Seeking Alpha: Whither Onshore Drilling Activity Goest, Basic Energy Services Will Follow

If large energy service companies like Weatherford (NYSE:WFT) are right about the second quarter of 2015 marking the trough of land rig activity in North America, investors may have already missed their chance to buy service names like Basic Energy Services (NYSE:BAS), Key Energy Services (NYSE:KEG), Superior Energy Services (NYSE:SPN), and C&J Energy Services (NYSE:CJES) at the point of maximum pain.

On the other hand, Basic Energy's exposure to competitive and largely commoditized services (the name "Basic Energy Services" really is a fair representation) in the oil fields means that this stock is highly sensitive to any changes in sentiment around North American onshore activity. As more than one analyst has described it, Basic Energy is the "tip of the whip" and however sentiment goes, Basic Energy's stock will react strongly.

As things sit today, with the shares up almost 75% over the past three months and having doubled off the low in mid-March, I'm not hugely interested in owning the shares. I think there are better bargains in the offshore services space (which admittedly has a very different set of fundamentals and drivers) and perhaps even on the onshore space. That said, sustained evidence of a bottoming/turnaround in the North American market could lead analysts to boost their estimates almost as quickly as they cut them and Basic Energy's stock would likely react dramatically. This isn't my kind of investment/speculation, but more aggressive or short-term oriented investors may see a better opportunity here.

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Whither Onshore Drilling Activity Goest, Basic Energy Services Will Follow

Seeking Alpha: Wright Medical Stumbling Toward Better Days

The share price performance of Wright Medical Group (NASDAQ:WMGI) has continued to languish in the wake of the company's announced intention to merge with Tornier (NASDAQ:TRNX). For what consolation it may bring investors, Wright Medical hasn't been alone here in 2015, as the stocks of other orthopedic players like Stryker (NYSE:SYK), Zimmer (NYSE:ZMH), and Exactech (NASDAQ:EXAC) haven't done particularly well either.

Short-term stock market performance isn't a particularly compelling way to view a stock, but there are other issues that investors need to consider here. While Wright Medical managed to avoid its fourth straight quarterly revenue miss, the company has seen the approval of its Tornier merger delayed by antitrust concerns and the approval of its Augment biologic product delayed by problems with a vendor. Wright Medical remains undervalued on the basis of what it could become in a few years' time, but investors who tend toward the less patient should probably look elsewhere for healthcare investment ideas.

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Wright Medical Stumbling Toward Better Days

Seeking Alpha: Lexicon Undervalued As It Approaches A Major Event

Lexicon Pharmaceuticals (NASDAQ:LXRX) has gone through many odd twists and turns as it has tried to migrate from a provider of drug targets to a developer of experimental compounds. Like most biotechs, Lexicon has had several clinical failures but has moved past those failures to continue developing the more promising candidates in its pipeline. Included among those twists and turns is an unusual ownership structure where an investor group effectively controls the company by virtue of its 60% ownership of the shares.

Adding to the strangeness is that the pipeline candidate that gets the most attention for Lexicon is not necessarily its highest-potential drug. While successful commercialization of sotagliflozin would be a significant event, the odds of the company gaining significant share in the large diabetes market aren't all that favorable. On the other hand, telotristat etiprate gets less attention but could actually be the more valuable drug to Lexicon today. As it stands, I still believe Lexicon offers a good potential return in spite of its high risk.

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Lexicon Undervalued As It Approaches A Major Event

Seeking Alpha: ABB Surprises, But Definitely Not In The Clear Yet

In a quarter where a lot of well-liked multinational industrial conglomerates have disappointed investors, I suppose it is par for the course that ABB (NYSE:ABB), hardly a well-liked name these days, would actually come in with better-than-expected results. To be sure, there were issues with ABB's results that will linger on (particularly with margins), but the company is stepping up its restructuring efforts and may be able to leverage improving conditions in the utility sector.

ABB still looks undervalued, but there are legitimate reasons why ABB looks that way at a time when companies like 3M (NYSE:MMM) and Honeywell (NYSE:HON) are trading closer to full value. ABB has to demonstrate that it can shore up its margins and live up to its own aggressive projections. While the underlying long-term conditions for automation and power are solid, Siemens (OTCPK:SIEGY), Honeywell, General Electric (NYSE:GE) and emerging rivals will give the company no easy path and ABB can ill-afford unforced errors or operational inefficiency.

