The Motley Fool: St. Jude Firmly Back In Wall Street's Good Graces

Wall Street can punish stocks quickly, but investors will return to a solid story almost as quickly. It was only about a year ago when St. Jude Medical  (NYSE: STJ  ) shares were hammered on worries that lead failures would severely compromise the company's ICD business and that the company was trailing major rivals like Medtronic  (NYSE: MDT  ) and Johnson & Johnson  (NYSE: JNJ  ) in key growth market opportunities.

Since then, sentiment has come back around in a big way. Not only does the company appear to be gaining some share in its cardiac rhythm management, or CRM, business, but the atrial fibrillation business has also been performing well. Add to that interesting opportunities in heart failure monitoring, neurostim, ablation, renal denervation, transcatheter heart valv
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Seeking Alpha: Vistaprint May Have Sizable Potential, But Also A Great Deal To Prove

If you're a nimble trader, you might like Vistaprint (VPRT). These shares have spent most of the last four years chopping between $30 and $60, as the company's inability to perform on a consistent basis has created sharp sell-offs and subsequent rallies. Now the shares are up again on investor's confidence (or hope) that the company's turnaround/self-improvement efforts will lend stability and consistency to the business, and possibly also on confidence that conditions in Europe have bottomed.

I have a hard time sharing this enthusiasm. Although I believe the company has a leveragable edge in its printing operations, I'm not sure that's a dependable long-term growth driver. Likewise, I'm not confident that Vistaprint will emerge as a strong presence in digital marketing for small businesses. Last and not least, serving the small business community is inherently volatile - a large percentage of businesses fail and the constant "flow" of new and failing businesses won't help the company establish a lasting market presence.

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Vistaprint May Have Sizable Potential, But Also A Great Deal To Prove

Seeking Alpha: RPC Needs Activity To Pick Up To Sustain The Rally

Many investors are already looking ahead to 2014, and it's probably just a matter of weeks before we start seeing the "stocks to own for 2014" pieces coming out. As it pertains to the energy sector, one of the biggest questions is the extent to which drilling activity will pick up in North America and how much of the excess capacity in areas like pressure pumping will get absorbed into the market.

Given how stocks like RPC (RES), Halliburton (HAL), C & J Energy Services (CJES), and Calfrac (CFW.TO) have been behaving of late, it looks investors are expecting a pretty favorable answer. Although the valuation on RPC isn't so great at this point, I do believe it's a stock worthy of further due diligence. Despite overcapacity in pressure pumping, the company has maintained solid margins and returns in capital, due in part to other service offerings like downhole tools and coiled tubing.

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RPC Needs Activity To Pick Up To Sustain The Rally

Seeking Alpha: Summer Infant's Self-Improvement Could Take It A Lot Further

I approach a bullish article on Summer Infant (SUMR) with more than a little trepidation, as I have been burned by writing favorably about this name once before. I previously underestimated the serious operational challenges that the company faced after a series of debt-fueled acquisitions and the resulting missteps with new product introductions, not to mention challenges at major retailers like Toys R Us/Babies R Us and the increasing penetration of private label competition.

Even with the stock up more than 80% over the past year, I do wonder if Summer Infant is back on stronger footing and has further gains ahead of it. Management has elected to discontinue low-margin licensing arrangements, is rationalizing its SKU count, and is broadening its retailer base. What's more, it would seem that conservative estimates for revenue and cash flow (not to mention discount rate) still leave appreciation potential in excess of 40% from today's levels. It has to be noted, though, that Summer Infant is a tiny player in the baby care products market and has yet to demonstrate that it can deliver consistent organic revenue growth, let alone attractive margins or cash flow.

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Summer Infant's Self-Improvement Could Take It A Lot Further

The Motley Fool: Johnson & Johnson Continues To Play To Its Strengths

I continue to be impressed with the strength Johnson & Johnson has been showing of late. The only fly in the ointment is that it's not a particularly well-balanced strength, as the company's drug business is really driving the improvements. As ointment-flies go, though, that's really not so bad and the company continues to see respectable performance in key categories like cardiology, orthopedics, and surgery. Johnson & Johnson isn't particularly undervalued today, but investors should nevertheless be able to expect high single-digit to low double-digit returns from this point, which is pretty compelling for investors looking for a quality long-term holding.

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Seeking Alpha: EnerNOC Looks Undervalued, But Mind The Risks

It feels as though almost anything related to the U.S. electricity market never manages to work out quite as well as hoped or advertised. Independent power producers like Calpine (CPN) have had their struggles, as have metering technology companies like Itron (ITRI), and the complex interplay of regulation (environmental and otherwise), utility business models, energy demand, and other factors has made for a pretty challenging operating environment.

So too for EnerNOC (ENOC). On one level, what EnerNOC does should be pretty simple. Utilities don't really want to build new plants, nor do they want to use expensive peaking plants any more than necessary, and there's more "slack" in power demand than commonly realized. As an intermediary between businesses and utilities, EnerNOC can help both sides - utilities can get the demand reduction they need and businesses can get paid to curtail their demand during peak periods. What's more, there's theoretically billions of dollars in helping enterprises better plan and manage their power/efficiency needs.

Of course it's never that simple. Between an ever-changing regulatory environment and the year-to-year uncertainties of auctions within its largest operating region, EnerNOC has had some huge swings in the market. I do believe these shares are undervalued today, and that management's plan to diversify and grow the business will bear fruit, but I also believe that this is likely to remain a risky situation with above-average volatility for the foreseeable future.

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EnerNOC Looks Undervalued, But Mind The Risks

Seeking Alpha: WEX Has The Growth, But How Much Do You Want To Pay For It?

It's getting a little disheartening to write up articles on solid companies with good prospects but demanding/rich valuations. But then that's not exactly a surprise given how strong the markets have been for some time now.

That brings me to WEX (WEX) - the latest entry on the "keep an eye on this if it gets cheaper" list. WEX has a very good business in its fleet card operations, and one where I believe there's still good growth prospects. Likewise, while the growth of virtual card business will bring overall margins down, the growth potential there is worth the margin compression in my opinion. It's really just a question of what you want to pay, as it is challenging (at best) to work up a scenario where WEX really looks like a cheap stock.

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WEX Has The Growth, But How Much Do You Want To Pay For It?

Seeking Alpha: Universal Stainless & Alloy Products Looking For Improving Markets And Mix ASAP

End-markets like aerospace, oil/gas, and power gen may not be back up to full power right now, but investors have already started positioning themselves for a better 2014. With that, the stocks of specialty metal/alloy producers like Allegheny Technologies (ATI) and Carpenter Technology (CRS) have strengthened recently, as have those of more conventional steel producers like Nucor (NUE) and Steel Dynamics (STLD).

The much smaller and less well-covered Universal Stainless & Alloy Products (USAP) has also enjoyed a solid rebound of late, with the shares up about 30% since early August. USAP is well-positioned to benefit from destocking in end-markets like aerospace and oil/gas, but the company also has a potentially powerful earnings driver in a mix that is shifting toward higher-value products. This stock is like many others in that it is not particularly cheap today, but I do like the prospects for better results in the coming years.

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Universal Stainless & Alloy Products Looking For Improving Markets And Mix ASAP

Seeking Alpha: Innospec Looking To The Next Run

Specialty chemical company Innospec (IOSP) has been quite the stock over recent years. Up almost 40% over the last year, over 60% over the past two years, and over 600% over the last five years, Innospec has done a good job of leveraging its solid share in fuel additives and surfactants used in personal care products. Along the way, Innospec has also uncovered a pretty interesting growth opportunity in drilling/oilfield chemicals that could ultimately increase its addressable revenue opportunities by several times.

The only "but" in the story is the valuation. As strong as the markets have been, this is a familiar lament (particularly from value-oriented investors like me) and certainly not exclusive to Innospec. On one hand, I do recognize that this company is well-positioned to out-grow the average specialty chemicals company and continue to generate good margins and returns on capital. On the other hand, you do have to stretch the growth estimates and/or multiples to generate an attractive price target today.

