Seeking Alpha: BB&T Looking To Leverage Its Strengths In The Quarters Ahead

Whether you like BB&T (NYSE:BBT) as an investment or not, I think even the bears (the rational ones, at least) will acknowledge that BB&T has a well-deserved reputation for excellent cost management, a diversified revenue and fee mix, solid growth-through-acquisition, and an ability to reposition itself as the market demands. Those are all traits that are going to be critically important to the company in the coming quarters, as the bank will be integrating two large acquisitions (and a third deal that's not exactly trivial), repositioning its lending portfolio, and leveraging additional cross-selling opportunties.

How cheap (or not) BB&T is depends on your horizon. In terms of near-term performance (estimated 2015 returns on tangible common equity), BB&T does indeed look expensive relative to some of its peers. Look a few years out, though, and factor in the synergies of acquisitions, higher rates, and a different loan book and I believe that a low-double digit ROE supports a fair value in the low $40's.

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BB&T Looking To Leverage Its Strengths In The Quarters Ahead

Seeking Alpha: BRF Tastes Better Than It Looks

The real reason to own Brazilian poultry and processed food giant BRF (NYSE:BRFS) is for the company's long-term leverage to a shift away from commodity protein toward processed food (think more Hormel (NYSE:HRL)/Oscar Mayer and less Tyson (NYSE:TSN)/Pilgrim's Pride (NASDAQ:PPC)) and its growing emerging market presence out of Brazil. That said, the market is still a quarter-to-quarter weighing machine and BRF posted a confusing set of first quarter results that were better than they may first seem.

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BRF Tastes Better Than It Looks

Seeking Alpha: 3M Still Pricey, But At Least Earning Its Keep

I continue to believe that 3M (NYSE:MMM) is a pricey stock, but an exceptionally well-run industrial. CEO Inge Thulin is starting to build a strong following among analysts and investors and while 3M's performance in the first quarter wasn't without some flaws, I would argue that its performance compares quite well to the industrial sector as a whole.

There's still a lot that 3M can do. The company can afford to add more debt to the balance sheet, particularly in pursuit of acquisitions that offer growth into adjacent markets and can leverage the already-substantial infrastructure in place. I also believe that while margin improvement potential may be limited relative to its peer group, there are still opportunities for 3M to leverage its product portfolio, reap higher prices, and post some improvement in margins. I'm not going to argue that 3M is a bargain at today's price, but there aren't too many U.S.-based industrials that I'd be happier owning today.

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3M Still Pricey, But At Least Earning Its Keep

Seeking Alpha: JPMorgan's Scale Remains Both Its Boon And Bane

Banks don't get much larger, much more complex, or much more central to their ecosystem than JPMorgan Chase (NYSE:JPM). JPMorgan's scale gives it considerable operating advantages, but it comes at the cost of greater regulatory scrutiny and higher capital requirements. While JPMorgan's trading, investment banking, and commercial banking operations are helping it through a weak stretch in consumer banking, the higher capital requirements are going to increase the pressure on management to cut costs, improve returns, and restructure business relationships and failing to execute on these moves will result in disappointing returns for shareholders.

I continue to believe that JPMorgan is the best-run bank in its weight class and still a stock worth owning. I continue to value the company on the basis of returns on equity below what management believes it can achieve, but that nevertheless support a fair value above $67 today. While there are risks of further regulatory and legal challenges to the bank and a more protracted period of lackluster rates, I believe the risk-benefit balance continues to favor owning these shares.

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JPMorgan's Scale Remains Both Its Boon And Bane

Seeking Alpha: EMC Not Exactly Making Its Case

Several large tech players, including Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), and Hewlett-Packard (NYSE:HPQ), have gone through multi-year stretches where their shares underperformed due to persistent concerns about their long-term competitiveness and growth potential. To varying extents these companies have changed the tone around their businesses, but it doesn't automatically follow that EMC (NYSE:EMC) will be able to go that same route. While EMC has managed to do a credible job of keeping itself relevant within its core storage market, there are persistent concerns about whether that market is truly valuable anyway and whether EMC can reposition itself for future growth.

I'm increasingly on the "cautious yes" side of that question. EMC has historically done a good job of buying the pieces it needs to remain at the top of the market, as well as identifying assets like VMware (NYSE:VMW) and RSA that can grow the business. Expectations are not particularly demanding today, but then EMC's performance doesn't call for aggressive projections and there are increasing risks (in my view, at least) that the company will respond to the pressure its under with a larger acquisition.

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EMC Not Exactly Making Its Case

Seeking Alpha: Broadcom Still Undervalued, And With Cards To Play

While it has not kept pace with Cavium (NASDAQ:CAVM) or Avago (NASDAQ:AVGO) over the past year, Broadcom (NASDAQ:BRCM) has still made a good showing with nearly 50% increase in the value of its stock price (considerably better than rivals like Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC), and STMicroelectronics (NYSE:STM)). Better still for today's shareholders, the company has not gone as far as it can with its new focus on sustainable growth and lean operations.

The murky outlook for connectivity isn't going to resolve soon, as it's still unclear if growth in IoT applications like wearables and home automation will offset all but inevitable share loss in mobile handsets. On the other hand, Broadcom's opportunities in the networking space may yet be underestimated, particularly if new product introductions can coax more business out of Cisco (NASDAQ:CSCO). With a fair value in the mid-$40's to low-$50's, Broadcom isn't a striking bargain but still offers enough upside to be worth buying and/or holding.

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Broadcom Still Undervalued, And With Cards To Play

Seeking Alpha: Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Swiss drug and diagnostics giant Roche (OTCQX:RHHBY) is in a challenging position today. On one hand, this remains the preeminent global oncology franchise with three incredible strong mature drugs and a deep pipeline. Roche is also a strong player in several diagnostics markets and has arguably done more than any other drug company to advance the companion diagnostics concept. The other hand is the uncertainty around the cash flow streams - many investors are worried about the prospect of generic competition for those "Big Three" oncology drugs, as well as the risk that Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and AstraZeneca (NYSE:AZN) might not only beat Roche to the punch, but preclude the company from being a market share leader in oncology.

