Seeking Alpha: Commerce Bancshares Starts The Season With A "Meh"

Surprises at banks seem to skew to the negative much more often than to the positive, so a relatively dull quarter in not such a bad result for Commerce Bancshares (CBSH). What's more, this highly-focused Midwestern bank continues to show very good loan growth in an increasingly competitive market. While I like management's recent move to acquire a small bank in Oklahoma, the valuation here seems too rich and I'm not completely sold on the company's strategy of increasingly funding loans with wholesale deposits.

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Commerce Bancshares Starts The Season With A "Meh"

Investopedia: Noble Energy Looks Great, But Is The Valuation Too Filling?

In what has been an extremely iffy year for the E&P sector, Noble Energy (NYSE:NBL) is an outlier in many respects. Not only has the stock done quite well over the past year, but that's even with a gas-heavy reserve base and exposure to the Gulf of Mexico – two things that the market has really soured on in general.

Clearly this is a situation where digging a little deeper is warranted. Noble Energy is doing so well in part because of its very successful drilling program in northern Colorado, it's large gas discoveries off the coast of Israel, and a very compelling outlook for debt-adjusted production growth over the next three to five years. Honestly, the question today doesn't seem to be so much about whether Noble is a top-notch emerging mid-tier energy company, but rather what to pay for all of that.

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Investopedia: Oceaneering Is A Great Business, But How Much Are You Willing To Pay?

When it comes to equipment and services in the energy space, “strong market share” is usually pretty relative. In many markets, a company is doing very well if it can get 25% or one-third of a market to themselves, which makes Oceaneering International's (NYSE:OII) nearly 60% share of the deepwater rig support market pretty significant.

What's more, this is not just a “market share at any cost” story, as the company has a pretty remarkable record of consistent operating margin and ROIC performance despite the vagaries of the deepwater energy market. The problem for investors is in figuring out what constitutes a fair multiple for all of these positives.

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Investopedia: Yum! Brands On Simmer For Now

Given that the company's troubles in China are very well known now, there's not much for Yum! Brands (NYSE:YUM), or its shareholders, to do but wait for things to get better. The company continues to look for growth in other emerging markets, while driving good profits from its U.S. operations, but it's going to take a while for markets like India, Russia, or Africa to make a difference relative to China. In the meantime, the shares don't look like that much of a bargain.

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Investopedia: Komatsu Looks Like A Winner, But Valuation Is Tricky

Most American readers will be well aware of the significant share and scale that Caterpillar (NYSE:CAT) enjoys in the construction and mining industries. What may be less appreciated is that Japan's Komatsu (Nasdaq:KMTUY) enjoys similar scale on a global basis, and has done quite well for itself in markets like China and Indonesia. What's more, Komatsu has made considerable investments in a variety of automation technologies that could set its equipment apart in the coming years. Valuation here isn't a simple exercise, but a multi-metric analysis suggests that Komatsu may well be cheap enough to merit serious investment consideration.

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Seeking Alpha: Weak Metalworking Corroding MSC Industrial's Growth

When I last wrote on MSC Industrial (MSM) about a month ago, I suggested that the solid average daily sales growth being reported by Grainger (GWW) and Fastenal (FAST) on a monthly basis was threatening to put the company in the penalty box with some investors. See, the challenge for MSC Industrial has long been in proving that it's more than a cyclical industrial supplier and that it can grow consistently, albeit even if not on the same level as Fastenal.

Unfortunately for investors, MSC Industrial's fiscal third quarter earnings were decidedly mediocre in that respect. Although the company did as it said it would in terms of revenue and exceeded its own guidance for operating efficiency, the relatively weak daily growth highlights the challenges of the company's focus on the metalworking industry and puts even more pressure on management to exploit the BNDA acquisition for all its worth in terms of broadening its addressed markets.

