Monday, June 30, 2014

The Motley Fool: MannKind Stock: Afrezza Approved at Last, But Will Sales Disappoint?

MannKind's (NASDAQ: MNKD  ) long and arduous path to FDA approval has finally reached a happy ending, with the company announcing late on Friday that the agency had approved Afrezza, the company's inhaled insulin product. Approval is a major event for MannKind, but the company still needs a commercial partner and the approved label for Afrezza doesn't do the product/company any particular favors.

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MannKind Stock: Afrezza Approved at Last, But Will Sales Disappoint?

Saturday, June 28, 2014

The Motley Fool: Auxilium Pharmaceuticals Inc Joins the Buyout Bonanza

Amidst high-profile deals like Pfizer's pursuit of AstraZeneca, Actavis's acquisition of Forest Labs, and Valeant's (NYSE: VRX  ) pursuit of Allergan, it might be easy to forget that it is not just large companies that can benefit from tax inversion deals that lead to a company reestablishing its headquarters in a lower-tax jurisdiction. Auxilium (NASDAQ: AUXL  ) , a small specialty pharmaceutical company, has thrown its hat into the tax inversion ring with an announced acquisition of Canada's QLT (NASDAQ: QLTI  ) . Investors did not universally cheer the news, though, and it's unclear just how much benefit Auxilium will really see from this move.

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Auxilium Pharmaceuticals Inc Joins the Buyout Bonanza

Seeking Alpha: Turbulence In Indonesia Is Manageable For Freeport-McMoRan

For all of the attention paid to Freeport-McMoRan's (FCX) issues and challenges with the Indonesian government, it hasn't hurt the stock all that much recently. The shares are up close to 30% over the past year, trailing First Quantum (OTCPK:FQVLF), but otherwise surpassing mining equities with big copper exposure like BHP Billiton (BHP), Antofagasta (OTCPK:ANFGY), Southern Copper (SCCO), and Glencore PLC. That strikes me as a pretty rational response, as although Indonesia is still important to Freeport, that importance declines pretty sharply within a decade and Freeport still has some valuable cards of its own to play.

My basic bullishness on Freeport is predicated on a few factors. First, I think Freeport has a strong collection of copper-producing properties around the world that have offset the political/operating risks in any one location. Second, I think copper is a good place to be in the coming years. Third, I think deepwater Gulf of Mexico E&P assets are still undervalued. Last, I think there's still an "Indonesia discount" in place that overstates the actual value risks to Freeport. All in all, I think these shares should trade closer to $40.

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Turbulence In Indonesia Is Manageable For Freeport-McMoRan

Seeking Alpha: Can Natural Gas Development Drive PetroChina Further?

Having recently gone over the investment prospects for Italy's Eni (E) and China's CNOOC (CEO), I went into PetroChina (PTR) expecting to find another state-owned energy company trading at a discount to fair value. I think that is what I found, though deciding on the "right" EV/EBITDA multiple involves pretty arbitrary decisions of whether to add a half-point here or there that move the fair value quite a lot. I think PetroChina is undervalued today if it can deliver the mid-single digit EBITDA growth that analysts expect, but significant reserve potential has to be viewed in the context of rising production costs and a significant degree of interference from the government at all levels of the operation and end markets.

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Can Natural Gas Development Drive PetroChina Further?

Seeking Alpha: C&J Energy Services Goes All-In With The Nabors Deal

Small-cap energy services company C&J Energy Services (CJES) doesn't want to be small any longer. C&J has done a good job building its fracking business on the back of modern, high-spec equipment and the ability to execute well on challenging or complex jobs, but now the company is looking to be an integrated services provider that can compete more effectively with Halliburton (HAL), Schlumberger (SLB), and Baker Hughes (BHI). While I appreciate the willingness of C&J management to make such a bold move, I do wonder about the price paid and the quality of assets the company is getting in return.

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C&J Energy Services Goes All-In With The Nabors Deal

Seeking Alpha: Differentials All The Difference For Cabot Oil And Gas

There are a lot of numbers supporting an argument that Cabot Oil & Gas (COG) is one of, if not the, best dry gas producers in the country. The company has shown exceptional capital productivity, as well as low lifting and finding & development costs. Add that to some top-notch acreage in the Marcellus, and Cabot has delivered top-notch adjusted production growth and returns on employed capital.

That's not what is driving the shares right now, though. All of the positives at Cabot seem to be taking a back seat to worries that production growth in the Marcellus will overwhelm takeaway capacity and force Cabot to accept weak differentials. This is most definitely a risk, as every $0.25/mmbtu has a roughly $5 to $6 impact on NAV, but I believe growth-hungry midstream and pipeline companies will address these infrastructure challenges, leaving Cabot meaningfully undervalued today.

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Differentials All The Difference For Cabot Oil And Gas 

Seeking Alpha: Teck Resources Hunkering Down

Whether it's BHP Billiton (BHP), Glencore (OTCPK:GLNCY), or Anglo American (OTCPK:AAUKY), the basic story of weak commodity prices is dominating the investing environment. It's even worse for Teck Resources (TCK) as this Canadian mining company is very heavily weighted toward metallurgical coal and prices continue to scrape along the bottom. Teck Resources has the benefit of unusually low production costs for its major products (coal, copper, and zinc), but this low price environment is pushing the company to cut costs and curtail expansion projects and leading investors to worry about the dividend. I do like this stock as a way to leverage better base metals and an eventual recovery in met coal, but there is room to quibble about the fair value today.

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Teck Resources Hunkering Down

Seeking Alpha: Owens & Minor And Medical Action Industries Find A Win-Win

Mutually beneficial deals may not be all that common in the med-tech world, but I think Owens & Minor's (OMI) acquisition of Medical Action Industries (MDCI) fits the bill. I was bullish on Medical Action Industries back in December and even though Owens & Minor is paying well above my fair value estimate, Owens & Minor has what I think is unique cost leverage in this deal to justify the price. The added value from this deal does push up my fair value estimate for Owens & Minor above today's price, but I'm still not exceptionally bullish given the harsh realities of the medical distribution industry.

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Owens & Minor And Medical Action Industries Find A Win-Win

Seeking Alpha: Aviva PLC Getting Better, But Maybe Not This Fast

Aviva PLC (AV) is up about 85% since management first laid out a comprehensive restructuring plan in July of 2012. While that sounds like an impressive return, it's not quite as remarkable when compared to the 70%-plus gains for Prudential PLC (PUK) and Legal & General (OTCPK:LGGNY), and the 50%-plus gains for Allianz (OTCQX:AZSEY) and AXA (OTCQX:AXAHY). Aviva management has done a good job of turning over its senior management and progressing with cost-cutting, shedding non-core businesses, and reducing leverage. Evaluating Aviva's fair value is a little more challenging, but even with the challenges presented by a change in the key U.K. annuities market, Aviva looks about 10% undervalued today.

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Aviva PLC Getting Better, But Maybe Not This Fast

Seeking Alpha: Defensive Allianz Not Feeling The Love

Germany-based multinational insurance giant Allianz (OTCQX:AZSEY) has amply demonstrated that it is a well-run insurer with strong underwriting policies and capital allocation discipline. Unfortunately, it's a lot of what investors don't seem to want these days - it's focused on slower-growing Western European markets when investors want to tap the growth in Latin America and Asia, it's defensive when investors want offense, and it hasn't been particularly aggressive in keeping up with AXA (OTCQX:AXAHY) or Aegon (AEG) in terms of new product development. Although I do like AXA more, I think the market is underestimating the value of this lagging giant today.

