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Showing posts from February, 2016

IB Net Payout Yields Model

Windstream: Low Margin Of Safety

Windstream reported mixed Q4 results, but the stock rallied as cash flows continue to cover the large dividend. The telecom provider made several capital return moves suggestive of an oversold stock. Ultimately, the stock offers a limited margin of safety with the current balance sheet. In my  last article , I highlighted how Windstream Holdings (NASDAQ: WIN ) offered a large dividend backed up by solid free cash flow. The biggest concern with buying the stock was whether the market could handle the mounting losses reported by the telecom provider.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Buy Baidu: Unquestioned Value

Baidu soared on solid Q4 results and guidance for Q1. The Chinese Internet search giant will benefit from multiple efforts to remove costs from the financials. The recommendation is to own Baidu as operating margins rebound going forward. Despite obvious value, Baidu (NASDAQ: BIDU ) traded near its lows over the last few months. The fears over the Chinese economy have overshadowed the company's incredible growth rates and the shift in the economy towards services and domestic consumption that benefits Internet-based businesses.  Read the full article on Seeking Alpha.  Disclosure: Long BIDU. Please read the disclaimer page for more details.

Williams: More Problems Could Lead To Ultimate Opportunity

More questions swirl about the ETE and Williams deal. A termination fee paid to Williams would quickly shore up dividend coverage and funding requirements of the next year or more. Based on the news, Williams is a stock to avoid unless more details emerge suggesting a termination fee is actually forthcoming that would provide an opportunity for the company. Despite a market rally on Thursday,  Williams Cos. (NYSE: WMB )  traded down over 3% on a couple of headlines that reinforce the risk surrounding the stock. My  previous questions regarding the risk in the stock are only magnified now. Read the full article on Seeking Alpha.  Disclosure: No postions mentioned. Please read the disclaimer page for more details.

Sprouts Farmers Market: Don't Chase Now

Sprouts Farmers Market crushed Q4 estimates while the stock ironically traded towards the post-IPO lows. The company benefits from a focus on affordable produce and reasonable margins to drive traffic growth. The stock is recommended long-term holding, but investors shouldn't chase the stock higher at the current levels. Over the last six months, I encouraged investors on multiple occasions to not view  Sprouts Farmers Market (NASDAQ: SFM )  so negatively ( here  and  here ). Outside of the flash crash, the stock traded down to $20 on two occasions providing attractive entry points.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Lowe's: Solid Numbers But Red Flags Abound - Avoid

Lowe's generated substantial comp sales growth during Q4 due to warm weather over the holidays. The purchase of RONA, subsequent exit of an Australian business, and reduced stock buybacks are all warning signs. The recommendation remains to avoid the richly priced home improvement retailer benefiting abnormally strong comp sales growth. Despite generally positive  Q4 earnings ,  Lowe's (NYSE: LOW )  traded mostly tepid for the next couple of days. Even with the ongoing positive results, the stock is struggling per my  prior warning .  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Glu Mobile: Celebrity Annuity

Glu Mobile has a big plan for celebrity games. The original revenue targets appear farfetched, but the social followers and mega stars might provide more staying power than market expectations. The stock remains amazingly cheap, considering another hit celebrity game and plenty of catalysts throughout this year. With the initial success of another celebrity game, Glu Mobile (NASDAQ: GLUU ) investors can finally start viewing the possibility of a long revenue stream from celebrities. Going over 18 months without a successful celebrity-based game launch since the original  Kim Kardashian: Hollywood  made it impossible for the market to embrace Glu's vision. The stock paid the price, trading below $2 recently.  Read the full article on Seeking Alpha.  Disclosure: Long GLUU. Please read the disclaimer page for more details.

