Wednesday, April 30, 2014

Seeking Alpha: Oshkosh Leveraged To A U.S. Construction Recovery

Not much has changed in the past quarter for Oshkosh (OSK) and that's not necessarily a bad thing. The company's aerial work platform business is recovering, but Oshkosh and Terex (TEX) are still waiting on rental companies in North America to renew their fleets. The potential for activist-prompted moves is still here, and it increasingly sounds as though management is considering an acquisition. Oshkosh still looks undervalued on the basis of construction and commercial vehicle prospects, with defense offering a highly binary outcome later next year, but delays in a U.S. construction recovery remain as a meaningful risk factor.

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Oshkosh Leveraged To A U.S. Construction Recovery

Seeking Alpha: Eaton Offering Middling Performance And Middling Value

Over the past year, a lot of the industrial conglomerates have moved together in a fairly tight group, Eaton (ETN) included. Given the company's middle-of-the-road financial performance and fairly average valuation, Eaton looks like an okay pick, but not necessarily anything special. The company still has the potential to drive additional savings and leverage from the Cooper deal and harness improving conditions in vehicle and aerospace markets, but the company's industrial business isn't offering the same prospects.

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Eaton Offering Middling Performance And Middling Value

Seeking Alpha: Cummins Revving Up For The Next Truck Cycle

There's no doubting now that the operating environment for the North American Class 8 truck industry is getting better, and Cummins (CMI) stands to be a major beneficiary. European and Chinese truck markets are also looking stronger, helping to offset weakness in other areas like Brazilian trucks and power generation. Cummins shares are already up about 28% over the past year, and BorgWarner (BWA) and Dana (DAN) may offer a little extra relative performance, but I wouldn't rush to take profits just yet.

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Cummins Revving Up For The Next Truck Cycle

Seeking Alpha: Orbital Sciences And Alliant Techsystems Look Like A True Win-Win

No company has ever announced a merger with "this is a value-destroying transaction that we're launching because we want a bigger fiefdom and don't really know how to build value." That said, while investors are wise to be very skeptical about the synergies companies promise with merger announcements, Tuesday's announced merger between Orbital Sciences (ORB) and Alliant Techsystems (ATK) looks like a really good opportunity to build a stronger business.

As I had valued Orbital at around $31 per share in February, and I calculate a value of about $31 in Alliant's offer for the company, I can't say that this is an unfair deal for either side. What's more, for those shareholders willing to hold on and see how the synergies play out, this could be a case where 1+1 equals something meaningfully more than "2".

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Orbital Sciences And Alliant Techsystems Look Like A True Win-Win

Seeking Alpha: ABB Gets Fried By Its High Voltage Business

In one bad quarter, ABB (ABB) appears to have undone a lot of the goodwill it had built up over the past year. Investors have been nervous for some time about ABB's very active board (which has led to two premature CEO departures), an uncertain M&A strategy, and the company's business mix, as well as its uncanny tendency to do well/poorly when others are doing the opposite. While the stocks sizable decline in the wake of the first quarter disappointment seems a little extreme, ABB is likely to find itself back into the "show me" penalty box of Wall Street.

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ABB Gets Fried By Its High Voltage Business

Seeking Alpha: Smart Deals And Smurfit Synergies Can Still Help Rock-Tenn

Rock-Tenn (RKT) is a fairly well-respected company in the paper packaging industry, but the company has struggled to generate appreciably better returns on capital over time. I suspect that is at least part of the reason that the company has lagged both International Paper (IP) and Packaging Corp (PKG) over the long term and other players like Graphic Packaging (GPK) and MeadWestvaco (MWV) more recently.

The company took on a big operational challenge (and a lot of debt) when it acquired Smurfit-Stone at a generous price in 2011, but the company has likely not maxxed out the potential synergies and operational improvements here. I do have some concerns about the near-term health of the corrugated and containerboard markets, but it looks as though the shares already factor in a fair bit of that risk.

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Smart Deals And Smurfit Synergies Can Still Help Rock-Tenn

Seeking Alpha: Roper Delivers A Best-In-Class Performance

Conditions seem to have improved in a big way for industrial conglomerate Roper (ROP) in a relatively short time. Not only did Roper beat expectations for the quarter, but the company delivered one of the best results in its sector. Roper is seldom an exceptionally cheap stock, but valuation isn't too demanding and the combination of good order momentum and an active hunt for M&A could lead to a more active 2014 for shareholders.

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Roper Delivers A Best-In-Class Performance

Monday, April 28, 2014

The Motley Fool: For Forest Labs, Inc, Deals Are Coming Fast And Furiex

This is definitely a season of deals in the health care space, with Forest Labs (NYSE: FRX  ) choosing to add another asset to its GI business ahead of its anticipated merger with Actavis (NYSE: ACT  ) . Forest Labs is offering a significant premium for Furiex Pharmaceuticals (NASDAQ: FURX  ) and there are still FDA-related risks in play, but it seems like a reasonable offer for what could prove to be a highly synergistic asset.

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For Forest Labs, Inc, Deals Are Coming Fast And Furiex

The Motley Fool: Do Disappointing Earnings Create a Good Buying Opportunity?

By most standards, Covidien (NYSE: COV  ) has been a superior performer in the med-tech sector. That hasn't always shown up in the company's stock performance, however, as rebound stories like St. Jude Medical, Boston Scientific, and Bard have raced ahead. With Covidien announcing a noisy quarter with some apparent seasonal pressures on Friday, it looks as though Fools have an opportunity to add shares in a high-quality name at a pretty interesting valuation.

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Do Disappointing Earnings Create a Good Buying Opportunity?

The Motley Fool: The Clouds Are Parting for Weatherford International

The first-quarter earnings report for the fourth-largest energy services provider, Weatherford International (NYSE: WFT  ) , was not flawless in terms of growth or margins. What was, and is, more important is that the company has very clearly put itself on a path of serious self-improvement and is remaking itself into a high-margin provider of services with relatively little overlap with the big three -- Schlumberger (NYSE: SLB  ) , Halliburton (NYSE: HAL  ) , and Baker Hughes (NYSE: BHI  ) .

With this progress, the penalty to Weatherford's earnings before interest, taxes, depreciation, and amortization multiple no longer seems as appropriate, and these shares continue to look undervalued as an improving play on unconventional reservoirs.

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The Clouds Are Parting for Weatherford International

Seeking Alpha: AtriCure Making Progress, But Can It Maximize Value On Its Own?

These are good times for investors to start thinking about putting together shopping lists for speculative healthcare stocks, as the market has been bailing out on not only biotechs but also speculative med-techs. AtriCure (ATRC) isn't speculative in many important respects, as the company has approvals for its key products, but is still quite speculative insofar as the company's ability to convince doctors to adopt its surgical ablation approach and generate meaningful revenue and profits.

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AtriCure Making Progress, But Can It Maximize Value On Its Own?

Seeking Alpha: At Basic Energy Services, Sentiment Has Changed Faster Than The Business

A sector-wide re-rating can be a powerful driver for a stock, and so it has been for Basic Energy Services (BAS). Amidst an improving outlook (or at least perceived outlook) for energy service stocks, Basic Energy has been one of the strongest names - handily beating Schlumberger (SLB) and Halliburton (HAL) so far this year, as well as most other small/mid-cap service names like Key (KEG), Superior (SPN), RPC (RES), and C & J Energy Services (CJES).

