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Showing posts from January, 2011

The New Met Coal Powerhouse

Rumors that began circulating prior to the close on Friday were finally confirmed Saturday afternoon that Alpha Natural Resources (ANR) had an agreement to purchase Massey Energy (MEE) for $69.33 a share based on Fridays closing price for ANR. This deal comes as little surprise to anybody in the market following the turbulent 2010 MEE faced after the Upper Big Branch explosion back in April. Then more recently, the company placed itself on the auction block after its long time CEO departed and ANR has been speculated as the top candidate for a merger.

The combined companies will become the 3rd largest metallurgical (met) coal miner in the world. Met coal is the coal needed by China and other BRIC nations to produce steel for the massive infrastructure projects they all have under way......

See complete article at Seeking Alpha.

Thank You Verizon! Terremark Gets $19 Offer

After the close last night, Verizon Communications (VZ) agree to buyout Terremark WorldWide (TMRK) for $19. The stock closed just above $14 yesterday providing for a 35% pop today.

TMRK was one of the larger holdings in the Opportunistic portfolios so that initially gave those portfolios a nice pop today. Unfortunately the market has become overly worried about a little disturbances in Egypt and the market has sold off since the opening. Did we learn anything from Greece?

The main reason we're excited about this offer from Verizon is that TMRK was on the list of stocks to sell. TMRK has had a huge gain over the last year due to its cloud offerings and growth. Unfortunately though they continue to borrow money to open new centers and lack actual profits. Considering the path to profits leads us to at least 2012, this investment had become extremely risky.

Its interesting that VZ claims the deal will have no impact on earnings in 2011. Possibly TMRK is so small that any impact will …

Lihua International Announces Big $15M Share Repurchase Program

After the markets closed today, Lihua International (LIWA) announced the approval of a $15M share repurchase program. This program equals roughly 5% of the outstanding shares. at current prices around $10.

While not a big fan of small growth companies engaging in such uses of cash when they could potentially use the cash for further expansion, it might be prudent in this case to at least implement the program. Especially considering the numerous fraud allegations lodged at LIWA. One way to take advantage of such claims that have pushed the stock down from $12 to $10 is to buy the shares on the cheap.

The company only has a forward PE of 5.7 so its definitely an accretive time to purchase shares. Once the stock gets back into the $14-15 range I'd hope that they just conserve cash for the next fraud allegation.

If the company is a fraud, they wouldn't have the cash for such a transaction.

Remember that $15M is relatively small for them. They expect to earn $40M in 2010 and end 2…

Intel Ups Net Payout Yield to Attractive Level

Yesterday, Intel (INTC) upped its dividend to 72.48 cents (ok, what's up with the fractional cents?). This brings the dividend yield up to a very respectable 3.4%.


Yet the dividend alone wouldn't make Intel a Net Payout Yield favorite. INTC also announced a $10B increase in the share repurchase plan, which increases the overall outstanding buyback to a whopping $14.2B. 


See the rest of the article at Seeking Alpha.


Subscribe to the Net Payout Yield Portfolio at Covestor - Net Payout Yields


Disclosure: Long AAPL, CSCO, TXN, ACN. No position in INTC. 

Did F5 Networks Management Sandbag Guidance?

After Wednesday's close, F5 Networks (FFIV) reported Q1 2011 numbers that easily beat their previous estimate of $0.81 by a large $0.07. The $0.88 number also surpassed the estimates of analyst who on average forecast $0.83.

The revenue number wasn't as robust, barely making the top end of the range and missing analyst estimates. With the stock plunging after hours, investors appear to either be placing too much emphasis on the revenue numbers or focusing on the Q2 guidance. Below are the numbers reported for Q1 and the guidance for Q1 provided in the Q4 report. 


See the full article at Seeking Alpha



Stat of the Day: German Investor Sentiment Soars

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So much for the government debt issue in Europe keeping the Germans down. Earlier this morning, Germany reported a huge jump in investor sentiment. The index jumped over 15 and was much better then the expected 6.8 points.

Though expectations for exports are slightly weaker in 2011, the private sector is expected to grow nicely. In reality, a jump in investor sentiment shouldn't be that surprising with the DAX jumping all the way back to 2008 highs. The market is booming yet analysts estimates still appear constrained and out of tune with the facts.

Whats amazing is that the US markets such as the SP500 remain nearly 300 points below its all time high back in October 2007. Will the US eventually catch up?