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Innospec Looking To The Next Run

Seeking Alpha: Orchids Paper Products Is Small And Solid, But Not So Cheap

Small, illiquid, and under-followed companies can be above-average alpha generators, as they are often overlooked by analysts and institutional investors or outright disqualified due to their low liquidity and so on. It's not always the case, though, that these small gems are cheap. In the case of Orchids Paper Products (TIS), I believe this is an interesting paper products manufacturer with an opportunity to further diversify its customer base and go up-market. I also believe, though, that despite a lack of sell-side coverage and institutional ownership, it's really not as cheap as I'd hoped it might be.

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Orchids Paper Products Is Small And Solid, But Not So Cheap

Seeking Alpha: There's Still Room For Parker Drilling To Outperform

Parker Drilling (PKD) has been a public company for quite some time, but the company hasn't had what you'd call a consistent record of performance. Energy services, and drilling particular, has always been a volatile, cyclical business, but I would estimate that the company has only earned its cost of capital once or twice over the last decade. Maybe it's not altogether surprising then that the stock has stayed pretty much stuck in a band between $4 and $6 over the past four years.

These shares dipped slightly below that range in April of this year, only to exceed it slightly in July and here again more recently, but I believe these shares may yet be undervalued. Demand for drilling barges in the Gulf of Mexico has picked up, and so too has demand for rental tools (particularly for deepwater activities). At the same time, I think the company's progress with its international operations still has not been fully appreciated by the Street. Although Parker Drilling remains a "show me" story, I wouldn't be surprised if these shares trade between $8 and $9 before too much longer.

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There's Still Room For Parker Drilling To Outperform

Seeking Alpha: Lionbridge Still Not Living Up To Its Potential

It's a big world out there, and keeping up with the local needs and demands of customers is an increasingly significant part of growing global sales. To that end, maybe it goes without saying that the translation and product localization services offered by Lionbridge Technologies (LIOX) are certainly necessary. Likewise, the company's development and testing services allow companies to more efficiently test and improve their mobile, web, and software releases prior to full commercial launch.

That all sounds fine, and Lionbridge boasts some major customers like Microsoft (MSFT), Nokia (NOK), and Google (GOOG). Unfortunately, the company hasn't been able to really carve out a lucrative niche for these services, and the company's revenue growth, margins, and returns on capital have been unimpressive for some time now. Although I do think there is significant untapped potential in this business, investing in the shares today requires a certain degree of faith that management will figure out the right combination to unlock that potential.

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Lionbridge Still Not Living Up To Its Potential

Seeking Alpha: Neenah Paper's Specialty Focus Sets It Apart

If you're going to thrive in the paper and paper-related products industry, you need to find a way to set yourself apart. Low-cost production is one option, but Neenah Paper (NP) follows a strategy broadly similar to Glatfelter (GLT) - focus on specialty niches where customers will pay a premium and where it is possible to carve out market share on factors related to performance and not price. That strategy has already done a lot of good for the stock's valuation and though these shares aren't exactly cheap, the company's focus on growth markets and share, market, and product expansion give it above-average odds of future outperformance.

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Neenah Paper's Specialty Focus Sets It Apart

Seeking Alpha: Even Near A 52-Week High, Investors Expect Little From Home Retail Group

Imagine a combination of Service Merchandise, Best Buy (BBY), and an overgrown ACE Hardware (or shrunken Home Depot (HD)) and you get into the neighborhood of what the UK's Home Retail Group (HMRTY.PK) is about. Combining Argos, a former trading stamp and catalog retailer that has transformed into a multichannel retailer, and Homebase, a home/garden-focused home improvement chain, Home Retail is a share leader in many parts of the UK retail market.

Home Retail Group is not a particularly popular stock in some respects. The shares are up more than 70% this year, but down 10% over the past five years and the shares trade at levels that suggest minimal growth and near-constant erosion to Amazon (AMZN) on an ongoing basis. Although I don't want to suggest it's smooth sailing from here on for Home Retail, I think the company's ability to drive online sales at Argos is encouraging and I believe even modest success from here on could drive worthwhile returns.

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Even Near A 52-Week High, Investors Expect Little From Home Retail Group

Seeking Alpha: Medifast May Be The Best House On A Scary Street

In principle, weight loss should be an incredible honey pot for pharmaceutical, packaged food, and consumer service companies. In reality, it has proven considerably more difficult for anybody to make consistently good money in the space. Sometimes the problems are largely self-inflicted (Weight Watchers (WTW) certainly comes to mind here), and sometimes the issue is more related to consumer patience/discipline.

Whatever the case, investors trying to profit from the weight loss theme through publicly-traded stocks have faced a treacherous environment. Nutrisystem (NTRI) has been strong this year, but the five-year returns of stocks like Weight Watchers, Nutrisystem, Arena Pharmaceuticals (ARNA), and Vivus (VVUS) haven't been that great relative to the S&P 500.

That brings me to Medifast (MED). Medifast has been quite strong relative to this group of weight loss-centric stocks (and the S&P 500 as well) over the past five years, though the last year hasn't been nearly so good. Although the company's weight control center strategy hasn't worked out so well, the relationship-driven "Take Shape For Life" has, and the company has generated some solid free cash flow of late. Although I have my concerns with the business model and the concept, the valuation doesn't seem demanding to me and this may be the best house on a very scary street.

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Medifast May Be The Best House On A Scary Street

Seeking Alpha: Waiting For Glatfelter To Cool Off

I'm generally a fan of "specialty" paper and fiber companies like Rock-Tenn (RKT), Packaging Corp (PKG), and Glatfelter (GLT), as these companies don't tend to be wildly popular with larger investment banks or the financial media and they can often give patient GARP-type investors good bang for the buck. On the other hand, we're not talking about companies that are developing the next blockbuster cancer drug or the next must-have consumer electronic gadget; overpaying for these companies can lead to painful losses as there often isn't nearly the same level of growth to bail out investors.

I am not particularly bullish on Glatfelter's stock right now, but it is due solely to valuation. While this company's management team has been canny in transitioning from declining/shrinking products and end-markets to other high-value opportunities, the shares seem to be richly valued on the basis of discounted cash flow, EBITDA, and ROE. I do not doubt the possibility that Glatfelter could attract an acquisition bid (as rival Buckeye Technologies (BKI) did) and that an acquirer could pay more than the company's independent stand-alone value, but I'd be careful about making a major new commitment to these shares, as I do think there will be a time when investors can buy them at a more reasonable valuation.

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Waiting For Glatfelter To Cool Off.

Seeking Alpha: Calavo Growers Presents A Tricky Growth/Value Trade-Off

Fresh produce is one of those industries where margins and free cash flow generation are typically poor across the board. Dole Food (DOLE), Chiquita Brands (CQB), and Fresh Del Monte (FDP) all have struggled to generate attractive margins over the long term. Even so, this sector can offer good capital appreciation potential when bought/sold opportunistically.

Calavo Growers (CVGW) is an interesting story right now. Although the shares do look expensive, management has some ambitious plans to diversify the business, further leverage its fresh produce capacity, and consolidate the fresh produce space (at least on a limited basis). The company is also trying to increase the percentage of value-added products it sells, while simultaneously launching an overnight fresh produce/meal business. With those initiatives in place, the possibility certainly exists that Calavo could deliver positive revenue and margin surprises and redeem what otherwise looks like a stretched valuation.

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Calavo Growers Presents A Tricky Growth/Value Trade-Off

The Motley Fool: Varian Medical Still The Dominant Player In A Lucrative Market

In some respects, it is a little surprising that Varian Medical (NYSE: VAR  ) is near an all-time high. Revenue and order growth haven't been all that robust lately, rivals like Accuray  (NASDAQ: ARAY  ) and Elekta appear to have some renewed vitality, and reimbursement in the U.S. is still choppy. Then again, we're talking about a company that has more than 50% global installed share in radiation oncology systems, a long record of 20%-plus returns on invested capital, and a well-deserved reputation as a "fast follower" with good technology, strong service, and demonstrated reliability.

