Performance - A Lousy, Mixed Up, No Good Year

Last year was a lousy year for a lousy reason … and that reason is part of why it took me almost four weeks into this month to get this post written. My wife/partner of 22 years was diagnosed with advanced cancer in 2014 and suffice it to say that helping and supporting her took precedence for the last third of the year as she went through surgery, radiation, and chemo. For the last three months of the year, I wrote fewer pieces in each month than I typically do in two or three days, so you can imagine how much time I was spending paying close attention to the markets.

Anyways, on with the show...

I maintain two separate portfolios (“A” and “B”). Portfolio A is supposed to be a more actively managed portfolio with a greater focus on year-to-year returns. Portfolio B is supposed to be more about long-term opportunities; I don't care so much about the year-to-year performance of holdings so much as the potential/performance over three or more years.

Portfolio A did okay in 2014, beating the S&P 500 and Russell 3000 but lagging the Nasdaq. The biggest positive contributors were Alnylam (ALNY) and Neurocrine Biosciences (NBIX), followed by Multi-Color (LABL). Hurco (HURC) and the Wright Medical Group CVRs (WMGIZ) both did well but make up a relatively small part of the assets. ABB (ABB), First Cash Financial (FCFS) and FEMSA (FMX) were the biggest drags on performance; Cameron (CAM), Lundbeck (HLUYY), Weatherford (WFT), and Ultratech (UTEK) were all laggards, but less meaningful given their smaller allocation.

Portfolio B was a total mess, lagging all of the indexes I care about and doing just generally rotten on its own. I suppose I could blame some of it on a lack of attention in the last third of the year, but the numbers are what they are. Alnylam, Broadcom (BRCM), and EMC (EMC) were the most meaningful positive contributors, while Statoil (STO), Triangle Petroleum (TPLM), and FEMSA were the biggest losers in the mix.

On a combined basis, the results weren't nearly good enough. The three-year and five-year numbers are still decent, but hopefully I can get back to the sort of performance I expect on a year-in/year-out basis.

2014 Returns

Portfolio A: +14.2%

Portfolio B: + 11.5%

Combined Portfolios: +13.53%

S&P 500: +13.69%

Nasdaq: + 14.75%

Russell 3000: + 12.56%

Three-Year Returns (annualized)

Portfolio A: +24.1%

Portfolio B: +16.9%

Combined Portfolios: +21.3%

S&P 500: +20.4%Nasdaq: +23.6%Russell 3000: +20.5%

Seeking Alpha: Good Execution Continuing To Boost UnitedHealth

UnitedHealth (NYSE:UNH) is the biggest player in managed care and, in my opinion, the best-run. Management has not only established a long history of "under-promise, over-deliver", but has built up a strong technology infrastructure that allows the company to price risk better, coordinate care more efficiently, and drive consumer behavior. Optum remains a real growth opportunity, as does international expansion.

The entire managed care space had a pretty good 2014, with stocks like Anthem (NYSE:ANTM) up more than 60%, Humana (NYSE:HUM) up nearly 60%, and Health Net (NYSE:HNT) up 65%. Only in that context is UnitedHealth's 50% appreciation over the past year something that might rankle investors. Health care, and by extension managed care, is likely to remain a controversial political topic in the years to come and UnitedHealth isn't particularly cheap right now, but I wouldn't be in a big rush to sell.

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Good Execution Continuing To Boost UnitedHealth

Seeking Alpha: Despite Some Challenging Markets, Microsemi Continues To Move Forward

This is starting to shape up as a disappointing quarter for semiconductor companies (Maxim (NASDAQ:MXIM), Linear (NASDAQ:LLTC), and Skyworks (NASDAQ:SWKS) not withstanding), so I suppose that ought to temper some of the disappointment with Microsemi's (NASDAQ:MSCC) in-line December quarter and soft guidance for the next quarter. On a more positive note, management is starting to see restructuring/cost reduction efforts pay off in margin leverage and the company's book-to-bill remains above 1.0x.

I continue to believe that Microsemi remains overlooked and undervalued. The company is looking to farm its legacy discrete business for margins and cash flow, while driving growth from newer businesses like timing and FPGA where the company's addressable markets and market share appear to be growing. I continue to believe that fair value on Microsemi shares lies above $30 and that they remain a good buy within the chip space.

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Despite Some Challenging Markets, Microsemi Continues To Move Forward

Seeking Alpha: BB&T Breaks From The Pack Again

I've said before that North Carolina-based super-regional bank BB&T (NYSE:BBT) seems to have a knack for moving against the tides in banking. When other banks are reporting good quarters, BB&T disappoints and when its super-regional peers report lackluster quarters it seems to do better. So I suppose it shouldn't really be a surprise that BB&T offered up a pretty solid set of results in a reporting season where most of its peers haven't impressed the Street.

BB&T isn't particularly asset-sensitive and it looks like next year will be another "muddle through" unless/until rates start moving up. Management is going to be busy, though, as it has three significant acquisitions to integrate, including the largest acquisition announced/attempted since the new regulatory system was put in place.

BB&T shares still look undervalued to me and the bank still has the capacity to do additional deals and increase its exposure to commercial lending.

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BB&T Breaks From The Pack Again

Seeking Alpha: Fifth Third Looks Undervalued, But Not Without Some Reasons

I've seen a quote attributed to Warren Buffett that goes "price is what you pay and value is what you get". With that in mind, Fifth Third (NASDAQ:FITB) does indeed look undervalued today but there are reasons why the stock has been weak over the last year (down almost 18%) and a real laggard next to peers like U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), and Huntington Bancshares (NASDAQ:HBAN).

From the sounds of it, 2015 is going to be a challenging year for Fifth Third. Management's loan growth guidance doesn't compare well to what other banks in overlapping regions are seeing and the wind down of a consumer advance product is going to create a significant headwind. Amidst all that, management is not looking for any positive operating leverage.

Why be positive? A bad year (or two) doesn't make a bad bank and Fifth Third shares are priced for virtually no improvement in ROE over the coming years. Fifth Third has a good collection of fee-generating operations and relatively good exposure to growing banking markets. Fifth Third isn't going to appeal to investors that prize quality in banking stocks, but there is enough upside here to make a closer look worth the effort.

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Fifth Third Looks Undervalued, But Not Without Some Reasons

Seeking Alpha: U.S. Bancorp's Steady Excellence Worth A Premium

Exciting is usually a bad thing in banking, and U.S. Bancorp (NYSE:USB) makes steady high-quality execution look pretty good. Not surprisingly, U.S. Bancorp isn't particularly levered to a quick turnaround in interest rates and management is not going to compromise underwriting discipline just to boost loan growth.

That said, U.S. Bancorp maintains one of the best net interest margins of its peer group, has kept pace with loan growth, is far more efficient with expenses, and has several lucrative fee-generating businesses. U.S. Bancorp looks as though it's priced only a bit below fair value, but that should be enough for long-term investors who want a cornerstone holding in financial services.

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U.S. Bancorp's Steady Excellence Worth A Premium

Seeking Alpha: F5 Shares Spin Out On Weakness In Product Sales

I liked F5 (NASDAQ:FFIV) back in September, but had some concerns about the valuation and the company's history of volatility around earnings. While the shares of this technology company did rise in the months after that piece (topping out at an 8% gain), the volatility I mentioned as a big concern has returned with a vengeance after the company's fiscal first quarter report.

There have been longstanding concerns about F5's ability to offset slowing growth in the legacy ADC market with a host of product enhancements (especially security) and the weakness in this quarter and guidance has given them new life. I'm still a long-term bull on F5, though, and I think this might be one of those "buy the dip" opportunities for adventurous investors who can handle the risk that additional weakness in product revenue pushes the shares down even further as the year develops.

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F5 Shares Spin Out On Weakness In Product Sales

Seeking Alpha: PNC Financial Running A More Cautious, Steady Long-Term Plan

I liked PNC Financial (NYSE:PNC) about six months ago and while the banking sector hasn't performed well since that time, PNC has shown better relative performance - PNC shares have dropped about 3% and lagged Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC), while U.S. Bancorp (NYSE:USB), Fifth Third Bancorp (NASDAQ:FITB), BB&T Corp. (NYSE:BBT), and KeyCorp (NYSE:KEY) have declined 4% to 15%. Nothing has really gone wrong with PNC Financial per se since last summer, but with pretty scant prospects for the much-needed rise in rates that would spur the sector, investors have turned their attention to more promising sectors.

