Showing posts from April, 2013

IB Net Payout Yields Model

What Has Investors so Excited Over Angie's List?

For the second consecutive earnings report the stock of Angie’s List (NASDAQ: ANGI ) has soared over 30%. Is this due to irrational exuberance or a change of fundamentals at the company? Angie’s List provides a web service that allows paid users the opportunity to find service providers recommended by the community. The company now has nearly 2 million users and spends a large percentage of revenue on sales more » Disclosure: No position mentioned. Please review the disclaimer page for more details. 

The Positive Beat Continues for the Airlines

Only a month ago this article theorized that airlines might finally be investable. Fortunately both Delta Airlines (NYSE: DAL ) and US Airways Group (NYSE: LCC ) obliged the theory by reporting strong Q1 earnings. A quarter that is typically the weakest actually turned solidly profitable for two of the market leaders. In fact, Delta claimed the highest profit in over a decade. Unless new competition comes out of left field or more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Vodafone Might Collect As Much As $130 Billion From Verizon Wireless

The rumors are always ripe in the Verizon Wireless saga between 55% owner Verizon ( VZ ) and 45% owner Vodafone ( VOD ) . The news has gone from a Verizon buyout of Vodafone's share to buying all of Vodafone and now back to buying out Vodafone's share. The latest news leak is that Verizon has hired advisors for a bid of $100B for the Verizon Wireless stake. Could Vodafone with a $150B market cap really receive a $100B payout on its 45% stake? Actually the data suggests the value will be 20-30% higher. Read the full article at Seeking Alpha. Disclosure: Long VOD. Please review the disclaimer page for more details. 

Yelp: Future King Of Content

While performing research for an article on Netflix ( NFLX ) , the constant discussion on original content made me wonder about other content generators. Especially when considering the massive valuations of entertainment content companies. As an example, nonfiction content creator Discovery Communications ( DISCA ) has a market value of $28B and The Walt Disney Corporation ( DIS ) is worth $111B. Is it possible for user generated content to ever create companies of that size? All of those firms are vastly different from a focus of distributing content in the case of Netflix to the creating content for a vast network of cable channels at Discovery to creating films and TV shows at Disney. In general, all of the companies are involved in the creation and distribution of entertainment content that has historically had significant value creation. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more deta

Reversion To The Mean With 3 Tech Earnings

After the close on Wednesday several technology firms reported earnings with vastly different stock reactions. In the tech world, earnings season tends to be a moment of wild swings. The stock reaction can be nothing more than expectations getting out of hand and investors turning too bearish or the result of a shift in the business fundamentals. Either way, the moves highlight the problems with investors getting too bullish or bearish as most stocks tend to eventually revert to the mean average. In the after hours action, investors got a prime example of what happens when a market leader makes a move in one direction. The likelihood exists that the stock will revert to the mean eventually and no better time exists than an earnings report. This exact scenario occurred in the earnings reports for Akamai Technologies ( AKAM ) , Equinix, Inc. ( EQIX ) , and Fusion-io, Inc. ( FIO ) on Wednesday night. Read the full article at Seeking Alpha. Disclosure: No positions men

Chesapeake Energy: Biggest Beneficiary Of Higher Natural Gas Prices

As natural gas prices soar this year, Chesapeake Energy ( CHK ) is likely the biggest beneficiary. The heavily indebted, asset rich firm will make out like a bandit if natural gas prices triple as Jeremy Grantham suggested earlier this month. As Chesapeake was its own worst enemy with an aggressive land acquisition and drilling plan over the last decade, the company might become its own best friend with a scaled back capital spending plan. After a decade of rapid growth, Chesapeake turned into the largest independent producer of natural gas and a leading landholder in the vast majority of the important shale areas. The company has a leasehold on 15M net acres and has a reserve base of nearly 20 Tcfe. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Good News From Apple

While the stock has been very volatile today, the news on the new capital program was very bullish. The news on the earnings front were mostly inline with the recent expectations from the market. The massive new capital return program blows away any previous programs in the markets. Apple (AAPL) announced plans to utilize around $100B of cash in the program by the end of calendar 2015. A plan that we suggested the company implement just a few days ago (see Apple: Time To Unleash A Massive Buyback Program ). The details include approving a 15% increase in the quarterly dividend to $3.05. The increase jumps the dividend up to 3%. The company will now spend $11B on these annual payments. The biggest move though was the increase in the repurchase authorization to $60B from $10B. Now the question is whether the company will make a substantial initial splurge with the stock trading around $400 or if it needs to borrow cash in the short-term to avoid paying any taxes on repatriating f

As Natural Gas Inventories Plunge, Investors Should Buy Oil Service Stocks

Based on the limited positive reaction of natural gas and coal stocks, the market continues to ignore the very bullish natural gas weekly inventory reports . In fact, the reports are now mostly glazed over in the financial media. For those that missed the report last week, the weekly inventories for the first full week of April dropped 14 Bcf. While less than the 21 Bcf expected drop, the small decline more » Disclosure: Long CJES & HEK. Please review the disclaimer page for more details. 