For my part, I think the push-pull of the Street has these shares more or less fairly priced. I'm content to own the fairly-priced shares of a great company, and I think Roche is exactly that. What's more, I see more potential to the upside from pipeline successes than downside risk to failures and generic competition. That said, I will once again repeat a complaint I've made multiple times regarding Roche - I'd like to see a stronger pipeline and R&D effort outside of oncology.

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Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Seeking Alpha: Ultratech Surprises To The Good, But Not Where Investors Want To See It

Investors can be fickle, and with that I have to wonder whether Ultratech (NASDAQ:UTEK) will hold on to the positive boost in sentiment that the company gained by reporting better earnings for the first quarter. Guidance for the second quarter was not as strong as could have been hoped, and there has been no easing of concerns regarding the company's ability to play a leading role in rapid thermal processing for sub-20nm chips and grab share from Applied Materials (NASDAQ:AMAT), Mattson (NASDAQ:MTSN), and/or Screen Holdings (OTC:DINRY).

Ultratech shares are still not pricing in any particularly significant ramp in sales or profits. That is in spite of real progress in diversifying the company's portfolio and recent growth in the advanced packaging opportunity. Although I cannot really model a scenario where Ultratech is shut out of the sub-20nm rapid thermal processing market and really thrives, progress with advanced packaging does at least provide some backstop. I continue to believe that Ultratech shares can generate double-digit returns from here, but this is a small position for me and I freely acknowledge that this remains much more of an "if" story than a "when".

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Ultratech Surprises To The Good, But Not Where Investors Want To See It

Seeking Alpha: Surprisingly Strong Margins Bode Well For Cameron

Across the energy sector, companies, investors, and analysts are pretty much ensconced in their storm cellars and just waiting to see how bad things get before somebody blows an "all clear". To be sure, the results and industry commentary posted by the likes of Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) has been consistent with a sharp pullback in North American onshore activity and a bleak outlook.

But that's not the totality of the story. Both Cameron (NYSE:CAM) and FMC Technologies (NYSE:FTI) reported relatively more positive prospects than expected, with subsea orders holding up better than expected. Although Cameron's drilling and valves segments have seen a sharp fall-off in activity, margins were notably stronger than expected and Cameron's diversified equipment model may help it steer through this downturn better than the Street presently expects.

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Surprisingly Strong Margins Bode Well For Cameron

Seeking Alpha: Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

The market certainly didn't like what it saw and heard from Microsemi's (NASDAQ:MSCC) fiscal second quarter results, as seen in the nearly 10% selloff on Friday. While weakness in the wireless sector is a concern and Microsemi's valuation wasn't exactly undemanding, I think this may be shaping up as a buy-the-dip opportunity for investors looking for good below-the-radar GARP stories in semiconductors.

Microsemi is looking to make significant content inroads in commercial aerospace and satellites, while continuing to benefit from a strong position in defense and a growing presence in FPGA. Add in the potential to leverage its timing expertise into the auto and industrial automation verticals, and there is worthwhile long-term potential here. I've changed little in my model after this quarter, and my fair value remains in the mid-$30's.

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Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

Seeking Alpha: Weatherford Still Pinning Its Hopes On Better Performance

Say this much for Weatherford (NYSE:WFT) - expectations had gotten tamped down enough that the stock has actually managed to outperform peers like Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), and Baker Hughes (NYSE:BHI) since my last piece. Of course, stretch that comparison out over time, and Weatherford emerges as a notable laggard. This underperformance was well-deserved, as the company consistently posted underwhelming performance from a business that was pretty much structurally incapable of doing well (by virtue of being more focused on more competitive and/or lower value-added segments).

This was supposed to be a new beginning for a leaner, better-focused Weatherford, but then the North American onshore market had its legs swept out from under it by a sudden and significant drop in oil prices. So here we are, looking at first quarter earnings, where Weatherford once again missed, and contemplating the future. I continue to believe that the company is undervalued, even if it takes until 2018 for profits to recover to last year's level, and I believe that ignores the potential upside of a business that may be more stable than believed, and better able to grow when oil prices and activity levels recover.

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Weatherford Still Pinning Its Hopes On Better Performance

Seeking Alpha: Skepticism Can Still Benefit Aspen Insurance Shareholders

Aspen Insurance (NYSE:AHL) continues to look like an opportunity within the insurance sector for a management team to drive better-than-expected results and positive re-ratings on the shares. More than a few sell-side analysts remain convinced that Aspen is going to see slower-than-expected premium growth (due largely to price pressure), higher losses, and lower than expected investment income. For its part, Aspen management believes that it is approaching a point of significant operating leverage for the insurance business and that a focus on more specialized segments within reinsurance can preserve pricing.

These shares are up about 10% from my last update on the company, and I believe they can go higher from here. I'm still not quite as bullish as management on its long-term ROE potential, but I don't think a low-to-mid $50's fair value is unreasonable today and if management can outperform the ultimate value will be higher. I'd also note that while Aspen management has been consistent regarding its views of Aspen's ability to gain share in the market and generate stronger than expected ROEs, the current move toward more M&A in the insurance sector could have suitors approaching the company once again.

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Skepticism Can Still Benefit Aspen Insurance Shareholders

Seeking Alpha: ACE Limited Earns Its Premium, But Excess Capital Weighs On Returns

P&C insurance company ACE Limited (NYSE:ACE) is another of those examples of the sometimes-frustrating difference between a company and a stock. As a company, I think anybody who follows insurance will appreciate and admire how ACE limited runs itself. As a stock, though, the shares didn't look cheap a year ago and they still don't look all that cheap today. While ACE arguably still merits a place in a long-term portfolio and has ample capital with which to build the business, it's hard for me to work up a lot of enthusiasm for buying shares today.