I still like PNC Financial, but I'm not going to argue that anybody has to own a bank stock. PNC doesn't offer the kind of leverage to higher rates that Wells Fargo or Bank of America offer, but this is a pretty solid, conservatively run bank that is focusing on sustainable loan growth, improving fee businesses, and operating expense control. The near-term upside for PNC isn't spectacular, but it remains a solid stock to consider for investors looking for a long-term holding in the banking sector.

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PNC Financial Running A More Cautious, Steady Long-Term Plan

Seeking Alpha: Johnson & Johnson Finding Growth A Little Harder Now

The health care sector has staged a strong multiyear recovery, and Johnson & Johnson (NYSE:JNJ) has more than just gone along for the ride. Although the company has had to deal with major recalls in the consumer business and unimpressive growth in the device business, the pharmaceutical business has emerged as a real star with six blockbusters introduced in the last five years.

Nothing lasts forever, though, and 2015 is shaping up as a more challenging year. Headwinds in the pharmaceutical business appear to be coinciding with forex-related pressure and the device business is unlikely to accelerate enough to make up the difference. None of this makes Johnson & Johnson a bad company, though, and investors may want to keep an eye on these shares for the opportunity to pick up a potential long-term holding at an attractive price.

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Johnson & Johnson Finding Growth A Little Harder Now

Seeking Alpha: PrivateBancorp Already Priced For Big Things

If you want a good growth story in banking, you're going to have to pay for it. Like Bank of the Ozarks (NASDAQ:OZRK), PrivateBancorp (NASDAQ:PVTB) is showing uncommonly good loan growth and has a large addressable opportunity supporting many years of growth. But like Bank of the Ozarks, that growth potential doesn't come with a bargain price.

I like PrivateBancorp's leverage to higher rates and its leverage to economically sensitive loan growth. I also think that the company has made excellent progress in working off legacy assets and fundamentally altering its business mix. If you want a bargain in banking, you're going to have to shop amongst banks well off the beaten path or with significant ongoing concerns/risks regarding asset growth, expense leverage, and regulatory/legal issues (names like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) come to mind). PrivateBancorp doesn't look like a bargain, but if you want to ride along with a rate-sensitive growth story, there may be something here for you.

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PrivateBancorp Already Priced For Big Things

Seeking Alpha: Amicus Therapeutics Has Driven Value Through The Clinic

In prior articles on Amicus Therapeutics (NASDAQ:FOLD) I spoke of the significant value creation potential of successful clinical trials. If Amicus could show investors that its lead drug migalastat was both safe and effective as a treatment for Fabry disease, the market would reward the company with a substantially higher valuation.

That has happened. Data from the '012 study and additional extension data from the '011 study have established that migalastat offers comparable efficacy to enzyme replacement therapy (or ERT) and meaningful benefits to cardiac and renal function. While the path to FDA approval is still a little murky, investors should have more information relatively soon and I believe the odds now favor approval and commercial success - at least in a subset of patients with amenable mutations. Migalastat's future as a part of combo therapy is still uncertain, but offers further upside, as do clinical programs in Pompe's disease and MPS-1.

Amicus Therapeutics has risen more than 160% over the past year, but still looks undervalued on the basis of its market potential in Fabry disease. With a more convenient administration (it's an oral medication) and a potential safety benefit, there could be still more upside from pricing and/or market share. Value creation through de-risking the Pompe and MPS-1 programs is certainly still possible (positive data will support higher odds of regulatory/commercial success), but those events are further off.

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Amicus Therapeutics Has Driven Value Through The Clinic

Seeking Alpha: Trial Data Add Little Clarity And Much Confusion To Conatus

Biotech investors can typically process positive and negative clinical trial results, but when the data are mixed and/or there are no simple conclusions it becomes more difficult to price the risk. I believe that is at least part of what's going on with Conatus Pharmaceuticals (NASDAQ:CNAT) in the wake of its confusing, and ultimately disappointing, Phase II trial data on emricasan in acute-on-chronic liver failure (or ACLF).

I think it's too early to say that emricasan is an ineffective drug and unworthy of further clinical development. The highest dose of the drug did suggest a benefit and it is worth the company's time to further refine the dosing and trial design. Unfortunately, the issues with trial enrollment and completion raise pertinent questions about the difficulty of future ACLF studies and whether management can find a clinical pathway to get this drug to market.

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Trial Data Add Little Clarity And Much Confusion To Conatus

Seeking Alpha: Bank Of America's Core Ops Showing Some Progress

The long road back for the U.S. money-center banks hasn't flattened out a bit. Absent higher rates, Bank Of America (NYSE:BAC) is going to have its work cut out growing net assets as it works down its run-off portfolio, but core expenses are coming down and if those rates to move up this bank should be ready. Declining litigation risk ought to help sentiment and economic growth should be good for loan growth, but I do have some concerns that trimming expenses could make the bank more vulnerable to market share losses to harder-charging rivals.

Bank of America was one of the stronger performers among the large banks over the past year but there's still enough potential here to merit a closer look, particularly for investors who believe that interest rates will rise higher and/or faster than the Street expects.

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Bank Of America's Core Ops Showing Some Progress

Seeking Alpha: Citigroup On The Right Track, But It's Not A Fast Lane

I haven't always been Citigroup's (NYSE:C) biggest fan, as I thought investors had gotten a little carried away with the stock. With the shares down 9% over the past year (although up more than 3% for 2014), Citi has emerged as a relative laggard among the big banks. At the same time, there has been ongoing improvement in the underlying fundamentals and I think the dichotomy between price and value now favors a more bullish slant on the shares.

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Citigroup On The Right Track, But It's Not A Fast Lane

Seeking Alpha: Growth Still The Heart Of Middleby's Story

For an investor who sees himself as more value-oriented than growth-oriented, Middleby (NASDAQ:MIDD) is always challenging and frustrating. Built largely through acquisitions, the company has nevertheless posted revenue growth in the vicinity of 20% a year (annualized) over the past decade, with a doubling of FCF margins supporting even better FCF growth. What's more, it arguably doesn't get enough credit for growing and improving those assets it acquires.

Middleby remains a stretch from a DCF valuation perspective, or at least unless you're willing to assume double-digit revenue growth and FCF productivity well above the norms of the industry. That said, the price isn't so unreasonable from an EV/EBITDA standpoint, and the company is working on commercializing several concepts with significant revenue and margin potential.

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Growth Still The Heart Of Middleby's Story

Seeking Alpha: Bank Of The Ozarks Continues To Execute

Even allowing for the fact that growth becomes more difficult as a company get bigger, if Bank of the Ozarks (NASDAQ:OZRK) continues to execute like this it is not going to be a small bank for long. This Arkansas-bank remains heavily weighted to real estate-based commercial lending, but continues to use disciplined underwriting to control risk while leveraging a very low-cost deposit base. The shares don't look cheap by most of the bank valuation metrics I like, but quality growth doesn't come cheap and I still see opportunities for outperformance and value-building acquisitions.

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Bank Of The Ozarks Continues To Execute

Seeking Alpha: Look Past A Sales Transition To Novadaq's Future

Emerging med-tech Novadaq Technologies (NASDAQ:NVDQ) is now entering a new phase of its corporate life. The soured relationship with LifeCell is now in the company's past, and Novadaq is moving forward with a suite of products that offered demonstrated clinical benefits. Transitioning back from LifeCell is going to have a near-term impact on sales, though, and not for the good. Longer-term, I continue to believe that Novadaq can generate more than $1 billion in annual revenue with a portfolio of products that drive better outcomes in open surgery, minimally invasive surgery, and wound care.

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Look Past A Sales Transition To Novadaq's Future

Seeking Alpha: Is It Time To Start Thinking Recovery For Komatsu?

The outlook for the construction and mining industries hasn't gotten much better, and with that both Caterpillar (NYSE:CAT) and Komatsu (OTCPK:KMTUY) have posted pretty uninspiring performances. While the environment for mining equipment is still under pressure from weak prices and shrinking capex budgets, and the construction market in key Komatsu markets like China and Japan is hardly great, Komatsu is investing in long-term innovation, maintaining a focus on margins, and positioning itself for the eventual recovery.