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Seeking Alpha: Marlin Business Services Offers Good Growth, But Less Value

Equipment leasing can be a lucrative business, as it allows companies that have access to large pools of attractively-priced of capital to earn strong yields from lessees that lack the same level of access to capital or simply don't wish to deploy it that way. In contrast to large leasing enterprises like General Electric's (GE) GE Capital and CIT Group (CIT) or bank leasing operations like those at Bank of America (BAC) and Wells Fargo (WFC), Marlin Business Services (MRLN) is focused on small-ticket and micro-ticket leasing to smaller businesses on a nationwide business.

Although there are few relevant comps to this business, I argue that Marlin is a pretty well-run leasing company. Returns, margins, and credit metrics have rebounded strongly from the 2008/2009 lows, as have the shares. What's more, I believe the company can benefit from the "reinvestment" of profits into an expanded sales force, consistent low-cost funding from its captive bank, and it's quality service offerings to an underserved market. On the other hand, it is difficult to stretch the expected return models enough to generate a truly attractive fair value at these levels.

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Marlin Business Services Offers Good Growth, But Less Value

Seeking Alpha: Amedisys Still Facing Significant Headwinds

It has been about a year and a half since I last wrote on Amedisys (AMED). In that time, a lot of the bad news I feared (namely ongoing Medicare pressure) materialized, and the company has struggled to offset weak reimbursement and volume with cost cuts. While my bullish call on the stock has technically worked out (the shares are up about 55% since February 7, 2012), the stock really didn't go anywhere before August of this year and I'm not really calling this a successful pick.

Looking ahead, I see Amedisys broadly the same as I did before, only with a higher valuation. I believe the Street still underestimates the long term potential of this business, but that "potential" has to be set against some very real challenges from reimbursement and in executing additional cost cuts. I'm reasonably confident that Amedisys can improve its margins from here, and I think the KKR investment supports that basic idea, but it's hard to really pound the table for a company that has to always stay a step ahead of government price cuts.

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Amedisys Still Facing Significant Headwinds

Seeking Alpha: OM Group An Interesting, Still-Evolving Story

OM Group (OMG) is another one of those "blast from the past" stocks for me. I have owned this own profitably more than once, with multiple opportunities to buy and sell provided largely by the historical volatility in the company's cobalt operations.

Today OM Group is a very different company. The volatile cobalt operations are gone, and the company is focused specialty chemicals and materials company with good global share in specialty batteries and magnets. Better still, OM Group has a clean balance sheet and is still of a size where small strategic acquisitions can make a real difference.

OM Group is not the cheapest stock out there, having risen almost 80% over the past year on Wall Street's enthusiasm for the evolution towards a cobalt-free specialty chemicals/materials company. Although I do believe weakness in Europe (a major market for the magnetic technologies business), electronics, and defense could be challenges for a couple of quarters, and the shares are not cheap enough to be an enthusiastic buy, this is a stock worth some due diligence today and a spot on watch lists.

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OM Group An Interesting, Still-Evolving Story

Seeking Alpha: TriQuint And The Paradox Of #2

No company is ever going to say "we don't want to be #1," but in the weird world of Wall Street, sometimes it's better to invest in the challenger to the throne than the current occupant. To that end, while I like Avago (AVGO) better as a company, TriQuint (TQNT) may yet have better relative upside given the latter's opportunity to gain share in BAW filters as a second-source supplier and improve its much-inferior margin and cash flow production.

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TriQuint And The Paradox Of #2

Seeking Alpha: Cavium Is Great, But So Are The Expectations

The annoying thing about watchlists and "waiting for pullbacks" is that you have to be ready and willing to pull the trigger when they do happen. More often than not, whenever a growth stock pulls back significantly and actually looks like it sports a reasonable valuation, there are numerous analysts out in print harping on whatever bad news drove the stock down in the first place.

That brings me to Cavium (CAVM), a very interesting specialty networking processor company. The market gave investors two cracks at this stock below $25 in just the last six months, and while I would not dismiss or ignore competition from Intel (INTC), Broadcom (BRCM), Freescale (FSL) and others, I believe Cavium is well-positioned to deliver some rather remarkable growth in the coming decade. The only problem is that most of the Street things so too now, and even robust growth expectations barely drive a fair value above today's price.

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Cavium Is Great, But So Are The Expectations

Seeking Alpha: Bill Barrett's Transformation Can Fuel Further Gains

Timing is everything in the market; had I written what I'm about to write in February of this year, I'd have come off looking pretty good. Be that as it may, while missing the 60% move in Bill Barrett (BBG) stings a bit, I have confidence that the company can continue to deliver the sort of results that will move the stock even higher in the coming years. More to the point, the company's ongoing transformation from a high-cost producer of natural gas to a competitive producer of oil with a deep drilling inventory makes this a name to watch.

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Bill Barrett's Transformation Can Fuel Further Gains

Seeking Alpha: PCTEL May Have The Right Combination For The Next Leg

I'm perfectly happy recycling past investment ideas, and PCTEL (PCTI) treated me quite well indeed when I owned the stock about a decade ago. Since that time, though, the company has gone through a significant transformation and is really only the same in name only. Different isn't always better, but I do believe that PCTEL now operates a collection of businesses with interesting growth and margin potential. PCTEL does not appear to be tremendously undervalued today on a cash flow basis, but with almost $3 per share in cash on the balance sheet further acquisitions could improve its growth prospects further.

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PCTEL May Have The Right Combination For The Next Leg

Seeking Alpha: CACI Fighting A Rising Tide

Sell-side support may help a stock, but it certainly isn't an absolute requirement for outperformance. Government IT services specialist CACI International (CACI) isn't well-liked by the Street (just one "Buy" rating against 10 "Holds" and three "Sell" ratings), but the shares have more than doubled the return of the S&P 500 over the past year and sit just 3% below their 52-week high.

Throughout the ups and downs of federal budget cycles, CACI has been remarkably consistent at generating free cash flow, and almost equally consistent in leveraging that cash flow (and debt) to acquire businesses and expand its revenue footprint. Certainly times are getting more challenging for the entire government IT sector, as sequestration, the debt ceiling, and now the government shutdown all loom over the business.

While childishness among U.S. political leaders and necessary cutbacks in government spending do threaten the near-term revenue and free cash flow of CACI, I believe the longer-term outlook is still positive on balance. It may be difficult for CACI to outperform against the optics of sub-1.0 book-to-bills, weaker orders, and lower revenue, but value-oriented investors may want to use the time to dig into this one more thoroughly, as even near a high the shares look undervalued on a long-term cash flow basis.

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CACI Fighting A Rising Tide

Seeking Alpha: Is PMC Sierra The Way To Play Storage And Carrier Spending?

On the surface at least, PMC-Sierra (PMCS) is in some of the right markets. Enterprise storage continues to score well in various CIO surveys of spending priorities, while carriers are stepping up their plans for metro/access network spending and wireless backhaul. Not only are the end-markets looking better in many cases, but PMC-Sierra also enjoys good share and growth prospects from WinPath and 6G/12G transitions.

It takes more than a good top-level story to drive a good stock performance, though, and I'm not completely sold on the value proposition for PMC-Sierra. I do believe storage and carrier spending will accelerate, and the possibility certainly remains that the company can outperform current expectations for 2014 and beyond. While these shares could move as much as 20% if PMC-Sierra's 2014 outlook doesn't worsen and the Street goes back to historical multiples for the company's comp group, the core DCF valuation doesn't suggest quite as much upside.

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Is PMC Sierra The Way To Play Storage And Carrier Spending?

Seeking Alpha: Basic Energy Services Looks Too Cheap

When I was thinking about writing up Basic Energy Services (BAS) for Seeking Alpha, I was surprised to see how little coverage there has been on the name on this platform. Sure, this is not a large energy services company (with a market cap around $500 million and an enterprise value around $1.3 billion), but it is the third-largest company in the well servicing industry and this is a business that could do substantially better when (or if?) demand and pricing improve in major basins like the Permian.