While I thought that Basic Energy had been overlooked back in 2013, it's hard to make the same argument now that sector-wide forward EV/EBITDA multiples have moved from 5x to 6x to 7x to 8x. Basic Energy is likely to see good improvements in its core Permian market in 2014, and those improvements are going to be an important part of the remaining upside in these shares as sentiment has already improved markedly.

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At Basic Energy Services, Sentiment Has Changed Faster Than The Business

Seeking Alpha: Superior Energy Services Needs U.S. Land To Turn

Investors have gotten quite a bit more bullish about prospects for the energy service companies over the last three to six months, largely due to increased optimism that U.S. land conditions really are improving. That should be good news for Superior Energy Services (SPN), as should the signs that deepwater Gulf of Mexico activity is turning around. The real question for Superior, though, is whether the company can better leverage its "integrated lite" operating structure and start delivering better returns for shareholders.

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Superior Energy Services Needs U.S. Land To Turn

Seeking Alpha: Old Dominion Continues To Take Share

As I expected back in February, Old Dominion's (ODFL) fourth quarter was just a bump on the road and business has gotten back to normal. Normal is a very good thing for Old Dominion, as the company's superior service quality continues to fuel share gains and good cost control allows the company to thrive with relatively lower price increases than its competition. Old Dominion shares aren't cheap by standard valuation metrics, but I believe standard metrics may be a little too confining for a significantly above-average operator.

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Old Dominion Continues To Take Share

Seeking Alpha: Another 'Is What It Is' Quarter From Microsemi

Because Microsemi (MSCC) zigs where most other chip companies zag, it never really seems to fit in with the general sentiment on chips. That's a plus when chip stocks go into the tank, but it can be frustrating when there's relatively more optimism about the semiconductor space. Given Microsemi's position in timing/synchronization and its growing FPGA business, I'm content to continue holding these undervalued shares, but I acknowledge that the company's erratic progress on revenue growth and margins will frustrate many investors.

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Another 'Is What It Is' Quarter From Microsemi

Seeking Alpha: For Ultratech The Story Remains 'Ready, Set... Wait!'

The wait goes on at Ultratech (UTEK), and it's not a particularly pleasant one for investors (nor, I imagine, the company's executives and employees). Management noted increased quoting activity for LSA systems and continues to expect orders and shipments to materialize soon, but investors are left in a frustrating grey zone wondering when foundries will make their orders and how the annealing market will shake out between Applied Materials (AMAT), Ultratech, DNS (OTC:DINRY), and Mattson (MTSN).

Ultratech's first quarter results do offer a reminder that the company has other credible business lines, including advanced packaging and tools for high brightness LED manufacturing, but it is the ramp in laser spike annealing tools that will make or break the stock in the near term. Ultratech could still trade into the $30s from here, and investors are now only a quarter or two away on better visibility into this next round of annealing tool orders.

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For Ultratech The Story Remains 'Ready, Set... Wait!'

Friday, April 25, 2014

Seeking Alpha: Is There Enough Gas In The Tank To Take CB&I Back Up?

The opportunity to leverage plentiful U.S. low-cost natural gas reserves into LNG exports is real and CB&I (CBI) has built itself into one of the best engineering, procurement, and construction companies in that space. Along the way it has also positioned itself as a strong player in chemicals and power, as well as a provider of process technologies for the chemical, refining, and gas processing markets.

CB&I has over 10 quarters of revenue already in the order book, and there is still the possibility (if not probability) of additional awards in LNG, chemicals, and OUS power plants. The catch, as is so often the case, is in the valuation. There's a pretty long record of EPC companies trading at forward EV/EBITDA multiples in the 8x to 10x range, and applying that range to CB&I doesn't point to much upside in a stock that has already risen 60% in the last year, 100% in the last two years, and almost 700% in the last five years.

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Is There Enough Gas In The Tank To Take CB&I Back Up?

Seeking Alpha: Allied World Delivers A Good Underwriting Result, Spiked With Reserves And Investments

About four months ago, I pointed out Allied World Assurance (AWH) as a high-quality specialty liability-focused insurance company that was trading a little rich for my tastes. With the stock having lagged the S&P 500 by about 6% since then, due in part to concerns about reserve strengthening in the professional healthcare liability space and overall worries about P&C insurance, now the valuation is starting to look a little more interesting.

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Allied World Delivers A Good Underwriting Result, Spiked With Reserves And Investments

Seeking Alpha: Can Fortinet Deliver A One-Two Punch Of Growth With Higher Margins?

It's probably true of all industries to some extent, but the enterprise/network security business seems to be one where there's always some nagging detail for the companies. Check Point (CHKP) has fantastic margins, but hasn't always been quick to innovate and seems willing to cede margin to maintain share. Palo Alto (PANW) has a great sales effort, but sometimes seems to overstate its own capabilities. For Fortinet (FTNT), the challenge is pairing good revenue growth and share gains with strong margins, and judging by management's guidance that challenge will continue on at least another quarter.

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Can Fortinet Deliver A One-Two Punch Of Growth With Higher Margins?

Seeking Alpha: Noise Over DCBs Clouds An Otherwise Okay Quarter At Bard

For a company with relatively modest underlying growth trends, C.R.Bard (BCR) has generated a fair bit of enthusiasm on the Street for the enhanced growth prospects bought through M&A and the royalty stream from Gore. Among the acquired products, investors are particularly keen on the prospects for the Lutonix drug-coated balloon and management's comments on the earnings call only seemed to add more confusion to already noisy situation. Bard is not a particularly cheap stock at these levels and the company is going to need better organic growth and clear differentiation in drug-coated balloons to support further gains.

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Noise Over DCBs Clouds An Otherwise Okay Quarter At Bard

Seeking Alpha: Federal-Mogul Has Work To Do On Margins

There were some solid positives in Federal-Mogul's (FDML) first quarter, as the company's Powertrain business handily outgrew the light vehicle markets in North America and Europe and the company successfully refinanced some large outstanding debt balances. There's more work to do on margins, though, and the company is facing increasingly difficult comps, higher interest expense, and integration expenses from three recent acquisitions. Federal-Mogul still looks undervalued today, but that's not exactly a consensus opinion and the company's high debt level increases the overall risk.

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Federal-Mogul Has Work To Do On Margins

Seeking Alpha: The Going Is Getting Tougher And W.R. Berkley Is Still Going

Four months ago, I was not too keen on paying up for W.R. Berkley (WRB) shares in the face of an increasingly difficult insurance environment, higher leverage, and a rich valuation. Since that late December piece, WRB shares are basically flat, while my preferred choice, RenRe (RNR), is up around 10%. On a positive note, W.R. Berkley continues to execute at an above-average level, and that makes it a little harder to fret as much about the valuation.

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The Going Is Getting Tougher And W.R. Berkley Is Still Going

Thursday, April 24, 2014

The Motley Fool: Execution Key to Cameron International Corp Unlocking More Value

This looks to be an interesting year in the energy capital equipment space, as large E&P companies like Petrobras, Total, and BP look to move forward with ambitious plans to develop deepwater fields. While order growth may not be as strong for companies like Cameron (NYSE: CAM  ) , National Oilwell (NYSE: NOV  ) , FMC Technologies (NYSE: FTI  ) , General Electric, or Drill-Quip (NYSE: DRQ  ) , it is definitely an opportunity to execute and show operational excellence. In particular, Cameron needs to show that its $11 billion backlog can be successfully converted into higher-margin cash flows.