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ACE Limited Earns Its Premium, But Excess Capital Weighs On Returns

Seeking Alpha: GOME Getting Its Due

It took a little longer than I'd expected, but China's GOME Electrical Appliances (OTCPK:GMELY) (0493.HK) has finally seen the market come around and recognize the progress that the company has made in repositioning itself as a competitive electronics retailer for the changing Chinese marketplace. These shares have jumped more than 50% from my last update (and are up about 40% from when I named them a Top Idea) and now stand more or less at my fair value. While I think there are still good days ahead for this retailer, I don't see the unreasonable discount to fair value that gets my attention as an investor.

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GOME Getting Its Due

Seeking Alpha: After A Good Run, It's "À Bientôt" For Quebecor

Canadian (or more accurately, French-Canadian) communications company Quebecor (OTCPK:QBCRF)(QBR-B.TO) has been a pretty solid pick for me over the past fourteen months or so, as the shares have risen about 40% from my initial recommendation and 20% from my last update on the company. Now, though, the shares are trading close to fair value and I'm not convinced there's enough reward in play for the risk at hand. Whether the company plans to go forward with a national wireless development plan, whether it buys out Caisse's 25% stake in Quebecor Media, and how the company allocates capital within its existing operations all are sizable unknowns that stack up pretty evenly with the prospects of better wireless performance within Quebec.

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After A Good Run, It's "À Bientôt" For Quebecor

Seeking Alpha: Cosan Is Complex, But Built To Win

The last year has been a bad one for Cosan Ltd (NYSE:CZZ). Despite strong positions in sugar, ethanol, fuel distribution, and logistics, a struggling Brazilian economy, a weaker Brazilian currency, lumpy results, and ongoing uncertainty over the complexity of the corporate structure has taken a toll on the shares. Down more than 40% over the past year (and since my last article on the company), Cosan seems unfairly maligned and overly discounted, but this will likely never be a stock suitable for investors who can't handle risk and volatility.

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Cosan Is Complex, But Built To Win

Seeking Alpha: Alnylam Strengthens Its Clinical Case Once Again

I can understand why many investors may be skeptical of Alnylam Pharmaceuticals (NASDAQ:ALNY). With a $10 billion market cap (as of last night's close), I believe this is the most highly-valued biotech without an actual approved drug. That creates considerable downside risk when (and I do believe it's "when", not "if") a clinical disappointment occurs.

The thing is, though, that Alnylam continues to make its case stronger and stronger. Not only has the company been very active in filling out a robust clinical pipeline, but the incremental data from those drugs has also been quite strong. Alnylam's latest announcement, positive 12-month data from an open-label extension study of patisiran, only serves to highlight that this biotech may in fact be developing a collection of medicines that deliver clear and significant benefits in a variety of undertreated conditions.

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Alnylam Strengthens Its Clinical Case Once Again

Seeking Alpha: Helix Energy Solutions May Be More Volatile, But Still Valuable

A few months ago, there were some at least some analysts pointing to Helix Energy Services (NYSE:HLX) as a defensive option in energy services and a relative oasis given the company's leverage to life-of-field services and the presumed advantages of the company's purpose-built well intervention vessels. The 27% decline in the share price over the past year and one-third drop over the past six months tells you most of what you need to know about how well that thesis has played out.

Snark aside, I do think there are solid reasons to consider Helix today. There is a real risk that prospective (or even contracted) well intervention clients will opt instead to utilize already-contracted rigs for intervention work, and a lull in activity isn't helping the robotics business, but I believe the long-term outlook for well intervention here is solid. Should 2015 prove to be an aberration, I think these shares can move back into the $20's as the outlook for utilization and revenue improves.

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Helix Energy Solutions May Be More Volatile, But Still Valuable

Seeking Alpha: Gulfmark Swamped By Pessimism

Quite a bit has changed for Gulfmark Offshore (NYSE:GLF) in the year since I last wrote about the shares. Not only did the hoped-for increase in drilling activity in the Gulf of Mexico not materialize, but the sharp decline in oil prices has reduced activity across all of Gulfmark's operating regions. Making matters worse, more boats have come into service and operators have accepted big declines in dayrates (particularly in the spot market) to keep their boats working.

There are a lot of ways to frame the damage done to Gulfmark shares. The stock price is down two-thirds from a year ago and the average sell-side price target has fallen by about 70%. Just in the past few months, sell-side analysts have cut their EBTIDA estimates for 2015 and 2016 by as much as 75% in many cases.

With shares trading at less than half their tangible book value, it's tempting to ask whether the Street has gone overboard. Gulfmark does have a modern fleet that can serve major drillers like Chevron (NYSE:CVX) and offshore drilling will eventually recover. The problem is that situations like this can get a lot worse before they get better. Gulfmark may manage to go through the bottom of the cycle without posting negative free cash flow, but it will likely be a close call and it could take a while for dayrates to recover. That said, if you want to play an aggressive contrarian view that pessimism on offshore energy activity has gone too far, this would be a name to consider.

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Gulfmark Swamped By Pessimism

Seeking Alpha: Orchids Paper Products Taking Big Swings To Become A National Player

Say what you will about Orchids Paper Products (NYSEMKT:TIS), but you can't accuse the company of lacking ambition. When I last wrote about this manufacturer of private label paper products like towels, toilet paper, and napkins, the company was a regional operator focused on serving customers (largely dollar stores and Wal-Mart (NYSE:WMT)) within 500 miles of the company's Oklahoma facility. About a year later the company is now pursuing plans that will have it operating as a national player (or at least very close to it) within a year.

There is certainly risk with Orchids' strategy, as the company will be adding meaningful debt to its balance sheet and the private label market has ample competition from the likes of Clearwater Paper (NYSE:CLW), Cascades (OTCQB:CADNF) (CAS.TO), and First Quality just to name a few. I'm also a little concerned about the potential disruption to the business over the next couple of years from this ambitious expansion plan, as well as the aggressive free cash flow efficiency assumptions baked into the price. All of that said, I don't think a $30-$31 fair value is unreasonable at this point and that would argue that this is a name worth following.