It's looking like 2013 is going to finish on a fairly sour note, as competition among service firms continues to keep a lid on prices and profits. The next year should be better, though, and even at relatively modest EBITDA multiples this stock looks undervalued. While I still presently prefer to own Cameron (CAM) and Weatherford (WFT), it's not by a wide margin and Basic would be high on my list if I wanted to go more overweight towards service companies.

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Basic Energy Services Looks Too Cheap

Seeking Alpha: Not Much Hope Left For Homex

In the steel cage match between hope and despair in the Mexican home building industry, hope got in a headbutt in back in the middle of April, but despair has pretty much had the industry in a figure four leglock ever since. None of the major publicly-traded builders - Homex (HXM), GEO (CVGFY.PK), Urbi (URBDY.PK) or Ara (CNRFF.PK) - are doing well, and the middle two (GEO and Urbi) have been halted since midsummer after postponing their second quarter releases indefinitely.

There are a range of issues impacting this industry. Not unlike what happened in the U.S., many Mexican homebuilders took on debt thinking the building boom could only continue, but housing starts have plunged over the last five years on a combination of economic concerns and policy changes. More recently, proposed tax changes threaten to shrink the new housing market even further, while government policy appears to clearly favor urban development over the suburban developments the homebuilders have preferred.

While Ara is the largest (by market cap) and healthiest of the big four, Homex is the more familiar and liquid stock in the U.S., and that is the focus of my attention. I do believe that Homex, as a company, will survive, but at this point it seems like equity investors will need a minor miracle for this stock to work out as an investment.

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Not Much Hope Left For Homex

Seeking Alpha: Can PowerSecure's Odd Mix Generate Real Cash Flow?

Just on the surface level, PowerSecure (POWR) looks like it should be in some businesses with attractive long-term prospects. The company's distributed generation operations address the dual realities that not as many commercial/industrial sites have backup power as you might imagine and that there are savings to be gained from using on-site generation for peak shaving/demand response. Elsewhere, LED lighting and energy efficiency are almost perennial hot topics, and though utility infrastructure is not necessarily a growth market on its own, transmission & distribution (T&D) work has been lagging long-term demand and PowerSecure is building off of a low base.

Clearly the Street is feeling more cheerful about the name. The shares are up more than 170% over the past year and roughly 300% from the mid-2012 lows, and a small cadre of well-known institutions own worthwhile chunks of the stock (though some of that is for ETFs). While I'm actually more bullish with my numbers than management's own presentation, I'm not quite as bullish as the sell-side at this point - I do believe these shares remain undervalued, but a price target in the $20s might be a bit much right now.

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Can PowerSecure's Odd Mix Generate Real Cash Flow?

Seeking Alpha: A Clean Quarter Does Wonders For Global Payments

It's been a challenging year for Global Payments (GPN) shareholders, as the stock has chopped around between $42 and $50 on a series of "yes, but..." quarters and uncertainties regarding the company's ability to overcome a past security breach, evolving dynamics in the payment industry, and growth challenges overseas.

Maybe this fiscal first quarter will bring closure to some of those questions. Certainly the stock has been on a good run from around the start of September, and the Street seems to be happy with the accelerated share repurchase that was announced with this earnings report. I continue to be more bullish than average on Global Payments, and believe there could still be upside into the mid-$60's on ongoing growth in international markets.

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A Clean Quarter Does Wonders For Global Payments

Seeking Alpha: TearLab Builds Its Bench

The ups and downs of life as a small-cap med-tech company go on for TearLab (TEAR). There's still plenty of controversy regarding this name, not the least of which is a mixed bag of clinical papers on the company's osmolarity system, but strong system bookings certainly haven't done the stock any harm.

Most recently, though, the company announced the appointment of Seph Jensen, a long-time Alcon (part of Novartis (NVS)) veteran, as the company's new President and COO. Not only can Jensen bring experience on the device side of ophthalmology to the company and help the company appropriately build its sales/marketing efforts, but the addition of an industry veteran from a well-known company helps the image of TearLab as well.

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TearLab Builds Its Bench

Seeking Alpha: Tower Group Using Reinsurance For Assurance

When I wrote about the "almost unbelievable" situation at Tower Group (TWGP) on September 18, little did I know the story was about to get even more volatile. Not only did the stock plunge significantly on that day (down almost 30%), but the following days saw the stock fall another 30% before rebounding a bit.

On Tuesday night, the company announced a series of reinsurance agreements that should bring some stability to the situation. While two of the agreements will help the company manage and contain additional losses from its workers comp and multi-peril liability businesses, the others will help ease the company's capital needs for the remainder of the year and also give the company a little more time to work through its loss estimate and reserving issues.

I don't want to jump to the immediate conclusion that these transactions "save the company". There are still serious issues and questions regarding the quality of Tower Group's management and their ability to correctly estimate and price risk. If they do not correct those deficits, all they have done is buy some time. What's more, it's still very difficult to value this company appropriately until the expected earnings report next week, when the company will hopefully provide updated information about the changes to its reserves, its book value position, and its near-term earnings guidance.

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Tower Group Using Reinsurance For Assurance

Seeking Alpha: Even With The Debt, WESCO Is Interesting

I'm well aware that not everyone uses discounted cash flow to analyze and value stocks, and that's perfectly fine. Not only is there no such thing as "one right way", but using different methods in tandem can tell you some interesting things about a stock. Along those lines, WESCO (WCC) looks like a pretty interesting value if you compare its EV/EBITDA multiple to other distributors and perhaps even cheap if you go with a PEG-based approach.

The problem I have with earnings/PE approaches, though, is that I happen to think that debt matters. And WESCO has a lot of that. So I'm torn - WESCO has more than enough cash flow and operating income to cover its interest expense and debt service, and the company's debt load is not likely to undermine its leverage to a rebound in commercial construction or utility spending. Given that Wall Street often just ignores debt when there is revenue growth and margin leverage to focus on, I'm not going to rule out the possibility of further gains in WESCO's share price, even though netting out the debt would normally generate an uninspiring fair value target.

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Even With The Debt, WESCO Is Interesting

Seeking Alpha: Will More Good Data From Lexicon Finally Bring In A Partner?

I've owned quite a few biotechs over the years, but Lexicon Pharmaceuticals (LXRX) is maybe one of the most frustrating I've owned. Forget about the company's prior business model of selling gene knockout data to drug developers and its near-death experience about five years ago - the simple fact that the company has some very interesting clinical candidates but can't get much love or attention from prospective partners is plenty frustrating in its own right.

Well, here we go again. Lexicon announced very encouraging data on its lead compound for diabetes ('4211), with the company's proprietary SGLT 1/2 inhibitor showing solid glucose control in diabetes patients with significant renal impairment. I don't really think this study is surprising to Lexicon bulls, but the Street is clearly cheered by the news and I suspect part of that enthusiasm is the hope/expectation that the last real obstacle to a partnership agreement may now be in the past.

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Will More Good Data From Lexicon Finally Bring In A Partner?

Seeking Alpha: Can Dana Do What So Few Parts Companies Can?

It hasn't exactly been difficult to find winning auto parts/components stocks over the past year, but Dana (DAN) has nevertheless enjoyed a good run - up more than 80% and within a hair's breadth of its 52-week high as of this writing. There are definitely a lot of things to like about Dana - it has a pretty good balance sheet (for a parts/components company), it has a good recent history of margin improvements, and a very diverse and balanced business.

The question is whether the good times can continue. There are certainly some near-term headwinds. Expectations for light vehicle (LV), commercial vehicle (CV), and off-highway vehicle volume growth in Europe have come down significantly, and growth in key markets like Brazil is still erratic (recently LVs have been weak, while CVs have been strong). What's more, while Dana appears to be on a good path today, the track record of companies in this industry with respect to sustained long-term free cash flow generation is not at all good. Although I do believe Dana still scores well for quality and relative value, the probable free cash flow path is a little less convincing.