Since my last piece on Komtasu, these shares have outperformed Caterpillar, Joy Global (NYSE:JOY) and Terex (NYSE:TEX) by a pretty healthy margin. Although Komatsu isn't particularly well-positioned for a construction recovery in North America (or Europe), a turnaround in the emerging markets would be a different story. I don't think investors need to rush to buy this stock, but the valuation isn't too bad and I think the company's emphasis on its more lucrative parts/service operations and long-term innovation could pay dividends down the road.

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Is It Time To Start Thinking Recovery For Komatsu?

Seeking Alpha: Wells Fargo Still Delivering Some Growth

Wells Fargo (NYSE:WFC) was the best performer of the seven largest U.S. banks last year, and it's hard to argue that the bank didn't earn that Wall Street love. The earnings quality here is relatively high, the net interest margin is solid, and loan growth has been pretty good. Add in solid returns on capital and Wells Fargo is definitely a solid bank.

The only real nit for me to pick is valuation. I think Wells Fargo still has a good opportunity to cross-sell more products to its retail and commercial customers, grow loans at a rate greater than GDP, and bolster businesses like cards and asset management. With its returns on capital supporting a fair value range between $51 and $54, though, I'm not so sure of Wells Fargo's ability to maintain that peer-beating stock market performance.

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Wells Fargo Still Delivering Some Growth

Seeking Alpha: Clouds Still Mar Sunshine Heart's Outlook

Development-stage med-tech Sunshine Heart (NASDAQ:SSH) has had a good run up from its mid-December lows, and the company continues to move forward with the clinical development of a device-based approach for congestive heart failure that could mark a real improvement in quality of care. That said, the company continues to see frustratingly slow enrollment and pushback on reimbursement.

Unfortunately, there don't appear to be easy solutions to Sunshine Heart's primary problem - it lacks the resources of major cardiology companies like Boston Scientific (NYSE:BSX), Medtronic (NYSE:MDT), or St. Jude Medical (NYSE:STJ) that could otherwise support and encourage enrollment. Getting the FDA's permission to run an interim analysis would certainly help, and the shares do appear undervalued, but the company is climbing a steep hill and investors shouldn't kid themselves into thinking that the need for a better treatment for heart failure and the apparent efficacy of Sunshine's C-Pulse system will, on their own, ensure a successful outcome.

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Clouds Still Mar Sunshine Heart's Outlook

Seeking Alpha: Linear Technology's Opportunities, And Challenges, Remain The Same

Six months have passed since my last article and not too much has changed for Linear Technology (NASDAQ:LLTC) on a fundamental basis. The company still has some exciting opportunities in the industrial and automotive verticals, but is also facing serious competition from Texas Instruments (NASDAQ:TXN) and Analog Devices (NASDAQ:ADI) (among many others) and widespread doubts that the company can take industry-leading margins much higher.

I thought Linear was more or less fairly valued six months ago (the shares are up 2% since) and that is still my opinion. Improving growth in the U.S., particularly in the industrial vertical, ought to help but probably not enough to radically alter sentiment. The company does have a large amount of cash, though, so additional capital returns to shareholders and/or acquisitions cannot be ruled out.

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Linear Technology's Opportunities, And Challenges, Remain The Same

Seeking Alpha: JPMorgan Chase Once Again Fails To Inspire

Uninspiring core profits (usually referred to as pre-provision operating profit) has become a theme for JPMorgan Chase (NYSE:JPM), and once again, this giant U.S. bank delivered a result that was shy of analyst and investor expectations. Add in some concerns about potentially higher capital requirements and a 10-year interest rate back below 2%, and I don't blame investors for selling this bank.

That said, I am still holding on to these shares, and I continue to believe that the Street underestimates the core earnings potential of this bank. JPMorgan is definitely levered to higher interest rates, but management has its own internal levers to pull as well - particularly where it concerns ongoing expense reductions and growing its commercial bank operations. With the shares looking 15% to 20% undervalued, I continue to believe JPMorgan is one of the better alpha opportunities among the large banks.

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JPMorgan Chase Once Again Fails To Inspire

Seeking Alpha: AtriCure Is Successfully Using Marketing And Training To Drive Revenue

Small-cap cardiology med-tech AtriCure (NASDAQ:ATRC) did see its stock price momentum slow down from the 100%-plus pace between two of my prior pieces, but the better than 20% rise since late April of 2014 still isn't bad at all. This growth isn't just about the Street turning up a previously overlooked name; the company is delivering good beat-and-raise quarters and posting the sort of revenue growth that growth investors like to see from med-techs.

It looks as though growth is going to slow in the next year due to currency movements, but the underlying growth story at AtriCure remains intact. The company remains the only company with FDA-approved surgical ablation products and surgical ablation remain an underpenetrated option for treating a-fib and reducing stroke risk. Add in the potential of the AtriClip as another option in reducing stroke risk and management may not be overstating an annual blue-sky potential market of $1 billion a year. Against a market cap of less than $600 million, that argues that AtriCure's shares still have more to offer.

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AtriCure Is Successfully Using Marketing And Training To Drive Revenue

Seeking Alpha: Receptos Shopping For A Partner With Strong Data In Hand

Receptos (NASDAQ:RCPT) has come along quite nicely since I first wrote about it as a Top Idea in August of 2013. The shares' 150%-plus move has been fueled by strong clinical data, as lead drug RPC1063 ('1063) has shown solid efficacy and cleaner safety in relapsing multiple sclerosis and very encouraging data in ulcerative colitis. The latter has created a very real possibility that '1063 could be a multi-indication blockbuster, as an effective oral therapy for ulcerative colitis and Crohn's disease could be a real blockbuster.

Investors may feel a little starved for big catalysts in 2015. The Phase III RADIANCE and SUNBEAM studies in MS won't have data to show until 2017 and the expectations are already high for the company's expected release of 32-week data from the Phase II ulcerative colitis study. That said, the company may put a new diabetes drug into human studies in 2015 and the company has made no secret that it intends to find a partner for '1063.

These shares aren't nearly the bargain they once were, but there is still significant potential value locked in the MS, UC, and Crohn's programs. It is going to take time to produce the clinical data that it will take to unlock that value, but I'd be in no rush to sell these shares and I would consider them if this recent sell-off continues.

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Receptos Shopping For A Partner With Strong Data In Hand

Seeking Alpha: XenoPort Prepping For Key Data In 2015

Nine months ago, I thought XenoPort (NASDAQ:XNPT) had some appeal for very aggressive investors willing to play the odds that not only would the biotech sector recover, but that the Street would get more bullish on XenoPort's relaunch of Horizant and the prospects of XP23829 ('829) in multiple sclerosis and possibly psoriasis as well. Since then, the shares have risen almost 120%.

Is there still enough upside in XenoPort to make it worth holding these shares? The answer is a guarded "yes". The markets for both psoriasis and multiple sclerosis are each likely to be worth more than $15 billion a year by the time '829 achieves commercial sales, but the company is still facing comparatively long odds for commercial success. That makes the Phase II psoriasis data later this year very significant - a strong indication of efficacy should unlock significant value (by de-risking the outlook), but inadequate results will sap virtually all of the upside.

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XenoPort Prepping For Key Data In 2015

Seeking Alpha: Celldex Therapeutics Still Building Its Immuno-Oncology Story

Enthusiasm for immuno-oncology hasn't waned, and why should it? Companies like Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and Roche (OTCQX:RHHBY) have been producing clinical data from immuno-oncology drug trials showing real improvements in response rates and survival in a range of hard-to-treat cancer types. Although Celldex (NASDAQ:CLDX) doesn't have the flavor-of-the-moment focus on CAR-T therapies, I would argue that the company's collection of vaccines, ADCs, and targeted antibodies is well worth a closer look from biotech investors.

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Celldex Therapeutics Still Building Its Immuno-Oncology Story

Seeking Alpha: The New And Improved Alcoa Showing Its Mettle

"I guess what I'm trying to say is, if I can change, and you can change, everybody can change." Rocky IV

That is probably the first time I've quoted Rocky Balboa in an investment article, but in the case of Alcoa (NYSE:AA) it fits. A year and a half ago, you wouldn't have found many analysts who gave Alcoa much of a chance to meaningfully restructure and improve its business, even though management was already well underway with cost and productivity initiatives.