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ABB Surprises, But Definitely Not In The Clear Yet

Seeking Alpha: BB&T Looking To Leverage Its Strengths In The Quarters Ahead

Whether you like BB&T (NYSE:BBT) as an investment or not, I think even the bears (the rational ones, at least) will acknowledge that BB&T has a well-deserved reputation for excellent cost management, a diversified revenue and fee mix, solid growth-through-acquisition, and an ability to reposition itself as the market demands. Those are all traits that are going to be critically important to the company in the coming quarters, as the bank will be integrating two large acquisitions (and a third deal that's not exactly trivial), repositioning its lending portfolio, and leveraging additional cross-selling opportunties.

How cheap (or not) BB&T is depends on your horizon. In terms of near-term performance (estimated 2015 returns on tangible common equity), BB&T does indeed look expensive relative to some of its peers. Look a few years out, though, and factor in the synergies of acquisitions, higher rates, and a different loan book and I believe that a low-double digit ROE supports a fair value in the low $40's.

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BB&T Looking To Leverage Its Strengths In The Quarters Ahead

Seeking Alpha: BRF Tastes Better Than It Looks

The real reason to own Brazilian poultry and processed food giant BRF (NYSE:BRFS) is for the company's long-term leverage to a shift away from commodity protein toward processed food (think more Hormel (NYSE:HRL)/Oscar Mayer and less Tyson (NYSE:TSN)/Pilgrim's Pride (NASDAQ:PPC)) and its growing emerging market presence out of Brazil. That said, the market is still a quarter-to-quarter weighing machine and BRF posted a confusing set of first quarter results that were better than they may first seem.

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BRF Tastes Better Than It Looks

Seeking Alpha: 3M Still Pricey, But At Least Earning Its Keep

I continue to believe that 3M (NYSE:MMM) is a pricey stock, but an exceptionally well-run industrial. CEO Inge Thulin is starting to build a strong following among analysts and investors and while 3M's performance in the first quarter wasn't without some flaws, I would argue that its performance compares quite well to the industrial sector as a whole.

There's still a lot that 3M can do. The company can afford to add more debt to the balance sheet, particularly in pursuit of acquisitions that offer growth into adjacent markets and can leverage the already-substantial infrastructure in place. I also believe that while margin improvement potential may be limited relative to its peer group, there are still opportunities for 3M to leverage its product portfolio, reap higher prices, and post some improvement in margins. I'm not going to argue that 3M is a bargain at today's price, but there aren't too many U.S.-based industrials that I'd be happier owning today.

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3M Still Pricey, But At Least Earning Its Keep

Seeking Alpha: JPMorgan's Scale Remains Both Its Boon And Bane

Banks don't get much larger, much more complex, or much more central to their ecosystem than JPMorgan Chase (NYSE:JPM). JPMorgan's scale gives it considerable operating advantages, but it comes at the cost of greater regulatory scrutiny and higher capital requirements. While JPMorgan's trading, investment banking, and commercial banking operations are helping it through a weak stretch in consumer banking, the higher capital requirements are going to increase the pressure on management to cut costs, improve returns, and restructure business relationships and failing to execute on these moves will result in disappointing returns for shareholders.

I continue to believe that JPMorgan is the best-run bank in its weight class and still a stock worth owning. I continue to value the company on the basis of returns on equity below what management believes it can achieve, but that nevertheless support a fair value above $67 today. While there are risks of further regulatory and legal challenges to the bank and a more protracted period of lackluster rates, I believe the risk-benefit balance continues to favor owning these shares.

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JPMorgan's Scale Remains Both Its Boon And Bane

Seeking Alpha: EMC Not Exactly Making Its Case

Several large tech players, including Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), and Hewlett-Packard (NYSE:HPQ), have gone through multi-year stretches where their shares underperformed due to persistent concerns about their long-term competitiveness and growth potential. To varying extents these companies have changed the tone around their businesses, but it doesn't automatically follow that EMC (NYSE:EMC) will be able to go that same route. While EMC has managed to do a credible job of keeping itself relevant within its core storage market, there are persistent concerns about whether that market is truly valuable anyway and whether EMC can reposition itself for future growth.

I'm increasingly on the "cautious yes" side of that question. EMC has historically done a good job of buying the pieces it needs to remain at the top of the market, as well as identifying assets like VMware (NYSE:VMW) and RSA that can grow the business. Expectations are not particularly demanding today, but then EMC's performance doesn't call for aggressive projections and there are increasing risks (in my view, at least) that the company will respond to the pressure its under with a larger acquisition.

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EMC Not Exactly Making Its Case

Seeking Alpha: Broadcom Still Undervalued, And With Cards To Play

While it has not kept pace with Cavium (NASDAQ:CAVM) or Avago (NASDAQ:AVGO) over the past year, Broadcom (NASDAQ:BRCM) has still made a good showing with nearly 50% increase in the value of its stock price (considerably better than rivals like Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC), and STMicroelectronics (NYSE:STM)). Better still for today's shareholders, the company has not gone as far as it can with its new focus on sustainable growth and lean operations.