The question for investors now is one of time horizon and patience. I do believe the company is making considerable investments today that will underpin above-average growth in the coming years (likely starting around the second half of 2014). I likewise believe that U.S. manufacturing (and particularly metalworking businesses) can and will recover in 2014. So while I continue to find MSC Industrial undervalued on a long-term basis, the exposure to the clearly underperforming metalworking industry could make it harder for these shares to outperform in the meantime.

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Weak Metalworking Corroding MSC Industrial's Growth

Seeking Alpha: Helen Of Troy Not Looking Like A Cheap Date Today

I've written on Helen Of Troy (HELE) plenty of times over the years, and it has long been a great stock for writers and stock pickers because it's quite a bit more volatile than you might expect from a maker of deodorant, hair dryers, and vegetable peelers. At the same time, it's well worth noting that the company has a pretty good record of delivering high single-digit returns on capital and acquiring under-developed brands/businesses that thrive with a little more direct attention.

Right now, the company is having a little trouble finding attractive deal candidates, while investments in a new distribution center compresses free cash flow. I don't think these shares are much of a bargain today, but I'd certainly keep this one on the watch list.

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Helen Of Troy Not Looking Like A Cheap Date Today

Seeking Alpha: Still Time To Think About Going All-In On Axiall

Even with my dedication to the philosophy of "enlightened torpor" with respect to changing up my portfolio, there are times where it's worthwhile to consider secular trades or themes. While many stocks have already enjoyed a pretty good run on the back of improving expectations for the U.S. housing market, there are still a few ideas left that hold potential.

One of those ideas to consider is Axiall (AXLL) - the new chlor-alkali giant that has emerged from the combination of Georgia Gulf and PPG's (PPG) commodity chemical business. Investors and analysts wigged out in response to higher-than-expected ethylene prices in the first quarter, but the company's outsized exposure to U.S. housing, potential PVC margins, and synergy possibilities make this a name still worthy of consideration. As it is a commodity chemical, though, investors should realize that this is a consummate example of a stock that is bought to be sold - this is not a stock I'd imagine many investors would want to hold for a decade at a time.

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Still Time To Think About Going All-In On Axiall

Investopedia: Fastenal Still Growing, But Still Highly Valued

Even when sluggish manufacturing activity weighs down growth in the industrial distribution/MRO space, Fastenal (Nasdaq:FAST) still manages to find the ways to outgrow most of its rivals. Quarter-to-quarter execution hasn't really ever been the issue here, nor the company's investments into aggressively growing the vending machine business. What the issue was, is, and likely will continue to be is what investors should pay for that growth – while Fastenal is clearly not as cyclical as some players in the space, even a 20% free cash flow CAGR estimate doesn't lead to a compelling price target.

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Investopedia: Best-Of-Breed Status Keeping Helmerich & Payne Near Fair Value

The past two- and five-year periods haven't been kind to the land drilling industry, but Helmerich & Payne (NYSE:HP) has fared quite a bit better than most. While rivals like Nabors (NYSE:NBR), Patterson-UTI (Nasdaq:PTEN), Precision Drilling (NYSE:PDS), and Pioneer Energy (NYSE:PES) have seen their shares decline from between 30% and 70% over the last two to five years, Helmerich & Payne is close to breakeven.

HP owes its success to a program of focused differentiation – namely, building high-spec rigs that not enable operators to drill the horizontal wells that are increasingly necessary to exploit oil and gas reservoirs, but to do so faster and with fewer drilling days. A significant recent increase in the dividend has demonstrated management's willingness to share success with shareholders, but the quality of this company is never far from the minds of Wall Street. Consequently, the shares don't look like a tremendous bargain today.