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Execution Key to Cameron International Corp Unlocking More Value

The Motley Fool: $13 Billion Bold Play: Zimmer Holdings, Inc's Purchase of Biomet

In mid-December I wrote that there was at least some chance that ortho giant Zimmer (NYSE: ZMH  ) would make a bid for Biomet and become the dominant company in hip and knee implants, as well as leverage stronger share in areas like extremities, dental, trauma, and spine. That speculation has come to pass, as Zimmer has announced a $13.35 billion bid for Biomet. Assuming the deal passes regulatory scrunity, Zimmer is likely to see meaningful cost synergy, but there are risks involved in devoting such a large amount of capital to a market with some growth challenges.

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$13 Billion Bold Play: Zimmer Holdings, Inc's Purchase of Biomet

Seeking Alpha: Lincoln Electric Comes Up A Little Short Amidst Sluggish Markets

The much looked-for industrial recovery seems to be a little behind schedule, or at least that's one possible interpretation of weak welding results from Lincoln Electric (LECO) and Illinois Tool Works (ITW). With Colfax (CFX) due to report tomorrow (as of this writing), investors will have a more complete picture of a market segment that often correlates pretty closely with overall economic activity, but the picture isn't as strong as analysts and investors had hoped.

Lincoln often trades at a premium valuation, and with double-digit ROICs in the nine of the last ten years, it's not hard to see why. With that, I'm tempted to think of pullbacks in the stock as buying opportunities for long-term investors, though I recognize the risk that a prolonged period of sluggishness in welding volume will weaken the stock further.

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Lincoln Electric Comes Up A Little Short Amidst Sluggish Markets

Seeking Alpha: Growth And Self-Improvement Versus Value At TCF Financial

Regional mid-cap bank TCF Financial (TCB) hasn't been shy about changing its business model to adapt to the new realities of the banking market. The company has cleared out a lot of its high-cost capital and shifted its operational focus towards a national specialty/niche lending platform with a low-cost local deposit base. The model TCF Financial is following carries above-average risks and the shares are not particularly cheap by convention means, but this bank looks poised to be an above-average grower at a time when bank earnings growth is hard to find.

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Growth And Self-Improvement Versus Value At TCF Financial

Wednesday, April 23, 2014

The Motley Fool: Can Allergan Find an Alternative To Valeant?

No one will accuse Valeant (NYSE: VRX  ) CEO Mike Pearson of lacking boldness. He has laid out a strategy for turning Valeant into one of the largest pharmaceutical/med-tech companies in the world and has proven more than willing to turn to bold M&A moves to make it happen. Valeant's latest move is far and away the largest – a $47 billion bid (at the time of the offer) for Allergan (NYSE: AGN  ) – but the target's acceptance is hardly a sure thing and the company's views about the pharma industry may give investors reason for pause regarding the long-term strategy.

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Can Allergan Find an Alternative To Valeant?

The Motley Fool: Illumina Inc's Seemingly Endless Victory Lap

It gets harder and harder to criticize a company's valuation when that company continues to surpass expectations and build its lead on its rivals. That is the basic story for Illumina (NASDAQ: ILMN  ) , as this company continues to distance itself from Thermo Fisher (NYSE: TMO  ) and other would-be sequencing competitors and build up its bona fides in the diagnostics market. With a diagnostics opportunity at least twice as large as the $2 billion sequencing market (and growing at a double-digit rate), there seems to be enough growth potential to keep investors keenly interested in this name.

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Illumina Inc's Seemingly Endless Victory Lap

Seeking Alpha: Almirall Quietly Building A Better Business

Definitely not a household name for most American readers, Spain's Almirall SA (OTC:LBTSF) (ALM.MC) is building an interesting specialty pharmaceutical business for itself in Europe. Roughly 80% of the company's sales are in Europe (half of that in Spain) and the company still depends upon in-licensed products for close to half of its sales, but aclidinium and a newly expanded dermatology business could lead to meaningful revenue growth and margin leverage in the coming years.

Almirall certainly still has challenges in front of it, including getting a combo version of aclidinium through the FDA approval process and bulking up its drug development efforts, but the forward valuation doesn't seem demanding and mid-cap drug companies are being hunted to extinction in the M&A market.

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Almirall Quietly Building A Better Business

Seeking Alpha: Aging Wells And Deepwater Expansion Bodes Well For Helix Energy Solutions

Investors haven't been too fond of offshore energy service plays over the last six months, with shares of companies like Oceaneering (OII), GulfMark (GLF), Tidewater (TDW), and Technip (OTCQX:TKPPY) all in the red. Against a peer group that has declined from around 5% to 20%, Helix Energy Solutions' (HLX) roughly 5% decline doesn't seem quite as bad. More importantly, the company's backlog continues to build and the company is likely looking at many years of well intervention deepwater support work. Helix looks about as undervalued as its peer group, but the company's more aggressive newbuild program and increasing acceptance of the company's well intervention approach could lead to outperformance.

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Aging Wells And Deepwater Expansion Bodes Well For Helix Energy Solutions

Seeking Alpha: GulfMark Looking At Short-Term Worries And Long-Term Opportunities

GulfMark Offshore (GLF) has a high-quality, high-spec modern marine vessel fleet, but investors presently seem more concerned about the risks of delays in new rig deployments in the Gulf of Mexico than the opportunities offered by higher utilization and dayrates in the North Sea and GoM in the coming years. GulfMark isn't hands down a screaming bargain today, but I believe the current market conditions support a bullish outlook for profit and cash flow generation over the next couple of years.

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GulfMark Looking At Short-Term Worries And Long-Term Opportunities

Seeking Alpha: Sterling Strengthens The Business, But Umpqua Not Exactly Cheap

There's likely always going to be a place for local/regional banks that focus on customer service and deep relationships as opposed to cross-selling and cost efficiency. Umpqua Holdings (UMPQ) is one such bank in the Pacific Northwest, where it has the #4 position in Oregon behind Bank Of America (BAC), U.S. Bancorp (USB), and Wells Fargo (WFC) and the #7 position in Washington state.

Umpqua has a lot going for it, including an uncommon retail-oriented branch network and strong growth opportunities in leasing. The acquisition of Sterling not only gives the company more scale in its core operating areas, but also the prospect of synergies and cost leverage and a more balanced loan book. The biggest problem is that the Street is already pretty favorably disposed toward Umpqua and the shares seem to factor in some pretty bullish expectations already.

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Sterling Strengthens The Business, But Umpqua Not Exactly Cheap

Tuesday, April 22, 2014

The Motley Fool: Is This a Good Deal for Novartis AG and GlaxoSmithKline plc?

This seems to be a week for Big Pharma to do big things, and Novartis (NYSE: NVS  ) and GlaxoSmithKline (NYSE: GSK  ) are certainly doing their part. The two companies announced a series of transactions that seem to offer "win-win" opportunities to clean up and consolidate some non-core operations for both companies. Though it seems like Glaxo is getting the better deal, there's arguably less risk to the Novartis side of the transactions.

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Is This a Good Deal for Novartis AG and GlaxoSmithKline plc?