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Defensive Allianz Not Feeling The Love

Thursday, June 26, 2014

Seeking Alpha: ING Groep NV Looks Significantly Undervalued Today

Dutch banking giant ING Groep NV (ING) hasn't been ignored over the past year by any means. As the company has continued to make solid progress with its restructuring efforts, the U.S.-listed ADRs have risen more than 50%, surpassing most of the Nordic banks but not quite matching the torrid run in the Spanish banks. Even with that significant run, I don't think today's price fully reflects the company's potential to return to double-digit ROEs relatively quickly nor its solid underlying RoTEs. Although ING won't likely pay a dividend for at least a year and there could be some noise with the impending IPO of NN Group and the further sell-downs of SulAmerica and Voya (VOYA) (formerly ING US), the potential here appears to be among the best in Europe right now.

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ING Groep NV Looks Significantly Undervalued Today

Seeking Alpha: Santander Looks Pricey Relative To Its Capital And Growth Prospects

The economy in Spain has been looking a little better and that has led Spanish banking shares to do quite a lot better, with Bankia up close to 120%, CaixaBank up about 90% and the big boys BBVA (BBVA) and Santander (SAN) up around 60%. Credit recovery can be a powerful factor in bank stock appreciation and incoming bad credits in Spain are getting better for Santander. On the other hand, Santander Mexico (BSMX) hasn't been doing as well as I'd hoped, Santander Brasil (BSBR) is losing share, and the company's credit position is still quite weak relative to other large banks. These shares already seem to reflect a lot of optimism about improving interest spreads and loan growth and I don't see much value at these levels.

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Santander Looks Pricey Relative To Its Capital And Growth Prospects

Seeking Alpha: Major Market Recoveries Can Take Cemex Further

Conditions are looking better in core Cemex (CX) markets like the U.S., Mexico, the U.K., and Germany, but there's still quite a bit further to go before conditions are back to normal. Improving construction trends in the U.S. and increasing public spending in Mexico should boost cement and ready-mix demand, helping pricing, capacity utilization, margins, and cash generation. The process of valuing Cemex is a little convoluted, but if Cemex can reach management's goals for mid-cycle EBITDA in 2016/2017, low-to-mid teens appreciation over each of the next three years doesn't seem unreasonable.

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Major Market Recoveries Can Take Cemex Further

Wednesday, June 25, 2014

The Motley Fool: A Smart Move for Endo International?

It's hard to find fault with Endo International PLC (NASDAQ: ENDP  ) . Management has done a great job of unwinding the mistakes of past management and has pursued an aggressive growth-by-M&A strategy that has the company well-positioned for the future and domiciled in low-tax Ireland. Over the past two months management has given investors another two examples of its ability to generate value – settling a large part of its vaginal mesh litigation and announcing another accretive M&A transaction.

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A Smart Move for Endo International?

Seeking Alpha: POSCO Looks Serious About Building Value

It looks like a new day for POSCO (PKX), Korea's giant steel company, as new management has made it clear that the empire-building of the past is going away in favor of a greater focus on margins, returns on capital, and businesses with long-term competitive advantages. The shares look like a decent enough value on near-term EBITDA, but the long-term potential is more attractive if the company can get back to mid-single digit ROEs in a year or two and double-digit ROEs down the road.

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POSCO Looks Serious About Building Value

Seeking Alpha: Yara International Offers A Tricky Balance Of Quality And Value

There's more to Yara International (OTCPK:YARIY) than run-of-the-mill commodity fertilizers, but I have to wonder whether the market is already sufficiently pricing in the advantages of the company's increasing leverage to value-added and specialty products. The ADRs have been quite strong over the past year (up about 29%) while most fertilizer stocks have lagged the market, and up almost 20% over the past three months despite very weak urea prices. I don't want to undersell the company's ability to leverage lower input costs and premiums for its nitrate and NK sales, but the valuation already appears to factor in a pretty healthy recovery from this trough.

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Yara International Offers A Tricky Balance Of Quality And Value

Seeking Alpha: Can Magellan Find A Route To An Even Higher Multiple?

Magellan Midstream Partners, LP (MMP) stands out in the MLP crowd for a lot of positive reasons. The company is a large player in refined product distribution, and is expanding its crude oil transportation business. The company's fee-based business model generates consistent performance, and the company's decision years ago to acquire its GP units and unwind the incentive distribution rights gives it a simpler structure and much lower cost of capital. Add in growth-oriented capital projects and a respectable balance sheet, and there's a lot to like.

Unfortunately, I think the Street likes it a little too much. I would definitely not bet against this company, but the valuation seems to imply either a level of distributable cash flow growth that I find improbable, or a discount rate that I find unpalatable for equity investments. Other readers may not be bothered by the low discount rate given the many good qualities of this business, but I just don't see enough upside for my own investment purposes.

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Can Magellan Find A Route To An Even Higher Multiple?

Seeking Alpha: CNOOC Has Growth Issues, But A Low Valuation Too

Production growth is a familiar issue for a number of large-cap energy companies, with ExxonMobil (XOM), BP (BP), and Royal Dutch Shell (RDS.A) all looking for minimal annual production growth over the next three years. Instead, these companies have largely prioritized their balance sheets and cash payouts to shareholders over growth. CNOOC (CEO), China's largest offshore operator, should be looking at better production growth in the coming years (possibly in the high single-digits over the next five years), but recent shortfalls have brought that growth into question, and a lot depends on ongoing turnaround efforts at the company's Nexen subsidiary.

The compensation for this less-than-perfect near-term performance is an undemanding valuation. With below-average lifting costs, above-average exposure to oil, and better growth prospects, I don't think it is unreasonable to give CNOOC an EBITDA multiple on par with global majors. Doing so produces a fair value above $196 share, leading to more than 10% upside and a respectable dividend to boot.

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CNOOC Has Growth Issues, But A Low Valuation Too

Seeking Alpha: Enbridge Energy Partners Working A Tricky Balance

A lot is going on these days in the energy MLP sector, as companies try to balance their needs for cash distribution growth to shareholders/unitholders, keep a sustainable balance sheet, and fund the capital spending needed to exploit what could well be a once-in-a-career buildout of new infrastructure to handle North America's growing energy output.

When it comes to Enbridge Energy Partners, L.P. (EEP), the balancing act is a little trickier. Enbridge's (ENB) recent decision to cut its top incentive distribution rights is a positive for EEP, as was a drop-down to Midcoast Energy Partners, L.P. (MEP), but the company is still stretched on its distribution coverage and has a delicate balancing act ahead of it in managing billions of dollars of growth-oriented capex.

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Enbridge Energy Partners Working A Tricky Balance

Tuesday, June 24, 2014

The Motley Fool: A Big Step Forward for Vertex Pharmaceuticals, Inc

There was no shortage of uncertainty and controversy around Vertex's (NASDAQ: VRTX  ) phase 3 trials for its cystic fibrosis (or CF) combo therapy. Bernstein analyst Geoffrey Porges was perhaps the most visible bear recently, asserting on June 16 that "the probability of failure in this trial is high". Now that Vertex has actually released the data, the bears are licking their wounds – the results of the TRAFFIC and TRANSPORT studies were not perfect, but a "B+" ought to be more than enough to get FDA approval, leading to upwards of $5 billion in incremental revenue.

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A Big Step Forward for Vertex Pharmaceuticals, Inc

Seeking Alpha: Williams Companies Offers Growth, Upside, And Risk

Williams Companies (WMB) isn't quite as complicated as Energy Transfer Equity (ETE), but this company too has turned to a model that prioritizes holding GP interests and stimulating MLP growth through drop-downs and growth-oriented capex. Key holding Williams Partners (WPZ) has had its challenges with the erratic progress in the Marcellus and Utica shales, but the combination with Access Midstream Partners (ACMP) should de-risk the cash flow that moves on to Williams Companies, while a slew of growth-oriented projects raise the prospect of double-digit dividend growth across the next decade.