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Can Dana Do What So Few Parts Companies Can?

Seeking Alpha: Allison Transmission A Stand-Out In Multiple Ways

In a vehicle parts/components sector that has seen many stocks rocket up over the past year, Allison Transmission (ALSN) doesn't look so appealing with its stock "only" up about 25% over the past year. That comes in spite of Allison owning exceedingly rare market share in its end markets and still having significant global under-penetration to fuel future revenue growth.

While it is true that Allison's cash flow is complicated by net operating losses carried forward and intangible asset amortization, the base operating margin and cash flow generation are still quite good for the sector. Although Allison is not a huge value today, and the EV/EBTIDA looks expensive without adjustments, upside from energy and on-highway markets could lead to higher expectations and the relative valuation (not to mention quality) makes Allison a name worth following.

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Allison Transmission A Stand-Out In Multiple Ways

The Motley Fool: The Expectations Hangover Still Hurting Edwards Lifesciences

It really wasn't that long ago when rampant enthusiasm for minimally invasive heart valves sent the shares of Edwards Lifesciences rocketing from around $22 to almost $110 per share in about four and a half years. While the stock was in the $90s, I dutifully played my role of Cassandra -- pointing out that analysts and investors were getting carried away with their expectations for the adoption of transcatheter heart valves and underestimating the risks of competition from companies like Medtronic (NYSE: MDT  ) .

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http://www.fool.com/investing/general/2013/09/30/the-expectations-hangover-still-hurting-edwards-li.aspx

Seeking Alpha: Achillion Is Burnt Toast

At this point, I'll be quite happy to never hear or read the word "Achillion" again, as my former positive calls on Achillion Pharmaceuticals (ACHN) just keep looking worse and worse. With the company's post-Friday close clinical update, it's very difficult to argue that there's enough value left in this name to bother with it even further. I have no doubt that there will be a "never say die" contingent that wants to stick with this name, and I suppose I can't completely rule out the possibility that the next drug combo will work, but the combination of weak data, questionable reporting of that data, and the emerging competitive landscape just makes it too hard to look at this name even as a serious dumpster-diving candidate.

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Achillion Is Burnt Toast

Seeking Alpha: Tenneco Really Needs To Start Showing Margin Leverage

I was fairly bullish on Tenneco (TEN) when I last wrote about the company back in January of 2012, as I thought the market would turn to this stock as a recovery trade and also bid it higher on the prospects for a growing contribution from higher-margin commercial vehicle business. While the trade idea has worked pretty well - the stock is up about 70% since my recommendation, and significantly outperformed BorgWarner (BWA), Cummins (CMI), and the S&P 500 - I think it might be time to tap the brakes here.

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Tenneco Really Needs To Start Showing Margin Leverage

MassDevice: Will The Stryker-MAKO Deal Lead To More Action In Ortho?

Stryker (NYSE:SYK) certainly found a way to liven up the ortho space, with Wednesday's announcement that it is buying Mako Surgical (NSDQ:MAKO) for a whopping 13 times 2013 estimated revenue. Stryker had been pretty clear about its intentions to put cash towards M&A, and Stryker's relative challenges in knees were already known, but few industry-watchers saw this deal coming, and certainly not at this price.

Over time, I think Stryker could do a lot with Mako. Obviously Stryker's management thinks so too, or they wouldn't have paid so much for it. What I'm interested to see now, though, is whether this move leads to any sort of consolidation push in the ortho industry and/or whether Stryker+Mako will fundamentally alter the balance of power in major joint recon and push the likes of Johnson & Johnson (NYSE:JNJ) and Zimmer (NYSE:ZMH) to up their games.

Read the full article here at MassDevice:
http://www.massdevice.com/blogs/brad-perriello/will-stryker-mako-deal-lead-more-action-ortho

Seeking Alpha: Expectations For Arkansas Best May Be Higher Than They Seem

National less-than-truckload (LTL) trucking company Arkansas Best (ABFS) has been one of the best turnaround stories of 2013, as a new Teamsters agreement with meaningful cost concessions gives the company a real chance to repair one of the worst cost structures in the industry. With that, the shares have rocketed up more than 200% this year, and 300% from the 52-week low.

Even with that major leap, it would seem that the company is not getting all its due. The shares trade at about 4.6x the current average EBITDA estimate for 2014, against a long-term average of about 4.5x and industry averages that often run in the 6x to 8x range. On the other hand, Arkansas Best could still be facing significant pension liabilities, and the company may find it difficult to meet some aggressive growth goals. All told, I'm intrigued by what Arkansas Best could become again, but it's for me to not still prefer the more richly-valued (but better-run) Old Dominion (ODFL).

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Expectations For Arkansas Best May Be Higher Than They Seem

Seeking Alpha: With More Realistic Expectations, Itron Looks Interesting Again

Smart metering company Itron (ITRI) is a good example of why I'm always skeptical whenever I see people writing "don't worry about the valuation, just focus on the growth". This was a great growth story for a number of years, but the stock got expensive along the way and the high valuation only served to magnify the disappointment when the financial performance got wobbly.

Years later, I'm finding Itron more interesting. A lot of the wide-eyed optimism about the opportunity in smart metering and related utility smart grid technologies has been scrubbed out, and the global market potential is still pretty compelling. While a recently announced restructuring suggests that the turbulence within Itron isn't completely over, these shares seem like a reasonable opportunity in a market offering fewer and fewer of those.

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With More Realistic Expectations, Itron Looks Interesting Again

Seeking Alpha: LNG Continues To Fuel The Chart Industries Story

The picks-and-shovels approach to the LNG market that Chart Industries (GTLS) offers has already delivered great results for long-term shareholders. Up almost 70% in the past year and over 400% for the past five years, Chart Industries has shown itself to not only be the real deal in terms of offering leverage to LNG infrastructure growth, but smart about picking and choosing its market opportunities.

Chart is not cheap by any valuation approach I can come up with, but I don't think it will get all that cheap until the outlook for LNG infrastructure growth slows significantly… and I don't expect that to happen any time soon. I'm not going to push the "valuation doesn't matter" angle as I like to practice what I preach, but with the build out of LNG infrastructure in the U.S. and Europe still in early days, it won't surprise me at all if Chart continues to perform quite well.

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LNG Continues To Fuel The Chart Industries Story

Seeking Alpha: Did PacBio Just Sorta Sell Itself To Roche?

As a Roche (RHHBY.OB) shareholder, I've been waiting for a while for the company to do something with its life sciences research business, and its sequencing business in particular. The company took a well-known run at Illumina (ILMN) and made a lesser-publicized joint bid for Life Technologies (LIFE). With the options getting narrower, particularly with respect to systems that could be commercialized on a near-term basis, Roche made its move - signing a development and marketing agreement with Pacific Biosciences (PACB) covering sequencing, consumables, and related diagnostics products for the in vitro market.

I'd be curious to know if Roche has made any overtures toward Oxford Nanopore, but that's neither here nor there at this point. For Pacific Biosciences, this is a major public affirmation of the progress the company has made to recover from system performance and reliability problems that took a once-ballyhooed story to almost flirting with bankruptcy. PacBio has already been a great pick for me (having recommended the stock in an Alpha-Rich piece here), but I wouldn't assume that there is all there is left in the story.

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Did PacBio Just Sorta Sell Itself To Roche?

Seeking Alpha: Can A Commercial Rebound Rebuild ARC Document Solutions?

The multi-year decline in commercial construction has been particularly painful for ARC Document Solutions (ARC) (formerly known as American Reprographics). Despite having the only national reprographic services business in the country and five to 10 times the market share of its closest competitor, revenue in 2012 was only 40% of what it used to be in 2008 as the company's core architecture/engineering/construction market has gone into deep hibernation.