Seeking Alpha: Cepheid's Results And Shares Are On Different Paths

Within the higher-growth molecular diagnostics segment of diagnostics, Cepheid (CPHD) remains one of the real up-and-comers. Roche (OTCQX:RHHBY) still has quite a bit more market share than Cepheid (and/or anybody else), but Cepheid stands shoulder to shoulder with big names like Abbott (ABT), Becton Dickinson (BDX), and Hologic (HOLX) and actually has leading share in terms of systems placement. Margins are still a "build it and they will come" sort of proposition, but as Cepheid continues to develop and launch high-volume tests, it should be in position to reap significant leverage down the road.

The concern here is that the market is already a long ways down that road in terms of valuation. Even if the company can more than double its share of the MDx market and generate FCF margins on par with the best companies, the shares are already well ahead of the implied value. Assigning Cepheid the typical top-of-the-range med-tech growth multiple of 8.0x forward sales produces a more attractive $55 target, more than 20% above today's price, but that multiple may be harder to maintain if the market really is turning away from aggressive growth stories in the healthcare space.

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Cepheid's Results And Shares Are On Different Paths

Seeking Alpha: Can Coca-Cola Amatil Bring Back The Fizz?

Bottling is often overstated as a great business. Bottling and selling assorted flavored sugar waters with Coca-Cola (KO) or PepsiCo (PEP) labels can be a license to print money in some cases, but other factors like competition, consumer preferences, and the power of retailers can make a big difference. Investors in Coca-Cola Amatil (OTCPK:CCLAY) have seen just how significant these factors can be, as the shares of what has been regarded as one of the best-run Coca-Cola bottlers are down more than 40% over the past year as a variety of factors have combined to undermine profits.

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Can Coca-Cola Amatil Bring Back The Fizz?

Seeking Alpha: Time To Stock Up On Stock Building Supply

In the relatively short time it has been a publicly-traded company, Stock Building Supply (STCK) has been a solid performer and a good way to play improving residential housing construction. Up about 30% from early August, Stock has been outperformed by Universal Forest Products (UFPI), which has climbed about 40%, but has outperformed Headwaters (HW) and Louisiana-Pacific (LPX) by wide margins. With the company picking up more share of new projects and looking to improve its mix toward higher-margin products, better results and a higher stock price seem like reasonable assumptions today.

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Time To Stock Up On Stock Building Supply

Seeking Alpha: High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Costs matter in mining, but not always in the way that investors think. All things considered, it is better to have the lowest possible cost of production, but companies like Copper Mountain Mining (OTCPK:CPPMF, (CUM.TO)) with elevated costs can offer more upside when commodity prices rise. This company has done many things right, including getting its southern British Columbia mine up and running both on time and on budget, but production challenges and high costs loom as ongoing challenges. These shares aren't tremendously interesting at prevailing prices, but if copper goes on a tear, these shares should outperform the peer group.

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High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Monday, April 21, 2014

The Motley Fool: Pfizer, Inc. Rebuffed: Is AstraZeneca plc Worth Another Try?

Big-time pharma mergers have had a mixed track record, with large combinations often leading to significant cost reductions (and firings) in sales and administration but at the cost of large disruptions to R&D. Pfizer (NYSE: PFE  ) is apparently not afraid to give it another try, as word came out over the Easter holiday that the company has approached AstraZeneca (NYSE: AZN  ) with a $100 billion-plus bid to acquire this once-struggling pharma giant.

Time will tell if Pfizer can coax AstraZeneca to the negotiating table and seal a deal, but such a combination may not be as big of a risk for Pfizer as it may immediately seem.

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Pfizer, Inc. Rebuffed: Is AstraZeneca plc Worth Another Try?

Sunday, April 20, 2014

Seeking Alpha: Has First Cash Financial Seen The Turn?

The core pawn business at First Cash Financial (FCFS) has definitely slowed, with weak conditions in both Mexico and the U.S. That the company has managed this better than most of its rivals is not all that much comfort, particularly as weaker scrap and retail margins coupled with higher store expenses has actually led to shrinking operating income.

The good news is that conditions may be already starting to improve in Mexico. Discount retailers are seeing improving traffic and are starting to pull back on more aggressive discounting, while consumer confidence and job growth are back on the way up. This may not be a sharp rebound year for First Cash, and investors are likely getting restless in regards to seeing/hearing more about expansion into new markets, but the valuation is attractive enough to make it all worth the wait.

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Has First Cash Financial Seen The Turn?

Seeking Alpha: As Palo Alto Networks Disrupts The Market, More Gains Can Come

Next-gen security company Palo Alto Networks (PANW) certainly does not look all that cheap on backward-looking metrics like price/sales, but the company's share gain prospects and well above-average growth could lead to more price appreciation from here. Palo Alto already generates pretty solid free cash flow margins with less than 15% market share, and as the company looks to turn up the pressure on Cisco (CSCO) and Check Point (CHKP), margin leverage could move higher.

Certainly, there a lot of words like "could" and "potential" when it comes to Palo Alto. The company has built itself into a low-teens market share holder in the network security space, but Cisco, Check Point, Fortinet (FTNT) and the rest are not going to roll over. Likewise, there are ongoing concerns about the company's litigation with Juniper (JNPR), the direction of future network security threats and solutions, and the fundamental long-term profitability of the business. Expectations for Palo Alto are demanding, and the risk is above-average, but this still shapes up as a hybrid hardware/software company worth a closer look.

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As Palo Alto Networks Disrupts The Market, More Gains Can Come

Seeking Alpha: Can Black Earth Farming Grow Profits?

It looks like enthusiasm has drained out of the global farmland market, as owners in Canada, the U.S., and Brazil are seeing either slower increases or actual declines in appraised value. This is not altogether surprising. While it is true that the global population is growing and these people will need food, that doesn't mean particular markets cannot and do not get overheated when investors suddenly see it as "the next big thing."

While I've written at some length about Brazilian and Argentine agriculture companies like Adecoagro (AGRO), Cresud (CRESY), and SLC Agricola (OTCPK:SLCJY), this time around I'm interested in Black Earth Farming (OTC:BLERF). The legal structure of the company is fairly convoluted; the parent company is based in the Channel Islands, the subsidiaries are legally Cypriot and Russian companies, the shares are listed in Sweden as Swedish Depository Receipts, and the U.S. ticker is the ADR of those shares. As the farmland assets are in Russia, I'm going to go with calling this a Russian farmland company.

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Can Black Earth Farming Grow Profits?

Seeking Alpha: Whiting Petroleum Working On The Second Act

Whiting Petroleum (WLL) has built itself over the years into one of the largest landholders in the Bakken, but instead of giving the company a victory lap, the Street is worried about whether that acreage is now too mature. Not only does Whiting's Williston acreage still have more than a little life left in it, this isn't a one-play story, and the company's potential in the Niobrara is definitely worthwhile. Investors have more than a few good investing options in the oil and gas sector today, but Whiting is worth a closer look.

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Whiting Petroleum Working On The Second Act

Thursday, April 17, 2014

The Motley Fool: Even With A Change At The Top, Danaher Corporation Will Roll On

Multi-industry conglomerate Danaher (NYSE: DHR  ) definitely buried the lede this quarter, as news of the unexpected retirement of well-liked CEO H. Lawrence Culp next year overshadowed an otherwise "OK ... but not great" quarter. Losing a good CEO is also a risk for a company, but Danaher is a consummate example of a company that reloads instead of rebuilds. These shares are not particularly cheap and they rarely ever are, but an overreaction to this news could perhaps create a window of opportunity.