Not Impressed With the CSX Buyback Plan

The purpose of a stock buyback plan should be to utilize excess cash to buy a significantly undervalued asset. In this case, the undervalued asset is the stock of the company involved. In order to even announce a buyback, the stock should be significantly cheap on a historical basis and future earnings expectations. For the stock to be significantly cheap, the company should be in a position that existing cash more » Disclosure: Long CSX. Please review the disclaimer page for more details. 

Delta To Profit From Mergers

While  Delta Air Lines ( DAL )  is set to become the world's 3rd largest airline when  U.S. Airways Corp. ( LCC )  and  AMR Corp ( AAMRQ.PK ) complete a merger later this year, the company could be set to profit the most from a slew of airlines mergers. In essence the domestic airlines market will become a three-headed monster with  United Continental Holdings ( UAL )  also competing for the top spot. Delta Airlines has already integrated a major merger with Northwest Airlines and stands to benefit from the other two market leaders struggling to complete the integrations of major mergers. United Airlines and Continental Airlines are still working through integration issues from a merger finalized already. In addition, Delta is working to finalize the purchase of Pinnacle Airlines out of bankruptcy. The deal has several plans that reduces costs and increases the focus on profitable routes which is refreshing for this industry. All of these mergers will benefit the industry, bu

Is The Coal Supercycle Back?

After reading the quarterly report for Peabody Energy ( BTU ), one has to wonder if the coal supercycle is back. A few years back the CEO proclaimed that coal had begun a long-term surge in demand yet the stock began a major slump as new mines and higher costs caused profits to plummet. As US investors remain focused on last year's domestic switch to natural gas from thermal coal, the global demand for coal remains as strong as ever. One major theme highlights the global demand picture for coal. Where alternative fuel prices are cheap, consumers prefer that source whether natural gas, nuclear, or alternative fuels. In the cases where alternatives don't exist or are no longer deemed appealing, coal demand is set to grow dramatically. The situation in the US is incorrectly framed as a preference for a cleaner alternative to coal, but the scenario might see a dramatic shift as natural gas prices soar in 2013. Read the full article at Seeking Alpha. Disclosu

Silver Bay Stock Distribution Helps, But Not Enough To Buy

Next week, Two Harbors Investment Corp ( TWO ) is expected to distribute its remaining shares of Silver Bay Realty Trust ( SBY ) to shareholders via a special dividend. Two Harbors holds 17,824,647 shares or around 45% of the outstanding shares of Silver Bay Realty. While this move was expected after the IPO back in December, the doubling of the public float is the next step making Silver Bay Realty an investable REIT. The company plans to acquire, renovate, lease, and maintain a portfolio of single-family homes in select attractive markets in the U.S. It plans to operate under a REIT where substantially all of future income is returned to shareholders. While Silver Bay still sees favorable trends for purchasing single-family rental houses, some news suggests that the onslaught of private equity money in major markets might be placing pressure on rental rates. As the company moves to invest and stabilize the purchased homes, the abundance of competition to an unprov

More Details On Teens Abandoning Facebook

Right Mix Marketing provided the below infographic that highlights the move of teens to new social networks. The damaging part to the Facebook valuation is the concept that parents have joined the social network in order to track teens. In essence, not only does this push the teens to another service, but it also suggests the parents aren't solid users either. This news fits our thesis that Facebook will have a very difficult time justifying the $61B valuation. Clearly it is a valuable social network that will maintain millions if not billions of users for a long time. The company can grow revenue while losing North American users as it becomes more efficient. The problem over the next few years is that the domestic user base could be much smaller and those are the users that are worth the most. In our opinion, it doesn't justify the current $61B valuation. Even at $20B, Facebook would be one of the largest companies in the world and trade at 3x revenue. Disclos