Although I've been writing on companies that I believe can leverage improving construction activity into higher share prices, I'm not completely sure where ARC Document fits into that group. I updated my research and models on ARC hoping to find an overlooked potential gem, but I'm just not sure that's what this is. The reprographics industry is changing and I'm not confident that the margins in the managed print services business will come close to what the company has achieved in the past. Although I can construct a bullish argument that would put ARC Document's potential fair value into the double-digits, my base-case assumption is much lower and not as much of a bargain relative to today's price when factoring in the risks of the company's changing business and end-markets.

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Can A Commercial Rebound Rebuild ARC Document Solutions?

Seeking Alpha: The Hurry-Up-And-Wait Continues At Maxwell

Many years spent in the market has taught me to be on guard whenever investors try to promote a story on the basis of technology that they call "disruptive", "world/game-changing" and so on. A quick look at the chart of Maxwell Technologies (MXWL) can show why - however game-changing ultracapacitor technology may prove to be, these are still very early days for the technology and the stock has chopped back and forth between $5 and $20 for almost 15 years after previously enjoying a roughly three-year run between $20 and $40.

There are plenty of criticisms you can level at Maxwell. The company has failed to keep its nose clean, with a DOJ deferred prosecution agreement over a bribery scandal and a more recent accounting scandal tied to revenue recognition practices. It's also true that the company has struggled to secure meaningful commercial adoption outside of China's wind power and hybrid bus markets.

And yet, the company has lifted itself to positive free cash flow, has managed to generate positive operating income, and sports an accumulated deficit of $155 million. What's more, the company has convinced leading manufacturers like Continental AG and Caterpillar (CAT) to at least give their technology a try. By no means do I believe the odds favor Maxwell, but unlike many energy tech names, Maxwell's valuation seems to at least factor in achievable expectations.

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The Hurry-Up-And-Wait Continues At Maxwell

Seeking Alpha: MAKO Surgical Gets Its Happy Ending

While many bullish analysts and investors had previously mentioned the possibility of MAKO Surgical (MAKO) receiving an attractive buyout bid, the reality proved even better than expected. On Wednesday morning, MAKO and Stryker (SYK) announced that the two companies had agreed on a deal that will see Stryker buy MAKO for $30 share in cash - a $1.65 billion deal that exceeded the highest sell-side price target on MAKO by 15%.

With only scant odds that a rival bidder will top Stryker's offer, the MAKO story comes to a relatively happy conclusion. What's more, Stryker would seem to be an ideal partner to grow MAKO's business and maximize the potential of the robot-assisted makoplasty concept.

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MAKO Surgical Gets Its Happy Ending

Seeking Alpha: Miller Industries Anything But A Wreck

I have a habit of digging deep into under-followed and obscure corners of the industrial world, and it has turned up a lot of good investment opportunities over the years. Leading tow truck and car carrier company Miller Industries (MLR) would seem to fit the profile, as this company leads an industry worth an estimated $600 million or more per year, and has only scratched the surface of its overseas opportunities.

To be fair, Miller's record with respect to margins and returns on capital isn't spotless, but I attribute much of this to the ups and downs of the towing industry it serves - an industry with few large-scale operators and above-average economic sensitivity. On its own, I believe Miller is worth around $23 per share, but I would expect the sale of the company to be a "when, not if" event, and Miller could be worth even more to the right acquirer than its stand-alone valuation would indicate.

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Miller Industries Anything But A Wreck

The Motley Fool: Will 3 Versions Of Pfizer Be More Valuable Than 1?

Like many value-oriented investors, I tend to take a dim view of companies that resort to financial gymnastics to make their reported numbers look better or to get a better valuation from investors. With that said, I'm curious, and more than a little skeptical, as to whether Pfizer's (NYSE: PFE  ) long-term plan to potentially break itself up into three separate companies will really generate any long-term value for investors.

To be fair, Pfizer has already done a little bit of this already. The company spun off Zoetis -- the world's largest animal health company with almost 20% share -- earlier this year, and Pfizer's shares have outperformed the S&P 500 by about 5% since then while Zoetis has lagged (though Zoetis is up more than 20% if you take the IPO price as the starting point). Time will tell regarding the ultimate value created by this transaction, but freeing Zoetis to invest in R&D and market development as it sees fit ought to be a win-win for both parties.

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http://www.fool.com/investing/general/2013/09/24/will-three-versions-of-pfizer-be-more-valuable-tha.aspx

Seeking Alpha: XPO Logistics Building Credibility In Aggressive Growth Targets

When I last wrote about XPO Logistics (XPO) in March of this year, I found the company's ambitions to be rather remarkable, but potentially very lucrative for shareholders. In the following four or five months, I didn't really second-guess my decision to "watch and wait" as the stock went nowhere fast. Then the company announced its largest-ever acquisition and the stock jumped to new highs before settling down a bit.

Six months later, it's hard not to like XPO Logistics even more. The company's combination of aggressive M&A and organic growth is building credibility that the 2016 target of $4 billion to $6 billion in revenue is attainable, not to mention the 5% EBITDA margin. A great deal could still go wrong between now and then and there are significant uncertainties about what the company's capital structure will look like at that point, but I think shareholders can still find meaningful value in these shares.

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XPO Logistics Building Credibility In Aggressive Growth Targets

Seeking Alpha: Keppel's Collected Parts Are Undervalued

I'll say it right up front - researching, valuing, and owning Singapore's Keppel Corporation (KPELY.PK) is going to be more of a headache than some investors want. This large conglomerate not only operates a huge rig-building shipyard and power/gas infrastructure business, it also owns sizable stakes in numerous listed companies, including Keppel Land (KPPLY.PK) and K-REIT. If that weren't enough, the government-owned investment company Temasek is a major holder of Keppel shareholders and quite a lot of Keppel's projects ultimately involve dealing closely with the government.

Despite those risk factors and/or drawbacks, I'm bullish on Keppel. While the company's shares took a big step down during the global recession, the company has a long-term history of building shareholder value. With the company still looking forward to significant rig orders and owning a majority stake in a premier Asian property developer, I believe Keppel is a solid, undervalued, income-generating stock trading about 20% below its fair value, and a stock that is capable of being a core holding for those looking to add international exposure.

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Keppel's Collected Parts Are Undervalued

MassDevice: Despite A Long Road Ahead, Sunshine Heart Is Worth A Serious Look

If you've been following the medical device (and/or pharmaceutical) space for a while, you know that congestive heart failure is one of the nastiest, hardest to treat, chronic conditions out there. There's really no way to reverse the disease short of a heart transplant, and the drugs and device therapies available sort themselves out between "largely ineffective" and "effective, but with serious issues".

That's terrible news for those patients who have congestive heart failure, but it leaves a tremendous opportunity for Sunshine Heart (NSDQ:SSH). This small-cap med-tech from Minnesota appears to have an ingenious solution to the problem, one that is based around well-understood principles and relatively simple technology. Although it will be at least four to five years before commercialization in the U.S., and that's only if the pivotal study shows adequate efficacy and an acceptable risk/benefit profile, this is definitely a name to watch in the med-tech space as the company looks to bring a new option to the table for seriously ill CHF patients.

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http://www.massdevice.com/blogs/massdevice/despite-long-road-ahead-sunshine-heart-worth-serious-look

Seeking Alpha: Are Investors Getting Free Call Options On Advanced Emissions' Long-Tail Technologies?

Getting to this point hasn't been easy for Advanced Emissions Solutions (ADES), previously known as ADA-ES before a corporate restructuring (a legal/business structure restructuring, not a bankruptcy-related restructuring). Like most companies trying to market "clean coal" technologies, the company has faced regulatory uncertainties, a risk-averse customer base, and sector-wide image issues created by disreputable firms trying to capitalize on investor interest in the idea of making coal-fired electrical generation cleaner and more environmentally sustainable.

The solutions and services ADES provides don't make burning coal 100% clean, and there are still a host of long-term challenges facing coal as a fuel for electrical generation in the U.S., but the company's patented technologies and processes can help electrical utilities come into compliance with new regulations governing mercury emissions. While the way Advanced Emissions will generate most of its cash flow is fairly convoluted, it looks as though even the 75%-plus rise in the shares over the past year doesn't fully capture the potential value of the company. More to the point, relative to the company's potential cash flows from its Refined Coal operations, investors could be getting technologies like M-Prove and CO2 capture for virtually nothing today.