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Williams Companies Offers Growth, Upside, And Risk

Seeking Alpha: Devon Has Come A Long Way, But Doesn't Seem Done Yet

Simplification and improvement has done some good for Devon Energy (DVN). Devon was once a diverse E&P with an unwieldy collection of assets, but a multiyear program of sales and purchases has created a focused onshore North American player with quality assets in the Permian, Barnett, Eagle Ford, Anadarko, Woodford, and Rockies, as well as underrated Canadian oil sands operations. As the shares have risen more than 50% over the past year, it is hard to say these improvements have gone unnoticed, but Devon still has some upside on an "as is" basis, as well as further self-improvement potential.

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Devon Has Come A Long Way, But Doesn't Seem Done Yet

Seeking Alpha: The Market Seems To Be In Tune With Southwestern Energy

Southwestern Energy (SWN) has emerged as one of the top natural gas E&P companies in the U.S., with large positions in both the Fayetteville and Marcellus regions. Southwestern has managed to lower its costs through significant integration, including company-owned rigs and midstream assets, but the company is looking at a significant slowdown in balance sheet-adjusted production growth (a major driver of value). Today's valuation looks pretty fair and reasonable, suggesting that upside is not surprisingly tied to better natural gas prices and/or positive exploration results in New Ventures acreage.

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The Market Seems To Be In Tune With Southwestern Energy

Seeking Alpha: Strong Operations In Mexico Buying Time For BBVA In Spain

Diversification has paid off for BBVA (BBVA). While Spain's economy continues to struggle, operations in Mexico, the U.S., and South American countries like Chile, Peru, and Colombia have continued to generate much-needed profits from their capital base. Although there may be too much optimism about a pronounced near-term turnaround in Spain, BBVA is nevertheless positioned to benefit from consolidation, better consumer conditions, and long-term credit repair.

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Strong Operations In Mexico Buying Time For BBVA In Spain

Monday, June 23, 2014

The Motley Fool: Boston's Watchman Under New FDA Scrutiny

Pipeline development has proved frustratingly difficult for cardiology-focused companies like Medtronic, St. Jude Medical (NYSE: STJ  ) , and Boston Scientific (NYSE: BSX  ) over the last few quarters. St. Jude modified their clinical trial plans for renal denervation and left atrial appendage closure because of enrollment worries against competing devices from Medtronic and Boston Scientific, while Medtronic's renal denervation program failed a pivotal study and its peripheral drug-coated balloon program has likewise disappointed. 

When it comes to Boston Scientific, challenging reimbursement has already gotten in the way of the growth of its Alair bronchial thermoplasty system and now it looks like the Watchman LAA device will be coming to market a year later than expected, if the FDA lets it go to market at all.

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Boston's Watchman Under New FDA Scrutiny

Seeking Alpha: HSBC Has A Valuable Core Franchise, But A Lot Of Work To Do

The giant global franchises of Standard Chartered (OTCPK:SCBFF), Citigroup (C), Deutsche Bank (DB), and HSBC (HSBC) definitely didn't live up to the notion that a global footprint would insulate them in tougher times. In the particular case of HSBC, it got to a point where some started asking whether it was actually a good global bank or just a very good Hong Kong bank with a lot of foreign market albatrosses dragging it down.

The truth, as is often the case, is somewhere between. HSBC certainly made some big mistakes in markets like the U.S., and the China operation has its challenges today, but Hong Kong continues to be exceptionally profitable and the large low-cost deposit bases in the U.K. and U.S. give the company attractive leverage to rising rates.

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HSBC Has A Valuable Core Franchise, But A Lot Of Work To Do

Seeking Alpha: Shinhan Financial: A Great Korean Bank, And Priced Like It

Investors have gotten a little skittish about the prospects for an ongoing economic recovery in South Korea, as large exporters and sectors like property seem to be recovering but smaller businesses see more tepid results. That has stalled out the momentum in Korea's banking sector, but conservatively managed Shinhan Financial Group (SHG) continues to perform well from an internal operations standpoint. Although I see prospects for Shinhan to average a low teens earnings growth rate over the next five years, there just doesn't seem to be much value in the shares at this price.

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Shinhan Financial: A Great Korean Bank, And Priced Like It

Seeking Alpha: Still Waiting For A Little More Value At Canadian Western Bank

The last six months have gone more or less as I expected at Canadian Western Bank (OTCPK:CBWBF). I thought the valuation was a little steep last time around, and while the shares haven't done horribly (up about 4% before dividends), they've lagged other Canadian banks and significantly lagged the broader Canadian market. Unfortunately the story remains the same - I say "unfortunately" because I think Canadian Western is a really good bank and a great way to play ongoing growth in Western Canada, but I just don't see much undervaluation right now.

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Still Waiting For A Little More Value At Canadian Western Bank

Friday, June 20, 2014

The Motley Fool: Who Will Win This $45 Billion Market?

The diabetes drug market continues to be a street fight between major pharmaceutical companies like Sanofi (NYSE: SNY  ) , Novo Nordisk (NYSE: NVO  ) , and Lilly (NYSE: LLY  ) . Considering that about $45 billion a year in spent on therapeutic agents for diabetes (drugs and insulin), it's no wonder why these companies compete so aggressively and look to gain labeling advantages through their clinical trials. 

This year's American Diabetes Association annual meeting has come and gone, with not a lot in the way of market-shifting events. Sanofi comes out of the meeting looking a little weaker, Novo a little stronger, and Lilly looks like the most aggressive player in the space.

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Who Will Win This $45 Billion Market?

The Motley Fool: Will Shire's Journey End in a Ring?

"I should like to save the Shire, if I could," J.R.R. Tolkien, The Fellowship of the Ring.

British rare disease specialist Shire PLC (NASDAQ: SHPG  ) has become a hot property in this latest round of pharmaceutical merger mania. Not only does Shire offer a relatively low tax rate by virtue of its Irish corporate domicile, the company's focus on rare diseases fits in with the desire of many pharmaceutical companies to focus on therapeutic areas where reimbursement is high and the barriers to entry are substantial.

That Shire continues to get marriage offers is no guarantee that it will consent to do so. Not unlike AstraZeneca, Shire sees itself as a buyer, not a seller, and it may well take a prohibitively high number to seal a deal.

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Will Shire's Journey End in a Ring?

Seeking Alpha: As Brazil Has Slowed, Itau Unibanco Has Battened Down The Hatches

As Brazil's largest private sector bank, and the second-largest bank overall with about 16% of system assets, Itau Unibanco's (ITUB) ("Itau") fortunes are certainly tied to the health of the Brazilian economy. That doesn't sound like such a good thing, as Itau Unibanco and Bradesco (BBD) are both looking for sub-2% GDP growth in Brazil for the next two years and early-stage delinquencies are starting to tick up. Management runs a tight ship, though, with better efficiency and NPL ratios than its rivals, and management has been shifting toward lower-risk loan types, building up its fee-generating businesses, and expanding outside of Brazil. The shares are not hugely cheap today, but still hold some long-term appeal.

