Seeking Alpha: U.S. Bancorp Still The Relatively Defensive Option

Since the middle of 2015, and particularly in the last month or so, investors have become more concerned about the health of the economy and the prospects for real growth in 2016. If that "lower for longer" scenario pans out, investors may want to take another look at U.S. Bancorp (NYSE:USB).

Much has been written (some of it by me) on the positive quality attributes of this large almost-national bank - the company's cost control is top-notch, as is the quality of the underwriting, and the bank has lucrative fee-generating businesses that chip in a substantial portion of revenue. U.S. Bancorp is also comparatively less asset-sensitive than peers like Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM), let alone smaller players like Zions (NASDAQ:ZION) and Regions (NYSE:RF), and if the economy slows in 2016 this bank will like fare better.

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U.S. Bancorp Still The Relatively Defensive Option

Seeking Alpha: JPMorgan Performing Well, But Credit Risk Back In Play

Not a lot is supposed to change in a month when you're talking about bank stocks, but it has been anything but an ordinary stretch since I last wrote about JPMorgan (NYSE:JPM). In those three weeks, the U.S. Big Four banks (JPMorgan, Citigroup (NYSE:C), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC)) have seen their shares fall around 10% to 20% on increasing worries about the health of the U.S. economy, the prospect for higher credit losses, and the uncertain outlook for rates.

There's definitely an interesting dichotomy between what banks are saying (good loan demand from businesses, generally good credit developments outside of energy) and what a lot of manufacturing / industrial companies are saying, and that ups the risk for 2016. As an asset-sensitive bank, JPMorgan should be able to generate better margins and returns as rates rise, but those increases may take a little longer to materialize. In the meantime, the bank continues to do a good job of shrinking its balance sheet, reducing its G-SIB burden, reducing costs, and pursuing revenue streams outside of banking. I still believe these shares should trade closer to $70, and with the declines in the stock it is a more interesting buy candidate than just a month ago.

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JPMorgan Performing Well, But Credit Risk Back In Play

Seeking Alpha: Parker-Hannifin: Good Company Meets Bad Markets

Parker-Hannifin (NYSE:PH) isn't a flawless company, but this leader in motion and process control has a pretty solid record of generating attractive full-cycle margins. What's more, the company is uncommonly diversified across its end-markets and generally eschews splashy moves in favor of just consistently doing a good job.

Unfortunately, Parker-Hannifin is caught up in a global butt-kicking of industrial equities and the company is facing a lot of demand weakness across its many markets. I believe that the company can generate long-term growth of over 3% and that the shares are probably too cheap today, but investors considering buying on this pullback have to have patience and a long-term vision to offset the near-term risks that weakness in oil/gas, off-road vehicles, and general manufacturing will get even worse before turning around.

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Parker-Hannifin: Good Company Meets Bad Markets

Seeking Alpha: Illinois Tool Works Is A Growth Story Now

Before hardcore Illinois Tool Works (NYSE:ITW) investors light the torches and sharpen the pitchforks, I'll explain the title right away; my view on this industrial conglomerate is that the biggest swing factor in the company's stock market performance in the next one to three years is going to be the amount of organic revenue growth that it can generate. ITW has done a good job of boosting margins through streamlining, and management is quite willing to divest commoditized businesses, but its projections call for the company to perform on a level that has historically been out of reach.

I do believe we're in the middle of a promising buy-the-dip opportunity for a number of industrials, but I can't make the numbers work for Illinois Tool Works today. I believe management can generate mid-teens FCF margins on a sustained basis (a marked improvement over the past 10 years), but I just don't see enough organic revenue growth to drive an exciting fair value today.

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Illinois Tool Works Is A Growth Story Now

Seeking Alpha: Atlas (Copco) Sneezed

How best to frame what has happened to Swedish industrial conglomerate Atlas Copco (OTCPK:ATLKY) in the six months since I last wrote about it? The roughly 25% drop in the ADR share price goes well beyond an Atlas Shrugged reference … we're talking full-on sneezing if not a pulled hamstring.

Some of this share price decline seems reasonable to me. First, Atlas has often carried a pretty healthy valuation and that's harder to support in a virtually no-growth environment. Second, the outlook for mining is feeble at best, while the "general manufacturing" segment served by the company is looking quite weak indeed and particularly so in the U.S. and China.

If you believe in buying good companies going through hard times not of their making, this is a good time to look further into Atlas Copco. There's definitely downside risk if a mild manufacturing recession for 2016/2017 proves more serious or longer in duration, but that's how it goes with "buy the dip" opportunities - there's almost always some reason for that dip.

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Atlas (Copco) Sneezed

Seeking Alpha: Ingersoll-Rand Better Valued, But Not Better

It has been a while since I've liked Ingersoll-Rand (NYSE:IR), as I believe the shares have been buoyed by quite a bit of faith around the Street in the company's restructuring efforts. This skepticism has kept me on the sidelines, and with the shares down around 20% from the time of my last article, I can't say as though I've missed out on much.

The startling weakness in global equity markets since the start of the year and in industrial stocks, really, since the middle of 2015 has created some bargains provided that 2016 isn't the start of another deep or prolonged recession. I still have a lot of quality-based issues with Ingersoll-Rand - the company is a strong player in HVAC, but I don't believe the company is doing much to shrink the gap with Atlas Copco (OTCPK:ATLKY) in industrial and there's still a lot of work to be done on margins. At this price, though, I don't think so much benefit of the doubt is baked into the price and patient investors could see some upside from here.

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Ingersoll-Rand Better Valued, But Not Better

Seeking Alpha: Not All's Well At Honeywell

American industrial conglomerate Honeywell (NYSE:HON) has a lot of positives going for it - the company is leveraged to several markets that look relatively healthy going into 2016, management has credibility when it comes to margin improvement efforts, and the balance sheet is in pretty good shape. That said, investors are bailing out of industrials left and right, and Honeywell shares have fallen about 10% from my midyear update. What's more, the health of key markets like aerospace, construction, and auto aren't exactly guaranteed and industrial markets look to be in for a weak run.

Between the prospects for a recession in manufacturing in 2016 and management's relatively conservative guidance for the year, I suppose I can understand why fund managers aren't eager to hold Honeywell right now. Nevertheless, I think this may well be a case where individual investors can benefit from not having that need to respond/report to clients with hair triggers; buying a dip usually means you're buying into trouble, but unless you think the world is in for a really bad stretch, I think this is the sort of opportunity that investors can exploit to get Honeywell shares at a more attractive price.

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Not All's Well At Honeywell

Seeking Alpha: Fastenal Battered Down By The Industrial Recession

Something is definitely wrong in the U.S. manufacturing sector, and it is showing up in the results of Grainger (NYSE:GWW), MSC Industrial (NYSE:MSM), and Fastenal (NASDAQ:FAST). While Fastenal hasn't fared too badly on a relative basis since my last report on the company, the shares nevertheless have fallen about 12% in the last six months. As is par for the course, Fastenal seen its growth rate hold up better than those of Grainger and MSC Industrial, but expectations have come down pretty significantly in response to slowing manufacturing activity.

Fastenal isn't exactly cheap, but it's about as close as the stock ever gets. Further weakness in industrial activity could push these shares down even further in 2016, but I like the company's prospects for high single-digit long-term revenue growth. I expect the company to continue to gain share in the industrial distribution space through its extensive store base, its vending efforts, and its growing efforts in onsite management and e-commerce.

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Fastenal Battered Down By The Industrial Recession

Seeking Alpha: Microchip Technology And Atmel The Right Match

It's been a while since I've written on Microchip Technology (NASDAQ:MCHP), mostly because I have thought this well-run MCU and analog chip company was pretty fairly priced in the market and didn't offer all that much opportunity. While some in the peanut gallery didn't like it when I last wrote in May of 2014 that I preferred Atmel (NASDAQ:ATML) (a smaller, less well-run MCU player), Microchip is down about 14% over that period while Atmel has fallen less than 4%.