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Even With A Change At The Top, Danaher Corporation Will Roll On

Seeking Alpha: Xenoport's Path Is Long, But The Potential Is There

Potential is a word you hear a lot in biotech, but it's also worth remembering a quote (apocryphally attributed to former Dallas Cowboys defensive lineman Randy White) that goes "potential is a fancy French word that means you haven't done yet".

If XenoPort (XNPT) can establish '829 as a true peer to Biogen Idec's (BIIB) Tecfidera, or possibly better in some respects, the stock is going to do very, very well. Of course, if the data don't come through, this company has very little left other than a record of repeated disappointments.

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Xenoport's Path Is Long, But The Potential Is There

Seeking Alpha: After A Rough Patch, Tidewater Looks A Lot More Interesting

Back in October Tidewater (TDW) was one of the relatively few energy service companies that looked overvalued to me. While I liked the company's strong position in offshore and deepwater supply vessels, I just didn't think that paying such a high multiple was reasonable given risks in the North Sea and Angola, not to mention potential delays in floater and jackup deliveries.

As it turns out, the shares declined more than 20% since that piece, with the stock taking a big hit on disappointing third quarter results. I don't see the results as a sign of any particular operating deficiency, though, and I believe the reset in valuation and expectations makes this a much more interesting name to consider today.

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After A Rough Patch, Tidewater Looks A Lot More Interesting

Seeking Alpha: Unit Corp. Still Not Getting Its Full Due

About six months ago, I thought that Unit Corp. (UNT) was undervalued by about 20% to 25% as the company's awkward mix of E&P, land drilling, and midstream assets led it to being overlooked. The shares have risen more than 27% since then, with much of that coming on good fourth quarter results and a significant improvement in sentiment for land drillers and service providers. Enthusiasm over land drillers may be getting a little overdone, but Unit still looks too cheap on a sum-of-the-parts basis and offers worthwhile upside from its E&P drilling program.

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Unit Corp. Still Not Getting Its Full Due

Wednesday, April 16, 2014

The Motley Fool: St. Jude Medical Inc.: In-Line Is Just Not Good Enough

It's hard to call it a bad thing when Wall Street likes a stock, but rising expectations can create problems of their own. St. Jude Medical (NYSE: STJ  ) seems to have done a good job of selling the Street on the idea that it has turned over a new leaf and that accelerating growth is around the corner.

Sell-side price targets are about 20% higher now than at the beginning of 2014, and the buy/hold/sell recommendation breakdown has moved from 11-10-3 to 14-8-2 over the past three months, though the EPS targets for 2014 and 2015 have hardly budged. That optimism may well explain why St. Jude's "good enough" first quarter wasn't quite good enough for investors.

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St. Jude Medical Inc.: In-Line Is Just Not Good Enough

The Motley Fool: Abbott Labs Earnings: Still Marking Time

Like many other large med-tech companies, Abbott Labs (NYSE: ABT  ) remains an exercise in frustration right now. There are pressures throughout most of the company's business lines, with only the diagnostics business really showing much growth. Although Abbott's results were a bit weak compared to expectations, analysts and investors knew that the company was going to go through this lull and longer-term expectations are still fairly bullish.

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Abbott Labs Earnings: Still Marking Time

Seeking Alpha: Frustrating To Value, Bank Of The Ozarks Keeps Growing

Valuing normal banks on the basis of their returns on tangible equity, tangible book value, and long-term returns on equity usually works pretty well. For better and for worse, Bank of the Ozarks (OZRK) is not at all a "normal bank" and investors have to make their peace with a demanding valuation to take part in a very strong, very well-run bank growth story.

The growth side of Bank of the Ozarks looks fine. While the company is seeing more competition for lending, the bank's capabilities in specialty and complex real estate lending sets it apart. Bank of the Ozarks also has the option to expand its leasing operations and use its equity to expand its asset base. It's tough to put together a valuation model that goes much past the low $60s for these shares, but I don't have any particular expectation of getting them cheap while the growth story remains intact.

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Frustrating To Value, Bank Of The Ozarks Keeps Growing

Seeking Alpha: Even After A Little Rally, Credicorp Could Have More Headroom

Shares of Peru's largest bank, Credicorp (BAP) have spent the last six months basically just hanging around, with the shares wobbling between $125 and $140. Investors have been mulling over changes in Peru's economy, the de-dollarization of the banking sector, loan growth and default trends, as well as company-specific issues like recent disappointments in earnings and the promising acquisition of Mibanco.

I hope it goes almost without saying that investing in a Peruvian bank carries certain risks above and beyond your typical investment, though clearly investing in banks like Citigroup (C) and so on is hardly risk-free. This looks like a well-run bank, though, and a company that is structured to benefit from both the growth of the Peruvian economy and the maturation of the Peruvian financial sector. Shares appear undervalued on both an ROE and book value basis, with upside to $160 on relatively conservative assumptions.

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Even After A Little Rally, Credicorp Could Have More Headroom

Seeking Alpha: WEX Still Has Good Growth Prospects, But A Fair Valuation

Shares of corporate payments specialist WEX (WEX) have hardly been still over the last six months, trading between $80 and $101 and sporting a beta (according to Yahoo! Finance) of 1.96. Even so, they are almost exactly where they were when I wrote that the company was a well-run player in attractive markets, but that the shares seemed a little expensive.

WEX has made some important moves since October, including acquiring operations in Brazil and acquiring Exxon Mobil's (XOM) European ESSO card business, but actual organic transaction growth has been fairly sluggish and the company's B2B virtual MasterCard (MA) program is still a faster-growing work in progress. I do see multiple opportunities for WEX to do better, but there's already a meaningful amount of growth baked into the share price and I still find myself wishing for a better entry price.

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WEX Still Has Good Growth Prospects, But A Fair Valuation

Seeking Alpha: XL Group Plc Is Over-Reserved, But Not That Undervalued

XL Group plc (XL) may have nearly gone out of business during the worst of the credit crisis, but in the time since the company has done a pretty decent job of repairing its capital situation, even if at a high cost in terms of dilution. The bigger question today is whether the company can generate substantially better results for the long-term - while the company looks over-reserved and over-capitalized, the nature of its underwriting may well limit the upside.

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XL Group Plc Is Over-Reserved, But Not That Undervalued

Tuesday, April 15, 2014

The Motley Fool: How Much Has Merck Shaken Up the Hepatitis C Race?

Even the wildest Gilead (NASDAQ: GILD  ) bulls seemed to acknowledge that the company was not going to grab and hold 100% share of the hepatitis C (HCV) market. Now the question seems to be shifting to just how much share rivals like AbbVie (NYSE: ABBV  ) , Merck (NYSE: MRK  ) , Bristol-Myers Squibb (NYSE: BMY  ) , Johnson & Johnson, and others can credibly hope to gain.

Recent data presentations at EASL continue to support the notion that Gilead has the best regimen for treatment-naive patients with the most common HCV genotypes in North America and Western Europe. AbbVie and Merck are looking increasingly competitive in more challenging patients, though. What's more, Gilead's decision to pursue aggressive pricing for its regimen, and the resistance of groups like Express Scripts, raises the question of whether price may prove to be a competitive option.