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Investopedia: POSCO's Above-Average Quality Already In The Shares

With economic weakness stretching from Europe to Asia to North America, there is no shortage of resource and commodity companies that appear to be trading below fair value. That's not quite so true in the steel sector, though, where valuations have seemingly held up a little better. Unlike global steel giant ArcelorMittal (NYSE:MT), which does appear to be meaningfully undervalued, South Korea's POSCO (NYSE:PKX) appears to be enjoying a relatively healthy benefit of the doubt from the Street. While I certainly wouldn't argue that POSCO will go along for the ride when investor sentiment on steel turns more positive, I think the margin of error here is too slight to make this a compelling buy today, even with the stock near a 52-week low.

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Investopedia: Can Apache Regain Its Reputation?

It feels like it wasn't all that long ago when Apache (NYSE:APA) was one of the most well-regarded energy companies in the game. Management had a knack for acquiring assets from larger companies at attractive prices and driving a surprising amount of productivity out of them. Along the way, the company developed a very broad portfolio that was well-balanced between oil/gas, individual basins, and near-term/long-term productivity.

Unfortunately, there's a blurry line “diversified” and “unfocused”, and Wall Street has come to the conclusion that Apache is too much of the latter these days. What's more, there are now substantial questions about the company's asset mix and its ability to generate good returns from those assets. Management is responding to these concerns with an asset sale program, and while Egypt is going to loom large in investors' minds for a while yet, I believe these shares are meaningfully undervalued today.

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Seeking Alpha: Cresud Is Confounding, But Trading Much Too Far Below Fair Value

Having given overviews of South American agricultural companies SLC Agricola (SLCJY.PK), Adecoagro (AGRO), and BrasilAgro (LND), I close the tour with Argentina's Cresud (CRESY). I'd like to say that I left the best for last, and maybe I have, but I think it's closer to the mark to say that I've left the most confounding one for last.

Make no mistake, Cresud has a lot of worthwhile assets, including productive farmland in four South American countries, a controlling stake in a significant Argentine real estate developer, and a major stake in BrasilAgro. At the same time, though, Argentina is going through another bout of significant political and economic turbulence, and I don't think anybody can say that means for agricultural exports out of Argentina, land values within the country, and/or the company's ability to pay cash dividends to foreign shareholders.

Assuming that nothing dramatic changes regarding the operating framework for the company in Argentina (and Brazil) and that land values stay strong, Cresud could well be the cheapest of the four companies I've surveyed. At a minimum, it's definitely the most diverse collection of assets.

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Cresud Is Confounding, But Trading Much Too Far Below Fair Value

Seeking Alpha: BrasilAgro Has Valuable Land, But An Uncertain Model

As I work my way through the South American ag giants, I now turn my attention to BrasilAgro (LND). BrasilAgro has done a pretty remarkable job of getting "potentially" arable land under cultivation, having nearly doubled its land under cultivation since 2010 and nearly quadrupled it since 2008. Moreover, management appears pretty smart about putting that land to best use, adjusting the planting of soy, corn, sugarcane, and cotton in response to market conditions.

All of this sounds great, but for the sizable stake that Argentina's Cresud (CRESY) and other foreign investors hold in the company. Brazilian law is stacked against the acquisition of land by foreigners, and that would seem to limit BrasilAgro's ability to further expand its land development operations. Though I do believe BrasilAgro's land is worth quite a lot, I have serious concerns about the long-term model and the company's virtual "pure play" vulnerability to Brazilian land values. With those risks, I'd prefer the potential offered by other South American ag companies like SLC Agricola (SLCJY.PK) and Adecoagro (AGRO), and perhaps Cresud as well.

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BrasilAgro Has Valuable Land, But An Uncertain Model

Seeking Alpha: Adecoagro - A Solid Operator With Argentina And Ethanol Risks

When I wrote on SLC Agricola (SLCJY.PK) a couple of weeks ago, it was just the first of a handful of Latin American farming names leveraged both to growing international food demand and rising farmland values in Brazil. SLC Agricola is not the only one that looks undervalued, though, as Adecoagro (AGRO) looks even more undervalued than SLC Agricola.