Now these two players are looking to tie themselves together permanently. Although I've thought for a while that Atmel could be a M&A target, I was surprised to see Dialog (OTC:DLGNF) step up given the questionable synergies. Dialog shareholders weren't too pleased either, and the erosion in value of Dialog shares kept a window of opportunity open for Microchip. Together, Microchip and Atmel will be the #3 MCU company in the world (trailing Renesas (OTCPK:RNECY) and NXP Semicondcutors (NASDAQ:NXPI) after its deal for Freescale), and Microchip will have a very fertile opportunity to drive margin synergies.

While the merger is not a done deal (so there is risk to deal closure), I believe Microchip's fair value climbs into the low $50's with Atmel in hand. Buying any stock feels like a bold move right now, but I believe Microchip has a strong record of driving cost savings from acquired properties (a primary driver of value in this deal) and a strong record of overall operating execution.

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Microchip Technology And Atmel The Right Match

Seeking Alpha: Assa Abloy Has Growth Locked Up

Assa Abloy (OTCPK:ASAZY) has a lot of the traits that investors looking for high-quality companies ought to prize. The company generates good returns on capital and consistently generates good cash flow from its revenue base. It also has a market leadership position, but operates in a market that still leaves it ample room to expand and grow. While the organic growth rate has been pretty dismal over most of the past decade, the severe disruptions to the construction markets in Western Europe after the collapse of the credit bubble certainly created some headwinds.

The problem (and if there was ever going to be a Stephen Simpson Seeking Alpha drinking game, this is where you'd take a shot) is valuation. Even amidst the crapalanche that is the year-to-date global equity market, Assa Abloy isn't cheap enough for me. Assa Abloy is almost never cheap, and I won't argue that it should be; it's a well-run company with great share. What's more, North American and Western European non-residential and residential construction look like good markets to be in for 2016. Nevertheless, I just can't connect the dots and come up with a valuation that makes me a willing buyer at today's price.

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Assa Abloy Has Growth Locked Up

Seeking Alpha: Rockwell Automation Punished For Being Mortal

When your biggest complaint about a stock is the valuation, that's a pretty clear signal you're looking at a good candidate for the watch list and future buy-the-dip-opportunities. I have long respected Rockwell Automation's (NYSE:ROK) position in the automation space and its strong presence in controls (especially PLCs). What I haven't liked as much has been the valuation, but the apparent realization among the sell-side and institutional investors that Rockwell is still a cyclical company appears to have created a window of opportunity.

The problem with buying the shares of a good company like Rockwell during a downturn is that you never really know how bad the decline will be. I believe the long-term drivers for automation are still very strong and that Rockwell's long-term future looks bright, but that doesn't mean that the shares couldn't see $80 again if conditions in markets like auto OEMs get really bad and margins decelerate further. If you're in a position to take the risk of short-term pain for long-term gain, though, I think this is a good time to consider these shares.

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Rockwell Automation Punished For Being Mortal

Seeking Alpha: Celldex Therapeutics Down, But Definitely Not Out

It's been a rough six months for biotech in general, but Celldex (NASDAQ:CLDX) has been hit worse than most. The shares are down almost 50% over the six months that have passed since I last wrote about the company. Given the large move down after the company announced it wouldn't be pursuing early approval for Rintega, it's clear that investors were disappointed they'd have to wait at least a year longer to see the drug hit the market. I also wonder if some investors starting feeling some "immuno-oncology fatigue" and began worrying that some of Celldex's approaches (including a cancer vaccine and an ADC) might be out of step with the hotter prospects in the developing IO field.

This plunge in the share price looks like an opportunity. It certainly may be true that the biotech boom is over, and that valuations across the sector are going to come under even more pressure. Outside of that, though, I believe Celldex has a solid, deep, and undervalued pipeline that could generate well over $1 billion in annual revenue down the road.

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Celldex Therapeutics Down, But Definitely Not Out

Sorry for the delayed posts

Sorry that it took me so long to post some articles from last week. No good excuse ... just a combination of little factors that conspired against me. It's a conspiracy, I tell ya!

Seeking Alpha: MSC Industrial Managing The Downturn

What do you do when your core market is contracting at a mid-teens rate? If you're MSC Industrial (NYSE:MSM) you double down on the things you can control - including tight expense control, good customer service, and expansion outside of that weak core. Those moves appear to be serving this leading metalworking MRO distributor reasonably well, as the company produced a set of fiscal first quarter results that were a bit better than expected.

I continue to believe that MSC Industrial has better days ahead. Weak markets are often an opportunity for stronger players to gain share, and while this oil/gas-driven manufacturing contraction is likely to continue through much of 2016, it won't last forever. I continue to believe that MSC Industrial can pair mid-single digit long-term revenue growth with double-digit FCF growth, supporting a fair value above $70 today.

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MSC Industrial Managing The Downturn

Seeking Alpha: Monsanto Making Do, But It's M&A That Everyone Seems To Want

Given the recent announcement of the intention of DuPont (NYSE:DD) and Dow (NYSE:DOW) to combine their operations and Syngenta's (NYSE:SYT) apparent increased willingness to at least consider M&A offers, the question of consolidation in the ag business seems to have rendered Monsanto's (NYSE:MON) near-term performance largely moot. Given the weakness in the ag sector, and ongoing softness in corn prices, that might not be such a bad thing.

I continue to believe that Monsanto is a solid long-term holding in the ag space. The stock is modestly undervalued and carries less operating risk than many cheaper-looking ag stocks. I also continue to believe that Monsanto will find a seat in this game of ag musical chairs, but there is definitely a risk that Monsanto either has to settle for something less than its first choice (or second...) or pay more than it would like to.

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Monsanto Making Do, But It's M&A That Everyone Seems To Want

Seeking Alpha: First Cash Financial Makes Its Move

As I have written on many occasions, one of the larger unmet expectations among First Cash Financial Services' (NASDAQ:FCFS) investors and analysts has been the lack of a big acquisition in Latin America to take the company beyond its very successful operations in Mexico. While management has now in fact made a big acquisition outside of the U.S., it is not exactly the strong entry into a large new market that some investors wanted.

Acquiring more stores in Mexico should round out the company's business from a geographical perspective and significantly accelerate the achievement of the company's desired footprint. The incremental expansion into Guatemala and El Salvador is nice, but not really game-changing. The paucity of detail that First Cash provides makes modeling challenging, but I believe this deal does improve the fair value by about 4% to 10% relative to my prior expectations.

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First Cash Financial Makes Its Move

Seeking Alpha: Hurco's Tiny Boat Facing Choppy Seas

I don't envy the job facing Hurco's (NASDAQ:HURC) managers today. I believe that this small industrial company remains a very overlooked manufacturer of high quality high-spec machine tools, but that is a very tough business to be in these days. As I've written in past pieces on companies like MSC Industrial (NYSE:MSM), demand for cutting and metalworking tools has plunged in the U.S. during this industrial slowdown and demand appears to be even worse in Asia.

I still believe that patience will pay with the stock. The company has released an interesting new control console (Max 5) and the acquisition of Milltronics and Takumi meaningfully expands both the company's product lines and geographic exposures. A machine tool company is a quintessentially cyclical company, but Hurco does look undervalued to me today.

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Hurco's Tiny Boat Facing Choppy Seas

Seeking Alpha: PCTEL Struggling To Grow

About a year ago, I thought PCTEL (NASDAQ:PCTI) could be an interesting overlooked opportunity if the company could take advantage of its growth opportunities in WLAN, fleet management, train control, and LTE build-outs. Unfortunately, those opportunities really haven't materialized, and the company has seen organic revenue weaken considerably, taking margins along for the ride.

With the shares down almost 40% since my last piece, a lot of damage has already been done. Looking ahead, the market seems to be anticipating very little revenue growth and/or no margin leverage. That is probably an overly grim assessment, but it is very difficult for me to look at this company's history of poor revenue growth, weak margin leverage, and poor returns on invested capital and say that investors should make the leap of faith that PCTEL will return to growth. The potential may be there, and management has a commendable record of returning capital to shareholders, but I can't see a reason to own until there is at least stability in the organic revenue trajectory.