And yet here we are - Alcoa's shares are about 60% over the past year, 80% over the past two years. While 2014 revenue was only about 14% higher than the 2010 level, total segment ATOI was more than 40% higher, as the company has made real strides with cost reduction and a mix shift toward higher-value products.

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The New And Improved Alcoa Showing Its Mettle

Seeking Alpha: With The Tornier Deal On Track, Wright Medical Will Be Busy

Investors haven't been all that enthusiastic about Wright Medical (NASDAQ:WMGI) since its late October announcement of a merger with Tornier (NASDAQ:TRNX) and an approval letter from the FDA for its Augment biological product. The shares have fallen almost 20% since then, as I would imagine some investors who had held Wright Medical in anticipation of a favorable Augment outcome and/or a bid from a larger med-tech company might have decided to call it a day.

To be sure, Wright Medical's management is putting a lot on its plate. Integrating the two businesses is going to take quite a bit of energy and launching Augment will demand a high level of sales execution - it has all the hallmarks of a great product, but it won't sell itself. If Wright Medical can successfully meld the two businesses, deliver on the multi-hundred million dollar promise of Augment, and drive greater leverage in manufacturing, sales, and distribution, a fair value above $40 is possible. If management stumbles, or if the extremities market slows, the market will not be forgiving.

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With The Tornier Deal On Track, Wright Medical Will Be Busy

Seeking Alpha: Ultratech's Order Outlook Is Murky At Best

The past year was a miserable one for Ultratech (NASDAQ:UTEK) shareholders. The recurrent theme of the year was that weak 14nm/16nm yields weighed on orders for new LSA tools, leading to multiples "shifts to the right" in order and revenue expectations. Expectations for 2014 revenue fell from the range of $180 million to $200 million in late 2013 to $147 million as of this writing and now there is concern as to whether Ultratech has lost share to Screen Holdings (OTC:DINRY) and Mattson (NASDAQ:MTSN) and whether 10nm might sap the 14nm/16nm cycle altogether.

This certainly showed up in the stock's performance. Ultratech fell 37% last year, while Mattson rose more than 19% and Screen rose almost 13% (Applied Materials (NASDAQ:AMAT), which also sells thermal processing equipment rose more than 36%). It's not hopeless at Ultratech, and the company does have growth opportunities in advanced packaging, metrology, and atomic layer deposition, but 2015 is likely to be a long year for shareholders without some visibility and encouragement in LSA orders.

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Ultratech's Order Outlook Is Murky At Best

Seeking Alpha: M&A Could Add Even More Pop To SABMiller

Given the importance of scale and exposure to emerging market growth for global consumer businesses, it seems like a "when, not if" type of question regarding SABMiller's (OTCPK:SBMRY) future involvement in M&A. The key question, though, is whether SABMiller continues to play the role of acquirer and consolidator, or whether the company (likely grudgingly) finds itself scooped up.

Arguably SABMiller doesn't need to concern itself overly much with M&A. The company generates 70% of its profits from emerging markets, the highest such percentage among the major brewers, and is weighed to the lowest per-capita consumption markets (meaning that it can expect to benefit from rising incomes/consumption). Not only that, SABMiller is one of the largest Coca-Cola (NYSE:KO) bottlers and stands to benefit from a new JV in Africa as well as further potential expansion.

With M&A likely to factor heavily in the company's future, a stand-alone valuation may be beside the point. That said, mid-single digit revenue growth and further incremental FCF margin potential do support the stock at this level, with M&A potentially adding revenue (if SABMiller buys) or margin synergy (if SABMiller is a seller) to the valuation.

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M&A Could Add Even More Pop To SABMiller

Seeking Alpha: Global Payments Continues To Acquire And Process Growth

The best tonic for a robust stock valuation is ongoing financial outperformance, and Global Payments (NYSE:GPN) has been delivering that over the past three quarters. Not only is Global Payments continuing to benefit from strong businesses in markets like Spain, but the company's direct efforts are offsetting the lower-margin ISO channel and management seems to be doing a good job of integrating and leveraging acquisitions.

I like the prospects for Global Payments to improve its margins in the coming years through more ex-US growth and the expansion of the higher-margin integrated payments business. I also believe there are several markets that the company could seek to enter by way of M&A that would also boost the sustainable growth rate. The only problem is that a lot of this seems to be worked into the stock price. I wouldn't argue against the idea that ongoing outperformance could continue to boost the shares from here, but I'd much rather buy on a dip if that were possible.

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Global Payments Continues To Acquire And Process Growth

Quick Update On The Cancer Fight

My wife is doing well with her therapy. She finished the radiation portion of her clinical trial a little while ago and has her last chemo infusion in about 10 days. The side-effects have been quite mild (at least relative to our expectations), but they could still flare up after the next infusion.

In the meantime, her PT is going reasonably well. Her lymphedema has been under good control (less than 2% in the arm) and her range of motion is quite good.

After the last treatment it'll shift to the "watchful waiting" portion ... a part that I suspect may be quite challenging in its own right (the "doing something" aspect of radiation and chemo offers its own type of comfort).

Seeking Alpha: Orders, Revenue, And Margins Continue To Expand At Hurco

Investors continue to fret about the health of the manufacturing sector in the U.S. and Germany, but Hurco (NASDAQ:HURC) continues to follow its own successful path. This small manufacturer of precision machine tools has delivered another solid quarter, lifting its full-year revenue growth back into the mid-teens and starting off the next fiscal year with a good order book and margin strength.

Looking ahead, there are still solid reasons to be bullish. The company's efforts in additive manufacturing / 3D printing aren't likely to make a significant difference in the near term, but the introduction of new control technology very well might. Hurco is small enough that it can move independently of the larger machine tool industry, but if manufacturing activity in Germany and U.S. can expand in 2015 Hurco ought to do well.

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Orders, Revenue, And Margins Continue To Expand At Hurco

Seeking Alpha: AngioDynamics Still Looking For Inflection

What AngioDynamics (NASDAQ:ANGO) does is not easy. This small med-tech company competes with huge players like Bard (NYSE:BCR) and Covidien (NYSE:COV) (as well as Teleflex (NYSE:TFX)) in markets that are not growing all that fast and where a large sales/marketing effort and the ability to bundle can make a significant difference in closing sales. AngioDynamics hasn't always helped their own cause either, with issues in manufacturing, quality control (including a recent FDA Warning Letter), and financial reporting.

The company is making progress, though, and seems to be nearing a point where margins and profits could grow disproportionately to incremental revenue growth. The company has also managed to add several products to its portfolio that offer real benefits to health care professionals (and savings to the facilities) and their patients. I'm not so crazy about the valuation here, but if management could push revenue growth above 5% the shares could still do rather well.

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AngioDynamics Still Looking For Inflection

Seeking Alpha: Strong Soy And A Deep Pipeline Supports Monsanto

Investors have unquestionably grown more and more concerned about the ag sector over the past 12 months. Corn and soybean prices have rebounded from the end of September, but soy prices in particular are well below the year-ago levels. With less profitable insurance levels likely for 2015, planted acres may well come under pressure and some farmers may be tempted to skimp on seed traits as a way of saving money.

That's not a great backdrop for Monsanto (NYSE:MON), but I continue to believe that Monsanto will be hurt less than rivals like DuPont (NYSE:DD) and Syngenta (NYSE:SYT). Increasing competition is a risk, as the Chinese have approved traits from Syngenta, Bayer, and Dow's (NYSE:DOW) delayed launch of Enlist will most likely eventually become a full launch (albeit not until 2016).

What Monsanto continues to have in its favor is a meaningful yield advantage that supports its value proposition to farmers, not to mention a deep pipeline of traits targeting disease resistance, yield enhancement, and other productivity initiatives. Add in the potential of precision ag/analytics, biologicals, and RNAI-based products, and there is still a valid argument for Monsanto as a long-term holding even if the next year or two are more challenging.