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Orchids Paper Products Taking Big Swings To Become A National Player

Seeking Alpha: SLC Agricola Whammied Well Below Fair Value

In the summer of 2013, I wrote about three South American agriculture companies as Top Ideas. Two of the three, Cresud (NASDAQ:CRESY) and Adecoagro (NYSE:AGRO), have done quite well since then, despite ongoing problems in Argentina. The third, SLC Agricola (OTCPK:SLCJY), has been a skunk - declining about 25% on a triple whammy of bearish ag sentiment, bearish Brazilian land value sentiment, and the depreciation of the Brazilian real (the local currency shares are up 4% over the same time).

At the risk of doubling down on a bad call, I think this reaction is overdone, and that there is some meaningful opportunity here. Calling a bottom in corn, cotton, and soybeans is risky, at best, and I do think it is too much to hope that Brazil's farmland will continue to appreciate at strong double-digit rates. Even so, I think SLC Agricola is getting too little credit for being a very efficient operator with significant underlying land value and the potential to leverage ongoing improvements in Brazilian's transportation infrastructure.

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SLC Agricola Whammied Well Below Fair Value

Seeking Alpha: Adecoagro's Diversity Sweetens The Value

These are rough times for both agriculture and Brazil, but Adecoagro (NYSE:AGRO) may yet be a stock that investors want to look at today. Calling a bottom in agricultural commodities is a fool's errand, but the company has more going for it than just the prevailing price of corn or soy. Adecoagro has established a quality sugar/ethanol/cogeneration operation in Brazil, and should be well placed to benefit from improving conditions. It is also leveraged to the extremely discounted farmland values in Argentina, and can benefit if a new government later this year pursues a more rational set of economic policies.

Adecoagro hasn't outshined Cresud (NASDAQ:CRESY) since mid-July of 2013 (when I wrote up both stocks as Top Ideas), but a 60%-plus improvement in the stock price since then still isn't bad. I believe that it is more than 10% undervalued just on the basis of its sugar/ethanol operations, and if economic reforms in Argentina allow the real underlying value of the company's farmland there to come to the surface, a fair value in the mid-to-high teens is not out of the realm of possibility.

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Adecoagro's Diversity Sweetens The Value

Seeking Alpha: Leveraged To Changes In Argentina, Cresud Can Still Outperform

"You have attributed conditions to villainy that simply result from stupidity" (Robert Heinlein, Logic of Empire)

It is hard to imagine that Christina and Nestor Kirchner could have run Argentina's economy deeper into the ground if they tried, but the reality is that nationalization, protectionism, regulation, currency controls, and other ill-considered economic policies have seriously damaged Argentina's economy. And yet, I think there's an argument to be made that Cresud (NASDAQ:CRESY) can still make sense in an aggressive portfolio.

Cresud should benefit from a change in government later this year, particularly if various candidates follow through on their pledge to rebuild the economy in part around agriculture and pursue ag-friendlier policies (including reducing or eliminating export tariffs). If Argentina's economy does improve, I would expect Cresud to also benefit from a catch-up trade in the value of Argentina's farmland (which should be worth more than it is, given its relative productivity and access to transportation infrastructure). Last and not least, Cresud may be poised to benefit from a bottoming of the ag cycle. All of that said, a lot can still go wrong within Argentina and Cresud's sizable stake in IRSA (NYSE:IRS) means this is not just a pure ag play.

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Leveraged To Changes In Argentina, Cresud Can Still Outperform

Seeking Alpha: LTE Penetration And Restricted Competition Should Benefit SK Telecom

It's increasingly difficult for telecom service operators in mature markets to post exciting top line growth, but that's not to say that SK Telecom (NYSE:SKM) doesn't have something to offer investors. I don't believe that South Korea's leading mobile services provider is likely to grow revenue at a long-term rate much above 3%, but I do think ongoing conversions of subscribers to LTE will support ARPU and margins. I likewise believe that the Korean government's willingness to hold the line on a law limiting subsidies will ultimately be good for margins for the industry.

SK Telecom doesn't appear radically undervalued to me today, but I wouldn't expect such a large and well-followed stock to trade at a wide discount. That said, I do believe the shares ought to trade closer to $30, and that the aforementioned boosts to ARPU and margins will wind up in shareholders' pockets in the form of higher dividends.

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LTE Penetration And Restricted Competition Should Benefit SK Telecom

Seeking Alpha: MOCON Has Some Headwinds For 2015, But A Good Underlying Business

I continue to believe MOCON (NASDAQ:MOCO) is an interesting, albeit very small and illiquid, play on the growth of the food and beverage industry with a kicker from newer ventures like energy and environmental testing. As a large amount of the company's revenue comes from Europe, this could be a more challenging year due to currency headwinds and the meltdown of the oil/gas sector is not going to help the company's efforts to grow its well logging business. Even so, I believe those challenges don't derail the long-term story.

It's worth saying again that this is very much a below-the-radar stock. The daily volume may be challenging for individual investors and is virtually a no-go for institutions. Likewise with the sell-side - there's no real money to be made making a market in these shares, so there's no coverage today and no reason to expect any in the near future. Even so, I believe the shares ought to trade in the low $20's on the basis of low-to-mid teens growth over the next five years and mid-to-high single-digit long-term growth.

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MOCON Has Some Headwinds For 2015, But A Good Underlying Business

Seeking Alpha: DigitalGlobe Ready To Reap Cash Flow, But Still Has To Build Its Commercial Efforts

Still deep in the middle of the "show me" part of its story, DigitalGlobe (NYSE:DGI) remains an interesting company but a risky stock. On one hand, no other company can offer the sort of high-quality, high-resolution satellite imagery that DigitalGlobal offers. On the other hand, it's uncertain how many customers really need top-notch image quality and projections of commercial market demand could prove significantly overheated.