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As Brazil Has Slowed, Itau Unibanco Has Battened Down The Hatches

Seeking Alpha: DBS Group Offers A Quality Play On Growth In China And ASEAN

Singapore's DBS Group (OTCPK:DBSDY) (DBSM.SI) is a different sort of bank for those readers more accustomed to the likes of Citigroup (C) or Wells Fargo (WFC). Residential lending is a smaller part of DBS Group's business and the company instead makes a significant amount of profits by extending trade and supply chain financing to companies operating in/from China, Hong Kong, and Taiwan. Management has made a lot of improvements to the operating model since 2009 and while the company's growing Chinese footprint presents some risks, there's a respectable amount of upside in the shares of one of Asia's best banks.

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DBS Group Offers A Quality Play On Growth In China And ASEAN

Seeking Alpha: Energy Transfer Partners And Equity Offer Complicated Value

If you like complex, convoluted investing stories, Energy Transfer Partners, LP (ETP) and Energy Transfer Equity, LP (ETE) could be right up your alley. Energy Transfer Partners is one of the largest energy MLPs in the country, and a major player in natural gas transportation/storage, along with significant assets in midstream, natural gas liquids, and fuel distribution. Energy Transfer Equity is not only the owner of the general partner interest in ETP, but also the incentive distribution rights and about 52.5 million units, as well as the owner of additional GP/IDR interests in other partnerships.

MLPs are not for every investor, as they are subject to meaningfully different tax treatment. Nevertheless, both ETP and ETE look interesting at these levels. ETP offers a higher yield and substantially less growth, while ETE could be looking at high-teens distribution growth for multiple years and significant upside to an LNG export project in Louisiana.

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Energy Transfer Partners And Equity Offer Complicated Value

Seeking Alpha: Lundbeck Delivers Some Data-Driven Upside

Danish specialty pharmaceutical company H Lundbeck A/S (OTCPK:HLUYY) (LUN.CO) is facing down some steep patent cliffs, as about two-thirds of the company's first revenue loses patent protection over the next two and a half years. Management hopes that significant new drugs launched with partners Takeda (OTCPK:TKPYY) and Otsuka (OTCPK:OTSKY) will more than fill the gap, and some recent updates on key drug Brintellix have been positive. Lundbeck is also looking at upside potential from desmoteplase, brexpiprazole, and Northera (which Lundbeck is acquiring in its announced deal for Chelsea Therapeutics (CHTP)), though these are higher-risk options today. All told, while Lundbeck remains a risky proposition, there is still upside to over $30.

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Lundbeck Delivers Some Data-Driven Upside

Thursday, June 19, 2014

The Motley Fool: Is Pfizer Putting the Car-T Before the Horse?

Immuno-onocology is grabbing a large share of the headlines in oncology drug development these days and generating significant buzz for Big Pharma companies including Merck and Bristol-Myers Squibb (NYSE: BMY  ) . While Pfizer (NYSE: PFE  ) has not been seen as a leader in IO drug development, the company does have antibodies in development targeting IO targets like 4-1BB, OX-40, and PD-1. Now the company has added more shots on goal to its IO platform, striking a collaboration agreement with French biotech Cellectis to develop chimeric antigen receptor T-cell therapies, an unproven but high-potential emerging therapeutic class.

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Is Pfizer Putting the Car-T Before the Horse?

Seeking Alpha: Share, Prices, And Costs Seem To Be Working In Nucor's Long-Term Favor

Commodity stocks can be frustratingly counter-intuitive during recoveries, as it is often the inferior companies that outperform. I don't know if anybody will argue that Nucor (NUE) isn't the best-run steel company in the business (or at least very near the top), but over the past year the shares of AK Steel (AKS) and U.S. Steel (X) have dramatically outperformed Nucor.

This year has been a little more frustrating, though, and Nucor has been outperforming on a relative basis - just barely negative while Steel Dynamics (STLD), AK Steel, U.S. Steel, and ArcelorMittal (MT) have fallen around 5% to 15%. Nucor doesn't immediately jump out as a cheap stock on conventional multiples, but the company's cost-reduction efforts should improve long-term margins and the company is still waiting for the recovery in construction that should boost demand, utilization, and margins.

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Share, Prices, And Costs Seem To Be Working In Nucor's Long-Term Favor

Seeking Alpha: RF Micro Devices Near A Major Transformation

No company ever announces a merger/acquisition and tells its shareholders that they expect to waste their money and produce no long-term benefits from the transaction. But even after adjusting for hope and optimism, I think the logic of the RF Micro Devices (RFMD) - TriQuint (TQNT) merger holds up. Together, the two companies should be able to achieve meaningful operating cost synergies while offering a comprehensive line of RF products for the mobile market and emerging Internet of Things market.

In terms of value, though, I think the market has the transaction pretty well figured out. There is upside if the two companies can quickly generate more than $125 million in cost synergies, but $10 to $11 looks about right for RF Micro Devices today and likewise $16.50 to $18 for TriQuint.

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RF Micro Devices Near A Major Transformation

Seeking Alpha: Popular's Credit Is Getting Better Faster Than Its Market's

Six months ago, I thought Puerto Rico's Popular (BPOP) was one of the better bargains in the banking sector, even if the company's elevated bad debt, outstanding TARP balance, and dependence upon the weak PR economy made it a higher-risk pick. Since that piece, shares have risen about 14% - not bad when the regional bank ETFs (iShares US Regional Banks (IAT) and SPDR S&P Regional Banking (KRE)) are both up less than 10% and fellow PR bank First Bancorp (FBP) has been flat, while Doral (DRL) has been crushed.

In my view, Popular has continued to do what it needs to do to get back in investors' good graces - leverage its leading market share to best effect with loan yields and deposit costs, work down the bad loans, and build up capital to repay the over $900 million in outstanding TARP funds. Popular remains a credit repair story and probably deserves to trade below tangible book value today, but ongoing credit repair could take these shares into the mid-$30s.

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Popular's Credit Is Getting Better Faster Than Its Market's

Seeking Alpha: Eni's Solid Upstream Overshadowed By Multiple Downstream Issues

To paraphrase Mark Twain, Italy's Eni (E) is a good upstream company spoiled. In this case, the spoilage comes from money-losing capital sinkholes in the downstream operations like its Gas & Power and Refining & Marketing operations. To be sure, Eni's upstream operations are not perfect or risk-free, as the company has a recent history of disappointing on production growth targets and its production is heavily weighted toward some pretty dicey countries. It's hard for me to argue strongly for buying Eni over other majors like Statoil (STO) (which I own), but I will say that sentiment is pretty bearish on Eni relative to its solid production pipeline and further progress in reforming its downstream operations and/or selling off subsidiary stakes could unlock some worthwhile upside.

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Eni's Solid Upstream Overshadowed By Multiple Downstream Issues

Seeking Alpha: Glencore PLC: A Mining Major With A Different Approach

Switzerland-based Glencore PLC (OTCPK:GLNCY) has certainly taken a different road on its way to becoming one of the world's mining majors. Glencore has no iron ore exposure at present and has instead built around quality base metal and copper assets. Glencore also has extensive agriculture assets and one of the largest physical marketing operations in the world. The shares do deserve a premium for that marketing business, and though the shares may not look like much of a bargain from an EV/EBITDA perspective, there's still credible value here.

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Glencore PLC: A Mining Major With A Different Approach

Wednesday, June 18, 2014

Seeking Alpha: China Shenhua Muddling Through Better Than Most

Six months ago I was pretty down on Yanzhou Coal (YZC), as I didn't like the company's asset mix or cost structure relative to other Chinese coal companies like China Shenhua Energy (OTCPK:CSUAY) or Indonesia's PT Bukit Asam (OTCPK:TBNGY). Since mid-December, Yanzhou's ADRs have fallen more than 13%, while Shenhua's shares have fallen about 7% and Bukit Asam's have risen about 5%. In that time, coal markets really haven't improved much as supply continues to stay well ahead of demand and producers are loath to close capacity.