Apple: Time To Unleash A Massive Buyback Program

With the stock price plummeting to 52-week lows, Apple ( AAPL ) should immediately unleash a massive buyback plan. A plan with the size and scope that it materially reduces the shares outstanding and provides support for the stock. Clearly signs exist that the company has exited the massive growth phase of the last decade with a load of competitors constantly attempting to undercut the price and performance of its smartphone and tablet products. Apple though isn't entering a feared phase of flat stock performance similar to the often compared decade of disappear at Microsoft ( MSFT ) . Investors continue to miss the drastic difference between the valuation prospects of both stocks at those starting points. As highlighted a month ago (see Apple s Cash Balances Approaching $150B ), Apple needs to adopt a material plan to absorb the constant cash inflows. The recent success of the buyback program of Yahoo! ( YHOO ) should energize a market that typically frowns on buyba

Limited Progress At Yahoo

After the market close on Tuesday, Yahoo! ( YHOO ) reported Q1 2013 results that provided limited progress at growing the business. The company has been busy updating main products such as the home page and mail yet it hasn't led to expanded revenue, adjusted EBITDA, or operating income. The consumer internet company continues to struggle in attracting the current generation of internet users focused on social media and attached to Google ( GOOG ) search. Yahoo! though has been able to dramatically increase the earnings per share based partially on the share buyback program and the exclusion of stock based compensation (SBC). Oddly the SBC number wasn't excluded in prior periods unlike other technology stocks. The company shared that engagements had increased on updated products, but clearly those numbers aren't flowing to the top or bottom lines. Read the full article at Seeking Alpha. Disclosure: No position mentioned. Please review the disclaim

All The Ducks Are Lining Up For Weatherford

As earnings for Q113 start up, one of the most intriguing stocks remains Weatherford International ( WFT ) . The company has infamously failed to accurately remediate federal income taxes for several years now. Even as Weatherford reported record revenues for Q412, earnings failed to match the previous years. The company also incredibly recorded an effective tax rate for the quarter of an amazing 92% to cap off a string of disappointing results. The company is a multi-national oilfield services firm with a large international presence operating in over 100 countries. For 2012, international revenue accounted for 58% of total revenue. Notably it also focuses more on liquids production in North America. With domestic natural gas prices surging, all oil services firms will benefit though Halliburton ( HAL ) and Baker Hughes ( BHI ) are the most focused on domestic gas. Weatherford is a play on that rebound as domestic pricing will improve, but in addition the stock will

Top 10 Net Payout Yield Stocks For 2013

This article is a continuation of a monthly series highlighting the top net payout yield stocks that was started back in June, 2012 (see article ). The series highlights the best stocks for the upcoming month. Please review the original article for more information on the net payout yield concept. March Returns Below are two charts highlighting the monthly returns of the top ten stocks from March (see list here ). Due to limitations with YCharts, the chart was broken into the Top 5 and Next 5 lists. The Top 5 stocks had a huge month after a weak February. Seagate Technology ( STX ) and DirecTV ( DTV ) had huge gains in March that easily offset the substantial 5% losses in February. DirecTV had a smashing 17.5% gain followed by 13.7% for Seagate. WellPoint ( WLP ) followed the February loss as well, with a 6.5% gain in March. Both Motorola Solutions ( MSI ) and Kohl's ( KSS ) also had small gains, though smaller than the 3.8% gain of the S&P 500. Read the ful

2 Major Catalysts For Nuance: Carl Icahn And Voice Ads

Anybody following previous articles on Nuance Communications, Inc. ( NUAN ) knows that the company and stock have been incredibly appealing, yet the scenario never existed to load up on the stock. The company has had a decent growth profile and it has compelling technology, yet the combination hasn't lead to stock returns over the last 18 months due an over reliance on mergers and the accumulation of debt. The company is a leading provider of voice and language solutions for businesses and consumers around the world. Its technologies, applications, and services make the user experience more compelling by transforming the way people interact with devices and systems. Nuance is famous for being the technology behind the Siri product used by Apple ( AAPL ) , which recently hit 52-week lows. Ironically within the same day reports of two potential catalysts hit the wires that could push the stock higher. Read the full article at Seeking Alpha. Disclosure: Long A

Invest In The Surging Buybacks Of American Capital

Another quarter and another major buyback by American Capital, Ltd ( ACAS ). The company announced it has now repurchased 61.4M shares since shifting from paying dividends back in Q3 2011. The total buyback has amounted to $623M over the last 7 quarters at an average discount to a continuously soaring NAV of nearly 40%. Nonetheless, the stock continues to trade at a substantial discount even after demonstrating to the market every quarter that it has the financial ability to spend that much cash. American Capital is a private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital manages $18.6 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $117 billion of total assets under manageme

Has Body Central Finally Hit Bottom?

