Saturday, October 10, 2015

Seeking Alpha: The Market Is Skeptical Toward ON Semiconductor ... As It Should Be

"Under-promise and over-deliver" is popular corporate speak, but apparently not a central part of the operating philosophy at ON Semiconductor (NASDAQ:ON). Although I do think that ON Semiconductor has some good things going for it and has done a respectable job of improving its cost structure, there has been a trend in place here for some time of promising more than is actually delivered.

That's an admittedly harsh opening statement on a company that, on balance, I still like. I wasn't all that fond of the shares back in March (and the price has fallen about 20% since), but the stock's performance relative to Texas Instruments (NASDAQ:TXN), Maxim (NASDAQ:MXIM), and Fairchild (NASDAQ:FCS) hasn't been too bad over the last year (or three years), though NXP (NASDAQ:NXPI) has handily outperformed the group. With this pullback, I think the shares are once again a more interesting prospect, particularly given growth opportunities in wireless, computing, and autos, but for as much as the performance of these shares may be tied to future revenue growth and margin improvements, a stronger sense of credibility from management may be the biggest potential catalyst of all.

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The Market Is Skeptical Toward ON Semiconductor ... As It Should Be

Brief apology on posting

I want to apologize to folks who depend on my posts here to keep up with my work - I've obviously forgotten to post some articles in a timely fashion. I'm happy to say that there's no "bad news reason" for this, and instead it's just a byproduct of being a little busy and sometimes forgetting to do it at night.

On a related note, I probably won't be writing as much this coming week (even though its earnings season), as my wife has multiple appointments and it's tough for me to "get in the groove" for a half-day or less of writing. But here's hoping the bloodwork and next infusion go smoothly on Wednesday!

Seeking Alpha: Neurocrine Biosciences Racks Up Some Much-Needed Good News

Stock prices in the biotech sector are getting carpet-bombed as investors bail out of the sector, but this is still fundamentally a data-driven industry where good data almost always win out in the end. To that end, Neurocrine Biosciences' (NASDAQ:NBIX) recent run of good news should encourage shareholders even as the market has turned cold on these once-outperforming shares.

Neurocrine Biosciences remains a challenging biotech to value, due in part to the fact that the markets that the company's lead drugs are targeting could prove to be substantially more robust than they seem at present. Even with what I believe to be relatively conservative assumptions, though, Neurocrine's shares look appealingly undervalued.

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Neurocrine Biosciences Racks Up Some Much-Needed Good News

Seeking Alpha: AGT Food And Ingredients Still Offers Interesting Upside

Canada's AGT Food and Ingredients (AGT.TO)/(OTCPK:AGXXF) has two characteristics that I really like in a publicly traded company - it does something that most investors find mind-numbingly tedious (sorting and processing pulses) and it is shifting its business up the value chain. I can't say that these efforts have gone unnoticed, as the shares are up about 7% since my last article and up 78% since my first article on the company for Seeking Alpha, but I believe the company's leadership position in pulse processing and nascent efforts in food ingredients can generate enough cash flow growth to make these shares interesting on a long-term basis.

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AGT Food And Ingredients Still Offers Interesting Upside

Seeking Alpha: Core-Mark Continues To Deliver With A Plan That Can Drive Further Growth

While I had some concerns about Core-Mark's (NASDAQ:CORE) valuation back in March, and there was a noticeable pullback in April that lingered for a few months. The shares have fought back to just above break-even for the year as this large convenience store (or "C-store") distributor continues to deliver good same-store sales growth and EBITDA leverage.

My concerns about the valuation are still in place, but I do still see opportunities for Core-Mark to outperform in terms of customer acquisition (competitive wins and M&A), improved infrastructure utilization, and greater penetration of value-added services. Were the shares to offer up another 10%-plus pullback, I would certainly be more interested, but this at least looks like a credible hold for now.