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Are Investors Getting Free Call Options On Advanced Emissions' Long-Tail Technologies?

Seeking Alpha: Wall Street Betting That Mueller's Profits Will Start To Flow

The markets have long loved water/fluid-management stories like Xylem (XYL), ITT (ITT), and Franklin Electric (FELE), and if you can add a residential construction rebound, you have an even better story in the making. That has certainly worked for Mueller Water (MWA), as shares have risen more than 75% over the past year, 235% over the past two years, and about 300% over the all-time low set in November of 2011.

Not surprisingly, it looks like the market has put a definite premium on the recovery potential here. I do believe that residential construction is on its way back, and I also believe that Mueller's investment in advanced products like advanced metering (AMI), leak detection, and pressure monitoring will provide a nice kicker to its growth in valves and hydrants. Mueller shares do look pricey on a cash flow basis, and could be vulnerable if the residential recovery proves shallower than expected, but I won't ignore the possibility that strong leverage could lead to significant profit growth and even higher multiples.

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Wall Street Betting That Mueller's Profits Will Start To Flow

Seeking Alpha: Oshkosh Has The Margins; Can It Grow Revenue Enough?

It has been an interesting run for specialty vehicle manufacturer Oshkosh (OSK) over the last three or four years. The company was able to leverage its long expertise in tactical vehicles for the defense market into strong revenue and cash flow during the wars in Iraq and Afghanistan, but the sharp declines in defense demand, coupled with a weak market for construction-related and municipal vehicles, cut the shares down almost two-thirds between mid-2010 and the fall of 2011.

Oshkosh's struggles attracted the attention of Carl Icahn, but management successfully fended off his efforts by convincing shareholders that the company's MOVE strategy was the better plan for the company. I'd argue that the company's running tally of strong quarterly beats is a good argument that the MOVE strategy is a good one, and the market has rewarded the shares to the tune of a 70% gain over the past year. Looking ahead, though, the story is now evolving into one that less about margins and more about whether the company can log enough revenue growth in its non-defense businesses to keep the numbers moving forward.

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Oshkosh Has The Margins; Can It Grow Revenue Enough?

Seeking Alpha: Air Transport Group Looking To Post Meaningfully Higher Cash Flow

Done correctly, equipment leasing can be a lucrative business. General Electric's (GE) GE Capital has done quite well for itself leasing everything from jet engines to rail cars to shipping containers, and passenger jet lessors Aircastle (AYR) and AerCap Holdings (AER) have likewise performed quite well over the past year and reasonably well over the last five.

Air Transport Group (ATSG) isn't a straight-up leasing company, as about 80% of the company's external revenue comes from ACMI (aircraft, crew, maintenance, insurance) operations, but the stock has nevertheless been quite strong both over the past year and since a 2008/2009 crisis threatened the company's survival. With the company looking to generate business for under-utilized assets in an improving economy and taking a new, disciplined approach to further capex, Air Transport Group should be looking at a period of improving margins and cash flows.

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Air Transport Group Looking To Post Meaningfully Higher Cash Flow

Seeking Alpha: Genco Shipping Offers A High-Risk Charter Rate Call Option

Dry bulk shipping company Genco (GNK) is holding on by its fingertips. With charter rates crushed by capacity additions over the last three years, Genco is deep in the red and facing a day of reckoning with its lenders. Recent spikes in certain dry bulk rates are encouraging, but not enough to get the company back on its feet without the cooperation of those lenders. Although I do believe Genco will manage to restructure or renegotiate its debt, that's a risky call at this point and the company's net asset value is in the red. Still, for those investors looking to bet on further recovery in charter rates, Genco could offer meaningful bang for the buck.

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Genco Shipping Offers A High-Risk Charter Rate Call Option

Seeking Alpha: Old Dominion Isn't Done Yet

Earlier this year, I thought the Street's reaction Old Dominion's (ODFL) fourth quarter results offered investors a good opportunity to buy shares in this high-quality, growing trucking company. Since then, the shares are up about 30% - more than doubling the return of the S&P 500. Although that performance is more mixed relative to other trucking companies- better than Con-Way (CNW), but inferior to Arkansas Best (ABFS), YRC Worldwide (YRCW), and Saia (SAIA) - Arkansas Best and YRC have benefited from a major catch-up trade and still notably lag Old Dominion on a two-year comparison.

While valuation on the shares has moved up, I don't think the opportunity is over for Old Dominion or its shareholders. The company continues to gain share in the less-than-truckload industry, and I believe the company's combination of service quality, organic growth potential, and strong margin leverage can continue to deliver good returns.

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Old Dominion Isn't Done Yet

Seeking Alpha: Rofin-Sinar Looking To A Cyclical Recovery And Fiber Share Gains

About a month and a half ago, I wrote that IPG Photonics (IPGP) was a good name to know in lasers for its growth potential tied to the expansion of the fiber laser market (where it has at least two-thirds market share). Circling back, it's also worth exploring the potential of the 800lb gorilla in the overall industrial laser space - Rofin-Sinar Technologies (RSTI).

Rofin-Sinar is the leading company in market share terms in a market that I'd characterize as "cyclical growth" - there are certainly ups and downs from year to year, but the overall laser market continues to outgrow overall industrial spending on a multi-year basis. With a strong IP position and industry reputation, not to mention a wide array of products, Rofin-Sinar can benefit from the ongoing expansion of industrial automation and the continuing penetration of lasers into new cutting, welding, and marking applications.

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Rofin-Sinar Looking To A Cyclical Recovery And Fiber Share Gains

Seeking Alpha: Is Titan Bottoming Out?

It's been a rough year for most companies that have much to do with the agriculture, earthmoving, or mining vehicle industries. Deere (DE) is up a little, Caterpillar (CAT) is down a little, Joy Global (JOY) is down a little more and the two Titans (Titan Machinery (TITN) and Titan International (TWI)) are down even more. Although AGCO (AGCO) and CNH Global (CNH) are up pretty strongly over the past year, they're more the exception and perhaps benefiting from less reliance on North America.

In any case, Titan International is the stock I'm interested in for this article. This company has had an up-and-down history, with management having something of a history of "I confess … it's not our fault!" excuses for operational issues, but also a cogent plan for building strong share in a variety of growth markets like Eastern Europe and Brazil. Calling a bottom in a stock always runs the risk of making you look stupid later on, and I do see risks that the ag and mining markets could get worse. Even so, unless Titan seriously drops the ball and actually loses share over the coming decade, I think the shares are undervalued today.

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Is Titan Bottoming Out?

Seeking Alpha: Alaska Air Still Different, Still Undervalued

I'm not sure any industry has a worse long-term reputation than airlines, but given that it is not so long ago that about 70% of the U.S. airline industry was in bankruptcy I'm not sure you can argue that reputation is undeserved. With that, I think the market has always waited in expectation for the other shoe to drop on Alaska Air Group (ALK), but the company stubbornly continues to out-execute and show that there is a better way to run an airline business.

Certainly Alaska Air is no longer any sort of hidden gem. The shares are up more than 80% over the past year, more than 500% over the past five years, and up almost 1,000% from the mid-2008 low. The company is facing more competition in some of its key routes, but returns and margins remain solidly above-average. I'm not naïve enough to believe that Alaska Air will ever get its full due, but I do still see some additional potential in these shares.

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Alaska Air Still Different, Still Undervalued

Seeking Alpha: Ship Finance Offers Good Returns For Above-Average Risks

Double-digit dividend yields often come with a substantial "but" attached. The junk in the trunk in the case of Ship Finance (SFL) comes in both the form of the significant ownership stake of shipping magnate John Fredriksen, as well as the company's heavily entwined dealings with other Fredriksen companies like Frontline (FRO) and Seadrill (SDRL).

