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Tuesday, July 10, 2012
Investopedia: June's Rail Traffic A Bit Of History Repeated
Rail traffic data, as reported by the Association of American Railroads'
"Rail Time Indicators," continues to show sluggish, but still very real
growth in the industrial economy of the United States. Conditions are
not great, as weaker coal and grain demand continue to impact total
volume, but they are at least supportive of a cautious optimism on the
overall U.S. economy.
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Investopedia: The Amazon Smartphone Rumor Just Won't Die
Clearly Amazon (Nasdaq:AMZN)
has ambitions that go beyond being the leading e-commerce platform. Not
only has the company gotten in the cloud services game, but the
company's Kindle has shown itself to be a legitimate tablet competitor
to Apple (Nasdaq:AAPL) and Samsung. Now it seems that buzz is building again that the company is about to launch its own smartphone.
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Monday, July 9, 2012
Investopedia: WellPoint Buys More Medicaid Exposure
Funny how a Supreme Court ruling can change strategic priorities. Not
all that long after management stated that it had no plans to expand its
Medicaid business, WellPoint (NYSE:WLP) announced Monday that it was acquiring Medicaid managed care company Amerigroup (NYSE:AGP)
in a nearly $5 billion deal. Not only does this deal look as though it
can be very accretive over time (even with a 43% premium), but it
arguably represents a best-of-breed buyout in a sector that could soon
see more activity.
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Investopedia: Bull Vs. Bear - Major Automakers Face A Tough Future
Question: Are automakers a smart investment right now?
Bear's Response
The auto industry has certainly enjoyed a meaningful recovery from the worst of The Great Recession, when both General Motors and Chrysler declared bankruptcy and Ford (NYSE:F) came under serious stress. It wasn't just an American phenomenon either - even mighty automakers such as Toyota (NYSE:TM), Nissan (OTC:NSANY) and Honda (NYSE:HMC) saw major declines in sales and profitability, and a host of European carmakers saw substantial stress.
While auto sales for the major automakers may be better than its lowest levels, that doesn't mean that major automakers represent great investments today. Not only are these companies facing a challenging demand environment, but production costs are increasing and this industry has a decidedly mediocre history of financial performance.
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Bear's Response
The auto industry has certainly enjoyed a meaningful recovery from the worst of The Great Recession, when both General Motors and Chrysler declared bankruptcy and Ford (NYSE:F) came under serious stress. It wasn't just an American phenomenon either - even mighty automakers such as Toyota (NYSE:TM), Nissan (OTC:NSANY) and Honda (NYSE:HMC) saw major declines in sales and profitability, and a host of European carmakers saw substantial stress.
While auto sales for the major automakers may be better than its lowest levels, that doesn't mean that major automakers represent great investments today. Not only are these companies facing a challenging demand environment, but production costs are increasing and this industry has a decidedly mediocre history of financial performance.
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Seeking Alpha: How Did It All Go So Wrong For Patriot Coal?
I imagine a few investors are feeling pretty confused now, with news that Patriot Coal (PCX)
has declared bankruptcy. So how is that a company whose assets ought to
hold hundreds of millions of dollars worth of net value is going the
route of bankruptcy?
Cue The Outrage
It is a pretty safe bet that we'll all hear from the anti-Obama contingent before long, and not without some reason. Notions like "Obama is trying to kill private enterprise" is garbage better suited to talk radio, but the fact remains that the Obama administration has made it meaningfully more difficult to be in the coal business. Whether it's OSHA regulations that cover underground mine operators like Patriot, Arch Coal (ACI), or Alpha Natural Resources (ANR), or EPA regulations that make it more expensive to burn coal for electricity generation, it's not easy to be in the Appalachian coal business (and not all that much better to be in Powder River Basin).
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How Did It All Go So Wrong For Patriot Coal?
Cue The Outrage
It is a pretty safe bet that we'll all hear from the anti-Obama contingent before long, and not without some reason. Notions like "Obama is trying to kill private enterprise" is garbage better suited to talk radio, but the fact remains that the Obama administration has made it meaningfully more difficult to be in the coal business. Whether it's OSHA regulations that cover underground mine operators like Patriot, Arch Coal (ACI), or Alpha Natural Resources (ANR), or EPA regulations that make it more expensive to burn coal for electricity generation, it's not easy to be in the Appalachian coal business (and not all that much better to be in Powder River Basin).