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How Much Has Merck Shaken Up the Hepatitis C Race?

The Motley Fool: Johnson & Johnson's Earnings Report Impresses

If you're going to have a "messy" quarter, you probably couldn't do it much better than Johnson & Johnson (NYSE: JNJ  ) did in the first quarter. Devices and Consumer continue to log disappointing results, but the higher-margin Pharma business is more than making up the difference. Priced for total annual returns in the mid-to-high single digits, Johnson & Johnson isn't the cheapest health care play these days, but it remains a good all-weather pick with one of the best-growing large drug franchises. 

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Johnson & Johnson's Earnings Report Impresses

The Motley Fool: This Forgotten Pharma Could Be a Hit for Your Portfolio

Within the world of Big Pharma, Roche (NASDAQOTH: RHHBY  ) offers a pretty compelling mix. Not only does Roche have one of the strongest oncology platforms today, it also offers one of the deepest pipelines. The company's non-oncology pipeline is not as strong in volume, but could well make up for that in quality if a couple of high-risk trials go the right way. Roche's modest debt and large cash generation capability also raises the prospect of M&A as biotech valuations quickly become more reasonable.

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This Forgotten Pharma Could Be a Hit for Your Portfolio

Monday, April 14, 2014

The Motley Fool: Edwards Lifesciences Corp Scores A Potentially Major Legal Ruling Against Medtronic

If a court ruling made late on Friday holds up, the battle for market share in the U.S. between Edwards Lifesciences'  (NYSE: EW  ) Sapien family of transcatheter heart valves and Medtronic's (NYSE: MDT  ) CoreValve may be over before it begins. In a rare move for the med-tech industry, a judge granted a motion for a preliminary injunction against sales of the CoreValve that would effectively put Medtronic on ice until at least 2016. Medtronic is going to fight this decision, but it definitely seems likely to reignite optimism for Edwards' position in this market.

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Edwards Lifesciences Corp Scores A Potentially Major Legal Ruling Against Medtronic

Seeking Alpha: Orchids Paper Products A Paper Tiger, But In A Good Way

When I last wrote about Orchids Paper Products (TIS) in October, I expressed a lot of respect and admiration for this well-run paper products company, but thought the valuation was a bit steep. I'm not going to claim that I got that part right; the shares rose another 20% or so from where I wrote and it was only a sharp three-day drop in Orchids' stock that brought it back down again. I still do not believe that these shares are all that cheap, but it's hard not to like a company with a credible growth plan and a solid dividend.

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Orchids Paper Products A Paper Tiger, But In A Good Way

Seeking Alpha: Cal Dive Still Waiting For That Offshore Recovery

There are more than a couple of ways to make Cal Dive (DVR) look cheap. If you look the book value of the company's vessels, it might be tempting to call the stock undervalued on the basis of its liquidation value. Likewise, if you look at past utilization rates and EBITDA margins, it can be tempting to base a strong bull argument on the basis of substantial earnings leverage once Gulf of Mexico activity levels recover.

I'm not nailing down the coffin lid on Cal Dive, but I do see this stock as a more speculative play on better offshore activity levels in the Gulf. The nature of offshore support functions is changing, and I believe it favors companies like Oceaneering (OII), Chouset, Subsea 7, Saipem, and Technip (OTCQX:TKPPY) as more work goes to ROVs and deepwater projects. Projects are starting to move forward, though, and Gulf rival Tetra Technologies (TTI) has sounded relatively bullish on near-term prospects. If Cal Dive can get more of its fleet working in FY 2014 and continue to move back toward mid-teens EBITDA margins, a substantially higher share price is possible.

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Cal Dive Still Waiting For That Offshore Recovery

Seeking Alpha: More Positive News For Lexicon, But Not The Big Announcement

Lexicon Pharmaceuticals (LXRX) continues to generate data on its SGLT-1/2 inhibitor LX4211 that suggest this is an effective and promising medication for treating not only Type 2 diabetes (the common target for non-insulin medications for diabetes), but also Type 1 as well. Lexicon's most recent update, a small short-term Phase II study in Type 1 diabetics is certainly a positive update, but it's not what investors really want to see. Lexicon still needs to find a development partner for LX4211 and the ongoing delays don't help sentiment or the long-term prospects for the drug.

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More Positive News For Lexicon, But Not The Big Announcement

Seeking Alpha: Titan Machinery Needs More Than Short Covering

It's always worth remembering that there is more to a stock's performance than just the reported financials. In the case of Titan Machinery (TITN), fiscal fourth quarter results were not all that greater and there are still real issues with the business model. Investors liked what they heard about cost-cutting in the next year, though, and with Yahoo! Finance showing about one-third of the float held short, it looks like a short squeeze helped catapult the shares last week.

I saw value up to the high teens on a cash flow-basis last time I wrote, and I still see a similar fair value after this latest quarter. I don't like the model, though, and I think investors have better options for playing bullish outlooks for agriculture and/or construction equipment demand.

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Titan Machinery Needs More Than Short Covering

Seeking Alpha: PTC Therapeutics Looks Like A High-Risk Play On Rare Diseases

With money and momentum flowing out of the biotech sector, there are going to be a lot of beaten-down diamonds in the rough amidst the wreckage. I'm not entirely convinced PTC Therapeutics (PTCT) is a diamond, or at least not yet. While the company's lead compound ataluren has a lot of promise, there some serious questions and concerns about the drug. Bulls are right about the high-end potential here, but prior trial failures shouldn't be ignored.

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PTC Therapeutics Looks Like A High-Risk Play On Rare Diseases

Saturday, April 12, 2014

The Motley Fool: What's Behind Intuitive Surgical Inc's Revenue Miss?

If surgical robot pioneer Intuitive Surgical (NASDAQ: ISRG  ) is going to keep its heady med-tech growth stock multiple, it has to do better than this. After logging just 4% revenue growth in 2013, Intuitive's announcement of a 24% drop to start 2014 is certainly not a step in the right direction. Some of the trouble may well be from transitory issues like weather and delays tied to hospitals awaiting new product rollouts, but Wall Street is not a forgiving place when high multiple growth stories stop delivering that growth.

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What's Behind Intuitive Surgical Inc's Revenue Miss?

Seeking Alpha: Impala Platinum Seeing Short-Term Pain For Uncertain Gains

As was the case when I wrote about South African platinum producer Aquarius (OTCPK:AQPTY), I can't help but feel a little sorry for management Impala Platinum (OTCQX:IMPUY) (also known as "Implats"). Dealing with the rapacious government in Zimbabwe was more than enough of a headache, and now the top three South African platinum producers are dealing with an extended strike that is running down their inventories and threatening significant cost increases over the coming years.

At some point the strike in South Africa will end and Implats, Anglo American Platinum (OTCPK:AGPPY), and Lonmin plc (OTCPK:LNMIY) will get back to business. The strike is likely running down global platinum inventories, but there is certainly the risk that higher wage costs at notoriously labor-intensive mines will weigh on the sector for years. Barring yet another attempt from the government of Zimbabwe to shake down the platinum miners, I would argue that Implats offers an investors a rocky short-term road, but decent value for the long-term.

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Impala Platinum Seeing Short-Term Pain For Uncertain Gains

Seeking Alpha: AngioDynamics Delivering The Growth, Margins Next?