The murky outlook for connectivity isn't going to resolve soon, as it's still unclear if growth in IoT applications like wearables and home automation will offset all but inevitable share loss in mobile handsets. On the other hand, Broadcom's opportunities in the networking space may yet be underestimated, particularly if new product introductions can coax more business out of Cisco (NASDAQ:CSCO). With a fair value in the mid-$40's to low-$50's, Broadcom isn't a striking bargain but still offers enough upside to be worth buying and/or holding.

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Broadcom Still Undervalued, And With Cards To Play

Seeking Alpha: Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Swiss drug and diagnostics giant Roche (OTCQX:RHHBY) is in a challenging position today. On one hand, this remains the preeminent global oncology franchise with three incredible strong mature drugs and a deep pipeline. Roche is also a strong player in several diagnostics markets and has arguably done more than any other drug company to advance the companion diagnostics concept. The other hand is the uncertainty around the cash flow streams - many investors are worried about the prospect of generic competition for those "Big Three" oncology drugs, as well as the risk that Bristol-Myers (NYSE:BMY), Merck (NYSE:MRK), and AstraZeneca (NYSE:AZN) might not only beat Roche to the punch, but preclude the company from being a market share leader in oncology.

For my part, I think the push-pull of the Street has these shares more or less fairly priced. I'm content to own the fairly-priced shares of a great company, and I think Roche is exactly that. What's more, I see more potential to the upside from pipeline successes than downside risk to failures and generic competition. That said, I will once again repeat a complaint I've made multiple times regarding Roche - I'd like to see a stronger pipeline and R&D effort outside of oncology.

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Stronger First Quarter Sales Help Roche, But ASCO Probably Matters More

Seeking Alpha: Ultratech Surprises To The Good, But Not Where Investors Want To See It

Investors can be fickle, and with that I have to wonder whether Ultratech (NASDAQ:UTEK) will hold on to the positive boost in sentiment that the company gained by reporting better earnings for the first quarter. Guidance for the second quarter was not as strong as could have been hoped, and there has been no easing of concerns regarding the company's ability to play a leading role in rapid thermal processing for sub-20nm chips and grab share from Applied Materials (NASDAQ:AMAT), Mattson (NASDAQ:MTSN), and/or Screen Holdings (OTC:DINRY).

Ultratech shares are still not pricing in any particularly significant ramp in sales or profits. That is in spite of real progress in diversifying the company's portfolio and recent growth in the advanced packaging opportunity. Although I cannot really model a scenario where Ultratech is shut out of the sub-20nm rapid thermal processing market and really thrives, progress with advanced packaging does at least provide some backstop. I continue to believe that Ultratech shares can generate double-digit returns from here, but this is a small position for me and I freely acknowledge that this remains much more of an "if" story than a "when".

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Ultratech Surprises To The Good, But Not Where Investors Want To See It

Seeking Alpha: Surprisingly Strong Margins Bode Well For Cameron

Across the energy sector, companies, investors, and analysts are pretty much ensconced in their storm cellars and just waiting to see how bad things get before somebody blows an "all clear". To be sure, the results and industry commentary posted by the likes of Schlumberger (NYSE:SLB) and Halliburton (NYSE:HAL) has been consistent with a sharp pullback in North American onshore activity and a bleak outlook.

But that's not the totality of the story. Both Cameron (NYSE:CAM) and FMC Technologies (NYSE:FTI) reported relatively more positive prospects than expected, with subsea orders holding up better than expected. Although Cameron's drilling and valves segments have seen a sharp fall-off in activity, margins were notably stronger than expected and Cameron's diversified equipment model may help it steer through this downturn better than the Street presently expects.

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Surprisingly Strong Margins Bode Well For Cameron

Seeking Alpha: Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

The market certainly didn't like what it saw and heard from Microsemi's (NASDAQ:MSCC) fiscal second quarter results, as seen in the nearly 10% selloff on Friday. While weakness in the wireless sector is a concern and Microsemi's valuation wasn't exactly undemanding, I think this may be shaping up as a buy-the-dip opportunity for investors looking for good below-the-radar GARP stories in semiconductors.

Microsemi is looking to make significant content inroads in commercial aerospace and satellites, while continuing to benefit from a strong position in defense and a growing presence in FPGA. Add in the potential to leverage its timing expertise into the auto and industrial automation verticals, and there is worthwhile long-term potential here. I've changed little in my model after this quarter, and my fair value remains in the mid-$30's.