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How Did It All Go So Wrong For Patriot Coal?
Seeking Alpha: Alnylam Far From Primetime, But Still An Intriguing Prospect
Here at the midpoint, 2012 is looking like a strong year for biotech
and some risky names have done quite well. Although not coming close to
the gains seen in Arena Pharmaceuticals (ARNA), Amylin Pharmaceuticals (AMLN), or Lexicon Pharmaceuticals (LXRX), RNA interference specialist Alnylam Pharmaceuticals (ALNY) has come on strong with encouraging early-stage data and a greater risk tolerance on the part of investors.
All of the standard warnings apply to Alnylam, as the company is indeed many years from potential product approvals and none of the company's programs are in advanced trials. Upping the risk even more is the fact that RNA interference is still an unproven approach and many Big Pharma companies appear to have backed away from the technology. All that said, this company has a broad clinical program, numerous high-value targets, deep IP, and a healthy balance sheet.
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Alnylam Far From Primetime, But Still An Intriguing Prospect
All of the standard warnings apply to Alnylam, as the company is indeed many years from potential product approvals and none of the company's programs are in advanced trials. Upping the risk even more is the fact that RNA interference is still an unproven approach and many Big Pharma companies appear to have backed away from the technology. All that said, this company has a broad clinical program, numerous high-value targets, deep IP, and a healthy balance sheet.
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Alnylam Far From Primetime, But Still An Intriguing Prospect
Friday, July 6, 2012
Investopedia: The Week Ahead In Healthcare
For better or worse, late June through mid-July tends to be a period
where very little of note happens. There are no major medical
conferences during this period, the FDA seems to avoid scheduling PDUFA
dates during this time period, and there are no significant earnings on
the calendar. With analysts and managers using the time to take rare
vacations (or not-so-rare excursions to the golf course), stocks tend to
drift and investors can likely expect the same for the week ending July
13.
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Investopedia: Navistar Changes Gear With Its Engine Program
It looks like truck and engine manufacturer Navistar (NYSE:NAV)
has finally bowed to the inevitable and is changing up its engine
technology. While the company's press release reads as though this is a
big leap forward, the reality is that management has struggled mightily
with its existing advanced exhaust gas recirculation (EGR) technology
and had little choice but to abandon an all-EGR approach in favor of
urea-based after treatment. Although this switch is a necessary step for
the company, it remains to be seen how much implementing this new
approach (and getting EPA certification) is going to cost.
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Investopedia: Early Returns From Tech Not Looking Good
'Tis the season for companies to issue warnings that calendar second
quarter earnings are not going to be up to snuff. With investors already
jittery about the outlook for tech stocks, July 5, 2012's warnings from
Seagate (Nasdaq:STX) and Informatica (Nasdaq:INFA) are not going to the sector any favors.
Seagate - Yes, It's Still a Cyclical Business
As the hard drive company least damaged by the Thai floods, Seagate has been on something of a roll with its operations. That roll has now noticeably slowed. Whereas the company had once guided to "at least $5 billion" in revenue and gross margin of 34.5%, management warned that actual revenue for the quarter will be more on the order of $4.5 billion, while gross margin will be closer to 33.6%. If there's good news here, it's that analysts were already getting more skeptical and cautious, and had been lowering their numbers. Consequently, the announced miss adds up to less than 10% on the top line and about one point on the gross margin line.
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Seagate - Yes, It's Still a Cyclical Business
As the hard drive company least damaged by the Thai floods, Seagate has been on something of a roll with its operations. That roll has now noticeably slowed. Whereas the company had once guided to "at least $5 billion" in revenue and gross margin of 34.5%, management warned that actual revenue for the quarter will be more on the order of $4.5 billion, while gross margin will be closer to 33.6%. If there's good news here, it's that analysts were already getting more skeptical and cautious, and had been lowering their numbers. Consequently, the announced miss adds up to less than 10% on the top line and about one point on the gross margin line.
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Thursday, July 5, 2012
Investopedia: Will Hot Dry Weather Shrivel These Sectors?
