largest supplier of gas to Europe outside of Russia. At the same time, management has openly turned to a more returns-oriented approach and has spent the last year upgrading its portfolio and making some major oil and gas discoveries. Valuation for oil and gas companies may be frustratingly imprecise, but Statoil seems to be offering a good mix of improving returns, capital appreciation, and a solid yield.

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Statoil ASA's Focus on Returns and Higher-Grade Assets Should Pay Off

The Motley Fool: Can Valeant Continue This Growth?

Canada's Valeant Pharmaceuticals (NYSE: VRX  ) is a good example of what can be done when a company chooses to go its own way and zig while others zag. In an industry that had becoming increasingly skittish about mergers and acquisitions as a growth driver, Valeant has done about 60 deals in the last six years. In an industry that is increasingly spinning off divisions and focusing on "core operations, Valeant management is willing to go wherever opportunity takes them – prescription drugs, devices, OTC, and branded generics.

The potential merits of Valeant's approach certainly have not gone unnoticed, as the shares have nearly doubled over the past year. Valeant's uncommonly aggressive use of leverage does add some risk to the story, but the company has used its balance sheet to build very sizable franchises in dermatology, eye care, and aesthetics, and the opportunity to launch a "merger of equals" and leverage better operating and tax efficiency could propel the shares further.

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Can Valeant Continue This Growth?

The Motley Fool: Can Alexion Pharmaceuticals Continue to Deliver?

Successful biotechs are generally expected to reinvest their profits into the development of broad pipelines, but Alexion  (NASDAQ: ALXN  )  is following a somewhat different path. While I do not mean to give short shrift to this company's pipeline development efforts, the fact is that Alexion has been more interested in maximizing the value of its blockbuster orphan drug Soliris than relying on new development projects. That strategy has served the company well so far, and while there may some reasons to question whether health care systems will continue to support such generous reimbursement for orphan drugs, Soliris could yet offer significant growth potential.

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Can Alexion Pharmaceuticals Continue to Deliver?

Seeking Alpha: Douglas Dynamics Looks For Cold Weather To Spur A Hot Streak

The last couple of years have added some operational complexity to Douglas Dynamics' (PLOW) business, as lower snowfalls and economic issues led to lower demand for the company's market-leading snowplows and lower orders from dealers looking to better manage their inventory. This winter has seen something of a perfect storm for the company, as higher than average snowfalls compared with low dealer inventories have led to higher shipments, orders, and management expectations for 2014 performance.

Douglas Dynamics enjoys very solid market share and should see relatively consistent replacement demand. The company also has the opportunity to pursue deals like its TrynEx acquisition to leverage its dealer network and generate operating synergies from similar businesses. All of that said, it seems a bit of stretch to call the stock significantly undervalued at today's levels.

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Douglas Dynamics Looks For Cold Weather To Spur A Hot Streak

Seeking Alpha: The LipoScience Holding Pattern Continues

The reimbursement environment for diagnostics company LipoScience (LPDX) is not going to change in a quarter's time and with that, neither will the commercial/financial situation change all that much. LipoScience remains what it has been for some time - a company with a very interesting cholesterol test, one that measures the actual number of cholesterol particles and not just the overall amount of cholesterol in the blood, but a company that definitely needs to sell payers and clinicians on the importance of this test and its role in health care management.

If LipoScience can accumulate and present the data necessary to sway insurance companies and doctors, $100 million in annual revenue in five years' time and $200 million in 10 years' time should be sufficient to justify a stock price closer to $8 today. Unfortunately, it's quite difficult to get institutions excited about a small-cap med-tech stock reporting contracting revenue and that has seen recent executive turnover. Readers thinking about LipoScience as an investment need to realize that this is both an above-average risk situation and one where patience will be required.

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The LipoScience Holding Pattern Continues

Seeking Alpha: With GRAS Status In Hand, It's Close To 'Go Time' For Senomyx's Partners

Patience with development-stage food additive developer Senomyx (SNMX) has really started paying off over the last six months. Investors started bidding up the shares on expectations of FDA approval of key product S617, as well as optimism that the company's direct sales effort will lead to greater adoption of products already shown to replace significant amounts of sugar or other sweeteners and those that enhance savory flavors.

Up almost 170% from where I recommended the stock as a Top Idea, it's tempting to call it a day and take the winnings off the table. While obtaining the GRAS designation removes a critical commercialization hurdle for Senomyx's partners PepsiCo (PEP) and Firmenich, there are still many operating risks remaining, including commercial introduction and acceptance of products using Senomyx's additives. I'm bullish about the prospects of S617 in beverages like sodas and sports drinks, but I'm not so bullish yet on the opportunities in foods like baked goods. If adoption there proves stronger than I currently expect, the upside for the shares could be considerable.

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With GRAS Status In Hand, It's Close To 'Go Time' For Senomyx's Partners

Seeking Alpha: An Unexpected Turn In Wright Medical's Attempts To Get Augment To Market

Wright Medical's (WMGI) acquisition of BioMimetic Therapeutics and its Augment biological product for bone healing has been almost nothing but trouble. At seemingly every turn the FDA has thrown up obstacles to Augment, quibbling about the use of CT scanning, demanding re-readings of scans by additional radiologists, requiring antibody testing, and forcing the company to count unrelated secondary surgeries as product failures.