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Strong Soy And A Deep Pipeline Supports Monsanto

Seeking Alpha: Amidst Macro Worries, MTN Group Can Still Outperform

While a long-term bull on pan-African mobile phone services provider MTN Group (OTCPK:MTNOY), I was cool on the stock's near-term performance potential back in September. Since then, the ADRs have dropped about 25% while the local shares have fallen about 20%. That move hasn't occurred in a vacuum, with investors worried about the macro outlook in Nigeria and South Africa and company-specific concerns about MTN's performance in those large markets.

I remain bullish and I think the shares are looking more appealing on a short-term basis as well. I believe the market has over-corrected for the risks in Nigeria and underestimates the steps taken to improve results in South Africa and the long-term potential of mobile money services. Adverse currency moves have pushed my target down by about $1, but I think MTN Group remains a well-run play on growth in Africa and to a lesser extent the Middle East.

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Amidst Macro Worries, MTN Group Can Still Outperform

Seeking Alpha: Neurocrine Biosciences Starts A Data-Rich Year On The Right Foot

Neurocrine Biosciences (NASDAQ:NBIX) has a lot on the line in 2015, as the company will see pivotal data on its two late-stage clinical compounds (Elagolix and NBI-98854, or '854) and these reports will have significant impacts on the value of the shares.

So far, so good. Neurocrine's partner AbbVie (NYSE:ABBV) announced positive top-line data from the VIOLET PETAL Phase III study of Elagolix in endometriosis on Thursday morning. While the release was spartan and investors will have to wait until later in the year for more details, the positive efficacy and consistent safety data nevertheless do help de-risk the program for Neurocrine shareholders.

Although Neurocrine shares don't look exceptionally cheap in the immediate aftermath of this data release, the potential of further positive releases can't be ignored. Should the pivotal study of '854 in tardive dyskinesia succeed, another $5/share or more in value could be unlocked, not to mention the potential value of clinical updates on Elagolix in uterine fibroids, '854 in Tourette's, and NBI-77860 ('860) in congential adrenal hyperplasia.

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Neurocrine Biosciences Starts A Data-Rich Year On The Right Foot

Seeking Alpha: MSC Industrial Continues To Skid

A couple of months ago, I expressed concerns over some potential red flags at industrial distributor MSC Industrial Direct (NYSE:MSM). Those flags are starting to wave more prominently now, and it is quite reasonable to ask whether management has a good enough plan in place to drive real synergy from the CCSG transaction and continue to gain profitable share in the industrial MRO market.

To be clear, I'm not saying it's all over for MSC Industrial. There is still substantial growth potential in its addressable market - from share gains and from expansion into new verticals and new product categories - but prior advantages like focuses on metalworking and e-commerce no longer serve the company as well as they once did. Management has some clear challenges in front of it; growth at CCSG must improve, synergies must emerge, and margins must improve. With another disappointing outlook on margins, though, investors can be forgiven if they opt for a "wait and see" approach with these shares.

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MSC Industrial Continues To Skid

Seeking Alpha: Turkcell Twists And Turns Continue

One of the most messed up stories in international telecom continues to be exactly that, as Turkcell (NYSE:TKC) faces the operating challenges of fierce competition in the Turkish mobile phone market and the behind the scenes dramas that continue to delay an annual shareholder meeting and the declaration of long awaited dividends. While I chose to hold on to the shares after my last update and continue to believe that there are ways in which Turkcell can report better performance in the coming years, it's hard to argue that this is the name investors need to own in emerging markets.


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Turkcell Twists And Turns Continue

Seeking Alpha: 3M Is Good As Gold ... And Priced Like It

I have long used a barbell investing strategy, where risky investments (like biotech) are offset by more staid and predictable holdings like 3M (NYSE:MMM). Ideally high-quality mega-caps like 3M can be held for many, many years at a stretch, allowing good management teams to generate substantial returns from the businesses.

Almost all good things have to eventually come to an end, though, and I can't in good conscience tell anybody else that they should look to buy 3M today. Based upon the company's recent financial performance and mid-December Investor Day I still believe that this is a very high-quality, very well-run industrial, but it is difficult to see how these shares are attractively priced on their intrinsic merits.

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3M Is Good As Gold ... And Priced Like It

Seeking Alpha: Execution And Purchasing Increasingly Important To PRA Group

PRA Group (NASDAQ:PRAA), the receivables collection company once known as Portfolio Recovery Associates, didn't have the best 2014 as concerns about revenue quality and the company's ability to replenish its store of receivables weighed on the shares after each earnings report. While the stock was in the black for the year (and matched the S&P MidCap 400), it trailed the S&P 500 and doesn't exactly trade at an undemanding valuation.

I'm not bearish on PRA Group, but I do believe the company has to re-earn its benefit of the doubt and there is less margin for error than in the past. The expected return of major sellers of charged-off debt in 2015 would be a boon, but emerging guidelines for the industry are still foggy. What's more, while the company has made strides with its collections efficiency, it is an increasingly large fish in its pond and may find its own size to be a formidable obstacle to maintaining historical growth rates.

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Execution And Purchasing Increasingly Important To PRA Group

Seeking Alpha: Summer Infant Looking To Transition Back To Growth

Infant products manufacturer Summer Infant (NASDAQ:SUMR) spent most of 2014 getting its house back in order. The company exited its low-margin licensing business, slashed its SKU count, restructured its product development process, as well as its sales approach, and reoriented the company around internally-driven sales and ROIC targets.

It seems premature to say "job done", but the company has definitely stabilized the business with a return to sales growth (high single-digit to low double-digit on an adjusted basis) and improving gross margins. Now it is time for management to show that it can gain share in important categories like monitors and strollers and establish a footprint in new retail channels. I'm bullish on management's plans and I believe that 2015 should see progress on internal growth initiatives. With a fair value target of almost $4 based on what I believe are relatively conservative projections, there is still credible upside to this consumer goods story.

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Summer Infant Looking To Transition Back To Growth

Seeking Alpha: Tiny Aptose Biosciences Looks Worth A Closer Look

Right off the bat, Aptose Biosciences (NASDAQ:APTO) triggers a few warning signals. The company has been around a long time (since 1986), has had two name changes, and really hasn't accomplished much of anything. Now this biotech is targeting one of the more under-served areas of oncology and one that has seen many flame-outs (most recently Cyclacel (NASDAQ:CYCC). Coupled with a sub-$100 million market cap and a recent reverse stock split, a lot of the "beware of" biotech boxes are already checked.

One of the most dangerous phrases in investing is "it's different this time", but perhaps in the case of Aptose that is true. This company cleaned house a while back and brought in credible new senior management, naming the founder of Achillion (NASDAQ:ACHN) as its new CEO. The company also raised money and listed itself on the NASDAQ. Most importantly, though, the company has a drug in its pipeline that at least appears to have a credible mechanism of action in treating acute myeloid leukemia - a relatively common type of leukemia, but one that often has poor expected survival outcomes.

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Tiny Aptose Biosciences Looks Worth A Closer Look

Seeking Alpha: Roche Loses A Little Luster Before Year-End

Even good drug companies have to cope with the fact that drug development is difficult and negative outcomes are more likely than clinical successes. Roche (OTCQX:RHHBY) has had plenty of wins over the year, and the company's presentations at September's ESMO meetings included some fantastic results, but the news on Friday was decidedly more negative for Roche as it reported surprisingly disappointing data from its MARIANNE front-line breast cancer study and saw yet another clinical failure in its non-oncology pipeline.

The disappointment of the MARIANNE study is tempered by the company's robust portfolio and deep immuno-oncology pipeline. Even so, the setback to Kadcyla takes some upside out of the story and the shares appear more or less fully valued at this point in time. I believe that the quality of Roche makes holding it still a worthwhile proposition, but investors with new funds to deploy should look around the space a bit first.

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Roche Loses A Little Luster Before Year-End

Seeking Alpha: Alnylam Pharmaceuticals Continues To Post Encouraging Results

Having written about Alnylam Pharmaceuticals (NASDAQ:ALNY) in early November, I thought I'd be done with covering the stock for a few months. Alnylam likes to make its analysts and shareholders work, though, and the updates from the company since then do merit further discussion.