I am not as fond of the stock at this level as I was back in August. I do expect the company to see strong improvements in margins and free cash flow over the next few years, but a lot of that is already worked into the share price. For the stock to really work as a long-term holding, there needs to be strong demand in sectors like agriculture, mining, and energy. None of those three are in great shape today, so projections based on current conditions aren't going to look good, but the potential is there to support high single-digit revenue growth over an extended time period.

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DigitalGlobe Ready To Reap Cash Flow, But Still Has To Build Its Commercial Efforts

Seeking Alpha: First Cash Financial - The Battle Between Good Long-Term Potential And Weak Near-Term Momentum

Pawnshop operator First Cash Financial (NASDAQ:FCFS) remains stuck in a relative lull, caught up in foreign currency pressure in Mexico and a challenging operating environment in the U.S. Although margins are holding up better than expected and there are reasons to believe that both the U.S. and Mexican operations can improve as the year goes on, it seems unlikely that this company can generate the sort of headline profit momentum that would get investors interested in the shares.

As a long-term shareholder of First Cash who has seen years of ups and downs, I'm inclined to wait it out. Although I do not expect robust growth in the U.S., I do believe that further regulatory efforts to curb other types of short-term lending will benefit the pawn industry and that First Cash is well placed to benefit from consolidation. I likewise believe that the company still has many years of double-digit growth in Mexico to look forward to, as well as potential expansion into new markets. The long-term potential continues to support a fair value in the high $50s to low $60s, but the company is likely still facing a few trying quarters.

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First Cash Financial - The Battle Between Good Long-Term Potential And Weak Near-Term Momentum

Seeking Alpha: Competition And Surplus Capital Seem To Be Holding Marlin Business Services Back

Leasing remains a fundamentally attractive business, but Marlin Business Services (NASDAQ:MRLN) has gone nowhere fast in the year since I last wrote about the company. While 2015 is shaping up as a decent year for leasing activity, more and more commercial banks are turning to leasing as a source of income as low rates crimp lending profits and regulations crimp once-lucrative sources of fee income. This has created some price pressure for this small business leasing operator and that pressure has been magnified by a relatively conservative balance sheet.

I used to value Marlin on the assumption that the company would reach the high end of management's 13% to 15% return on equity target. While higher interest rates would make reaching that level easier (as leasing yields will rise faster than the company's cost of funds), I can't make the argument that 15% is a reasonable target anymore. I do believe that Marlin could be an attractive acquisition for a bank that wants to grow its small business leasing (and/or cross-sell with commercial lending), but I don't see exciting standalone value today.

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Competition And Surplus Capital Seem To Be Holding Marlin Business Services Back

Seeking Alpha: Wabtec Looking To Leverage Mandates And Grab Foreign Share

Value investors have nightmares about stocks like Westinghouse Air Brake Technologies (NYSE:WAB) (or Wabtec). The shares are expensive by most conventional metrics, but the company has roughly doubled its margins over the past decade and only scratched the surface of its market share opportunities outside of North America. Skilled at both product development and M&A, Wabtec has tied itself to the ongoing growth and use of both freight and transit rail - arguably as close as you can get to a sure thing in the industrial world.

Valuation remains a challenge when it comes to this stock. On one hand, projecting double-digit annualized revenue growth for a company that is already generating more than $3 billion a year in revenue and has more than 50% share in its core market is aggressive. On the other hand, while replicating such impressive share outside of North America is by no means guaranteed, getting only half that would still be more than enough to support 10%-plus revenue growth.

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Wabtec Looking To Leverage Mandates And Grab Foreign Share

Seeking Alpha: Dana Holding Needs To Ride Multiple Cycles

As someone whose body type is more manatee than mako shark, I've never had that much interest in surfing, but I do appreciate the skill that goes into finding the right wave and then riding it all the way in to shore. Maybe I'm stretching the metaphor a little too far here, but I think Dana Holding (NYSE:DAN) needs to do the same now, as investors are clearly concerned about the risk that supportive light vehicle and commercial vehicle cycles in North America are peaking, and other sectors are not in a state to pick up the slack.

I was lukewarm on the stock back in September, and the performance since then hasn't been great (down about 7%). Plenty of other auto and truck components companies have seen their stocks struggle to make much headway (let alone outperform), and I don't think there's anything particularly wrong here. While some of its valuation multiples suggest a relative bargain, and the company does have more going on in terms of product development than it often gets credit for, I don't see so much of a discount here to make this a must-own at a time when a lot of investors appear nervous about the sector.

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Dana Holding Needs To Ride Multiple Cycles

Seeking Alpha: Cummins Is Alluring... But Is It A Trap?

By and large nature teaches you to be wary of pretty things - they don't taste good, they have fangs, and so on. That may be an odd segue into a discussion of Cummins (NYSE:CMI), but it captures how I feel about the shares. I think Cummins is a great company, but as attractive as the shares seem, I do wonder how they will fare as the North American truck cycle peaks and many emerging markets continue to struggle.

I think investors forget that trucks and truck components are cyclical markets at their own risk. But I also think that the company can still generate long-term revenue and cash flow growth in the mid-single digits, and that the shares are trading below the value of those cash flows. I'm wary about buying into a peaking North American market, but the underlying strength of the components business, the opportunities in China, and the overall quality of the business make this a tough stock to ignore.


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Cummins Is Alluring... But Is It A Trap?

Seeking Alpha: 2015 May Be Tough, But BorgWarner Is Tougher

All in all, BorgWarner (NYSE:BWA) hasn't really gone anywhere since I last wrote about this high-quality auto parts supplier. While the shares have traded between $48 and $68, the net change since that last article has been virtually zero. That's not too surprising relative to the performance of Cummins (NYSE:CMI), Allison (NYSE:ALSN), or Tenneco (NYSE:TEN), but it is enough to have me reconsidering whether this is a buying opportunity for a stock that is rarely cheap and a company that is well-placed to leverage the seemingly inexorable drive toward more efficient vehicles.