Not all coal companies are the same, though, and this could be a reasonable time to consider China Shenhua. The company has large thermal coal reserves, but also highly integrated coal-fired power generation and railway assets. Though I'm not expecting a fast turnaround in Chinese coal prices, Yanzhou has one of the best cost structures in the business and its parent company could inject addition value-creating assets into the business. At a somewhat distressed multiple of 6x EBITDA these shares offer a decent total return, while a more normalized 7x multiple would offer a good return.

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China Shenhua Muddling Through Better Than Most

Seeking Alpha: BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

Chemical companies have been basking in some investor love, as companies like Dow Chemical (DOW), Wacker Chemie (OTC:WKCMY), Clariant (OTCPK:CLZNY), and DuPont (DD) have seen their shares rise from 26% to 53% over the past year. With that, the "fair" multiple on sales and EBITDA has risen more than 10% as investors bid up companies that are exposed to global growth and have succeeded in restructuring operations away from basic/commodity markets.

BASF (OTCQX:BASFY) is a tricky stock within that context. BASF is the largest chemical company in the world and a top player in numerous markets. The company also has above-average profitability despite a sizable ongoing commitment to R&D. Despite that, the shares have lagged, as the local shares (BAS.XTA) have risen less than 20% over the past year. Stretch out the comparisons to two or three years, though, and BASF's performance is much more competitive - suggesting that BASF was simply early in getting recognized for its qualities. BASF as a lot of positives from a qualitative standpoint, but it's tough to argue the shares are undervalued unless you believe that it's somehow "different this time" for chemical companies.

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BASF Has Lagged On A Relative Basis, But Excels On Its Own Merits

Seeking Alpha: Less Bad Is Good Enough For Cheung Kong

It's hard to call the Hong Kong property sector healthy when prices just recently crossed the point where they are up for the year, but this "less bad than expected" market in Hong Kong has been enough to send the shares of property developer Cheung Kong (OTCPK:CHEUY) up about 15% so far this year. Better yet, Cheung Kong continues to trade at a low implied multiple on its Hong Kong and China property businesses, while management retains its focus on mass market customers and low gearing. Add in an increasing willingness to take the business wherever it needs to go to find good returns, and there is enough remaining upside to merit a closer look.

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Less Bad Is Good Enough For Cheung Kong

Seeking Alpha: Hutchison Whampoa's Juggling Act Continues To Create Value

Investment conglomerate Hutchison Whampoa (OTCPK:HUWHY) (or "HWL") is one of those stocks that will test an investor's ability and desire to really get into the fine details of all of its operations. From ports to telecom to property development to retail and infrastructure, HWL's management team operates a large asset base spread across the world. Although investment company structures aren't always the best in terms of reflecting full value of the underlying assets, HWL has been doing well with its retail, telecom, and property ventures, while also increasingly allocating capital away from less promising businesses. Trading around 10% to 20% below fair value, these shares appear to offer solid value with a highly diversified business mix.

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Hutchison Whampoa's Juggling Act Continues To Create Value

Tuesday, June 17, 2014

The Motley Fool: Is Roche's Dividend In Danger?

Swiss giant Roche (NASDAQOTH: RHHBY  ) swims in treacherous waters. The pharmaceutical industry can be a challenging place to operate, as companies must spend $1 billion or more to develop a new drug and a majority of those that are put into development will fail to reach the market. Even if a company can beat the odds and get a drug to market, it will almost certainly face multiple competitors and a limited time of patent protection before generic manufacturers can sell knock-offs. 

Even with that backdrop, Roche looks like a good bet to continue paying a healthy dividend. Roche has established itself as the leading player in biologic drugs and oncology, and a rich pipeline (backed by spending nearly 20% of sales dollars on R&D) bodes well for the future. Biosimilars are a threat to the company's established products and emerging areas like immuno-oncology have no shortage of would-be rivals, but Roche pursues a good balance of risk and reward with its pipeline and steady debt reduction efforts should free up even more capital in the coming years.

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Is Roche's Dividend In Danger?

Seeking Alpha: PNC Financial Looks Undervalued, With Quality To Spare

Not unlike Fifth Third Bancorp (FITB), PNC Financial (PNC) is looking to offset relatively sluggish growth in its traditional core markets by expanding into the faster-growing Southeast region, while also prioritizing mortgage market share growth and operating efficiencies. PNC doesn't offer the highest exposure to higher rates, but the company generates above-average yields at below-average costs and with solid credit quality. Growth expectations seem fairly modest, and PNC shares don't seem to be getting the full value benefit of its likely trend in returns on capital.

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PNC Financial Looks Undervalued, With Quality To Spare

Seeking Alpha: Can Grantley Open The Gates For Mellanox's Growth?

It has been a pretty frustrating case of "hurry up and wait" at Mellanox (MLNX). While there is little doubt that Mellanox is the technology and market share leader in InfiniBand, the value of that leadership has come into question. Mellanox has seen growth improving in its storage and Web 2.0 markets, the high-performance computing market has been sitting on its hands ahead of a major new product cycle from Intel (INTC). If the Grantley cycle can do for Mellanox what the earlier Romley cycle did, Mellanox could finally live up to some of that growth potential, but a series of disappointments and more muted expectations for Grantley have made this more of a "show me" story.

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Can Grantley Open The Gates For Mellanox's Growth?

Seeking Alpha: Bluebird Takes Flight On Very Promising, Very Early Data

Investors have had good reason to be skeptical of Bluebird Bio (BLUE). Gene therapy was the "next big thing" in the mid-to-late 1990s and while it is too negative to say it has thus far produced almost nothing of value, it certainly hasn't lived up to "the medicine of tomorrow, today!" hype. While I was bullish on Bluebird Bio back in February, I wasn't entirely surprised to see the shares of this very early-stage, high speculative stock sell off when the biotech sector started wheezing shortly thereafter.

Now, investors have some enticing data to mull over. Over the weekend, Bluebird Bio presented data on two patients in its HGB-205 study of LentiGlobin gene therapy in beta-thalassemia, and while two bluebirds may not make a summer, the surprisingly strong response in these two patients suggests that Bluebird may just have something big on its hands.

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Bluebird Takes Flight On Very Promising, Very Early Data

Seeking Alpha: FormFactor Coming Into Shape

In early December of 2013 I wrote that FormFactor (FORM) looked like an appealing risk-reward trade for more aggressive investors, as the market seemed to be very down on the prospects for the company to grow its SoC probe card business and improve its margins. Since then, the shares are up over 50%, with a big run over the past few weeks driven by improved guidance for the second quarter. There remain valid ongoing concerns as to whether FormFactor can improve margins enough to generate attractive long-term cash flow streams, but technology transitions in memory and logic could make the next couple of years very interesting for FormFactor.

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FormFactor Coming Into Shape

Seeking Alpha: Multi-Color Light On Growth, But Stronger On Margins

I suppose a cynic could say that "it's always something" when it comes to Multi-Color (LABL), as this label solutions company has found it challenging to generate attractive organic revenue growth and margin leverage in the same period. Price competition certainly isn't helping, as the company continues to see significant competition in lower value-added label categories. Even so, the company continues to churn out a pretty meaningful free cash flow stream and scale-derived margin leverage and long-term deleveraging suggest more FCF generation down the road. Multi-Color doesn't appear to be priced as a tremendous bargain today, but relatively modest outperformance on gross margin could still lead to meaningful surprises.