Fortunately for shareholders, the updates are universally positive. Revusiran appears to be safe and while efficacy remains unknown, the company has launched the Phase III ENDEAVOUR study. Alnylam has also reported encouraging early-stage data on its ALN-AT3 hemophilia treatment, started a Phase I/II study for ALN-CC5, and has seen partner The Medicines Company (NASDAQ:MDCO) start clinical studies of ALN-PCSsc. Last and not least, the company has shifted its strategic and research priorities a bit, with three large areas of focus.

Much as I don't like the well-trod path on the sell-side of "the stock has reached my price target, so I'll raise my target", the changes in just the last month do prompt me to bump my fair value estimate higher.

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Alnylam Pharmaceuticals Continues To Post Encouraging Results

Seeking Alpha: Economic Worries Weigh On FEMSA

Mexican consumer conglomerate FEMSA (NYSE:FMX) hasn't had a great 2014, as analysts and investors have continued to worry about the impact of new taxes and a sluggish economic recovery on Mexican consumers. Insofar as the things under FEMSA management's control go, however, 2014 has been a decent year and the company continues to offer a solid investment case as a good play on Mexico's economy and a long-term profitable redeployment of capital.

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Economic Worries Weigh On FEMSA

Seeking Alpha: Despite A Reminder Of The Risks, Senomyx Still Has Appealing Potential

Wall Street can be a harsh teacher (I have the grey hairs to prove it), so it's best to learn certain lessons with a minimal number of repetitions. One of those lessons is that it almost always pays to be skeptical when it comes to small development-stage companies that depend upon commercial launches controlled by larger companies.

Senomyx (NASDAQ:SNMX) has an interesting IP and technology portfolio for taste receptor-based food additives and a high-profile partnership with PepsiCo (NYSE:PEP). Optimism over the commercialization potential of an additive designed to reduce the sugar/HFCS content of sodas and other beverages sent these shares close to $13 this year, but then the market swept the legs out from under the stock on worries about a later-than-guided commercial launch from Pepsi and lackluster self-directed sales efforts.

I had been less bullish on Senomyx's near-term prospects than at least some of the sell-side, so the consequences of this six-to-nine month delay aren't as bad to my valuation. I still believe this is a high-risk/high-reward situation, but the commercial potential of products that can reduce the sugar or salt content of food and beverages, or enhance their savory characteristics is such that this is still a stock for aggressive investors to consider as a 2015 breakout story.

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Despite A Reminder Of The Risks, Senomyx Still Has Appealing Potential

Seeking Alpha: The Going's Getting Tougher, But ABB Is Still Going

Swiss industrial conglomerate ABB (NYSE:ABB) largely did what it needed to with its September capital markets day, reassuring investors that management is moving to fix the problems in the Power businesses, that automation remains in good health, and that capital returns to shareholders were a priority.

Since then, though, ABB has seen some adverse developments. Europe's economy, as reflected by metrics like Germany's PMI, has been looking soft and tumbling oil prices threaten a sizable end-market for the Process Automation business. Add to that that ABB was already being somewhat bold in projecting market-beating growth, and it is perhaps not so surprising that a lot of sell-side analysts have cooled on the shares.

There are certainly risks in front of ABB, but that is always going to be true for an international industrial conglomerate. ABB's plans to turn around the Power operations still appear credible and while automation orders from the oil/gas sector are at risk, lower oil prices could stimulate more capex investment and demand from customers in other end markets. All told, ABB still looks like a credible stock to own today for investors looking to gain international and industrial exposure.

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The Going's Getting Tougher, But ABB Is Still Going

Seeking Alpha: Despite A Share Price Slide, Commercial Vehicle's Plan Remains On Track

Institutional investors can be a notoriously fickle and impatient lot and Commercial Vehicle (NASDAQ:CVGI) shares have certainly fallen out of favor since the summer of 2014. Commercial Vehicle wasn't the only commercial vehicle-exposed company to see its stock slide, Cummins (NYSE:CMI) and Allison (NYSE:ALSN) also saw declines (albeit not as steep), but it looks as though the Street was unimpressed with Commercial Vehicle's mid-September Analyst Day and is less bullish on the long-term self-improvement prospects.

Admittedly, management's guidance that 2015 and 2016 will be years of investment instead of significant margin improvement was a little sobering. Likewise, I can understand if investors are worried that management is banking on agriculture equipment, a sector that many now expect to be in a multiyear bear market, as a major source of future growth. All things considered, though, not a lot has changed in my long-term fundamental outlook for the company and I continue to believe that $10 is a credible medium-range destination for the shares.

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Despite A Share Price Slide, Commercial Vehicle's Plan Remains On Track

Seeking Alpha: Philips Looks To Long-Time Laggard Volcano To Perk Up Its Healthcare Biz

It took a long time, but Volcano (NASDAQ:VOLC) finally found its buyer. Now the question is whether Philips (NYSE:PHG) can generate the growth and profits from Volcano's platform of technologies in intravascular imaging and therapeutics that Volcano's management never could. Investing more resources into image-guided therapeutics is not a bad call on the surface, but Philips must prove that it has moved past its legacy of below-average (if not outright poor) deal integration and must prove that the potential synergies between these two cath lab companies can win out over competitive threats from the likes of Boston Scientific (NYSE:BSX) and St. Jude Medical (NYSE:STJ).

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Philips Looks To Long-Time Laggard Volcano To Perk Up Its Healthcare Biz

Seeking Alpha: Better Priorities Leading To Better Outcomes For Broadcom

Broadcom (NASDAQ:BRCM) has had to learn some hard lessons about growth for growth's sake. Chasing revenue growth for its own sake led the company to two sizable ill-fated (and overpriced) acquisitions, not to mention the fruitless investment of substantial monetary resources into the uncompetitive broadband business.

Chastened by its failures, Broadcom management has retrenched around its established strengths and reprioritized profitable growth. Lost, or at least obscured, in the fuss over baseband and the lingering concerns about wireless connectivity is a very strong business in switching and broadband, not to mention upside from IoT-oriented connectivity products. Broadcom isn't obviously cheap from a FCF perspective, but if Broadcom can deliver the margin improvements its management projects and if the company can stick to a Texas Instruments-like (NASDAQ:TXN) transformation, there could be long-term upside beyond $50.

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Better Priorities Leading To Better Outcomes For Broadcom

Seeking Alpha: Lundbeck Continues To Fight To Stand Out

The Danish pharmaceutical company H Lundbeck A/S (OTCPK:HLUYY) (LUN.CO) isn't going to resolve its challenges quickly. While I continue to believe there is a strong argument to be made that Lundbeck has developed a roster of differentiated CNS products that can stand apart from branded and generic competitors, the fact remains that the Street has yet to be convinced and the company is still facing significant near-term profit erosion from lost patent coverage on key drugs and significant investments to support drug launches.

Buying Lundbeck now remains a bet on the prospects that better clinical data for key products like Brintellix, Abilify Maintena, and brexpiprazole will translate into major sales and that compounds like Selincro and Northera will emerge as significant contributors in their own right. With base-case upside of around 25% and bull-case upside of more than 40%, I continue to believe it's a bet worth making for more aggressive investors.

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Lundbeck Continues To Fight To Stand Out

Seeking Alpha: Cyclacel Now An Exercise In Futility

If there's any lesson worth learning about biotech - other than that, somehow, Hemispherx (NYSEMKT:HEB) will manage to convince a new crop of investors that its experimental compound Ampligen actually has some use - it's that trying to play long odds with micro-cap oncology biotechs rarely works out. Cyclacel (NASDAQ:CYCC) shares had already been pricing in a much lower than normal expectation of success for a Phase III cancer drug, but even those expectations have proven too optimistic.

With Tuesday's announcement that sapacitabine is unlikely to meet its primary endpoint in the Phase III SEAMLESS study of the drug as treatment for newly-diagnosed acute myelogenous leukemia (or AML) in elderly patients, there is little reason for investors to hold on to hope. While it may technically be possible (as in the odds are not 0%) for the final results to look a little better, that seems exceptionally unlikely and investors should resist the temptation to believe that other applications like MDS will save the day. Cancer biotechs rarely ever go away entirely and these shares could be a speculative playtoy for traders, but investors looking for biotechs with a real future in oncology should move along.