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PCTEL Struggling To Grow

Seeking Alpha: Synergy Pharmaceuticals Looks More Interesting Today

I can't really complain with how the Synergy Pharmaceuticals (NASDAQ:SGYP) story has developed. When I last wrote about the stock in April, I calculated a fair value of just under $6 with the shares trading at around $4 at the time. Since then, the shares have moved up $1 (up about 25%), though there was a big move up to $10 in the meantime as investors reacted very positively to strong Phase III data on the company's lead drug.

Since then, I think reality has set in and dragged the shares down with it. Medically significant constipation (by which I mean a condition that is persistent and not quickly relieved with OTC options) has proven to be a challenging market for Allergan (NYSE:AGN)/Ironwood (NASDAQ:IRWD) and Sucampo (NASDAQ:SCMP)/Takeda (OTCPK:TKPYY), as these companies have had to push direct-to-consumer campaigns to drive awareness. I likewise believe that investors had inflated expectations of an acquisition, and impatience with that process has disappointed some shareholders (or former shareholders).

I do believe that Allergan et al are slowly chipping away at the awareness issue, and that by virtue of its solid efficacy and better tolerability, Synergy can reap the benefits of these early market-building exercises. My fair value estimate has nearly doubled as the successful Phase III results for plecanatide significantly de-risked the value and I believe the company's efficacy/safety trade-off can gain more share than I previously assumed. I do see meaningful risk of further dilution as the company will need to raise funds to build a marketing effort, and investors will likewise have to wait to see whether a lower-dose version of linaclotide can better balance the tolerability issues.

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Synergy Pharmaceuticals Looks More Interesting Today

Seeking Alpha: LDR Holdings Has To Reestablish Its Growth Cred

Sometimes it's more that a company missed than by how much they missed. Take the case of small-cap spinal care company LDR Holdings (NASDAQ:LDRH). The market reacted very badly to the company's October third quarter pre-announcement, even though the magnitude of the miss was just 2% relative to the Street's expectations. Institutions hate to see a revenue miss so early into the launch of a major product (the Mobi-C cervical disc, in this case), though, and with so much of the value tied to revenue and profit targets far in the distance, even a small course correction can lead to a much bigger correction in the share price.

When I last wrote about LDR Holdings, I noted that this was a high-risk situation and those risks have certainly manifested themselves with the shares down about a third in the past three months. I still do believe that insurers are going to get on board with two-disc procedures and that greater adoption of LDR Holdings' less-invasive technologies can drive long-term revenue growth in the mid-teens. The decline in the share price has pulled the stock below my DCF-based fair value and that's pretty rare for a growth med-tech. There are still definitely risks here, as investors are going to be very sensitive to any sign of further disappointment in growth, but for investors who can take the risk this is a name worth some due diligence.

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LDR Holdings Has To Reestablish Its Growth Cred

Seeking Alpha: Novadaq Doing The Heavy Lifting

As expected, 2015 was a challenging year for Novadaq (NASDAQ:NVDQ) in many respects. The company had to manage the transition from a partner-based marketing model to a direct model, as well as a growing transition from a lease-based model to a capital sales model. The company has also seen more companies throw their hat into the surgical fluorescence imaging ring, most especially Stryker (NYSE:SYK).

For all of that, though, I believe the company has done a good job of managing its sales transition. Management has improved its communication with the Street and underlying procedure volume growth looks okay. There's definitely a lot of work left to do in terms of building the market and establishing a powerful sales trajectory, and these shares are priced pretty aggressively. I still believe that there is a money-making opportunity in Novadaq shares, but there are a lot of uncertainties here and the market will not be forgiving if the sales momentum stalls.

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Novadaq Doing The Heavy Lifting

Seeking Alpha: Neogen Flexing Its Operational Excellence

If you want to argue that valuation doesn't matter, you could certainly do worse than to highlight Neogen (NASDAQ:NEOG) as a prime example. Seemingly always expensive, Neogen has nevertheless leveraged its proven model to generate mid-teens annualized revenue growth over the last decade and nearly 20% operating income growth. Then again, maybe valuation does matter - if you had bought in five years ago, you'd be sitting with a double, but that's true for IDEXX (NASDAQ:IDXX) too, and you would have done even better with Illumina (NASDAQ:ILMN), Thermo Fisher (NYSE:TMO), or MWI Veterinary Supply (NASDAQ:MWIV). Even 3M (NYSE:MMM) (and yes, we're really stretching the notion of comparable here) would have given you a 70% return before dividends over the past five years.

So, what to do about this stock? I love Neogen's business, and I think the company has a lot of room to grow with its allergen, toxin, and antibiotic tests, its food safety products, and its genetics/bioinformatics business. I also think the company's time-tested acquisition strategy can be applied again and again to grow the business, particularly outside the U.S.

But trees don't grow to the sky, and how much growth should investors expect? Growing revenue at a double-digit annualized rate for the next decade would be fantastic for most companies, but even a 20% 10-year FCF growth rate only gets you to about a $60 fair value in my model. My concern, then, is that Neogen can remain an operationally superb company but one whose share price performance could lag as those multiples start to come down.

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Neogen Flexing Its Operational Excellence

Seeking Alpha: Conatus Has A Clearer Path, But It's Long And Uncertain

The past year was a tough one for companies focused on treating liver disease, but Conatus (NASDAQ:CNAT) had an especially bad year. The shares fell almost 60% as investors grew increasingly concerned about the company's drug emricasan, particularly with respect to just how reliable or meaningful the data collected so far are with respect to real-world efficacy.

Emricasan seems to have clinical activity, but it is still very much an open question as to whether it is effective enough to halt the progression of cirrhosis and spare people with this life-threatening condition a liver transplant or worse. Unfortunately, investors are in for a relatively long wait before more clinical clarity is achieved, and in the "time is money" world of biotech, Conatus investors are likely looking at substantially more dilution before a clinical approval is attainable.

If Conatus can demonstrated a place for emricasan in even just a single-digit percentage of cirrhosis patients, it is not hard to arrive at over $2 billion in peak revenue and even a huge amount of anticipated dilution would still support a fair value above $6 today. That said, Intercept (NASDAQ:ICPT) and Genfit (OTCPK:GNFTF) have proved quite a bit more with their drugs and are undervalued in their own right. It is certainly possible that the success of Intercept/Genfit and/or other companies targeting liver disease will shrink the pool of eligible patients for emricasan, but frankly the biggest issue today is establishing whether or not the drug is effective and which patients stand to benefit the most.

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Conatus Has A Clearer Path, But It's Long And Uncertain

Seeking Alpha: Intercept Pharmaceuticals Weighed Down By A Troubling Trifecta

Once a darling of the biotech space, Intercept Pharmaceuticals (NASDAQ:ICPT) has seen investors flee from the shares in droves, pushing it down close to 50% from my last article on the company and leading to a significant underperformance to its primary NASH-driven comparable Genfit (GNFT.PA) (OTCPK:GNFTF), which has fallen almost 20% over the same time period.

Investors have had a lot to mull over since the beginning of summer. Both Intercept and Genfit have produced mixed clinical trial results that have required further explanations from management, and both are subject to the questions and risks over pricing for drugs that could be given to millions of patients. More specific to Intercept, there are valid concerns now about safety, efficacy, competition, and market potential for its lead drug, and investors aren't happy about the uncertainty.

I still believe that Intercept's lead drug OCA is active and safe in primary biliary cirrhosis (PBC) and likely to demonstrate approval safety and efficacy in nonalcoholic steatohepatitis (NASH). I also believe, though, that there are meaningful questions about true market potential and that Genfit could be a more significant competitor (albeit not necessarily on an apples-to-apples basis).