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Multi-Color Light On Growth, But Stronger On Margins

Monday, June 16, 2014

The Motley Fool: 3 Undervalued Amgen Growth Opportunities to Watch

Amgen (NASDAQ: AMGN  ) hasn't put as many eggs into the megablockbuster basket as Merck or Bristol-Myers Squibb, nor has it sought to utterly dominate a therapeutic area the way Biogen Idec may dominate MS. What Amgen does offer, though, is a deep pipeline that goes well beyond the much-discussed PCSK9 cholesterol market. Biosimilar risk is a real threat to the current marketed portfolio, and Amgen does not have much to offer within the hot immuno-oncology sector. Less-appreciated opportunities in psoriasis and migraine could offer upside as analysts start working those into their models, though.

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3 Undervalued Amgen Growth Opportunities to Watch

The Motley Fool: Medtronic Inc Changes the Game

In one dramatic swoop, Medtronic (NYSE: MDT  ) answered a lot of the questions that investors had about its plans for its overseas cash balance, it's long-term growth plans, and whether it wanted to enter additional "power alley" med-tech markets. Medtronic has announced that it will be acquiring Covidien (NYSE: COV  ) in a cash-and-stock transaction that is not only a tremendously large med-tech deal, but one that makes an exceptional amount of sense. 

Medtronic has changed the med-tech game on multiple levels. Not only will the new Medtronic be the most diversified company in med-tech, with leadership in over a half-dozen major therapeutic markets, but the size of this deal may well spur actions to close the tax inversion loopholes that companies have been using to reduce their tax bills. Most importantly of all, it's a good deal for Medtronic and Covidien shareholders, though some will see the tax ramifications as less than ideal.

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Medtronic Inc Changes the Game

The Motley Fool: Will Apple's New Health Care Push Pay Off?

In pursuit of the general idea that anything that can be Apple (NASDAQ: AAPL  ) or Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) should be Apple or Google, both of these tech giants are getting increasingly serious about their efforts to develop products targeting the medical device space. A recent Freedom Of Information Act request from AppleToolbox revealed details of a meeting between Apple and FDA officials that suggests a pretty high level of interest on the part of Apple in determining what they can, and cannot do, in relation to the marriage of consumer electronics, technology, and health.

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Will Apple's New Health Care Push Pay Off?

Saturday, June 14, 2014

Seeking Alpha: Flat Rates And Business Transitions Challenge Fifth Third

All things considered, Fifth Third (FITB) is a good bank dealing with what should be relatively short-term challenges. The states that make up the core of the business, including Ohio, Michigan, Indiana, and Illinois, aren't seeing particularly good growth right now, but manufacturing activity appears to be improving and Fifth Third is focusing on growing its presence in more promising markets like Florida and North Carolina. Fifth Third does appear to be undervalued on the basis of its quality, but management may find it challenging to deliver the better-than-high single-digit earnings growth that already seems factored into the price.

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Flat Rates And Business Transitions Challenge Fifth Third

Seeking Alpha: For KLA-Tencor, Strong Expertise Battling With Volatile End-Markets

When it comes to wafer fab equipment (or WFE) companies, strong market share and technical expertise is no guarantee of quarter-to-quarter or year-to-year performance. Foundries and IDMs have their own schedules when it comes to buying lithography, etch, deposition, inspection, RTP, or other tools and in combination with overall market demand and internal yields, that can lead to very erratic order patterns.

I fully expect KLA-Tencor (KLAC) to get its share of orders, and I believe the company's strong position in process diagnostic and control will serve it well as Taiwan Semiconductor (TSM) ramps up in 20nm and other foundries move toward 14nm/16nm FinFET and 3D NAND. KLAC has been an okay performer over the past year, lagging Applied Materials (AMAT) and Lam Research (LRCX), and outperforming others like ASML (ASML) and Hitachi High-Tech (OTC:HICTF), but it doesn't seem strikingly cheap relative to its historical valuation range and my cash flow estimates.

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For KLA-Tencor, Strong Expertise Battling With Volatile End-Markets

Seeking Alpha: Avago Definitely Getting Some Benefit Of The Doubt

A little more than a year ago, I wrote about Avago Technologies (AVGO) and liked the prospects for the stock based both on its strong position in FBAR filters (an important component for handsets) and its under-appreciated positions in areas like fiber optic transceivers, SerDes ASICs, industrial fiber optics, and motion encoders for markets like networking, automation, and so on. In the 14 months since that piece, the shares have risen more than 110%.

I'm not quite as bullish on Avago now, though. I have a positive opinion of the LSI acquisition on balance, but I feel like sentiment has improved at a much greater rate than the long-term business prospects. While I do think Avago can exceed its own targets for reaping benefits from the LSI deal, it would appear that management pretty much has to if the stock is going to remain strong. I do like the newly-diversified Avago's business mix a little more and I think the company can do big things in both wireless and networking, but I think it takes some pretty ambitious assumptions to drive a significantly higher value estimate.

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Avago Definitely Getting Some Benefit Of The Doubt

Seeking Alpha: Taiwan Semiconductor Keeps Building For The Next Act

If Glengarry Glen Ross gave us the motto of "always be closing", maybe Taiwan Semiconductor (or "TSMC") (TSM) can be said to follow a motto of "always be changing". TSMC not only has to stay at the edge in terms of process nodes, it has to keep pace with the volume needs and demands of its client base. This year will mark the fifth straight year of well above-average capital spending, as TSMC looks to keep its position as a leader foundry provider to communication chip designers and compete with Intel (INTC), Samsung, GlobalFoundries ("GloFo"), and United Microelectronics (UMC) in the emerging 10/nm14nm/16nm FinFET (or "FF") nodes.

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Taiwan Semiconductor Keeps Building For The Next Act

Seeking Alpha: Altera: A Semiconductor Catch-Up Play Long In The Making

More than half of the sell-side analysts covering Altera (ALTR) have a Buy/Strong Buy rating on the shares, with many of them calling for a catch-up trade relative to Xilinx (XLNX) driven by gains in 28nm and a strong start with Intel's (INTC) 14nm process. Discounted free cash flow does suggest that these shares are undervalued enough to be worth a good look, but management needs to deliver better margins and investors should not underestimate the challenges in competing with Xilinx.

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Altera: A Semiconductor Catch-Up Play Long In The Making

Thursday, June 12, 2014

Seeking Alpha: GOME Continues To Gain Share And Evolve Toward A Logistics-Driven Model

The best thing I can say about early December Top Idea GOME Electrical Appliances (OTCPK:GMELY) (0493.HK) is that the shares did quite a lot better than rival Suning and only very slightly worse than the Hang Seng Index. Even so, the 5% decline over that stretch is quite disappointing.

I continue to believe that GOME is on the right track with its focus on becoming an "omni-channel" retailer and driving a competitive advantage through low-cost/high-service logistics and supply chain management. Online appliance and electronics retailers seem to be pulling back from aggressive price competition and the company is taking share in Tier 1 and 2 cities. The online strategy is still a work in progress, but with a focused strategy to improve its product mix and logistics costs, I believe these shares are still meaningfully undervalued.

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GOME Continues To Gain Share And Evolve Toward A Logistics-Driven Model

Seeking Alpha: Amicus Therapeutics Still A "Show Me" Story

When investors are keen on a sub-sector within biotech, as they have been relatively recently for immuno-oncology, RNAi, and liver disease, companies and their stocks often get the benefit of the doubt, with gaudy sales forecasts and approval odds well in excess of historical norms. On the flip side, and in a case like Amicus Therapeutics (FOLD), once investors have largely written off a company it can be very hard to regain their interest and confidence.