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Cyclacel Now An Exercise In Futility

Seeking Alpha: Ghosts Of Business Problems Past Visit Accuray Again

Since taking over Accuray (NASDAQ:ARAY) in October of 2012, Josh Levine has done a lot of good things at Accuray. Not that you'd know it by the stock performance (down about 3% over that stretch), but Levin has championed a reorganized sales force, reduced operating costs, and significant improvements in product quality and product development.

Unfortunately, there are still multiple issues bedeviling Accuray. Communication with the Street, long an issue of the prior management team, has emerged as an issue again as the company has failed to adequately communicate the impact of order age-outs to investors. There have also been challenges in getting the CyberKnife multi-leaf collimator to market, not to mention the challenges that go with competing against the 500lb gorilla that is Varian (NYSE:VAR).

Despite these rather sizable bumps in the road, I'm still bullish on Accuray. I've unfortunately gotten a much closer look at the realities of radiation oncology and I continue to believe that Accuray's technology and products can gain share in a changing radiation oncology market.

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Ghosts Of Business Problems Past Visit Accuray Again

Seeking Alpha: Manitex Still Hopes To Grow Past The Crane Wreck

It's been a rough year for Manitex (NASDAQ:MNTX), as the hoped-for turnaround in crane demand failed to materialize. For what little it may comfort investors, Manitex hasn't fared much worse from a stock market perspective as Terex (NYSE:TEX), Manitowoc (NYSE:MTW), and Palfinger (OTCPK:PLFRY) have all been weak as well.

There are certainly still clouds on the horizon, as rental fleets likely do not need to refresh aging fleets on a one-to-one basis and housing/infrastructure spending hasn't caught fire. Even more concerning to Manitex, oil and gas spending is likely to drop meaningfully next year as energy companies respond to a sudden drop in oil prices that has pushed many drilling projects below breakeven.

Amidst the challenges, Manitex has continued to build its business toward a critical mass in specialty equipment and 2015 could see the company break out over $500 million in revenue. Pushing out my expectations for organic growth and margin improvement has dropped my fair value in the low-to-mid teens and the debt magnifies the risk, but Manitex is still targeting growth in recovering sectors like infrastructure and industrial capex.

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Manitex Still Hopes To Grow Past The Crane Wreck

Seeking Alpha: Lexicon Pharmaceuticals Fights On

Nothing has ever been easy for Lexicon Pharmaceuticals (NASDAQ:LXRX). When the original plan to operate as a generator of knockout-based drug targets for other companies fell through, the company retrenched around the idea of developing its own drugs. After drugs targeted at rheumatoid arthritis and IBD fell through, the company found two much more promising candidates - telotristat etiprate for carcinoid syndrome and sotagliflozin (formerly LX 4211) for diabetes.

Here again, though, the company has encountered unexpected difficulties. Despite a strong profile in Type 2 diabetics with impaired renal function (a large piece of the market) and the possibility of strong efficacy in Type 1 diabetes, Lexicon has not been able to attract a partner to develop the Type 2 indication. This has left the company in a tough spot, forcing it to conserve resources and scramble for the cash it will need to develop the Type 1 diabetes indication on its own.

With the company's recent efforts to raise cash, it does look as though the company can make it through to pivotal data for both of its lead drugs. Whether the company can in fact market them on their own remains to be seen, but for now Lexicon remains what it has long been - a scrappy biotech with ugly financing and seemingly undervalued clinical assets.

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Lexicon Pharmaceuticals Fights On

Seeking Alpha: Microsemi Chugging Along

Microsemi (NASDAQ:MSCC) has always been a different sort of semiconductor company. In an industry where investors pay a lot of attention to leading-edge technologies, Microsemi has historically been better known for less advanced high-reliability products that are often sole-sourced. Where many semiconductor companies are tied heavily to end markets like communications, industrials and consumer products, Microsemi has long been more leveraged to defense and aerospace.

The end result of all of this is that Microsemi shares often seem to zig when others zag. But with the defense, aerospace, and space markets looking stronger into 2015 and the company still building up its underrated FPGA business, Microsemi seems to me to be getting stronger at a time when many investors are worried about the semi space. As I continue to see fair value in the low-to-mid $30's, I continue to believe this is a stock well worth investors' due diligence efforts.

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Microsemi Chugging Along

Seeking Alpha: Multi-Color's One-Two Growth And Margin Punch

Multi-Color (NASDAQ:LABL) has been on a tear over the last year, up about 50%, and as a shareholder I can't really complain. Over the last few quarters the company has seen not only improving organic growth trends, but better than expected contributions from acquisitions and faster improvements in margins. I do have some concerns that valuation is getting stretched, but margin leverage can unlock additional value and the company has a deep pool of acquisition candidates to augment internal growth efforts.

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Multi-Color's One-Two Growth And Margin Punch

Seeking Alpha: Short-Term Concerns Stacking Up At MSC Industrial

One of the endless debates between investors is whether it is better to move in and out of positions in response to short-term trends or to identify well-run companies with long-term drivers and hold them through thick and thin. I'm generally in the latter camp, but even I will acknowledge that it is harder to argue that industrial distributor MSC Industrial (NYSE:MSM) is a must-buy today.

The fundamental bull theses for MSC Industrial still seem to be in place. MSC Industrial is a well-run distributor with a strong core in metalworking that is looking to leverage its CCSG business to address new industry verticals (beyond manufacturing) and to enter new adjacent markets (like fasteners). On the other hand, the company is seeing margin pressure as it spends on initiatives to drive future growth and sales growth targets may be pressured by weak pricing and increased competition from the likes of Fastenal (NASDAQ:FAST) and other distributors.

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Short-Term Concerns Stacking Up At MSC Industrial

Seeking Alpha: Alnylam Pharmaceuticals Staying Ridiculously Busy

Investors who prefer biotechs with potential platform technologies that can support multiple drug candidates can still find a lot to like in Alnylam Pharmaceuticals (NASDAQ:ALNY). With the shares up about 60% over the past year, a $6.6 billion-plus market cap, and multiple analysts following the stock, this is no longer an under-the-radar play on RNA interference, but the company's preclinical research efforts continue to produce interesting new candidates while those already in the clinic are showing meaningful potential.

For a company with one late-stage program, it may seem hard to argue that Alnylam shares are seriously undervalued today. At the same time, I would note that trial read-outs later this year and in 2015 could add significant value as investors revise their projected odds of approval and revenue expectations. I continue to hold these shares myself and I certainly think they make sense in a portfolio for investors who are comfortable with the risks that attend biotech stocks.

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Alnylam Pharmaceuticals Staying Ridiculously Busy

Seeking Alpha: Neurocrine Biosciences Looking Forward To A Big Year

"Hurry up and wait" remains the order of the day for Neurocrine Biosciences (NASDAQ:NBIX). This research-stage biotech has a big year on the way in 2015, with key data expected on both Elagolix and the VMAT2 inhibitor NBI-98854 (or '854). Strong efficacy and safety data could add $7 to $10 per share in value, while disappointing results would certainly have a negative impact on the shares. These shares still look undervalued today, though, and the possibility of new clinical candidates and/or buyout rumors could add a little excitement before year-end.

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Neurocrine Biosciences Looking Forward To A Big Year

Seeking Alpha: BRF's Operational Improvements Shining Through

Brazil's largest food company, BRF SA (NYSE:BRFS), continues to show progress with its self-improvement efforts. Although economic stress on Brazilian consumers has been leading to some trading-down in buying patterns, BRF has offset this with a more profitable SKU mix and an increased focus on operating efficiency. Despite an unexpected change in the company's leadership, the company looks on track with previously announced plans to shift more emphasis to higher-margin processed/packaged products and to prioritize margin and cash flow efficiency.

The biggest problem with BRF shares, apart from the volatility of the Brazilian economic and political environment, is valuation. I do believe that BRF has a plan that can lead the company into the ranks of the multinational packaged food giants, but the shares reflect a lot of optimism. I'm in no rush to sell just because of valuation, but new investors may find it wiser to wait for one of the seemingly inevitable corrections in the Brazilian stock market before stepping to the plate.

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BRF's Operational Improvements Shining Through

Seeking Alpha: First Cash Continues To Invest For The Long Term

These still aren't the best of times for the pawn/payday lending segment of the specialty lending industry. Gold is setting multiyear lows, limiting jewelry-based pawn lending growth, while Mexico's economic recovery remains slow. First Cash Financial Services (NASDAQ:FCFS) has done alright since my last update, rising more than 2% and beating both the S&P 500 and EZCORP (NASDAQ:EZPW), but lagging Cash America (NYSE:CSH) and not exactly setting the world on fire.