With increasingly demanding fuel economy and emission requirements potentially adding more than $1,000 in vehicle content by 2020 (and continuing on after), I like the prospects for BorgWarner to deliver strong revenue growth and at least decent margin leverage. This year could be dicey given foreign exchange headwinds and uninspired European production expectations, and the valuation is not a screaming bargain on a cash flow basis, but few comparables seem as well-placed to generate multiple years of double-digit growth as BorgWarner.

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2015 May Be Tough, But BorgWarner Is Tougher

Seeking Alpha: Allison Transmission Hits Pause

As I have written in prior pieces, stocks like Allison Transmission (NYSE:ALSN), Cummins (NYSE:CMI), and BorgWarner (NYSE:BWA) get more interesting to me during those periods where investors start worrying about the near-term growth environment. All of these companies are, at least in my opinion, proven winners in the vehicle components space by virtue of a long-term focus on innovation and responsible year-to-year management of the business.

It would look as though Allison is heading into one of those pauses. The shares are up about 7% since my last piece, putting them in the same "meh" performance group as Cummins, BorgWarner, and Tenneco (NYSE:TEN), and management's guidance back in February for the full year was not inspiring, as revenue may decline this year. While there is certainly risk in buying these shares ahead of earnings (due in about two weeks), I think Allison still has attractive long-term growth potential and a price at or below the low $30's should be a good opportunity for long-term investors.

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Allison Transmission Hits Pause

Seeking Alpha: Progress At Synergy Pharmaceuticals, But Not Enough To Really Please Investors

Synergy Pharmaceuticals (NASDAQ:SGYP) continues to be an unusual little biotech with almost as many weaknesses or concerns as strengths. On one hand, you have a company with what could be a best-in-class drug that addresses a market that may include millions of people in the U.S. alone. On the other hand, the drug will be second-to-market and may have difficulty differentiating itself, to say nothing of the difficulties of developing the market as a whole and securing good reimbursement.

Synergy shares have risen almost 20% since my last article on the company, but not without spending most of the intervening time down about 20%. Management has possibly secured enough cash to get its lead drug to market, but the company still needs a partner (or a buyer) and that financing didn't come cheap. The prospective dilution of the financing takes my fair value down, but the shares still look undervalued with two catalysts on the way that could improve the risk-adjusted fair value by almost 30%.

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Progress At Synergy Pharmaceuticals, But Not Enough To Really Please Investors

Seeking Alpha: Ironwood Has Plenty Of Market-Development Work Ahead

Biotech investors love to speculate on the basis of what a drug could generate in future sales, but relatively few of them have the patience to stick it out and support a company as it transitions from an R&D enterprise to a commercial enterprise. In cases like Ironwood (NASDAQ:IRWD) where the company has a lot of market development work to do, patience can be even thinner.

To be fair to Ironwood, the shares have done quite well over the past year (up more than 50%), but over the trailing five years the shares are up just 5% (during a red-hot biotech market). For Ironwood to work well as a stock from here, management has to deliver on its efforts to drive patient and physician awareness and that's no easy task when a large proportion of the market can arguably be suitably managed with diet modifications or cheap OTC and generic options. While the potential is here for Ironwood shares to be worth considerably more in a few years' time, I think the potential rewards and risks are pretty well balanced right now.

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Ironwood Has Plenty Of Market-Development Work Ahead

Seeking Alpha: Miller Industries Making The Most Of An Upturn

Miller Industries (NYSE:MLR) is well off the beaten path. Practically uncovered, this leading manufacturer of tow truck chassis has nevertheless been performing pretty well of late as the company has been leveraging improving domestic demand, a growing foreign operation, and internal cost improvements into a strong run of double-digit operating profit growth.

Now, though, it seems like a fair time to wonder how much upside is left. These shares have risen about 30% since my last article and almost 50% since I wrote on them as a Top Idea in the fall of 2013, and the valuation no longer looks as skewed to "high upside, low downside" as it once was. Although I expect Miller to improve upon its long-term track record of revenue growth and free cash flow generation and I may be underestimating the potential of the company's efforts overseas, it's hard for me to call the shares dramatically undervalued. I still think Miller could generate double-digit annual total returns for its shareholders, but reward and risk look more balanced now unless/until Miller can really outperform on the margins and generate even more cash flow.

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Miller Industries Making The Most Of An Upturn

Seeking Alpha: A Strong Order Book Can Drive MTS Systems, But Watch The Margins

Over the last six months or so, MTS Systems (NASDAQ:MTSC) has remained a consistent (and perhaps frustratingly consistent) story. The stock has done a little better than the S&P 500 since my last piece, and the company has been logging good order growth, but order growth has been slowing and the company's margin trajectory hasn't been strong.

It's hard for me to work up a lot of enthusiasm for the shares at today's valuation. A large backlog of custom orders will make margin leverage more challenging, and I have my doubts as to whether today's global economic environment is conducive to a re-acceleration of orders. I presently think that the mid-$70s is about where the shares ought to trade, but I will note that if management can hit its revenue growth and margin leverage targets (both of which are above my estimates), a fair value in the high $80s to low $90s comes into play.

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A Strong Order Book Can Drive MTS Systems, But Watch The Margins

Seeking Alpha: MSC Industrial Suffering From Weakening Markets And Execution Issues

I have been a shareholder of MSC Industrial (NYSE:MSM) for a long time, and with that comes the risk of papering over problems and telling myself "oh, it's not that bad" in the interest of holding on to a position that has done pretty well for me. To be sure, I still think that MSC Industrial has a lot of potential - I think the company's combination of e-commerce, vending, catalog, and vendor-managed inventory channels can drive meaningful share gains in what is still a fragmented (but essential) industrial wholesaling market.