Don't look now, but Body Central (BODY) appears to have hit bottom. After the huge plunge last Spring, the stock has spent the last 7-8 months flat lining. Now for the first time since a false attempt in September, the stock has moved above the 20/50EMAs. Have the fundamentals really changed? Analysts have cut the Q113 earnings estimates from $0.34 90 days ago to only $0.18 now. The stock is signaling a potential change in the air. With the 52-wk high at $30.93, BODY could be a sweet gainer if the turnaround is complete. Just not convinced it is in the bag yet. Disclaimer: No positions mentioned. Please review the disclaimer page for more details. 

Document Security Systems Setting Up For Huge Gains?

After our last writing about Document Security Systems, Inc ( DSS ) in late December, the stock dropped to new lows at $2. Considering the shift of the patent case to California, it isn't too surprising that the stock has limped along. The previous documented success of VirnetX Holding Corp ( VHC ) and Vringo Inc. ( VRNG ) only occurred after those stocks had initial progress in their patent cases. DSS is a leading developer and integrator of cloud computing data security, Radio Frequency Identification (RFID) systems and security printing technologies that prevent counterfeiting and brand fraud. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Prospect Capital: Buy This 12% Yielder With Record Orginations

After the trading week closed on Thursday, March 28, Prospect Capital Corporation ( PSEC ) made a surprising announcement that the company had originated a record $800 million during the March quarter. The surprise comes after the company claimed in early February that the originations for Q1 were a mediocre $141 million almost halfway into the quarter. The market didn't actually expect much following the year-end push to exit businesses to beat the tax deadline. Prospect Capital is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. It trades as a closed-end investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940. The origination pace, while bullish, does bring into play a previous concern about another equity raise, as a surge in deals were the only reason equity would be needed. C

3 Stocks to Exit Soon With Plunging Net Payout Yields

With dividends and high yields in vogue these days, investors need to be careful that they don’t overpay for these stocks. Some of the stocks have performed so well over the last couple of quarters that their share prices have surged 30-50% during that time period, which is odd for multi-billion dollar consumer goods and insurance stocks. This issue faces the investors in Campbell Soup (NYSE: CPB ) , Chubb (NYSE: CB   more » ) Disclosure: Long CB and TRV. Please review the disclaimer page for more details. 

Cash Flowing with Ocwen Financial

The mortgage servicing business has become a very profitable business since the financial crisis as large banks have sold the rights to smaller, focused firms such as Ocwen Financial (NYSE: OCN ) . The ongoing trend of banks selling off non-core servicing assets is expected to continue as many large and some regional banks see the servicing of delinquent loans as harmful to the banks consumer franchise--not to mention the fact that more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

CenturyLink To Fill The February Gap Caused By The Dividend Cut

As investors might remember, back in mid-February CenturyLink, Inc. ( CTL ) did the unthinkable at the time. The company slashed the dividend in order to better allocate cash and implement a more flexible stock buyback plan (see Did CenturyLink Just Become A Gold Mine To New Investors? ). The mega-cap stock plunged 26%, which is unheard of for a stock that still maintains a market cap of $22B. As cooler heads prevailed, the third largest telecommunications provider in the U.S. has rebounded sharply from the initial lows below $32. At the current price over $35, savvy investors have already made 10% from those first day lows. Read the full article at Seeking Alpha. Disclaimer: No positions mentioned. Please review the disclaimer page for more details. 

ExOne Reports Huge Growth As Expected

With a 47% gain on the first trading day of an IPO, it's difficult for any stock to gain in the after market. Industrial 3D printer ExOne Company ( XONE ) is attempting to be the rare exception after impressing investors with strong guidance for 2013. The stock surged nearly 10% in trading on Thursday following the announcement. The company that focuses on manufacturing and selling 3D printing machines for industrial customers only sold 8 machines for the quarter making it difficult to develop a long-term investment thesis. Due to the late date of the IPO, the company is just now reporting the Q4 numbers at the very end of Q1. With the quarter virtually over, the 2013 guidance should be very solid at least for the first half of the year. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Should Investors Stick with Adobe While Insiders Are Fleeing?

Last week, Adobe Systems (NASDAQ: ADBE ) reported earnings that easily surpassed estimates, sending the stock to new highs . So why are insiders selling shares at alarming rates while the CTO is exiting stage left? The company is in the middle of a dramatic shift from graphic designed package software to cloud based software as a service (SaaS). The transition from licensed software to subscription services via Creative Cloud for popular more » Disclosure: Long AAPL. Please review the disclaimer page for more details.