To be very clear, I believe Amicus still has a difficult road ahead of it. The data on lead compound migalastat are not clean and sufficient evidence of efficacy to drive approval (and/or market adoption) is no guarantee. Likewise, the company's 3-in-3 strategy to get three rare disease enzyme replacement therapies (or ERTs) into the clinic over the next three years is ambitious but high-risk. These shares do still appear to be undervalued, but I can frankly understand why many investors may conclude that there are better reward-to-risk opportunities elsewhere in biotech.

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Amicus Therapeutics Still A "Show Me" Story

Seeking Alpha: Core-Mark: A Great Small-Cap Play On Convenience

The convenience store (or "C-store") industry represents nearly $225 billion in in-store retail sales every year in the U.S. and Canada, and every one of those 175,000 or so stores needs distributors to deliver the goods they stock on their shelves. Core-Mark Holdings (CORE), the second-largest C-store distributor, continues to offer some attractive leverage to this market. Up about 18% from my prior write-up, the valuation isn't quite as compelling, but I believe Core-Mark can continue to be a share-gainer in a fragmented market, while leveraging the margin and cash flow benefits of providing value-added services to smaller clients.

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Core-Mark: A Great Small-Cap Play On Convenience

Wednesday, June 11, 2014

The Motley Fool: Is Medtronic a Buy? What Analyst Day Revealed

Medtronic's (NYSE: MDT  ) June 6 analyst day was by no means light fare, as the company crammed quite a bit of information into more than seven hours. While action-oriented investors are likely disappointed that management's commentary would seem to suggest a bid for Smith & Nephew (NYSE: SNN  ) is not too likely, management laid out a vision of an evolving global device market where Medtronic is likely to be among the few players with the scale to really cover all of the major bases. While Medtronic shares do not appear priced for supreme near-term market outperformance, they still make sense within a diversified portfolio that tends toward the conservative.

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Is Medtronic a Buy? What Analyst Day Revealed

Seeking Alpha: Overlooked Hurco Still A Good Play On Europe's Recovery

Never let it be said that I won't go to some lengths to find good ideas, particularly in the industrial space. Following recent pieces on such household names (alas, there's no sarcasm or irony font) like KUKA (OTC:KUKAY), a German industrial robot company, and Semperit (OTC:SEIGY), an Austrian rubber products company, I turn back home with a quarterly update on Hurco (HURC), an American machine tool company that generates about two-thirds of its revenue in Europe, and particularly in Germany.

Hurco remains a difficult company to benchmark, as its focus on user-friendly high-spec machines for small manufacturing jobs (either small companies or larger companies doing small/prototype batches) sometimes puts it outside the overall trends in machine tool activity in North America and Germany. Likewise, Hurco just isn't that much like DMG Mori Seki (OTCPK:MRSKY) (GIL.XTA), Makino (OTCPK:MKMLF), or Okuma (OTC:OKUMF), and privately-held Haas Automation isn't any help either as a comp. All of that said, I believe the Hurco story is developing well and the company remains a good play on the improving economic and manufacturing activity in Europe.

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Overlooked Hurco Still A Good Play On Europe's Recovery

Seeking Alpha: Receptos Continues To Hit Its Marks

Receptos (RCPT) has given its shareholders a pretty wild ride, even for an early-stage biotech. Up around 125% from when I wrote on it as a Top Idea and 39% from my Christmas Eve update, the intervening time has seen the shares shoot up to $55 (90% higher than the price on Christmas Eve) on expectations for strong Phase II data and rumors of a buyout before the shares were cut in half over two months as that speculation cooled and momentum investors bailed out of biotechs.

Now the roller coaster is shooting higher again as those strong Phase II data on RPC1063 in relapsing multiple sclerosis have materialized. Receptos still has to successfully complete its Phase III study, but the promise in multiple sclerosis can nearly support the stock on its own, let alone adding in the potential from the ulcerative colitis indication and additional compounds in the pipeline.

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Receptos Continues To Hit Its Marks

Seeking Alpha: Neurocrine In "Hurry Up And Wait" Mode

"Long moments of boredom punctuated by moments of sheer terror" is a relatively common expression used in reference to war, but it can also apply to biotech investing, to a limited extent. Stocks like Neurocrine Biosciences (NBIX) are inarguably driven in large part by relatively infrequent news on clinical trial outcomes and partnering arrangements, with the shares left to drift on speculation and overall biotech sentiment in the long spaces between.

Neurocrine management is certainly not just sitting on its hands as they work to put '854 into Phase III development for tardive dyskinesia and Phase II development for Tourette's, and as partner AbbVie (ABBV) moves Elagolix through clinical trials in endometriosis and uterine fibroids. Between final agreement on a Phase III '854 protocol and top line data from one Phase III endometriosis study, investors still have important data to look forward to this year, but there will be some long waits in between.

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Neurocrine In "Hurry Up And Wait" Mode

Seeking Alpha: Allscripts Still In The Middle Of A Challenging Transition

The executive management team at healthcare IT company Allscripts Healthcare Solutions (MDRX) has already accomplished quite a bit to its credit. Product quality has improved, clients have better product roadmaps, and higher investments in R&D should enhance the company's long-term competitiveness. The company has also carved out a solid position in the emerging population health space.

All of that said, Allscripts has just kept pace with Cerner (CERN) over the past one to two years, and lagged growth darling athenahealth (ATHN). Not only is the healthcare IT space brutally competitive in the largely penetrated acute care setting, but the company has not yet proven that its transition to a recurring revenue model (including SaaS) will support healthy margins. Allscripts does not look all that cheap, which is quite common in the healthcare IT space, though the company's relative valuation will hold more appeal to those investors who believe management can deliver EBITDA growth in the high teens or low 20%'s in the coming years.

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Allscripts Still In The Middle Of A Challenging Transition

Tuesday, June 10, 2014

Seeking Alpha: Valhi Seems Like A Tough Way To Seek Value

Holding companies and conglomerates can offer investors an opportunity to take advantage of management expertise and invest in industries/markets that are otherwise difficult for retail investors to access. Companies like PICO Holdings (PICO), Cosan (CZZ), Brookfield Asset Management (BAM), Macquarie Infrastructure (MIC), and Sprott (SCP.TO) all offer that to some extent, while better-known names like Berkshire Hathaway (BRK.A) and Icahn Enterprises (IEP) could likewise be considered variations along that theme.

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Valhi Seems Like A Tough Way To Seek Value

Seeking Alpha: Can Micro-Transport Be A Major Driver For Kandi Technologies?

There's a lot of weirdness around Kandi Technologies (KNDI). These shares have risen more than 50% in the past year and about 340% over the past two years on the sizzle of the company's opportunity and potential in all-electric vehicles (or EVs) within China, even though it has never been particularly successful at selling electric ATVs, go-karts, or other products, let alone passenger autos. Like many Chinese companies, it employs a Byzantine holding company structure, employs a largely unknown auditor, and used a reverse merger to list its shares in the U.S..

On the other hand, this company boasts a joint venture with Geely (OTCPK:GELYY), one of the largest domestic auto manufacturers in China. Together, these companies are addressing a "micro-transport" market in China that could support hundreds of thousands of vehicles without needing to compete directly with the likes of Tesla (TSLA), BYD (OTCPK:BYDDY), BMW (OTCPK:BAMXY), and a host of joint ventures between Chinese domestics and larger global car companies. While working Geely doesn't guarantee the quality of Kandi, it does offer some assurance that there are real products and a real market here. While I think the fair value is far beyond murky and very difficult to quantify at this point, as "opportunity stocks" go, Kandi at least has a good story to tell.

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Can Micro-Transport Be A Major Driver For Kandi Technologies?