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Core-Mark Continues To Deliver With A Plan That Can Drive Further Growth

Seeking Alpha: Coloplast Is A Rare Story On Multiple Levels

You don't see many large-cap med-tech stocks trade for more than seven times sales, but then you don't see many companies in that space logging high-single digit sales growth and excellent margins/returns on capital with a significant opportunity to grow sales and profits even further. That's the basic story on Coloplast (OTCPK:CLPBY) - a Danish med-tech company that has built an excellent business by focusing on some decidedly un-sexy areas of healthcare like ostomy and incontinence - and it creates a challenge for investors. While investors can do well in supposedly "boring" med-tech stories like Becton Dickinson (NYSE:BDX) and Bard (NYSE:BCR), it's tough to ignore an eye-watering multiple even when the growth is strong.

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Coloplast Is A Rare Story On Multiple Levels

Wednesday, October 7, 2015

Seeking Alpha: LDR Holding Corp. Seems To Be In The Right Place At The Right Time

The spinal surgery/spinal care market has been marked in recent years by a few trends that run counter to how many investors historically see the med-tech market. First, size hasn't proven to be such an insurmountable competitive advantage, as up-and-comers like NuVasive (NASDAQ:NUVA), LDR Holding (NASDAQ:LDRH), and Globus (NYSE:GMED) have gained share at the expense of larger rivals like Johnson & Johnson (NYSE:JNJ) and Medtronic (NYSE:MDT). Second, and apologies for the obvious pun, it seems to be one of the few areas of medicine where insurers have found some backbone and pushed back on pricing.

The subject of this article, LDR Holding, strikes me as an appealing growth story in med-tech by virtue of its commitment to doing things differently in the spinal space. Not only does the company have a strong product in the fast-growing cervical disc replacement market, but the company is also advancing technology in the lumbar area that features less hardware and less collateral damage to the patient. LDR Holding still has a difficult climb on its way to the top, including not only competition with the likes of JNJ and Medtronic, but also surgeon inertia, and the valuation is not obviously cheap, but the balance between growth and valuation is at least promising enough to look closer.

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LDR Holding Corp. Seems To Be In The Right Place At The Right Time

Tuesday, October 6, 2015

Seeking Alpha: Launch Delays The Wrong Prescription For GenMark Shares

Investors don't really have to look forward many years to value potential high-growth med-tech stories, but the consequences can be severe when those companies disappoint. GenMark Diagnostics (NASDAQ:GNMK) is certainly not the first or only diagnostics company to disappoint investors with delays in its commercialization timeline, but the confluence of a roughly half-year delay, ongoing progress at BioMerieux, and more risk aversion in the market has pushed the shares down about 40% since my last update.

The good news is that GenMark's ePlex system still compares quite favorably to systems from BioMerieux, Luminex (NASDAQ:LMNX), and Nanosphere (NASDAQ:NSPH) and the multiplex molecular diagnostics (or MDx) market is still very underpenetrated at hospital and reference labs. The bad news is that BioMerieux has done really well with system placements and the hospital diagnostics market is intensely competitive. GenMark does look undervalued today, but investors are looking at a wait of several years before there is meaningful revenue or cash flow and the risk here is well above average.

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Launch Delays The Wrong Prescription For GenMark Shares

Seeking Alpha: After Some Turbulence, NuVasive Appears To Be On A Better Flightpath

I've liked NuVasive (NASDAQ:NUVA) for some time now, and the company's share price performance (up 12% from my last article in March, and up 48% since this article in the summer of 2014) has given me no cause for regrets. While the company has seen plenty of turmoil, including major departures of "C-suite" executives, the basic plan of driving increased market share, increased overseas sales, and better margins seems very much intact.

I continue to believe that NuVasive has a strong future. Minimally invasive procedures should continue to gain share within the large spinal procedure market, and I see little evidence that NUVA is losing its edge in terms of innovation and product development. The company does have the significant challenge of striking the right balance between growth-supportive spending and improved margins, but I think it has a credible plan to achieve both. M&A remains a big wildcard, both in terms of who/what NuVasive may buy and who may try to buy NuVasive.

A relative outperformer in a tough market, NuVasive doesn't leap out to me as a cheap stock today, but then again high-quality med-tech growth seldom sells cheaply. A mid-$50s fair value still looks reasonable on an EV/revenue basis, but the volatility of these shares may argue for a wider-than-average margin of safety for new buyers.

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After Some Turbulence, NuVasive Appears To Be On A Better Flightpath