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Intercept Pharmaceuticals Weighed Down By A Troubling Trifecta

Seeking Alpha: Copa Holdings Looks Undervalued, But Its Markets Likely Haven't Bottomed

Copa Holdings (NYSE:CPA) and Alaska Air (NYSE:ALK) make for an interesting study in contrasts. Both are well-run airlines by most of the metrics that matter, but they operate in very different markets. While Alaska Air continues to benefit from a benign-to-healthy U.S. airline industry environment, Copa is getting crushed by economic turbulence in major markets like Brazil, Venezuela, and Colombia. Since the time of my last article on Copa, the shares have fallen more than 40% while Alaska Air's shares have climbed nearly 25%. That Copa has outperformed GOL (NYSE:GOL) and Avianca (NYSE:AVH) is true, but doesn't put any money back into shareholders' pockets.

I do believe that the current share price discounts the long-term value of Copa, but it's hard to make money in the midst of weak reported results and lower expectations. Likewise, it's worth at least asking why investors should expect any meaningful turnaround in Brazil, Venezuela, or Colombia in the near term, as these are all commodity-driven markets that need a combination of higher oil, base metal, and agricultural prices to lead a turnaround.

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Copa Holdings Looks Undervalued, But Its Markets Likely Haven't Bottomed

Seeking Alpha: Alaska Air Making The Most Of Its Opportunities

I hate avoiding the shares of really good companies just because they look a little pricey, and Alaska Air Group (NYSE:ALK) is a good example of why that is. I liked the company back in February and thought that the shares had upside into the $70s, but the stock has managed to touch the high $80s this year and sits more than 25% higher than when I wrote that last article. Since that time, Alaska Air has continued to compete very effectively - not only withstanding Delta Air Lines' (NYSE:DAL) aggressive expansion in Seattle, but also adding several new routes of its own and leveraging its cost advantages.

And now we come back to the perpetual issue with Alaska Air's shares - valuation. At a 5.5x multiple to EBITDAR, the shares are about fairly valued, while a 6x multiple (still within the bounds of normal for an airline) adds about $8/share to the fair value and bumps the undervaluation up over 10%. Looking at free cash flow, today's price seems to be pricing in mid-to-high single-digit annualized FCF growth from 2015's estimated end point, and that's pretty generous for an airline.

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Alaska Air Making The Most Of Its Opportunities

Seeking Alpha: IPG Photonics Still On Top Of A Rising Mountain

I've made no secret of the fact that I like and admire IPG Photonics (NASDAQ:IPGP), and I can't say that the shares haven't rewarded that enthusiasm. Since my first piece for Seeking Alpha on the company, the shares are up more than 60%, trouncing other laser companies like Rofin-Sinar (NASDAQ:RSTI), Coherent (NASDAQ:COHR), and Newport (NASDAQ:NEWP), and beating the NASDAQ by a relatively comfortable margin as well.

When I last wrote about the company, the business was running quite smoothly, but I was concerned about the expectations baked into the valuation. The shares have been more or less flat since then on a "net" basis, but I did suggest that investors could look for dips into the $80s as buying opportunities and investors got two such chances (including a move into the $70s).

Now what? I still like this business, and I think IPG Photonics is poised for a decade of revenue growth that averages out to around 9% to 10% a year coupled with excellent free cash flow margins. I do have some worries about the potential of "peak margin", as well as the possibility that IPG Photonics' growth will make it more susceptible to the vagaries of the machine tool cycles, but no stock comes without risks. The shares do look a little undervalued now, but I'd be tempted to try another "buy the dip" move given the macro uncertainties.

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IPG Photonics Still On Top Of A Rising Mountain

Seeking Alpha: Manitex Struggling As The Boom Cycle Goes Bust

It's cold comfort when one of the nicest things you can say about a long call is that the company's peers have gotten hammered about the same in the intervening time. Manitex (NASDAQ:MNTX) borrowed extensively to fund an M&A program that has taken the company from around $100 million a year in revenue in 2010 to almost $100 million a quarter now, but the severe downturn in the energy market has hammered this company and pushed operating margins back into the low single digits. Although I think Manitex could still pay its interest even with a 10% sales decline next year and negative gross margin leverage, the situation is far from ideal today.

This is not just a Manitex-specific problem. Manitowoc (NYSE:MTW) is down about as much since the last time I wrote about Manitex, and Terex (NYSE:TEX) has done worse. Europe's Manitou (OTC:MAOIF), which is largely screened from the energy-related downturn in the U.S., hasn't done much better either.

At the risk of not knowing when to quit, I think Manitex still has a worthwhile future. The company's acquisition of PM Group gives the company better exposure to what should be an improving European construction sector in 2016, not to mention exposure to growth in North America (where PM Group has been historically under-represented). I think it's early (or at least very aggressive) to expect an energy recovery, but PM Group and ASV do at least give Manitex more leveraging to a healthier construction sector in North America.

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Manitex Struggling As The Boom Cycle Goes Bust

Seeking Alpha: Persistent Sluggishness In The U.S. A Growing Problem For First Cash Financial

It's getting harder and harder to give First Cash Financial (NASDAQ:FCFS) the benefit of the doubt. While the currency issues that are pressuring the reported revenue from the company's large Mexican operations are arguably forgivable, the persistent sluggishness in the U.S. operations is harder to excuse. What's worse, I don't think investors are, or should be, all that happy that the company has committed sizable amounts of capital towards consolidating the slow-growing U.S. pawn market and held off on expanding into faster-growing regions like Colombia and Peru.

Cutting expectations for a stock you've recommended is never fun, and it's even less so when you own the shares yourself. The reality, though, is that First Cash has been a rotten stock over the last year, with the shares down about 30%. While there is still an opportunity for First Cash to generate high single-digit to low double-digit growth in Mexico for years to come and generate better margins from the U.S. operations, this is very much a "show me" story today.

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Persistent Sluggishness In The U.S. A Growing Problem For First Cash Financial

Seeking Alpha: JPMorgan's Steady Progress Not Fully Rewarded

It may be boring, but JPMorgan Chase's (NYSE:JPM) ability to deliver on the "blocking and tackling" issues identified by management continues to build value for long-term shareholders of this enormous financial institution. More specifically, JPMorgan's management has managed to reduce its GSIB buffer and make progress on cost reductions while simultaneously driving above-average loan growth.

These improvements have led me to adjust my revenue and earnings targets, as well as the company's risk premium, and those improvements support a higher fair value. JPMorgan definitely has a delicate balancing act to maintain between further reducing its buffers and costs and not alienating customers, not to mention balancing the risk of expanded credit and credit losses, and maintaining leading market share in multiple businesses without getting dragged into a race to the bottom on pricing.

JPMorgan appears to be handling this balancing act with considerable skill. Given that, as well as the higher fair value and a generally "meh" attitude towards banks over the past six months, I think JPMorgan is looking a little more interesting as a new buy.

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JPMorgan's Steady Progress Not Fully Rewarded

Seeking Alpha: The Going's Getting Tougher - Will ABB Keep Going?

The outlook for industrial companies, particularly early-cycle companies, is looking worse as 2015 draws to a close. While a few sectors look as though they could do well in 2016, many sectors with significant capex spending like mining, energy, trucks, and autos are starting to look weak. For Swiss power and automation conglomerate ABB (NYSE:ABB), the weakness in mining, oil/gas, chemicals, and auto manufacturing is definitely a threat, and a call for stronger utility spending in the year ahead is definitely not a consensus call.

The good news is that it doesn't look as though ABB's management is just hiding under their desks and waiting for the storm to pass. Management has started up some relatively meaningful cost-cutting programs and is now examining whether they want to stay in the power grid business for the long term. Add in a healthy balance sheet that would facilitate M&A, and I think ABB is in okay shape heading into this downturn.

The shares are a trickier call right now. More often than not, buying into a downturn doesn't really work well. The exception is if and when the company in question manages to produce "less bad" performance than expected. I believe there's a chance for ABB to do that, and I do believe that these shares trade at a double-digit discount to fair value. That said, this company has earned some of the doubts around it concerning its margin leverage, its ability to spot and navigate industry downturns, and its ability to execute on value-additive M&A.