The problem is that management's recent execution has not been sharp and the company may be in the midst of a one-two punch of self-inflicted disappointment and weakening core markets. I still believe that MSC Industrial can outgrow the industrial MRO market and generate mid-single digit revenue growth (and double-digit FCF growth), supporting a low-to-mid $80's fair value. I also acknowledge, though, that this stock may have further to fall before hitting bottom and investors looking here for value today may want to think carefully about what the next few quarters could look like.

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MSC Industrial Suffering From Weakening Markets And Execution Issues

Seeking Alpha: Rofin-Sinar Making Progress, But Not Particularly Quickly Or Dramatically

I suppose you could approach Rofin-Sinar Technologies' (NASDAQ:RSTI) performance over the last year as something of a Rorschach test. A bear can point to the company's ongoing lackluster sales performance, bottoming margins, and lack of progress in really challenging IPG Photonics (NASDAQ:IPGP) in the growing fiber laser market. A bull could argue that the company has stabilized its revenue situation (and that currency moves make the comps worse than they really are), put in a bottom with margins, and can look to new product introductions in fiber and ultrafast lasers to help drive better results in the coming quarters.

For my part, my feelings haven't changed all that much since I last wrote on the shares. I do think that the market is still undervaluing the company's long-term growth prospects, but I don't think the undervaluation is all that great. I'm also concerned that it has taken this long for Rofin-Sinar to really get moving in fiber lasers and that the company is stuck as a legacy producer in an industry with a lot of R&D/product feature competition on the high end and growing price competition on the low end.

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Rofin-Sinar Making Progress, But Not Particularly Quickly Or Dramatically

Seeking Alpha: Slowing Growth Weighing On Tenneco

There has definitely been a split between the "have's" and "have not's" in the world of auto/truck parts and components. Companies like BorgWarner (NYSE:BWA), Dana (NYSE:DAN), and Cummins (NYSE:CMI) have been pretty unimpressive over the past year, while the likes of TRW (NYSE:TRW), Lear (NYSE:LEA), and American Axle (NYSE:AXL) have done quite well. With slowing growth across the last four quarterly reports, worries about a slowdown in North American and European demand, and weakness in commercial vehicle markets, it's not entirely surprising that Tenneco (NYSE:TEN) has found itself in the "have not" list of performers over the past year.

One of the challenges for Tenneco has been what has seemed like a constant "push to the right" with management's growth and margin improvement expectations. While Tenneco has been growing, and growing faster than underlying industry production rates, and posting better margins, the progress hasn't come fast enough to suit many analysts and investors. I was lukewarm on the stock a year ago, and I still am today. I like BorgWarner and Cummins better as long-term growth stories, but it's worth noting that Tenneco does look undervalued on what I think is a reasonably conservative DCF outlook (a rarity for auto/truck components companies) and would do likely well if off-road CV demand and/or forex headwinds were to come in better than expected.

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Slowing Growth Weighing On Tenneco

Seeking Alpha: Ship Finance Needs To Skillfully Redeploy Capital

I continue to believe that the management team at Ship Finance (NYSE:SFL) is high quality and savvy, but they do not have the luxury of standing pat with the hand they're playing. The cash sweeps from the company's renegotiated charter agreements with Frontline (NYSE:FRO) have chipped in solid cash flow and give the company exposure to higher tanker rates in 2015, but those sweeps end after this year and front-loaded drilling contracts will reduce the cash to be reaped from the drilling rig assets.

On a positive note, the company has over $200 million that it can deploy into the vessel market and the company's comparative "platform neutrality" means that management can look for value in tankers, containerships, dry bulk, or drilling rigs as the market dynamics dictate. What's more, the shipping industry is still seeing a lack of high-quality (and affordable) capital, which should work in the company's favor.

Today's valuation is arguably fair if you do not believe that Ship Finance's management can successfully redeploy that capital into vessels/charters that will earn an attractive risk-adjusted return. Historically that has not been a good bet to make and while I can appreciate the appeal of other ideas in shipping like Euronav (NYSE:EURN) and Costamare (NYSE:CMRE), I think Ship Finance is undervalued and offers an attractive yield for those investors who prefer to generate their returns from dividends versus capital appreciation.

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Ship Finance Needs To Skillfully Redeploy Capital

Seeking Alpha: Air Transport Group Delivering On Schedule

Sane and rational competition is a good thing for most industries, but especially for the operators of aircraft. While domestic passenger airlines like Delta (NYSE:DAL) and Alaska Air (NYSE:ALK) have taken advantage of improved conditions to post some good results, so too have conditions improved for freight/air cargo operators like Air Transport Services Group (NASDAQ:ATSG). In the case of ATSG, though, it's not just about a better overall operating environment, as the company's internal expense and capital management efforts have started to pay off as well.

Air Transport's shares have done alright since my last article, boosted (I think) by more optimism around the air cargo space and growing expectations that the company would start returning cash to shareholders in 2015. The 11% move in the shares since that September piece has just slightly outdone FedEx (NYSE:FDX) and outpaced the S&P 500, but has lagged Atlas Air (NASDAQ:AAWW) which has climbed about 25% in that time. With the rise in Air Transport shares, I'm not as bullish as I was before. I still think there is room for the company to outperform and an argument for a share price in the low double-digits, but a mid-teens undervaluation isn't quite enough to get my wholehearted bullishness today.

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Air Transport Group Delivering On Schedule

Seeking Alpha: Skidding Prices Have Brought Rare Sanity To Kirby's Valuation

Back in August, I reiterated what had become an all-too-familiar refrain for me in reference to leading barge operator Kirby Corporation (NYSE:KEX) - the company was a top-notch operator with strong share and a solid balance sheet, but the stock was just too expensive for my comfort. Since then, plunging oil prices and increased concerns about pricing and barge utilization, not to mention serious pressure in diesel engine services business, have more than a third of the stock's market cap away.