Much has been made of the near-record corn planting this year in the U.S., and this activity has certainly been a boon to Monsanto (NYSE:MON) and presumably DuPont's (NYSE:DD)
Pioneer business as well. With this high level of planting activity,
analysts had assumed a bumper crop and easing input cost pressures on
the food sector. Unfortunately, planting is about the only part of the
process that farmers can control and hot, dry weather is starting to sap
the corn crop. Not only is this becoming a worrying scenario for
farmers, but also for a host of companies and industries that need a
healthy corn crop for their own prosperity.
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Wednesday, July 4, 2012
Investopedia: Microsoft Recognizes A Multi-Billion Dollar Error
Relative to companies like Oracle (Nasdaq:ORCL) and IBM (NYSE:IBM), Microsoft (Nasdaq:MSFT)
is perhaps not as acquisitive as investors might expect for a company
of its size. Coupled with top-line growth that is not exactly robust, it
would seem to set up the question as to why Microsoft isn't more
active. Perhaps the announcement of a $6 billion goodwill writedown in
the Online Services business goes some way toward explaining it.
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Investopedia: Bid Rigging Costs Barclays Its Diamond
As news continues to unfold regarding the scale and depth of the LIBOR manipulation scandal, politicians are starting to hunt for scalps. The now-former CEO of British bank Barclays (NYSE:BCS)
has chosen to cooperate, as Bob Diamond has resigned his position. It
remains to see just how far this scandal will reach, and whether or not
Diamond will be the only major CEO to lose his job over bad behavior
that is increasingly looking like an industry phenomenon.
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Investopedia: Do Nike's Earnings Have Broader Meaning On China?
Nike (NYSE:NKE)
is often as near as what comes to a bulletproof stock - the company's
brand is known all over the world, management runs the company with high
efficiency and results are generally reasonably predictable.
Occasionally, a little gap in the armor appears and patient investors
have an opportunity to buy shares at a reasonable price. Nowadays it
looks like Nike's "China problem" may be just such a gap.
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Investopedia: Lincare Shows That You Can Go Home Again
If I had to guess the sort of healthcare company that would get a premium acquisition offer, Lincare (Nasdaq:LNCR)
would be low on my list, as relatively few buyers would want to pay a
premium to get into a business that is beset by constant reimbursement
pressures. But, as the old saying goes, you only need one buyer to make a
deal and Lincare found that one.
In a deal that reverses a spin-out from nearly 25 years ago, German industrial gases company Linde will be acquiring Lincare for $4.6 billion in total considerations. That works out to $41.50 per share for Lincare's shareholders; a 22% premium to Friday's closing price (which had been moving up on takeover rumors) and a whopping 67% premium to the stock's three-month average price.
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In a deal that reverses a spin-out from nearly 25 years ago, German industrial gases company Linde will be acquiring Lincare for $4.6 billion in total considerations. That works out to $41.50 per share for Lincare's shareholders; a 22% premium to Friday's closing price (which had been moving up on takeover rumors) and a whopping 67% premium to the stock's three-month average price.
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Tuesday, July 3, 2012
Investopedia: According To Siemens, An Industrial Rebound May Not Be Around The Corner
For the first half of 2012, most large industrial companies repeated a
similar refrain - first half results were weak due to problems in Europe
and China, but the second half would be better. If recent comments from
Siemens' (NYSE:SI) CFO are broadly applicable, though, that rebound may not materialize as hoped.
Siemens Finding Its Targets Harder to Hit
Siemens has been one of the more relatively conservative industrial conglomerates for a little while now, as CFO Joe Kaeser started the year off by telling the Wall Street Journal that full-year guidance was going to be "ambitious." Mr. Kaeser recently updated these views, suggesting that the company's financial targets for the second half were getting even harder to reach.
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Siemens Finding Its Targets Harder to Hit
Siemens has been one of the more relatively conservative industrial conglomerates for a little while now, as CFO Joe Kaeser started the year off by telling the Wall Street Journal that full-year guidance was going to be "ambitious." Mr. Kaeser recently updated these views, suggesting that the company's financial targets for the second half were getting even harder to reach.
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Investopedia: Monsanto Has Bloomed, But Summer Won't Last Forever
To be clear right from the start, I am a fan (and owner) of Monsanto (NYSE:MON).
I think it is a fantastic (albeit flawed) company that has a major role
to play in feeding the world against a backdrop of increasing pressures
on land and water. I also know it's extremely controversial, and that
saying anything favorable about Monsanto or the genetically enhanced
seeds that it sells (alongside others like DuPont (NYSE:DD) and Syngenta (NYSE:SYT))
is a virtual guarantee for generating emails from those who want to
"educate" me on how it's an evil company that will doom us all.