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The Going's Getting Tougher - Will ABB Keep Going?

Seeking Alpha: BB&T Has A Full To-Do List For 2016

Back in July, I thought BB&T (NYSE:BBT) looked a little rich from a valuation perspective, and the shares have sold off about 5% since then - modestly underperforming peers like U.S. Bancorp (NYSE:USB), Wells Fargo (NYSE:WFC), PNC (NYSE:PNC), and Fifth Third (NASDAQ:FITB). Since that time, the company has increased its interest sensitivity a bit, announced another acquisition focused on Pennsylvania, and reiterated its commitment to grow by acquisitions while getting a little more conservative on overall loan growth.

Looking ahead, I don't think BB&T is done doing deals, but I don't believe the company is as likely to pull the trigger in 2016 unless a can't-miss opportunity comes along. Instead, I expect the company to prioritize the integration of its recent acquisitions and particularly the realization of expense synergies. At the same time, I would look for the company to try to offset pricing pressure in its insurance brokerage operations with greater volume and continue to develop its specialty lending operations.

I would describe BB&T's current valuation as "okay". The company paid up for its Pennsylvania acquisitions and its going to take time for those deals to show their value, putting even more pressure on those expense synergies. In the meantime, I like BB&T's strong credit quality and its disciplined approach to loan growth. Investors willing to take the elevated risk will find better banking bargains outside the U.S., but with a fair value in the low $40's, BB&T might be worth a look again today.

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BB&T Has A Full To-Do List For 2016

Seeking Alpha: Lenovo Looking To Have The Last Seat When The Music Stops

It's easy to dismiss Lenovo (OTCPK:LNVGY) right now. What sane management team would want to be in the PC business when shipments are declining at a double-digit rate? What sane management company would want to battle high-end smartphone champion Apple (NASDAQ:AAPL) and low-end dynamo Xaomi with the rusty blade that is Motorola at their side? Why would anybody think there's money to be made in a server business that IBM (NYSE:IBM) didn't want?

What I think many of the superficial analyses of Lenovo miss is that this is a company with a proven ability to squeeze blood from a stone and relentlessly drive costs lower. While PCs are likely never going to be a growth market again, I do think there's still an opportunity for Lenovo to gain share and take what growth is there. Likewise, I don't think Lenovo ever unseats Apple in smartphones, but I believe Lenovo's cost structure can allow it to be one of the last companies standing after the industry shakes out the weaker players. Finally, I think there's meaningful server growth opportunity in China and other emerging markets, and here too I believe Lenovo has an opportunity to benefit from stripping costs out of the IBM assets and running the business more cost-effectively.

I've decided to take a more negative view of Lenovo's revenue growth prospects, as the decline in PC shipments has been exceeding my expectations from a year ago and the smartphone market too has cooled more quickly than I expected. Nevertheless, even with a lower revenue growth rate, the opportunity to add around a point and a half to operating margin over time and a similar amount to FCF margin supports a fair value above $28.

Lenovo has to achieve its cost-reduction goals for the Motorola business on schedule to rebuild investor/analyst trust, but I believe Lenovo has seen the bottom in mobile and servers and will surprise with what it does over the next three to five years. More importantly, I think Lenovo has a cost structure and a cost philosophy that makes it a long-term survivor - as virtually every market eventually becomes a commodity market over time, cost leadership is ultimately what distinguishes the survivors and I believe Lenovo has the corporate DNA to be the last (or at least one of the last) players standing in PCs, x86 servers, and phones.

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Lenovo Looking To Have The Last Seat When The Music Stops

Seeking Alpha: Does 3M Have Enough Cards Left To Play?

The current management team at 3M (NYSE:MMM) has done a lot to address the issues that used to contribute to the stock's historical relative undervaluation. Management has streamlined the company and boosted margins, maintained a strong internal R&D culture, continued to diversify geographically (particularly into faster-growing emerging markets), levered up to buy back shares, and gotten active on strategic M&A.

The market has noticed, and over CEO Inge Thulin's tenure the shares have outperformed the S&P 500 by about 15%. The shares have also outperformed peers/comps like General Electric (NYSE:GE) while keeping up with the likes of Honeywell (NYSE:HON), Danaher (NYSE:DHR), and Illinois Tool Works (NYSE:ITW).

The question I have, though, is whether 3M has enough cards left to play to continue that run of outperformance. Next year is looking pretty rough for the "general industrial" markets that make up a lot of 3M's business, not to mention the emerging markets that contributes to about one-third of the company's sales. Along similar lines, 3M doesn't have a lot of exposure to commercial aerospace or construction and I'm not sure there's too much left to accomplish on the restructuring side. Large M&A is still a possibility, but a transformative deal that moves the company into new markets would frankly be a little out of character.

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Does 3M Have Enough Cards Left To Play?

Seeking Alpha: SK Telecom May Be Cheap For Some Good Reasons

I wasn't particularly bullish on SK Telecom (NYSE:SKM) back in April, but I thought the combination of more disciplined competition in the South Korean mobile market and increasing growth of LTE subs would at least be good for dividend coverage. As it turns out, growing MVNO subs and fierce rate competition have kept a lid on per-user growth, leading to several underwhelming quarters at the operating line. What's worse, it looks like management hasn't completely moved beyond its value destroying aspirations of empire building.

I guess the good news here is that the business hasn't eroded as dramatically as the 20%-plus decline in the share price might otherwise suggest. In fact, a lot of what's wrong with SK Telecom's share price performance could be tied to the wider rout in emerging markets, as the local shares (017670.KS) are down only about 8% more than the KOSPI index as a whole (-15% versus -7%).

The company's lower ARPU has led me to revise my growth expectations lower, but today's share price is still about 20% below my fair value estimate. Unfortunately, I have real concerns about management's ability to effectively deploy capital. Rumors of a spin-off of non-strategic investments in POSCO and Hynix are encouraging but not new, and I think investors considering these shares need to at least contemplate the risk that the shares look undervalued for some good reasons.

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SK Telecom May Be Cheap For Some Good Reasons

Seeking Alpha: MTN Group Desperately Needs To Get Its Act Together

Emerging market stocks have had a bad year in general, with most of the diversified indexes showing double-digit losses. South Africa's MTN Group (OTCPK:MTNOY) has done substantially worse, falling more than 50% this year and doubling the poor performance of the iShares MSCI South Africa Index (NYSEARCA:EZA), as the company has faced competitive challenges in many African markets, ongoing executive turmoil, and a huge regulatory fine in Nigeria.

That the shares seem significantly undervalued and represent a diversified play on the growth of Africa is really the only reason to continue to put up with the drama and volatility. MTN Group does do some things right, and the company is seeing strong performance from mobile data and mobile money, but the company desperately needs to name a strong candidate as CEO and craft a plan that will see the company compete profitably in its markets.

I believe that mid single-digit long-term revenue growth and high single-digit FCF growth can support a fair value close to $14 for the ADRs. That represents a substantial erosion of value over past articles on this company, but the movement of the rand against the dollar (from around 10.50 to 15.20) has done a lot of the damage. Cooperatively resolving the fine in Nigeria, leveraging growth potential in Nigeria, Iran, and Ghana, and competing intelligently in South Africa would all help drive value apart from macroeconomic factors like currency rates.

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MTN Group Desperately Needs To Get Its Act Together

Seeking Alpha: Turkcell Looking Long Term, Market Thinking Short Term

As a reader commented on a prior Turkcell (NYSE:TKC) piece, Turkey's leading mobile operator sits at the intersection of two unpopular avenues today - mobile communications and Turkey. Investors have grown impatient with the growth prospects of mobile carriers as penetration rates grow, revenue and earnings growth slows, and the capex bills grow to keep with the evolution of technology. On the Turkey side, there are no shortage of problems and concerns ranging from so-so economic growth (4% GDP in the third quarter), a high-profile spat with Russia that cost a pilot his life, and ongoing military conflict involving Daesh in Syria and the PKK in Turkey.