The Motley Fool: Will Merck's Bold Hepatitis C Play Pay Off?

There is a significant (and sometimes larger than expected) gap between "looks like it can compete" and actually competing with a rival that has both strong data and a big head start, but Merck (NYSE: MRK  ) continues to show that it is serious about competing with Gilead (NASDAQ: GILD  ) and AbbVie (NYSE: ABBV  ) in the market for advanced therapies for hepatitis C (or HCV). The company's nearly $4 billion acquisition of Idenix (NASDAQ: IDIX  ) is an expensive affirmation of that long-term focus, but one that could start paying off before the end of the decade.

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Will Merck's Bold Hepatitis C Play Pay Off?

Monday, June 9, 2014

Apologies for the delays

Sorry for the interruption in my regular stream of articles. I was under the weather for a large part of last week and through the weekend. Things are looking better, though, so I think a return to a more normal production schedule is imminent. Thanks for your patience.

Seeking Alpha: After A Big Run, Can Danske Bank A/S Still Impress?

It's hard to complain about the performance of the Nordic banks over the past year. When Swedbank (OTCPK:SWDBY) is one of the laggards with a 14% yoy rise in the local stock price, you know you're talking about a fairly solid group. Amidst yoy performances like DNB (OTCPK:DNBHF) (up 23%), Nordea (OTCPK:NRBAY) (up 28%), SEB (OTC:SEBYF) (up 40%), Danske Bank A/S (OTCPK:DNSKY) has been a clear winner with a nearly 54% rise over the past year on new management, a new operating plan that emphasizes tighter operations, and expectations for improved funding costs and loan loss realizations.

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After A Big Run, Can Danske Bank A/S Still Impress?

Seeking Alpha: Can New Ownership Add A Spark To TransMontaigne Partners LP?

Change can be a scary thing for a business like TransMontaigne Partners LP (TLP), whose terminaling and storage operations generally thrive on consistency. With Morgan Stanley's (MS) Morgan Stanley Capital Corp. closing in on a sale of its GP interest in the MLP (and likely its stake in the LP units as well), though, investors should hope that a motivated new owner can do more with these assets and bring in some growth.

Up roughly 20% move over the last three months, I don't think TransMontaigne has been trading just on the prospects of new ownership. Other terminal operators like Magellan Midstream Partners LP (MMP), Sunoco Logistics Partners LP (SXL), and NuStar Energy LP (NS) have also been enjoying strong interest over the last few months. The MLP sector as a whole has been seeing better fundamentals (good first quarter earnings), low interest rates, and a fair bit of structural activity, with M&A picking up and multiple announcements regarding repurposing and converting infrastructure assets. Against that backdrop, I don't see TransMontaigne Partners as a particularly interesting MLP from a value perspective, but the sale process could put the company on a better long-term path.

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Can New Ownership Add A Spark To TransMontaigne Partners LP?

Seeking Alpha: Competition And Momentum Reversal Hammer Natural Grocers

Owning a popular momentum stock can be a thrill ride, but if and when the company stumbles (and most growth companies do stumble at least once), the thrills turn to chills as investors stampede to the exit. Such is the case lately for Natural Grocers by Vitamin Cottage (NGVC) ("Natural Grocers"), where the shares have lost more than half of their value in less than three months.

While the drop at Natural Grocers has certainly been accelerated by a disappointing same-store sales figure for the fiscal second quarter, this has been a lousy stretch lately for comps and peers within the natural/organic food space like Whole Foods (WFM), Sprouts (SFM), and The Fresh Market (TFM). I think it's much too early to say that Natural Grocers is done as a growth concept, but it may take a while for institutions to come back to the segment.

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Competition And Momentum Reversal Hammer Natural Grocers

Seeking Alpha: Societe Generale Continues To Grind Forward

The last three months haven't been the easiest stretch for Western European banks, and Societe Generale (OTCPK:SCGLY) is down around 6% over that stretch. BNP Paribas (OTCQX:BNPQY) has been even weaker (down more than 10%), while Credit Agricole (OTCPK:CRARY), UniCredit (OTCPK:UNCFF), Credit Suisse (CS) and many others have done better but are still down over that short stretch.

Not all that much has changed, but banks have moved to a different part of the recovery phase. First quarter results were pretty "meh," including those at Societe Generale. The stories have shifted from significant cost of equity and balance sheet improvements to slower, grind-it-out return on equity improvements. I continue to believe that Societe Generale is undervalued and one of the more attractively-priced large bank stories today, but it's going to take time and the Street still isn't convinced that Societe Generale is going to produce the double-digit ROE on schedule and/or improve its lagging Russian operations.

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Societe Generale Continues To Grind Forward

Tuesday, June 3, 2014

Seeking Alpha: Triangle Petroleum Building To Bigger Things

"It takes money to make money" is an all-time great cliché, but it happens to be very true in the energy sector, where acreage and wells both cost money. Triangle Petroleum (TPLM) hasn't been shy about spending money, whether it is to drill wells in its core Williston Basin acreage, build up its RockPile services business, or acquire additional acreage. Although I do have some concerns about the pace at which Triangle is adding debt and the real quality of recently acquired acreage (not to mention the ever-present risks that go with operating a still largely prospective energy company), I believe the shares are still undervalued to a meaningful degree.

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Triangle Petroleum Building To Bigger Things

Seeking Alpha: Oceaneering Seems A Little Underloved

This hasn't been a fun stretch for offshore energy service companies. Land-oriented service providers like Helmerich & Payne (HP) and Halliburton (HAL) have performed nicely so far this year, but the offshore companies like Oceaneering (OII), Tidewater (TDW), and Helix (HLX) have been left behind on worries that actual activity is going to underwhelm as large energy companies pay much greater attention to costs and free cash flow generation.

I think the details matter. I would be more nervous about owning shares in companies heavily leveraged to drilling activity and those dependent upon Brazil for a large share of revenue. I also have much less interest in the offshore construction and seismic spaces as a whole. But in the case of Oceaneering, I believe the Street is overlooking what should be a profitable multiyear opportunity in drilling support and vessel support.

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Oceaneering Seems A Little Underloved

Seeking Alpha: NetScout's Performance Management Managing Good Performance

Competing with a varied mix of hardware, software, and integrated rivals like Danaher (DHR), IBM (IBM), and CA (CA) is no picnic, but NetScout Systems (NTCT) believes it has found a winning combination with a mixed hardware and software approach to network and application performance management. The company still generates the bulk of its revenue from three verticals (finance, telecom services, government), but the relatively new nGeniusONE platform should meaningfully expand its addressable market and could fuel strong growth for multiple years. While backward-looking valuation metrics may not scream "bargain" on these shares, high single-digit free cash flow would support a fair value in the mid-$40s.

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NetScout's Performance Management Managing Good Performance

Monday, June 2, 2014

The Motley Fool: 3 Reasons to Like Zoetis

Wall Street is often willing to pay extra to sleep better at night, and Zoetis (NYSE: ZTS  ) is the sort of business that won't often lead investors to lose much sleep. The largest player in animal health, Zoetis is in the top three in every relevant sub-market it addresses and is often #1 or #2, but its leading product is less than 10% of sales and the top 10 list of products is less than 40% of revenue. Helping Zoetis' valuation even further is the relative lack of alternatives – companies like Neogen, Virbac, and Dechra are much, much smaller (and harder to own for larger funds), while the big comparables remain locked within large pharmaceutical companies like Merck (NYSE: MRK  ) , Sanofi (NYSE: SNY  ) , and Lilly (NYSE: LLY  ) .

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3 Reasons to Like Zoetis