When it comes to publicly-traded companies, growth fixes a lot of issues and AngioDynamics's (ANGO) return to revenue growth has seen the stock outperform nicely over the past year. There are certainly considerable challenges left for AngioDynamics management, including taking share from Bard (BCR) and Teleflex (TFX) in vascular access and maximizing the value of newer offerings like BioFlo and AngioVac. Efforts to restructure the business and generate better margins are likewise a big part of the bull thesis.

These shares are still in that grey area of "strong hold" for me. The shares don't appear all that cheap by discounted cash flow, even giving management the benefit of the doubt on margins, but the EV/revenue multiple is quite low and this is often the number that institutional investors follow. So long as the company can post better growth numbers and keep the margin improvement story alive, I would think retesting the high teens is a credible expectation.

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AngioDynamics Delivering The Growth, Margins Next?

Seeking Alpha: MSC Industrial Continues To See An Early Cyclical Recovery

While the bad winter weather early this year certainly had an impact on some businesses, it doesn't seem to have hurt the industrial distribution businesses as much feared. MSC Industrial (MSM) didn't see the same level of growth in its most recent quarter that HD Supply (HDS) did, and the company did miss the published average sell-side revenue target, but many analysts had this stock's earnings pegged as a likely disappointment.

Instead of disappointing the Street, MSC Industrial gave a relatively encouraging update regarding the U.S. manufacturing sector and its business. Business still is far from rampant recovery levels, but the company's efforts to add sales associates and SKUs seem to be progressing on plan, as is the integration of the large BDNA deal. The expected returns here are looking increasingly ordinary, though, so I can't really pound the table as hard on this stock today as in past articles.

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MSC Industrial Continues To See An Early Cyclical Recovery

Seeking Alpha: Quality Doesn't Come Dirt-Cheap With Franco-Nevada

I'm not a gold bug by any stretch, but I do like the basic business model pursued by precious metal royalty companies like Franco-Nevada (FNV), Royal Gold (RGLD), and Silver Wheaton (SLW). By providing financing to mining companies and getting a low-cost cut of their metal production in exchange, these companies offer leverage to precious metal prices and better diversification of operating risks. They're also something of a "heads I win, tails I don't really lose" proposition, as periods of weaker metal prices limit miners' financing options and allow royalty companies to set up new agreements on better terms.

The long and short of it is that I believe Franco-Nevada offers a pretty efficient way to gain exposure to precious metals. The company has generally outperformed gold in good times and bad and also offers a dividend stream - addressing one of the major complaints with precious metal investments. These shares are not exactly cheap at around 1.9x NAV, but that's a little below the middle of the historical range for a company with a good operating history and solid production growth prospects in the future.

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Quality Doesn't Come Dirt-Cheap With Franco-Nevada

Seeking Alpha: Summer Infant Looking To Get Smaller, Smarter, And More Profitable

Picking Summer Infant (SUMR) as a Top Idea in mid-October of 2013 has been a boneheaded move so far, as the stock has declined about 25%. Summer Infant's share price weakness has come in response to greater-than-expected struggles to migrate away from low-margin licensed business and reduce SKU counts.

With new management in place, Summer Infant is continuing its basic strategic decision to slim down and refocus itself around a smaller number of more profitable, more competitive SKUs. This is not an unusual or uncommon phase in prior growth-by-acquisition stories, but the process can be difficult and stretch on longer than investors' patience. Summer Infant has a long way to go before it is a more credible threat to Dorel Industries (OTCPK:DIIBF), Newell Rubbermaid's (NWL) Graco, or Mattel's (MAT) Fisher-Price, but Summer Infant doesn't have to become the best to be better.

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Summer Infant Looking To Get Smaller, Smarter, And More Profitable

Seeking Alpha: EnerNOC Working, But The Outlook Still Cloudy

I liked demand response and energy management company EnerNOC (ENOC) six months ago and the stock has done well since, rising about 40% as the brutal winter weather brought attention back to the advantages of electricity demand response. I still like this company, particularly as the company shifts its attention to international DR markets and the sizable opportunities in providing enterprises with tools to better analyze and manage their energy needs.

The prime issue with EnerNOC remains the volatile regulatory environment. PJM Interconnection, a major source of EnerNOC's revenue, is serious about altering its rules for demand response and those changes threaten a meaningful portion of today's revenue and cash flow. Over time the company's efforts to diversify and the underlying advantages of DR should smooth this out, but the company's reported performance could be erratic in the meantime. That complicates valuation, though today's price does not seem unreasonable.

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EnerNOC Working, But The Outlook Still Cloudy

Wednesday, April 9, 2014

The Motley Fool: Can Perrigo Company PLC Continue Its Bull Run?

There's a pretty good chance that if you use store-brand OTC consumer health products, you have a Perrigo (NYSE: PRGO  ) product in your bathroom right now. Perrigo hasn't completely eschewed the prescription-based generic drug business that build companies like Teva (NYSE: TEVA  ) , but it has focused a great deal of its time and energy on ruling the store-brand OTC market. That business now offers pretty solid cash flow and returns, with plenty of growth opportunity in areas like diabetes and pet care. Perrigo doesn't exactly carry a "store-brand" multiple today, but these shares could still offer some upside as the company looks forward to further OTC launches, additional M&A, and growth in the nutrition and overseas markets.

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Can Perrigo Company PLC Continue Its Bull Run?

Seeking Alpha: Has Universal Stainless & Alloy Products Bottomed?

When last I wrote about Universal Stainless & Alloy Products (USAP), I was bullish on the long-term potential of the company's efforts to upgrade its product mix, but skeptical about the valuation of the stock. Since then, the shares are down about 7%, having spent the last six months chopping between $32 and $38. In that time, that company's progress on volume growth and mix has been frustratingly inconsistent.

I have a nerdish interest in metallurgy and companies like Allegheny Technologies (ATI), Carpenter Technology (CRS), A.M. Castle (CAS), and Haynes International (HAYN), but following companies and science is a completely separate issue from the stocks. I do generally like the potential for advanced alloy growth in aerospace, power machinery, and oil/gas, and I also do believe that vacuum induction melting (or VIM) products will skew USAP's mix higher over time. Here and now, though, it's hard to call the shares undervalued, with an apparent fair value around $33 to $37.

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Has Universal Stainless & Alloy Products Bottomed?

Seeking Alpha: Parker Drilling Starting Slow, But On A Better Path

I liked Parker Drilling (PKD) and its turnaround/self-improvement story about six months ago, and while the idea worked pretty well for a short time (the stock rose about 30% in the first month after that article), performance has trailed off noticeably since March as the company warned that 2014 would be off to a slower start. With that, the shares have been left behind by other small-cap energy service providers and contract drillers.

The sluggish start to 2014 is disappointing, but the Parker Drilling story is still worth a closer look. The company is the leading player in domestic drilling barges, earning a dayrate premium for the quality and capabilities of its rigs. The company's international land rig business is seeing better utilization, and there is a significant opportunity in the tool rental business from expanding operations in the Gulf of Mexico (or GOM) and improved margins in the international business (or ITS). A fair value of around $8 may not scream "must own" today, but it is worth a look as a relative laggard in the space.