Turkcell's ADRs have lost about 20% of their value since early May of this year, with further adverse moves in the Turkish lira magnifying a double-digit decline in the home TCELL.IS shares. For the little to no good it does to make investors feel a little better, Vodafone's (NASDAQ:VOD) ADRs have declined about 10% and Turk Telecom's (OTC:TRKNF) local shares have fallen more than 25% in Turkey.

I realize that fighting the tape is an invitation to short-term pain, but I think the market is too worried about the near term at Turkcell and not willing to consider the long-term opportunities. Turkcell continues to gather higher value post-paid subscribers and has been generating good growth from its mobile data, and the company's substantial investments in spectrum will have the company positioned for mobile data leadership for a decade. Turkcell's ADRs definitely need a more favorable outlook/sentiment for Turkey as a whole, but with a fair value close to $12, I think these shares are worth a look from patient investors today.

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Turkcell Looking Long Term, Market Thinking Short Term

Seeking Alpha: Multi-Color Trading Short-Term Pain For Long-Term Gain

I've had my issues with the valuation of Multi-Color (NASDAQ:LABL) from time to time, but I can't really complain about the overall performance of this "under-known" label company, as the shares are up over 200% for me as an investor and up about 150% from my first article on the company for Seeking Alpha. While management still has work to do on gross margin improvement, the company has delivered operating margin improvements while using M&A to grow its revenue base and establish foothold in growth markets.

Although the label industry isn't really R&D-driven, Multi-Color doesn't really get its due for innovation in areas like in-mold and heat-transfer labels, nor value-added features like peel-aways, holographics, tamper resistance, and other technically demanding innovations. I also wonder if the Street appreciates that about half of the company's plants are still operating below management's long-term margin targets and could offer significant margin leverage in the coming years.

To be sure, I'm not saying that Multi-Color is a cheap stock. I might still be too conservative with my numbers, but I think 10% free cash flow margins are still at least five years away (on a sustainable basis). The shares do trade at an EV/EBITDA multiple below my expected EBITDA growth rate, but this is a stock that I'd be a lot more aggressive on below $60.

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Multi-Color Trading Short-Term Pain For Long-Term Gain

Seeking Alpha: After Multiple Updates, Alnylam Hasn't Cleared Up Much

It's hard to say that Alnylam (NASDAQ:ALNY) has been badly treated by the market when it still sports a $7.5 billion market cap with no approved drugs (and no approvals likely until 2018). Leaving aside the impact of the debate about drug pricing and the overall turbulence of the biotech sector, there have been some Alynylam-specific issues weighing on investors' minds - including the efficacy and tolerability of revusiran and the efficacy of fitusiran and ALN-CC5.

The latter, in particular, seems to be a flashpoint with investors, as some bulls had hoped this would be a "Soliris-killer" and an heir to the substantial revenue that Alexion (NASDAQ:ALXN) has generated in complement-mediated diseases like paroxysmal nocturnal hemoglobnuria (or PHN). Unfortunately, data presented at the ASH meeting and further discussed at the company's R&D day haven't really improved the sentiment.

As ALN-CC5 is not a big part of my valuation for Alnylam, I'm not bothered by the implications that it is not a clear winner in complemented-mediated diseases. Moreover, I think Alnylam has a potential winner in hemophilia and a deep overall pipeline of RNA interference drugs that will generate stock-moving clinical data in 2016.

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After Multiple Updates, Alnylam Hasn't Cleared Up Much

Seeking Alpha: PRA Group Feeling A Tough Squeeze

Whatever the arguments about PRA Group's (NASDAQ:PRAA) underlying financial performance, there is really no argument that the stock market performance has been abysmal, with the shares down almost 40% since my last update on the company. PRA Group is trying to deal with multiple headwinds at once - the bankruptcy business has fallen off sharply, regulatory impediments are increasing, supply is tight, and the company is no longer in a part of the cycle that is as conducive to attractive collections numbers.

PRAA has navigated cyclical ups and downs before, and I believe the company will do so successfully once again. It's a high-risk call, though, as the company can do little to influence supply or the regulatory environment and the company's size makes outperformance more challenging. I believe the market is assuming a pretty sharp drop in the long-term profitability of the business that doesn't fully account for the potential of the non-U.S. business, nor the money to be made when large traditional sellers return to the market. Given the challenging accounting here and the generally reviled nature of the debt collection industry, I believe this is a story with high risk to offset the significant potential gains if 20% ROEs are still in play on a long-term basis.

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PRA Group Feeling A Tough Squeeze

Seeking Alpha: Maxwell's Road Still Bumpy, But Seems To Be Leading Somewhere

Maxwell (NASDAQ:MXWL) continues to be an exasperating story. On one hand, it's one of the only real ultracapacitor companies out there (let alone one of the only investable ones) and the company has scored wins with legitimate companies like Continental AG (OTCPK:CTTAY) and PACCAR (NASDAQ:PCAR). On the other hand, the company's excessive reliance on the heavily-subsidized Chinese bus and wind power markets has created a lot of volatility and left it exposed to intense price competition.

There is a very real chance that Maxwell could log three straight years of revenue contraction before seeing growth again in 2017, and that's hardly consistent with a traditional growth story. On the other hand, truck and passenger car manufacturers do seem to be increasingly interested in Maxwell's ultracapacitor technology and these two markets could drive meaningful future growth. A potentially sharp downturn in the Chinese bus opportunity over the next couple of years leads me to cut my fair value slightly and I'm not sure there's enough upside today to be worth the risk, but management's efforts to simultaneously sign up new OEM customers and improve margins could start paying off significantly in a couple of years.

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Maxwell's Road Still Bumpy, But Seems To Be Leading Somewhere

Seeking Alpha: From Bad To Worse For MSC Industrial's Core Markets

I had my concerns about MSC Industrial (NYSE:MSM) back in the summer, as I was worried that ongoing weakness in U.S. manufacturing would make it harder for the company to achieve its margin leverage goals and grow revenue. That's proven to be the case, with monthly sales having turned negative and the shares losing another 22% or so in value from that last article.

I still believe that MSC Industrial is a good house in an increasingly sketchy neighborhood, and that's a tricky set-up for investors. Investors looking for more short-term punch (and/or who can't stand seeing near-term losses) should avoid these shares until there are real signs of strength in durable goods orders, ISM's purchasing managers' index, and other manufacturing metrics. More patient value-oriented investors may want to take a closer look, though, as there could be meaningful margin leverage and share gains pushing results (and the share price) higher over the long term.

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From Bad To Worse For MSC Industrial's Core Markets

Seeking Alpha: Decision Time With Broadcom ... And Maybe With The Larger Sector

As the transaction with Avago (NASDAQ:AVGO) moves forward, Broadcom (NASDAQ:BRCM) investors have to make their decision on what to do with their shares. While shareholders may not ultimately get exactly what they want (the deal is subject to proration), they have the option to take cash, regular shares, or special restricted shares.

Investors are also looking at a changing semiconductor landscape. Barring any additional announcements before year-end, 2015 has already seen more than 25% of U.S. publicly-listed semiconductor stocks acquired or underway with being acquired. Given the rising cost of chip development, the low cost of debt and high cash balances at chip companies, and the opportunity to drive synergies, there may be more decisions like the Broadcom situation coming for investors.

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Decision Time With Broadcom ... And Maybe With The Larger Sector

Personal update

I'm not sure how many people come here (and only here) for articles and updates vs. Seeking Alpha, so I thought I'd offer a quick update on my wife's condition. Between Facebook, Seeking Alpha, and personal emails, I'm not really able to remember where I've said what, so apologies if there repetitions here.

This past week my wife ended her second round of radiation and received another pembro infusion. The radiation was a five-day course intended to treat a metastatic tumor in her pelvis that has caused her muscle pain and some loss of mobility. While she hasn't experienced the severe pain you often hear about with bone mets, it was enough to cause her to need ibuprofen every day and eventually need a cane to walk. Interestingly, ibuprofen is a more effective pain reliever for bony mets than heavier painkillers (like oxy).