There are reasons for this undervaluation, though. For starters, a substantial percentage of the farmland that Adecoagro owns is located in Argentina - a country undergoing significant economic turbulence and a lot of uncertainty regarding financial/tax rules and regulations. What's more, while about 70% of Adecoagro's 2013 EBITDA is likely to be generated in the more stable country of Brazil, the nature of the business there (sugarcane and ethanol) is volatile in completely different ways.

All told, I believe Adecoagro is significantly cheaper than SLC Agricola, but that at least a portion of that difference has to be viewed as compensation for the significantly different risk profile. Even with some sizable haircuts to valuation, though, I believe Adecoagro shares are worth about $10, or 60% more than today's price. Investors considering Adecoagro need to be aware of the risk that flagging crop prices and rising global rates could significantly slow land value appreciation and/or that ethanol prices could reverse, but risk-tolerant investors may find the balance here still very favorable.

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Adecoagro - A Solid Operator With Argentina And Ethanol Risks

Seeking Alpha: Despite Attractive Market Shares, Rexnord Doesn't Look Too Interesting

More often than you might think, you find situations where there's a meaningful gap between the merits of the company and the merits of that company's stock. Rexnord (RXN) is a significant player in the process/motion control and water infrastructure spaces - two markets that not only have above-average long-term growth prospects, but where Rexnord holds the #1 or #2 market share position in the segments that produce about 85% of its revenue.

Put together market-leading positions, a credible management system/philosophy, and potential rebounds in key end-markets like construction, and I can see solid prospects for the business. The stock, though, doesn't make nearly so much sense to me. Even though the shares are down almost 10% over the past year, robust expectations for margins, cash flow, and/or EBITDA aren't enough to generate a fair value that makes these shares look appealing today.

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Despite Attractive Market Shares, Rexnord Doesn't Look Too Interesting

Investopedia: Wolverine Surpassings Its Marks, But Not Cheap

It's not just well-run athletic shoe companies like Nike (NYSE:NKE) or Adidas (Nasdaq:ADDYY) that can reward shareholders. The shares of companies that fall more into the “lifestyle footwear” category like Brown Shoe (NYSE:BWS) and Wolverine (NYSE:WWW) have also done quite well over the past year, with the later clearly benefiting from the huge scale-up provided by the PLG acquisition. While I'll admit that underestimating Wolverine could be dangerous as it continues to surpass sell-side estimates, it's hard for me to see the value argument for these shares right now.

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Investopedia: Kroger Leverages Its Strength To Get Even Stronger

National supermarket chain Kroger (NYSE:KR) appears to be running off the playbook that says strong companies should leverage that strength to put even more distance between them and their rivals. In buying Harris Teeter (Nasdaq:HTSI), Kroger is not only buying a growing, high-quality grocery chain in the Mid-Atlantic, but also positioning itself to take advantage of even more leverage in purchasing, distribution, and logistics. Provided Kroger doesn't interfere with what made Harris Teeter stand out from the crowd, this looks like a deal with good long-term return prospects.

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Investopedia: Alcoa Running Hard To Go Nowhere

Another quarter is in the books at Alcoa (NYSE:AA), and although I think management continues to do a good job with its downstream operations and rationalizing its upstream cost structure, all of it matters little in the face of persistent price weakness in aluminum. As has been the case for a while now, Aloca looks undervalued on both an EV/EBITDA and NAV basis, but the relentless erosion in aluminum prices makes it difficult to have much faith in those metrics.

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Investopedia: Cemex Looking For U.S. Prices To Get Firmer

There aren't too many commodities more leveraged to construction activity than cement, which is both good and bad news for Cemex (NYSE:CX). A major player in the cement and ready-mix concrete markets in the U.S., Mexico, and Europe, Cemex has been buffeted by the severe downturns in the U.S. and Europe. With a debt restructuring providing more breathing room and a focus on “value over volume” in the U.S., Cemex could have some room to trade higher on optimism about a U.S. housing recovery.

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