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Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

Seeking Alpha: Weatherford Still Pinning Its Hopes On Better Performance

Say this much for Weatherford (NYSE:WFT) - expectations had gotten tamped down enough that the stock has actually managed to outperform peers like Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), and Baker Hughes (NYSE:BHI) since my last piece. Of course, stretch that comparison out over time, and Weatherford emerges as a notable laggard. This underperformance was well-deserved, as the company consistently posted underwhelming performance from a business that was pretty much structurally incapable of doing well (by virtue of being more focused on more competitive and/or lower value-added segments).

This was supposed to be a new beginning for a leaner, better-focused Weatherford, but then the North American onshore market had its legs swept out from under it by a sudden and significant drop in oil prices. So here we are, looking at first quarter earnings, where Weatherford once again missed, and contemplating the future. I continue to believe that the company is undervalued, even if it takes until 2018 for profits to recover to last year's level, and I believe that ignores the potential upside of a business that may be more stable than believed, and better able to grow when oil prices and activity levels recover.

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Weatherford Still Pinning Its Hopes On Better Performance

Seeking Alpha: Skepticism Can Still Benefit Aspen Insurance Shareholders

Aspen Insurance (NYSE:AHL) continues to look like an opportunity within the insurance sector for a management team to drive better-than-expected results and positive re-ratings on the shares. More than a few sell-side analysts remain convinced that Aspen is going to see slower-than-expected premium growth (due largely to price pressure), higher losses, and lower than expected investment income. For its part, Aspen management believes that it is approaching a point of significant operating leverage for the insurance business and that a focus on more specialized segments within reinsurance can preserve pricing.

These shares are up about 10% from my last update on the company, and I believe they can go higher from here. I'm still not quite as bullish as management on its long-term ROE potential, but I don't think a low-to-mid $50's fair value is unreasonable today and if management can outperform the ultimate value will be higher. I'd also note that while Aspen management has been consistent regarding its views of Aspen's ability to gain share in the market and generate stronger than expected ROEs, the current move toward more M&A in the insurance sector could have suitors approaching the company once again.

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Skepticism Can Still Benefit Aspen Insurance Shareholders

Seeking Alpha: ACE Limited Earns Its Premium, But Excess Capital Weighs On Returns

P&C insurance company ACE Limited (NYSE:ACE) is another of those examples of the sometimes-frustrating difference between a company and a stock. As a company, I think anybody who follows insurance will appreciate and admire how ACE limited runs itself. As a stock, though, the shares didn't look cheap a year ago and they still don't look all that cheap today. While ACE arguably still merits a place in a long-term portfolio and has ample capital with which to build the business, it's hard for me to work up a lot of enthusiasm for buying shares today.

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ACE Limited Earns Its Premium, But Excess Capital Weighs On Returns

Seeking Alpha: GOME Getting Its Due

It took a little longer than I'd expected, but China's GOME Electrical Appliances (OTCPK:GMELY) (0493.HK) has finally seen the market come around and recognize the progress that the company has made in repositioning itself as a competitive electronics retailer for the changing Chinese marketplace. These shares have jumped more than 50% from my last update (and are up about 40% from when I named them a Top Idea) and now stand more or less at my fair value. While I think there are still good days ahead for this retailer, I don't see the unreasonable discount to fair value that gets my attention as an investor.

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GOME Getting Its Due

Seeking Alpha: After A Good Run, It's "À Bientôt" For Quebecor

Canadian (or more accurately, French-Canadian) communications company Quebecor (OTCPK:QBCRF)(QBR-B.TO) has been a pretty solid pick for me over the past fourteen months or so, as the shares have risen about 40% from my initial recommendation and 20% from my last update on the company. Now, though, the shares are trading close to fair value and I'm not convinced there's enough reward in play for the risk at hand. Whether the company plans to go forward with a national wireless development plan, whether it buys out Caisse's 25% stake in Quebecor Media, and how the company allocates capital within its existing operations all are sizable unknowns that stack up pretty evenly with the prospects of better wireless performance within Quebec.

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After A Good Run, It's "À Bientôt" For Quebecor

Seeking Alpha: Cosan Is Complex, But Built To Win

The last year has been a bad one for Cosan Ltd (NYSE:CZZ). Despite strong positions in sugar, ethanol, fuel distribution, and logistics, a struggling Brazilian economy, a weaker Brazilian currency, lumpy results, and ongoing uncertainty over the complexity of the corporate structure has taken a toll on the shares. Down more than 40% over the past year (and since my last article on the company), Cosan seems unfairly maligned and overly discounted, but this will likely never be a stock suitable for investors who can't handle risk and volatility.

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Cosan Is Complex, But Built To Win