The potential undervaluation here is not necessarily remarkable (in the neighborhood of 10%), but First Cash does appear poised to grow free cash flow at a double-digit rate for many years to come. What's more, management is making use of its cash flow and healthy balance sheet to acquire stores in the U.S. and Mexico at attractive multiples and is likely still considering expansion into additional markets. Weak gold prices and muted retail demand are near-term threats, but I believe First Cash is taking advantage of the present trying times to build its base and position itself for stronger growth down the road.

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First Cash Continues To Invest For The Long Term

Seeking Alpha: Did Wright Medical Make The Right Move?

Four months ago, I fretted that Stryker's (NYSE:SYK) acquisition of SBi reduced the pool of eligible buyers to acquire Wright Medical Group (NASDAQ:WMGI) and/or Tornier (NASDAQ:TRNX). A lot of bullishness on these companies was based on their attractiveness as M&A targets for larger ortho companies, but the two companies have instead decided to come together to create a leading enterprise in the fast-growing extremities segment.

I have mixed feelings on this move as a Wright Medical Group shareholder. Wright Medical's somewhat disappointing third quarter sales result suggests that there's still more self-improvement to be done and Tornier has been working through sales restructuring efforts of its own. That said, Wright Medical CEO Bob Palmisano is a proven leader in the med-tech space and the prospects of a company with leading technology in both upper and lower extremities is appealing, not to mention the fact that the impending approval of Augment brings hundreds of millions of potential revenue into play.

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Did Wright Medical Make The Right Move?

Seeking Alpha: Neenah Paper Continues To Execute

I've had my issues with the valuation at Neenah Paper (NYSE:NP), but this specialty paper company continues to execute at a high level and the market has continued to reward that performance. While the shares have been basically flat since my last update, that performance is still quite a bit better than those of comps like Glatfelter (NYSE:GLT), Wausau Paper (NYSE:WPP), and Ahlstrom.

Sluggish European markets should be a challenge for the company's Technical Products segment, but filtration and specialty products continue to drive market-beating volume growth, while the fine paper business remains a very profitable business. With the balance sheet flexibility to add more revenue through M&A, I'm not worried about the company's ability to continue generating value-added growth. I'm still not overly excited about the valuation, with a DCF-based and EV/EBITDA-based approach bracketing about (5%)-15% potential, but I'd keep an eye on this name in the event that the market pullback takes these shares back to a more interesting price.

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Neenah Paper Continues To Execute

Update On The Fight

I've received a couple of notes asking how things were going with me and Christina (my partner), so I thought I'd write a quick update.

Christina had surgery nine days ago and the surgeon thought it went well (pretty much went as he expected). She is now healing/recovering and will be progressing on to radiation and chemo in due course.

She's still looking at a long, tough battle, but we have a great team of doctors and a network of friends who have been fantastic through this process.

Seeking Alpha: OM Group Hasn't Transformed Fast Enough

It wasn't supposed to be this way for OM Group (NYSE:OMG). Selling its cobalt and ultra-pure chemicals businesses and acquiring an advanced magnets business was supposed to transform this company from a cyclical commodity business to a growth-oriented specialty materials business. As it happens, though, the company has seen a much weaker recovery in Europe than hoped, not to mention lower demand in renewable energy, medical batteries, and electronics.

Management meaningfully lowered full-year EBITDA expectations after the second-quarter report, and more recently, laid out a medium-term growth outlook that calls for just 2%-3% annual revenue growth through 2017. The combination of relatively low expected growth and investors allocating away from specialty materials stocks has led to a one-third drop in OM Group's share price from the time of my last update in April.

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OM Group Hasn't Transformed Fast Enough

Seeking Alpha: Sluggish European Demand May Be Opening A Window Into Innospec

I've liked specialty chemical company Innospec (NASDAQ:IOSP) as an operating entity for some time, but I've been less excited about the stock given its valuation. The shares are now down more than 20% from my initial write up and down a similar amount since my last write up, though, and that makes the risk-reward balance more interesting. While I do have some concerns that demand in Europe for the company's fuel additives will weaken further, I like the long-term outlook for the company's oilfield chemical and personal care performance chemical operations.

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Sluggish European Demand May Be Opening A Window Into Innospec

Seeking Alpha: The Frustrating Wait For Value Realization At PCTEL

It is not too hard to see how PCTEL (NASDAQ:PCTI) could parlay billions of dollars of end-market potential in markets like smart grids, process automation, enterprise WLAN, precision agriculture, train control, and fleet management into potentially hundreds of millions of dollars of revenue. "Potential" is always a tricky word when it comes to small cap companies, though, and PCTEL doesn't have the best track record when it comes to delivering on its potential at any given point in its past.

PCTEL doesn't trade at particularly ambitious multiples, but then why would it? The company has been free cash flow positive for some time, but doesn't have any real record of attractive margins or returns on capital. I do believe that investors need to focus on where a company is going more than where it has been ("skate to where the puck is going to be"), but I have questions about PCTEL's ability to truly differentiate itself as a component supplier. I ultimately come down favorably inclined toward PCTEL, but near-term headwinds in wireless infrastructure spending could stretch out what has already been an extended wait for market-beating performance.

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The Frustrating Wait For Value Realization At PCTEL

Seeking Alpha: WESCO Still Waiting

WESCO (NYSE:WCC) hasn't exactly distinguished itself in the six months since I last wrote about the company. Admittedly, not many distributors have done well over that time, as HD Supply (NASDAQ:HDS), Grainger (NYSE:GWW), Fastenal (NASDAQ:FAST) and several others are in the red, but it is nevertheless frustrating that WESCO has paired a frustratingly slow recovery in key markets with shortfalls in its reported margins.

Pushing out some of the expected improvements in financial performance does take some upside out of my price target, but with a fair value in the mid-$80s, I still believe WESCO is a worthwhile name to consider as a play on a non-residential construction recovery. Management needs to show that it can deliver real results from its "One WESCO" strategy, but I do see a path for the company to generate better margins and asset turnover as it continues to integrate acquisitions and leverage end-market recoveries.

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WESCO Still Waiting

Seeking Alpha: Maxwell Down On Power, But Still Promising

Six months ago, I thought that the hoopla over Maxwell Technologies' (NASDAQ:MXWL) prospects of securing an ultracapacitor order from Tesla (NASDAQ:TSLA) (in addition to or along with other auto OEM orders) had taken the shares a little too far for my comfort, and that it was better to wait for a pullback. The shares proceeded to climb another 25% from that point, but have been cut down by more than half on a guidance reset following second-quarter numbers and the perception that management has backed away from its guidance for multiple automotive design wins in 2014.

All in all, while the this sharp decline from the late May highs has to be painful for Maxwell shareholders, the story has really changed all that much. The company's ultracapacitors continue to look like an interesting solution for a variety of applications in transport and energy, while the company's manufacturing approach should support attractive margins. Order timing is a major unknown, and these shares are vulnerable to the vagaries of the market's appetite for risky stories, but this seems like a good time for risk-tolerant investors to take a closer look.

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Maxwell Down On Power, But Still Promising

Seeking Alpha: Cemig's Wild Ride Continues

Brazilian utility Cemig (NYSE:CIG) is a good case in point that emerging market utilities don't always offer that higher growth/lower volatility mix that investors often seem to expect. There are certainly a lot of company-specific challenges for Cemig, including an ongoing fight over retaining concessions to three sizable hydropower generating assets, aggressive cost reduction guidance, and worries that management is pursuing low-return investments. On top of those, Cemig faces hydrology risks, political uncertainty, and economic risks in Brazil.

Since my last piece on March 20, these shares have been pretty volatile - jumping almost 50% (for the local shares) before a nearly 25% sell-off. There would be further upside from here if Cemig's legal efforts to retain its hydropower concessions prevail and the company does have additional spot exposure to the Brazilian electricity market, but with the valuation close to a weighted average base case scenario I'm not thrilled about the risk-reward balance.

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Cemig's Wild Ride Continues