Anyways, we should know relatively soon whether the radiation helped. The oncologist was not optimistic that it would cure that tumor or be a 100% solution, but it should help.

On the chemo front, her bloodwork has stayed quite good, which is very positive. It doesn't prove that her liver tumors are quiet, but it does suggest they're not causing significant damage to the liver at this point. We'll know more in February when she gets her next CT/PET. For the time being, though, she's doing pretty well - the drug seems to be keeping the cancer in check and is not causing too many side-effects. The most curious side-effect is that it seems to intensify muscle aches/pains. It doesn't cause them, but if she has them around the time of the infusion, the drug seems to dial them up.

So, that's about it. She is feeling pretty well, and that's about the best we can expect for now.

Seeking Alpha: Orchids Paper Products Continues To Blossom

It's always encouraging to see stories develop in line with your expectations, and I really have nothing to complain about when it comes to Orchids Paper Products (NYSEMKT:TIS). The shares are up about 30% from April, when I wrote that the company's strategy of "controlled aggression" toward geographic expansion and its cost consciousness could serve investors well as a GARP story.

The story here continues to center around the growth potential of private label tissue products, the company's geographic expansion, and management's prudent approach to costs. Valuation is a more interesting topic to me though, as I think an argument can be made that a FCF-based target in the high $30s is not unreasonable. While that works back to a 10x multiple on 2016 EBITDA, a high multiple for a paper company, it might not be so unreasonable relative to the three-to-five year growth potential.

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Orchids Paper Products Continues To Blossom

Seeking Alpha: Pacific Biosciences Has Taken Some Big Steps Forward

It has been a while since I've written about next-gen sequencing company Pacific Biosciences (NASDAQ:PACB), but this is definitely a case where absence has made the heart grow fonder. The shares are up more than 75% from that last piece in March of this year, and up a solid 260% from my June 2013 Top Idea call.

What has changed? Well, for starters, PacBio has done a very good job of addressing the prior shortcomings (both real and perceived) of its technology, rolling out a series of improvements that have made the system more useful and economical for researchers. That has, in turn, supported management's goal of significant improvements in system utilization as measured by consumable sales relative to the installed base. The company also scored a significant deal with Roche (OTCQX:RHHBY), a major player in clinical diagnostics, to develop a platform suitable for human in vitro diagnostics.

More recently, PacBio launched a new platform called Sequel. The underlying technology has remained the same, but the company now offers a smaller, cheaper machine with a significantly improved throughput. While PacBio is never going to threaten Illumina (NASDAQ:ILMN) for rulership in next-gen sequencing, PacBio has strengthened its case that it has a very particular set of skills that ought not be underestimated.

I believe Sequel can take PacBio to a new level of system placement, utilization, and revenue, but then so too does the market. I had already expected a lot from this company and while there have been some aspects of outperformance, my refreshed fair value range of $10 to $11 doesn't leave huge obvious upside. I may yet be underestimating PacBio, but this currently looks more like a "consider on a pullback" opportunity than a "buy it all you can today" situation.

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Pacific Biosciences Has Taken Some Big Steps Forward

Seeking Alpha: Ultratech's Convoluted And Uncertain Path

The Ultratech (NASDAQ:UTEK) story continues to be an exercise in frustration. While management has long argued that its laser annealing technology was the superior option for sub-20nm chip fabs, the reality is that fabs like Taiwan Semiconductor (NYSE:TSM) and Samsung (OTC:SSNLF) just aren't all that dismayed by the issues with the flash annealing tools offered by rivals like Screen Holdings (OTC:DINRY) and Mattson (NASDAQ:MTSN). With that, the argument that LSA tools would replicate their 50%-plus share of 28nm manufacturing at 14nm/16nm has evaporated, and the real market share has been closer to the 20% seen at the 45nm node.

Looking at this a different way, what was supposed to be a year of momentum in LSA tool orders and roughly $200 million in revenue (the sell-side expectation in December of 2014) has instead turned into minimal order activity (none in the third quarter) and probably something closer to $150 million to $160 million in 2015 revenue.

What to do with these shares now? The shares are actually up about 10% from my last update and now arguably (very arguably, in my opinion) have a new value metric established by the merger agreement that Mattson signed with Beijing E-Town Dragon Semiconductor. What's more, I do think there is legitimate momentum in the advanced packaging (AP) business and good prospects in metrology. On the other hand, I just don't have the confidence in management that I once did, and I think Ultratech is firmly in the "show me" penalty box today.

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Ultratech's Convoluted And Uncertain Path

Seeking Alpha: BRF Sticking To Its Plan In A Challenging Market

The ever-volatile, and generally bad, economic situation in Brazil isn't doing any favors for BRF S.A. (NYSE:BRFS), and neither is increasing competition. Worries about market share and a potential price war in Brazil cast an already tough third quarter in an even more negative light, helping accelerate a nearly 20% decline in the Brazilian shares since my August update and a nearly 30% decline in the ADRs.

As I have warned in prior pieces, BRF shares and ADRs have always been more volatile than global integrated food companies like Nestle (OTCPK:NSRGY) and General Mills (NYSE:GIS) and I expect that to be the case for the foreseeable future. Nevertheless, I think fears of a price war are overdone and I believe BRF's management continues to execute on a very sound plan to position the company as a truly global protein and processed foods player.

Absent a more robust recovery in Brazil (which nobody seems to expect right now), it's going to likely take a couple of strong quarters for BRF to get back into investors' good graces. Unfortunately, growing poultry export competition from U.S. producers, higher grain prices, and a tougher domestic market could make that a more prolonged process than investors would like to see. I still believe BRF shares are an attractive long-term holding, and that this is the sort of pullback that investors can/should use to build positions, but the next quarter or two could offer a level of volatility that nervous investors won't like.

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BRF Sticking To Its Plan In A Challenging Market

Seeking Alpha: In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Monsanto (NYSE:MON) wasn't the first to feel the pinch from the negative ag cycle, and it certainly hasn't suffered the most, but weak grain prices have nevertheless done their damage. Monsanto's shares are down about 10% from my last update, and about 20% over the last year, as investor expectations and analyst targets have dropped significantly in the face of weak crop pricing and pinched farmer budgets.

There's always a big "but" that goes with forecasting the results for any ag-sensitive company and that is the unpredictability of the underlying market; a really bad (or good) crop could shift prices dramatically and change MON's operating environment quickly. That said, a lot of those fluctuations even out over time, and I believe the company's deep, high-quality R&D operation is a strong source of future value.

My expectations for Monsanto were lower than the Street's prior to this most recent reckoning, so my revisions are correspondingly more mild. I still expect MON to be a 10%-plus long-term grower, supporting a $105 fair value today and maybe some upside if a deal for Syngenta (NYSE:SYT) or another strategic target materializes.

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In A Bad Ag Market, Can Monsanto Do Enough That Matters?

Seeking Alpha: Societe Generale Not Getting Its Due

It's been a disappointing summer and fall for European bank stocks, and despite two solid quarters with double-digit earnings beats, Societe Generale (OTCPK:SCGLY) (GLE.FR) has been unable to beat that trend in European bank stocks. While the shares haven't done as badly as names like Credit Agricole (OTCPK:CRARY) (down about 24%), Banco Bilbao (NYSE:BBVA) (down about 25%), or UniCredit (OTCPK:UNCFF) (down 20%), SocGen is still down about 6% from my last update.

I believe this performance has created a more interesting gap between the bank's current price and long-term potential. The world has certainly changed for large banks, and the higher capital levels that regulators are demanding will make it much harder (if not impossible) to achieve past high-water marks in ROE/ROTE/ROA. What's more, I wouldn't say that Western Europe is quite the picture of economic health yet, and Russia still has the potential to get worse before it gets any better. All of that said, I think SocGen has made underrated progress with its French retail operations, its retail operations outside of France, and with its overall costs and capital allocation. I believe that fair value for the ADRs is around $11.50 to $12.50, making these shares a more interesting consideration particularly when including the dividend.