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Parker Drilling Starting Slow, But On A Better Path

Seeking Alpha: Vistaprint Still Consistently Inconsistent

Bullish sell-side analysts have long pushed Vistaprint N.V. (VPRT) as a way to play growth in small businesses and the advantages of online/web-based disintermediation in bringing more sophisticated marketing tools to the SMB sector. It all sounds good (it always has), but Vistaprint seems stuck in this yo-yo business model where sustainable, balanced growth seems elusive.

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Vistaprint Still Consistently Inconsistent

Seeking Alpha: Marlin's Retreat Starting To Get Interesting

The market has apparently started turning its back on small caps, and that is likely to produce some long-term values. I think Marlin Business Services (MRLN) is starting to earn its way onto that list. Marlin is a good play on a small business recovery, and the company's over-capitalized balance sheet and low cost of funds gives management considerable flexibility. I haven't always been so fond of the stocks' valuation, but this 30%-plus pullback from the high is starting to look a little excessive.

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Marlin's Retreat Starting To Get Interesting

Tuesday, April 8, 2014

The Motley Fool: Mallinckrodt plc Takes a Big Swing for Growth

Facing declining market share in its core generic controlled substance (painkillers) market and holding the valuable asset of an Irish tax domicile, Mallinckrodt plc (NYSE: MNK  ) has aggressively put its balance sheet to work. First the company announced a $1.3 billion deal for Cadence Pharmaceuticals (NASDAQ: CADX  ) and its hospital-centered Ofirmev product (injected acetamenophen). Now the company is taking an even bigger swing – announcing a $5.6 billion deal for controversial Questcor (NASDAQ: QCOR  ) and its lead drug Acthar.

If Mallinckrodt can steer Questcor past the rocks that short sellers have been loudly claiming are in the company's path, this deal could double Mallinckrodt's earnings in relatively short order. If the short sellers are proven right about the many and varied problems of Questcor and Acthar, Mallinckrodt's shareholders will pay the price.

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Mallinckrodt plc Takes a Big Swing for Growth

Seeking Alpha: A Sharp Pullback In Celldex Could Be A Window Of Opportunity

To buy when others seemingly can't sell fast enough takes a lot of guts (and other less family-friendly attributes), but it can be one of the best ways to exploit Wall Street shortsightedness. Small-cap oncology immunotherapy biotech Celldex (CLDX) has gotten swept up in this biotech bubble-popping, even though the data from the company has generally been positive and supportive of the idea that this company has some promising high-potential drugs.

On a risk-adjusted basis, I calculate a fair value of $29 per share for Celldex, suggesting significant upside from today's level. Readers have to consider two key risks here. First, there is the ever-present biotech risk that Celldex's drugs will fail in advanced clinical studies and never make it to market. Second, there is a growing risk that investors are cycling out of biotech and may no longer be willing to use the same long-term revenue multiples and discount rates. A true rout in the biotech space could take these shares down another 50% without any bad news from the company, but investors who can stomach that risk as the price of admission to a potential winner should look further into this story.

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A Sharp Pullback In Celldex Could Be A Window Of Opportunity

Seeking Alpha: Still Waiting For Tenneco's Margin And CV Leverage

On at least one level, Tenneco (TEN) offers a compelling story. European governments take emissions control fairly seriously, China is starting to take it more seriously, and while the commitment in the U.S. seems to wobble from administration to administration (or Congress to Congress), it has been marching toward higher standards. As the second-largest emissions player in the world (with around 22% share in light vehicles and 10% share in commercial vehicles), that should feed ongoing growth for Tenneco.

The problem is less about the story and more about the timing and valuation of that opportunity. Bullish analysts have been pushing a margin leverage and commercial vehicle growth story for a little while now, but the timelines keep sliding to the right. I don't disagree that Tenneco will get there, but the timing does have valuation implications. Although Tenneco's long-term DCF-based valuation isn't so impressive, the recent sell-off has pushed the price to a more attractive level on an EV/EBITDA basis.

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Still Waiting For Tenneco's Margin And CV Leverage

Seeking Alpha: Some Of PICO Holdings' Value Finally Peeking Through

Waiting for the market to realize the value in PICO Holdings (PICO) is not unlike waiting for paint to dry. The shares are up all of 9% in the past 12 months, though the six-month performance (up 11%) is a little better. Part of the problem is that so much of the company's asset base rests on a stronger housing market in the Western/Southwestern U.S., and that just hasn't materialized yet. While I would suggest investors who want to own holding company-type investments should certainly consider names like Brookfield Infrastructure (BIP) or Macquarie Infrastructure (MIC), PICO does have some appeal for those investors particularly interested in playing a Western/Southwestern housing recovery.

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Some Of PICO Holdings' Value Finally Peeking Through

Seeking Alpha: In A Shaky Biotech Market, Alnylam's Prospects Are Getting Stronger

Biotech investing is not where you go if you want an easy investing life, but the profits of patience and good stock selection can be significant. Investors are clearly nervous about biotech now, and there is a threat that sector-wide selling in these notoriously fickle stocks will put them in hibernation until the cycle turns around again.

Specific to Alnylam (ALNY), though, I would argue the company has never been stronger. The company is on pace to exceed its target of having five compounds in human studies by the end of 2015 ("5 x 15"), and a recent deal with Sanofi (SNY) gives Alnylam development funding, a motivated commercial partner, and the perception that it has been vetted by a large pharmaceutical company with a significant presence in rare diseases.

Alnylam is absolutely a risky pick, and investors should not ignore the risk that not only may the company's drugs fail in the clinic or in the marketplace, but that investors indiscriminately bailing out of the sector could weigh on the share price at times. On the flip side, I cannot ignore that Alnylam has multiple potential billion dollar-plus drugs in the clinic and a very strong R&D position in what could prove to be one of the next major therapeutic alternatives. With that, I see almost 50% upside in Alnylam shares today.

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In A Shaky Biotech Market, Alnylam's Prospects Are Getting Stronger

Seeking Alpha: Cascade Microtech Still Waiting On The Semi Rebound

The last six months have not been easy ones for small-cap semiconductor equipment and product companies. Those with exposure to LED, solar, or other non-semiconductor markets like Advanced Energy Industries or Veeco have done alright, but it has been a more challenging run for the likes of Mattson (MTSN), FormFactor (FORM), and Cascade Microtech (CSCD).

I'm still relatively bullish on Cascade, though. True, order and activity levels have not picked up as much as projects back six months ago, but Cascade is still leveraged to the increasing sophistication of chip production, as new process nodes, materials, structures, and wafer geometries will all require the company's probe cards. What's more, management has launched new tools like the CM300 and APS200 and acquired new capabilities that should make it more competitive in the wafer probe markets for advanced logic and SoCs.

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Cascade Microtech Still Waiting On The Semi Rebound

Monday, April 7, 2014

The Motley Fool: Pfizer Inc's Palbociclib Delivers the Goods

Pfizer (NYSE: PFE  ) could use another blockbuster right now, and data presented from the phase 2 PALOMA-1 study for its CDK 4/6 inhibitor palbociclib over the weekend suggests it likely has one. The only major issue now could be the Street's already aggressive expectations, particularly as they pertain to Pfizer filing for approval on the basis of phase 2 data and getting to the market ahead of Lilly (NYSE: LLY  ) and Novartis (NYSE: NVS  ) . 

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Pfizer Inc's Palbociclib Delivers the Goods