Via CNBC:


The Mannheim-based ZEW think tank said on Tuesday its monthly index jumped to 15.4 points from 4.3 in December. KEY DATA GERMANY JAN DEC economic sentiment 15.4 4.3 current conditions 82.8 82.6 Economists had expected the economic sentiment reading to rise to 6.8 points,…

Expecting Australian Coal Mines to Remain Under Water for Months

he recent floods in the state of Queensland in Australia have ravaged the operations of coal mines, specifically those that mine coking coal. Queensland produces roughly 90% of the coking coal in Australia, so that's a huge impact to the global trade of this commodity. According to this report from Mining Weeklysome of the flooded mines, especially open pit mines, could be off line for up to 6 months. It's still early in the process, but it'll be interesting to see how this will play out on demand and pricing.
See the rest of the article at Seeking Alpha.

Chinese Reverse Mergers Debate

Interesting debate on Chinese Reverse Mergers between Herb Greenberg and David Gentry, president and CEO of RedChip Companies. Its interesting because of my investments in Puda Coal (PUDA) and Liwa International (LIWA) that fall into this category though they appear to be of the higher quality. The Chinese reverse merger sector is just as scary as any microcap US stock. They've got issues, but it doesn't appear to be as widespread as Herb suggests.

Regardless, the investment total in my models has been kept low via diversification which is always the key when investing in small companies in the first place whether China based or not. The US isn't that much better then China regardless of what people think.

Interesting theater so its worth watching..... Have to agree with the guy from RedChip that Herb is focusing on the wrong stuff and not the hard facts. Has he been to China to view the factories or not? Claiming all reverse mergers are fraud is just a horrible generaliza…

The Brighter Side of Sears Holdings

Sears Holdings (SHLD) via its Sears and K-Mart retail stores is regularly bashed in the media for declining stores and a negative future. Luckily for investors though, spending on stores isn't always meaningful to the bottom line. Sure it would drive the top line, but would all those costs to improve stores really be covered on the bottom line?

Today SHLD reported that Q4 results would easily surpass the expectations of analysts. Q4 won't end until Jan 29th so the period still has roughly 3 weeks remaining, but SHLD is confident enough to guide to between $3.39 and $4.12 per share compared to analysts in the low $3 range. The number though will be just flat versus last year so no real improvement on that front.

The key to SHLD is that it still isn't a retail play. It always has and always will remain an asset play. The company will end the quarter with roughly $1.1B in net cash plus approximately $8.3B in inventories. Remember the market cap is only $8.2B and this doesn…

Investment Report - January 2011: Net Payout Yields

This article focuses on the Net Payout Yields Model offered via Covestor.com where investors can subscribe to the trading data of Mark Holder. 


The Net Payout Yields model recently started up and spent most of November and the early part of December allocating cash in the model. The model is now basically fully invested and will typically remain that way. The goal of the model is not to time the market or follow economic conditions, but rather to invest in companies with the highest Net Payout Yields (buybacks + dividends).

The model struggled over the last couple of months of 2010. Hard to tell whether it was investors cashing out of dividend stocks fearing a tax increase in 2011 or large cap stocks with market caps above $10B struggling to keep up with a surging market.

For December, the model returned 6.08% though the relative performance was disappointing considering the 6.53% gain of the SP500.

The largest weightings are now CSX Cosp (CSX), Walt Disney (DIS), Home Depot (HD), Wel…

Investment Report - January 2011

This report focuses solely on the Opportunistic Levered Portfolio, but contains general information that relates to all of the Opportunistic models. The investment returns relate to subscription data available at Covestor.com. 

December was another excellent month for the Opportunistic Arbitrage model as the streak of months exceeding 9% gains extended to 4. The model was up 10.92% versus 6.53% or a active return of 4.39%. Not bad, but not as much relative performance as hoped for in this risky model.

Despite the strong market in December with the SP500 up over 6% on a relatively straight line up, this model faced a very volatile time period with numerous big winners and several stocks that actually saw 5%+ declines. When investing in small and mid cap stocks one has to be cognizant that these stocks can be very volatile on a daily, weekly, and even monthly basis. As one wise investor once said, its better to make a volatile 15% then a straight line 12%. In the end, investors are bett…

BlackRock Sees Coal Stocks Doubling

BlackRock's Daniel Rice told Bloomberg that he could see coal stocks doubling with oil and gas companies lifting only 25 to 30%. Interesting comments because even though we're bullish on coal stocks some of the bargains are in the natural gas and oil service space.

Rice has been very successful over the last decade so maybe we should continue to follow him with our overexposure to coal stocks such as Massey Energy (MEE), Alpha Natural Resources (ANR), and Puda Coal (PUDA).

He does make some interesting points about remaining bullish on energy stocks unless oil surges above $120. Hard to tell if that will be the tipping point as consumers have already tasted that level of oil in the past and since made adjustments, but regardless demand will start to drop when oil rockets above $100. Nobody really knows the tipping point though. Just have to remain on guard.

Rice's largest holding is Massey Energy so he appears to share the same opinion as Stone Fox on that stock. He sees A…