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Societe Generale Not Getting Its Due

Seeking Alpha: Wright Medical Has To Execute Against A Promising Backdrop

It's been a busy few months for Wright Medical (NASDAQ:WMGI). The company completed its merger with Tornier, creating a new entity with a strong share in the fast-growing orthopedic extremities sub-sector. Wright Medical also managed to secure FDA approval for its long-awaited Augment biological, a product that could be game changer with multi-hundred million dollar sales potential.

Now comes the harder, and decidedly less glamorous, part - execution. Wright Medical will have to deal with Johnson & Johnson (NYSE:JNJ), Stryker (NYSE:SYK), and Zimmer Biomet (NYSE:ZBH) on a daily basis, while also integrating the sales forces and ensuring a smooth transition into a blended entity. The high-single digit market growth of upper and lower extremities makes this a potentially strong multi-year growth story, but Wall Street won't be forgiving if the sales growth and cost synergies don't materialize.

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Wright Medical Has To Execute Against A Promising Backdrop

Seeking Alpha: Improving Traffic And Aggressive Capital Deployment Makes FEMSA An Intriguing Story

I can't complain about FEMSA's (NYSE:FMX) performance since my last write-up, as the U.S. ADRs of this leading Mexican retailer have risen more than 10%. Better still, the company's underlying financial performance has been pretty solid, and management has continued to deploy capital to support the long-term growth of the business.

I really like the company's expansion into Chile's drugstore sector, and I fully expect that FEMSA will follow it up with an expansion of its OXXO C-store concept into this under-penetrated country. I also expect further consolidation of the Mexican drugstore market, and I wouldn't be surprised if Coca-Cola FEMSA (NYSE:KOF) looks at a deal or two of its own. There is also the question of what FEMSA's management may elect to do with its Heineken (OTCQX:HEINY)(OTCQX:HKHHY) stake now that the lockup has expired and an acquisition of Heineken by SABMiller (OTCPK:SBMRY) is clearly off the table.

The "but" is that the move in the shares has mopped up a chunk of the undervaluation I saw back in the summer. I still like FEMSA as a long-term holding as I believe the company is on a trajectory to become one of, if not the, largest retailers south of the U.S. border over time. At this point, though, I would be inclined to advise new investors to hold off on building a full position in the hope that a market pullback would greater a bigger discount to full value.

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Improving Traffic And Aggressive Capital Deployment Makes FEMSA An Intriguing Story

Seeking Alpha: Commercial Vehicle Changing Gears At An Inopportune Time

As a turnaround story, Commercial Vehicle Group (NASDAQ:CVGI) has been a lousy call. The company has not had all that much success growing share within the seating market for commercial trucks, and management has tried to build up it agriculture and construction businesses during major downturns in those two markets. While the company has made what I consider to be underrated progress in improving its margins, balance sheet, and free cash flow, the fact remains that the shares are down almost 50% over the past year and about 60% over the past three years - significantly underperforming other commercial vehicle parts/components manufacturers like Cummins (NYSE:CMI), Allison (NYSE:ALSN), and Grammer AG.

Now things are about to get even more challenging. The North American commercial truck market is likely at or near its near-term peak, and that doesn't bode well for volumes, or margins, in the company's largest and most profitable business. The ag and construction markets are still soft and not really in a position to contribute offsetting growth. Last and by no means least, the company recently announced the departure of its CEO after less than three years in the job.

While the shares arguably do still trade below fair value, it's hard to argue that investors need to risk their hard-earned money on this turnaround story. The company could well be looking at two or three years of revenue contraction and margin deleverage, and that is often enough to scare off most investors. Patience could still pay here, but the ride is likely to get a lot bumpier before smoothing out.

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Commercial Vehicle Changing Gears At An Inopportune Time

Seeking Alpha: Old Dominion's Operating Environment Has Shifted

Maybe the nicest thing I can say about Old Dominion's (NASDAQ:ODFL) performance since my last update on this leading less-than-truckload carrier is that even in a rough patch for trucking, the company has continued to do better than most of its peers. The shares are down about 20% over the past nine months, but ArcBest (NASDAQ:ARCB), Saia (NASDAQ:SAIA), and Roadrunner (NYSE:RRTS) have all done notably worse, with YRC Worldwide (NASDAQ:YRCW) the only notable outperformer excluding M&A.

My prior positive view on Old Dominion was predicated on a healthy economy and continuing excellence in operation, and only the second of those has really materialized. I continue to believe it is the best-run trucking company out there (at least in the LTL space), but a softer industrial economy, reduced truckload spillover, and changing shipping patterns are creating notable headwinds. Although I believe the shares are trading at an interesting valuation today, the Street will likely want to see weight trends and economic activity improve before getting significantly more bullish.

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Old Dominion's Operating Environment Has Shifted

Seeking Alpha: Air Transport Services Group Ready To Take Off

I liked the direction of Air Transport Services Group (NASDAQ:ATSG) back in April, as the company had taken steps to reduce some of the contract risks with its huge DHL business, was building business with the likes of Cargojet (OTC:CGJTF) and West Atlantic, and was about to begin repurchasing shares. What I didn't like so much was the valuation, and with the shares basically flat since then (up 2% against a 1% decline in the S&P 500), I don't feel like I've missed out on all that much.

There are some legitimate areas of concern in the global airfreight market. Airfreight volumes are up for the year, but have been outpaced by capacity growth and it's hard to find much optimism regarding the health of the U.S. or Chinese economies. That said, Air Transport's regional focus is an important differentiator, as it gives the company exposure to e-commerce growth, and the company's efforts to diversify its business seem to be on a good track. I wish my fair values weren't so closely aligned with the sell-side consensus, but I do think fair value for these shares lies between $11 and $12 today and supports an interesting value opportunity.

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Air Transport Services Group Ready To Take Off

Seeking Alpha: Kirby Tossed By The Crude Market

Persistently weak oil prices have continued to apply pressure to Kirby's (NYSE:KEX) valuation, as the shares are down more than 10% from my last update on this leading operator of tank barges. While Kirby's direct exposure to crude oil is relatively modest, the company can't escape the downstream consequences of less demand for crude oil transportation or the worries around a broader economic slowdown in the U.S. that would impact its petrochemical business.

Over the long term, Kirby should be fine. The large number of chemical plant expansions and newbuilds already underway should support future demand for inland barges, and the eventual expansion of domestic crude production should help both the inland and coastal businesses.

The question is how long "over the long term" takes to materialize. Pricing has softened in the inland business (with contracts renewing at prices down by the low-single digits) and there are plenty of examples of businesses/industries that have seen cyclical pullbacks go longer and deeper than expected. Kirby looks undervalued relative to its historical EV/EBITDA averages, but with three straight guidance cuts, it is hard to argue that the business has stabilized or found its bottom yet.

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Kirby Tossed By The Crude Market

Seeking Alpha: China's Economic Challenges Making Life More Difficult For HollySys

As a company that generates the lion's share of its revenue and profits from capital spending in China, the last year has not been an easy one for HollySys (NASDAQ:HOLI) (also sometimes written as "Hollysys"). Like Siemens (SI) (OTCPK:SIEGY), Rockwell (NYSE:ROK), ABB (NYSE:ABB), and the rest of the factory and process automation sector, HollySys has seen a sharp correction in demand for automation systems. While the rail system business has offset this to some extent, here too orders have been inconsistent.

It's difficult to strongly recommend a stock that is so heavily exposed to capital spending in China at a time when China's economic outlook is still murky at best. Patient value investors will argue that that's the time you want to go shopping, and while I agree with that sentiment, the reality is that investors considering HollySys's shares need to brace themselves for the possibility that the business hasn't yet bottomed and that there could be downside risk ahead of a recovery. I still believe that this company can be a high-single-digit grower over time, though, and the stock should trade closer to the mid-$20s.

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China's Economic Challenges Making Life More Difficult For HollySys