Setting aside the emotional aspects of it, Monsanto is not the sterling stock idea it once was. Business is going gangbusters today, and investors have pushed up the valuation along the way. While I do believe the long-term outlook for Monsanto is excellent, investors looking to commit new money today do need to be disciplined about the price that they pay.
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Setting aside the emotional aspects of it, Monsanto is not the sterling stock idea it once was. Business is going gangbusters today, and investors have pushed up the valuation along the way. While I do believe the long-term outlook for Monsanto is excellent, investors looking to commit new money today do need to be disciplined about the price that they pay.
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Investopedia: Paychex Still In A Low Gear
A muddle-through economy and a legacy of high valuation continues to
weigh on shares of small business payroll and human resource (HR)
service provider Paychex (Nasdaq:PAYX).
While the large amount of sell-side skepticism on this stock might
appeal to investors with a contrarian streak, the lack of growth and
momentum are legitimate concerns. Paychex's above-average yield and
strong potential for dividend growth makes it a worthwhile hold, but
it's hard to get excited about this combination of growth and valuation
today.
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Investopedia: Healthcare Outlook For The Week Ahead
With the Fourth of July holiday coming smack in the middle of the week,
this week is likely to be light on news and investable events for
investors. Trading volumes will likely be thin, and there are no
scheduled announcements of any significance.
Will Glaxo up Its Bid?
GlaxoSmithKline (NYSE:GSK) ended last week by extending its tender offer to acquire Human Genome Sciences (Nasdaq:HGSI), but has not increased its bid beyond the original $13 per share. With Human Genome shares trading just above $13, it seems that investors have only modest confidence that a higher bid will come, though RBC's Michael Yee recently published a note suggesting that a higher bid (of $15 per share) could be on the way.
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Will Glaxo up Its Bid?
GlaxoSmithKline (NYSE:GSK) ended last week by extending its tender offer to acquire Human Genome Sciences (Nasdaq:HGSI), but has not increased its bid beyond the original $13 per share. With Human Genome shares trading just above $13, it seems that investors have only modest confidence that a higher bid will come, though RBC's Michael Yee recently published a note suggesting that a higher bid (of $15 per share) could be on the way.
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Monday, July 2, 2012
Seeking Alpha: Dells Wins Quest; Now For The Hard Part
Patience has apparently prevailed for Quest Software (QSFT) shareholders, as Dell (DELL)
has publicly announced a deal to acquire the enterprise software
company for $28 per share in cash. While Dell has long been rumored as
the lead suitor for the company (apart from original bidder Insight
Venture Partners), this is the first public acknowledgment from Dell.
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Dells Wins Quest; Now For The Hard Part
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Dells Wins Quest; Now For The Hard Part
Sunday, July 1, 2012
Seeking Alpha: Amylin Bows Out Gracefully
The long drama around the Amylin Pharmaceuticals (AMLN) looks like it has reached its end - Bristol-Myers Squibb (BMY)
announced the acquisition of Amylin late Friday night in a deal that
will pay Amylin shareholders $31 per share in cash. While some sources
have reported the size of the deal as $5.3 billion, it's actually larger
than that (about $7 billion) as Bristol-Myers will also be taking on
over half a billion in Amylin debt and over $1 billion in financial
obligations to Lilly (LLY).
Bristol-Myers is also bringing a partner into this deal. While it technically won't take place until the Bristol-Amylin merger closes, AstraZeneca (AZN) will be buying in as part of the existing diabetes drug partnership between the two companies. For $3.4 billion, AstraZeneca will be getting a 50% interest in Amylin's products and the option to chip in another $135 million for the right to equal say in the management and strategic planning of the collaboration.
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Amylin Bows Out Gracefully
Bristol-Myers is also bringing a partner into this deal. While it technically won't take place until the Bristol-Amylin merger closes, AstraZeneca (AZN) will be buying in as part of the existing diabetes drug partnership between the two companies. For $3.4 billion, AstraZeneca will be getting a 50% interest in Amylin's products and the option to chip in another $135 million for the right to equal say in the management and strategic planning of the collaboration.
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Amylin Bows Out Gracefully
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