I still hesitate to call Kirby a clear-cut bargain. The shares are admittedly more in tune with historical valuation averages, but the market is still showing a willingness to pay more for Kirby's growth than it will pay for other transport companies. I'm not so bothered by this; I see no reason for "valuation equality" and I think companies that have established themselves as superior operators ought to get premium valuations and Kirby is one of those. So while hard-core value hounds may still balk at this price, and there certainly are reasons to worry that the shares could drop further before bottoming out, I think long-term investors who look to "buy the dip" on good companies ought to take a closer look here.

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Skidding Prices Have Brought Rare Sanity To Kirby's Valuation

Seeking Alpha: ARC Document Solutions' Recovery Still Off Most Investors' Radar

ARC Document Solutions (NYSE:ARC) is still an unknown name to a large swath of Wall Street. Two sell-side analysts cover the stock and there has been no coverage on Seeking Alpha since my piece a year ago. During that year, though, these shares have climbed about 20% as the company has continued to make progress in transitioning from a heavy reliance on architecture/engineering/construction (or AEC)-based reprographics toward managed print services, color printing, and digital archiving.

I've been impressed with what I've seen in terms of the company's ability to offer an expanded array of services to its traditional customer base while also trying to expand beyond its roots in the AEC sector. I believe ARC is still poised to benefit from a recovering AEC sector and success in expanding outside of the AEC sector would offer some upside. I think the shares are undervalued below $10 but a disappointing fourth quarter did cost the company some credibility and management needs to rebuild confidence in the prospects for consistent high single-digit/low double-digit EBITDA growth.

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ARC Document Solutions' Recovery Still Off Most Investors' Radar

Seeking Alpha: HollySys Needs To Ease Concerns Over Slowing Automation And Rail Orders

While I thought that the shares of HollySys Automation Technologies (NASDAQ:HOLI) might have been getting ahead of themselves back in August of 2014, the shares managed to go up another 10% or so before disappointing fiscal second quarter results and concerns about the outlook chopped off about one-third of the company's market valuation.

HollySys shares have rebounded about 20% from the recent low, but there are still some real questions about the near-term outlook. Investment in the company's largest automation sectors has slowed significantly and management's efforts to address higher-growth sectors and new markets will take time to bear fruit. Elsewhere, the potential of new rail products is matched against worries of substantially lower rail investment spending in the next couple of years.

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HollySys Needs To Ease Concerns Over Slowing Automation And Rail Orders

Seeking Alpha: Lincoln Electric Facing A Tougher Year

Timing can be one of the most frustrating parts of investing. I don't have any real doubt that Lincoln Electric (NASDAQ:LECO) will continue to be a well-run and successful industrial company over the long-term, but I definitely have some doubts about how 2015 and 2016 might go and whether the Street has fully worked the risks into the valuation.

If you are the sort of investor who can see a holding go down 10% to 20% and not worry much about it, this could be a good time to consider Lincoln Electric. With headwinds like a weak oil/gas sector, weak demand in Brazil and Russia, and an uncertain outlook for U.S. exports, estimates may have to come down and that will likely pressure the stock. On the other hand, this is a company with consistent double-digit ROICs, growing share, and growth opportunities in areas like automation and I wouldn't try to get too precise with timing the low point in sentiment as this is a good long-term holding that likely won't hang out in bargain territory for all that long.

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Lincoln Electric Facing A Tougher Year

Seeking Alpha: Is Gordmans Stores Pulling Out Of Its Tailspin?

It's funny how much easier it can be to walk when you stop shooting yourself in the foot. That may not be a completely fair opening line for discussing Gordmans Stores (NASDAQ:GMAN), as not all of the company's problems have been self-inflicted, but there have been more than enough missteps in merchandising, marketing, and supply chain management to suggest that the bullet-ridden shoe still fits.

Credit where due - new (or relatively new) CEO Andy Hall seems to be moving quickly to fix many of the serious issues at Gordmans. The market has certainly noticed, with the shares more than doubling since my last article in the fall of 2014. I don't see as much potential in the shares as before, but if Gordmans' new approach to merchandising can boost traffic more than I expect, if supply chain improvements lead to better margin leverage, and/or if the company can credibly re-accelerate its store opening schedule there could still be upside.

That said, investors would do well to remember that retail is savagely competitive and very few companies can establish a compelling brand identity or assortment that makes them a "must have" in the retail sector over the long term.

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Is Gordmans Stores Pulling Out Of Its Tailspin?

Seeking Alpha: Israel Chemicals Takes A Long-Term Potash Call Option

Friday's news that investment and marketing partner Israel Chemicals (NYSE:ICL) was bidding for the remainder of the shares of Canadian junior potash producer Allana Potash (OTCPK:ALLRF) shouldn't have come as a major surprise, though the 40%-plus move in Allana's shares certainly reflected the skepticism that had been worked into that company's share price. In many ways this is a marriage of convenience if not necessity - Allana was going to struggle to get its operations in Ethiopia into production on its own and Israel Chemicals increasingly needs to think beyond its home base of Israel if it wants to ensure its long-term future.

I had been bullish on Allana for some time (having written about it here, here, and here) and this buyout is a somewhat bittersweet endpoint. If the deal goes through, it will be at a price more than a quarter above where I first started writing on the stock … but I don't think investors should celebrate a 25%'ish return on such a risky name. On the other hand, fundamentals in the potash market have been getting worse and follow-up due diligence on Allana's Ethiopia project prominently includes words like "inhospitable", "unwelcoming", "difficult", and "challenging".

For Israel Chemicals, this is, at best, a long-term answer to a growing problem. The Israeli government is looking to take a bigger cut of the profits that the company generates from within Israel and labor difficulties are creating additional challenges. Buying Allana doesn't exactly make ICL a global conglomerate with a greater specialty chemical focus (something I think needs to happen eventually), but it does at least add a potential viable source of potash outside of Israel.

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Israel Chemicals Takes A Long-Term Potash Call Option