While the shipping industry is still in rough shape, I don't think Ship Finance gets enough credit for the moves it has made to diversify into operations like offshore drilling (admittedly, another boom-bust industry) and offset the risk of customer defaults. A default from Frontline would certainly be noisy and negative, but not nearly as harmful to underlying cash flow and dividend support. With these shares trading below what appears to be fair value on an EBITDA and NAV basis, and paying a 10%-plus yield as of this writing, I believe Ship Finance is an attractively-priced, albeit risky, way to play shipping and collect a large dividend.

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Ship Finance Offers Good Returns For Above-Average Risks

Seeking Alpha: Ply Gem Highly Leveraged To New Housing

If investors want to own stocks leveraged to a recovery in new home construction in the U.S., it's hard to do better than Ply Gem (PGEM) in terms of sheer end-market leverage. Distributor Builders First Source (BLDR) has more overall leverage to new housing construction, but at nearly 50% of sales, Ply Gem is well ahead of companies like Masco (MAS) and Fortune Brands (FBHS), and is roughly on par with Louisiana-Pacific (LPX).

It takes more than just good end-market exposure to be a long-term winner, though, and Ply Gem certainly has work to do in improving margins and cleaning up its balance sheet. Although I think management has a solid plan for improving margins and I like the growth prospects, it feels like you have to stretch to really make the numbers work on the fair value side of things (and it seems like many sell-siders have done exactly that). Though I do believe Ply Gem will be a good stock proxy for new home construction (and investor sentiment about it), I'd be wary of a slower, more drawn-out recovery.

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Ply Gem Highly Leveraged To New Housing

Seeking Alpha: Tower Group Goes From Bad To Worse To Almost Unbelievable

When I last wrote about small insurance company Tower Group (TWGP) back in January of this year, my faith in management was wavering after management chose to compound the poorly-executed acquisition of OneBeacon and successive reserve charges (that essentially revealed that prior earnings and returns on equity had been overstated) with a risky transformative merger. In the interim I lost what remaining faith I had in management and sold my shares, and the company's ongoing issues with reserves certainly erodes confidence in the company's future prospects

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Tower Group Goes From Bad To Worse To Almost Unbelievable

Seeking Alpha: Bio-Rad Built For Consistency, Not Short-Term Out-Performance

Within the life sciences and clinical diagnostics worlds, Bio-Rad (BIO) is an odd duck. More like Techne (TECH) than Illumina (ILMN), Cepheid (CPHD), or even Thermo Fisher (TMO), Bio-Rad isn't looking to redefine its markets or change the game. Instead, this is a company that lets others be the first-movers and focuses on leveraging its large global distribution system and driving consistent, dependable financial results.

That's all well and good when the stock is priced that way. Unfortunately, Bio-Rad is often picked as an undervalued "hidden gem" in the life sciences/diagnostics space on the basis of its EV/EBITDA or EV/rev ratio, but without the acknowledgment of the differences in the models. None of this is to say that Bio-Rad is a bad company - trailing growth rates of 8% to 16% for revenue, free cash flow, and book value per share are quite good - but I do think investors have to be careful about the extent to which they goose their growth rates when considering the shares' fair value.

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Bio-Rad Built For Consistency, Not Short-Term Out-Performance

Seeking Alpha: PolyOne Has A Great Business, But Is It A Great Stock?

With the major market indices having performed as they have this year, it's not exactly surprising that there are numerous situations where you see a good or great business with a stock up 40%, 50%, or 60%-plus over the past year. Such is this case with PolyOne (POL), as investors have bid up the shares of this chemical company not only on expectations of improving construction and transportation markets, but also its clear commitment to transitioning to a higher-margin specialty chemical model.

Valuation admittedly always comes down to elements of guesswork and judgment, and arguments over the "right" multiples or discount rate for PolyOne can lead to pretty significant swings in estimated fair value today. Even so, it's hard for me to still call PolyOne a great stock for new investors at this level, as a lot of the company's plans and intentions seem to be already incorporated into expectations.

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PolyOne Has A Great Business, But Is It A Great Stock?

Seeking Alpha: DigitalGlobe Hopes A Near-Monopoly In Satellite Imaging Pays Off

"Up here in space, I'm looking down on you; My lasers trace everything you do." Judas Priest, "Electric Eye"

The jury is still out as to whether or not DigitalGlobe (DGI) can build a strong business in satellite imaging outside of government defense and intelligence contracts. The integration of the company's merger with GeoEye already appears ahead of schedule, and not unlike the merger that created Sirius XM Radio (SIRI), I expect the combined entity to be stronger and more profitable than either of its constituent parts would be on their own. Even so, getting companies in industries like oil/gas, mining, and agriculture is going to be the factor in whether investors' solid enthusiasm for these shares in 2013 pays off down the road.

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DigitalGlobe Hopes A Near-Monopoly In Satellite Imaging Pays Off

Seeking Alpha: MTS Systems Isn't Afraid Of Bold Expectations

For many companies, the role of CEO comes down to carefully massaging expectations such that institutional shareholders stay happy and stock options end up in the money. That sort of attitude doesn't lead to much in the way of boldness, and it probably goes some length to explain just why "average" performance is often so mediocre.

MTS Systems (MTSC) isn't like that, though. Management here has laid out bold targets - compound revenue growth of over 10% through 2018 and doubling revenue to $1 billion. Double revenue in six years would be aggressive for most companies, let alone a company that serves cyclical industries like autos and aerospace and competes with large companies like Illinois Tool Works (ITW) and Moog (MOG.A). While I'm not 100% convinced that management will hit that market (it's a goal, not a guarantee), I do believe that even a "near miss" would make these shares undervalued at today's price.

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MTS Systems Isn't Afraid Of Bold Expectations

Seeking Alpha: Kirby Looking At A Rising Tide Of Volume

Unless you live near a major river or coastal waterway, you may not give much thought to barges as a means of bulk transport, but it's a significant carriage option for agricultural and petrochemical products. With roughly 30% of the inland tank barge market and more than 20% of the coastal market, Kirby (KEX) not only has uncommonly high share, but is in a good position to benefit from the ongoing growth in U.S. oil and gas production, as well as the billions of dollars of new petrochemical capacity coming online. While these shares are seldom cheap, waiting for a significant pullback can be a frustrating exercise.

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Kirby Looking At A Rising Tide Of Volume

Seeking Alpha: Manitou Looks Like A Hidden Gem In France

France is probably not a country where most investors are going to think of searching for a quality industrial company, but Manitou (MAOIF.PK) (MTU.PA) just may be the exception. Although the company is heavily exposed to Europe and the shares aren't all that liquid even on the Paris exchange, the company's rough terrain handling and industrial material handling equipment could fuel years of above-average global growth.

This is definitely a riskier-than-average proposition. The stock is basically controlled by two families, sales to the U.S. and Asia are minor, and the company has yet to rebuild its margins in the wake of the global credit crunch. But if Manitou can return to free cash flow generation on par with Terex (TEX), Oshkosh (OSK), and CNH Global (CNH), these shares are set to rise more than 40%.

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Manitou Looks Like A Hidden Gem In France

Seeking Alpha: Relative To The Risks, The Turnaround Rewards At Bebe Don't Impress

With shoppers seemingly on a general strike, there is no shortage of turnaround/recovery ideas in the apparel sector. It's different situation with bebe stores (BEBE), though, as this company isn't suffering from the fickle whims of teen fashion or the sudden drop in mall traffic. Rather, bebe has seen its reported sales decline year over year since 2008 and hasn't sniffed a double-digit operating margin since that same year.

The company has a turnaround strategy in place, as well as a CEO who is less than a year into the job. While management has done a good job of telegraphing what are likely to be ugly-looking numbers until legacy merchandise is off the shelves and out of the stores, I'm not sure the probable long-term gains are worth the pains. The shares do look a little undervalued, but bebe will have to go from its current stressed state to new all-time performance records to justify a target price that would make it a superior investing option to names like American Eagle (AEO) or Aeropostale (ARO) in the broader retail space.

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Relative To The Risks, The Turnaround Rewards At Bebe Don't Impress