The end result is that the FDA has refused on multiple occasions to approve Augment, putting the $190 million acquisition (excluding potential future contingent payments) at real risk. Wright Medical isn't going down without a fight, though, having appealed the FDA's last rejection. On Monday March 10, though, a new development arose that while not really improving the ultimate odds of approval, at least suggests that the FDA may be trying to work with the company to get Augment to market after all.

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An Unexpected Turn In Wright Medical's Attempts To Get Augment To Market

Tuesday, March 11, 2014

Seeking Alpha: Belle Needs To Polish Its Online Efforts

Belle International (OTCPK:BELLY) has built itself into the largest branded footwear retailer in China with a vertically integrated model, a half-dozen of the strongest brands in the country, and over 14% market share (and almost 50% market share of ladies mid-to-high-end brands). Although Belle has shown itself to be pretty adept at building brands and running a store-based concept (with over 19,000 points of sale in China), it has proven far less skilled with its online offerings and the company has struggled to drive profitable growth through this channel and is instead facing some real competition.

Belle acknowledges its deficits in online marketing/retailing and management is working on the problem. In the meantime, the company is slowing its new store construction in Tier 2 and Tier 3 cities and using its considerable cash pile to conduct M&A transactions with an eye toward becoming a more diversified apparel retailer. I would give Belle a better chance than its peers of pulling off this transition successfully, but it may be some time before revenue and EBIT growth returns to a strong double-digit clip.

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Belle Needs To Polish Its Online Efforts

Seeking Alpha: Amidst A Weak Chinese Consumer Market, CRE Faring Even Worse

Naming China Resource Enterprises (OTCPK:CRHKY) as a Top Pick in August of 2013 has been a lousy call so far. Down almost 20%, about the best thing I can say about that call is that most of the Chinese consumer sector has gotten hit too, with Sun Art (OTCPK:SURRY), Lianhua (OTCPK:LHUAF), and Tsingtao (OTCPK:TSGTY) down about 5% to 10% over the same period on a lot of worries (and some reality) about weaker consumer spending in China.

At the risk of doubling down on a bad call, I do believe that the market is playing up short-term risks and losing sight of what CRE can accomplish over the long term. Clearly "can accomplish" is not the same as "will accomplish", but I expect CRE to leverage leading share in Chinese food retailing and beer into a strong mix of revenue growth and higher margins down the road. I've lowered my expectations and fair value to account for the near-term softness and the earnings dilution from the Tesco JV, but I continue to believe these shares are an interesting long-term opportunity.

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Amidst A Weak Chinese Consumer Market, CRE Faring Even Worse

Seeking Alpha: Ugliness In Venezuela Creating An Opportunity With Copa Holdings

There are exceptions to every rule, including the generally sound advice to steer well clear of airline stocks. Alaska Air Group (ALK) has done well for investors by focusing on the disciplined operation of regional routes, and Copa Holdings (CPA) has followed a broadly similar strategy in across North, Central, and South America.

Investors expect certain risks with airline stocks, namely volatile fuel prices and revenue uncertainty stemming from often irrational competition and the macroeconomic client. The ongoing mismanagement of Venezuela has created another significant risk for Copa, as devaluation imperils the company's significant cash holdings in the country and an escalating spat with the government of Panama could threaten even more.

No airline is a safe investment, but Copa looks well positioned to take advantage of growing traffic across Latin America for many years to come. The market appears to be all but writing off Copa's Venezuela operations, and the shares look too cheap today.

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Ugliness In Venezuela Creating An Opportunity With Copa Holdings

Seeking Alpha: A Rising Tide Of Sentiment Has Lifted Ship Finance

My decision to call Ship Finance (SFL) a Top Idea back on September 19, 2013 wasn't a particularly popular one, but the shares of this large marine vessel leasing company have risen almost 25% since then, while paying a healthy dividend along the way. I'll call that a short-term victory, particularly as Ship Finance has performed just as well or better than a lot of the vessel operators, including Nordic American Tankers (NAT), Costamare (CMRE), and Navios Maritime Partners (NMM).

There seems to be more optimism now about tanker and vessel rates than there has been in some time. Ship Finance has also managed to add vessels to its fleet, with attractive charters, while growing the drilling rig business. I am not as concerned about Ship Finance's ability to maintain its dividend payments, and apparently neither is management, as they recently increased the payout. The solid run in the shares has taken the easy money off the table, but they still hold some appeal for investors with a desire for above-average income and exposure to what may finally prove to be the long-awaited recovery in vessel rates.

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A Rising Tide Of Sentiment Has Lifted Ship Finance

Monday, March 10, 2014

The Motley Fool: FDA Cholesterol Drug Concerns: What You Should Know

As Sanofi (NYSE: SNY  ) / Regeneron (NASDAQ: REGN  ) , Pfizer (NYSE: PFE  ) , and Amgen (NASDAQ: AMGN  ) prepare for the stretch run to getting their PCSK9 inhibitors, high-potential new treatments for cholesterol, approved by the FDA, a new potential complication has emerged. Sanofi and Regeneron revealed through SEC filings that the FDA is now taking a closer look at potential neurocognitive issues with the entire PCSK9 inhibitor class.

The odds still seem to favor the thesis that PCSK9 inhibitors are safe enough for FDA approval. That said, the role of cholesterol in neurocognitive process is significant, so it's not a ridiculous notion to investigate – particularly considering the possibility that many millions of people will be taking these drugs once they are approved and available.

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FDA Cholesterol Drug Concerns: What You Should Know