Undervalued And Major Catalysts Make Macy's A Core Portfolio Position

Macy's easily surpassed reduced Q4 results due to a snapback in sales from cold weather in January. Even after the recent rally, the stock trades far below the intrinsic value of the real estate assets and a profitable retail operation. With several catalysts in 2016 and beyond such as the new store concepts and capital returns, the stock is a core position in a value portfolio. The  final Q4 results  for  Macy's (NYSE: M )  indicates that weather truly impacted the apparel business over the holidays. The limited cold weather in the prime Northeast stores prior to the holidays was highly harmful to results.  Read the full article on Seeing Alpha.  Disclosure: Long M. Please read the disclaimer page for more details.

Motorola Solutions: Don't Ignore Stock Buybacks

Motorola Solutions easily smashed EPS estimate for Q4. The tech company returned $3.5 billion to shareholders last year due to large stock buybacks including a Dutch auction. With the ramping EPS estimates, the stock is a recommended buy. After a  post-earnings  rally, Motorola Solutions (NYSE: MSI ) is one of the few tech stocks trading near multi-year highs. The stock benefits from large stock buybacks the market typically discounts.  Read the full article onSeeking Alpha.  Disclosure: Long MSI. Please read the disclaimer page for more details.

Fitbit: Are Signs Finally Pointing Up?

Fitbit easily smashed Q4 estimates due to a strong holiday season. The weak Q1 guidance is a mixed blessing by adding to worries over the fad nature of the business and providing a lower entry point. The valuation in the stock is finally compelling with the market no longer having any expectations from the company. Despite the strong holiday sales, Fitbit (NYSE: FIT ) trades near post-IPO lows due to the self-inflicted wounds and market fears  highlighted  in my  previous research . Unfortunately, for investors, the company has a long way to go to prove that the fitness tracking business isn't a fad and Under Armour (NYSE: UA ) isn't a competitive problem.  Read the full article Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Williams: Too Many Questions

Weak Q4 cash flows don't help the dividend coverage ratio and concerns about the ability of Williams supporting the dividend. The questions surrounding the business relationship with Chesapeake Energy was extensively discussed in the presentation and earnings call, yet the impact from a restructuring remains unknown. Too many questions remain regarding negative outcomes to owning Williams. Williams Companies' (NYSE: WMB )  quarterly results  brought some interesting points regarding Energy Transfer Equity (NYSE: ETE ) and Chesapeake Energy (NYSE: CHK ). The details didn't really provide a resolution to the  outstanding issues  highlighted in my last article.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Buy Misunderstood Nvidia

Nvidia smashed FQ4 earnings on robust revenue growth. The market seems to understand the growth drivers, but the earnings story is misunderstood. The stock is a strong recommendation on any pullback going forward. After  warning investors  that upside was limited prior to the drop leading to a bottom in mid-February, Nvidia (NASDAQ: NVDA ) is only now trading back at those levels after the rally following solid  FQ4 earnings . My previous thesis centered on a stock that had doubled in a little over a year despite limited revenue growth.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Top Net Payout Yields For February 2016

The top 10 net payout yields had a larger loss than the benchmark index in January. . The top 10 net payout yield stocks average yields of 20.8% to start February. . Motorola Solutions continues to hold the highest yields at 38.6%. . This article is a continuation of a monthly series, highlighting the top net payout yield (NPY) stocks, that was started back in June 2012 (see  article ) and explained in August 2012 (see  article ). The series highlights the best stocks for the upcoming month utilized in part to make investment decisions for the  Covestor model  that is now beating the S&P 500 for five out of the last six years. Please review the original articles for more information on the NPY concept.  Read the full article on Seeking Alpha.  Disclosure: Long AAL, AIG, BBY, CBS, CTL, GM, KSS, M, MSI, NTAP, QCOM. Please read the disclaimer page for more details.

Glu Mobile Set To Crush Q1 Guidance

The new celebrity game is a big hit even prior to the official release. The Kendall & Kylie game brings an additional game into the celebrity theme to test the ability to incrementally grow the concept. Based on initial success, Glu Mobile is on pace to smash Q1 guidance. After the failed release of the Katy Perry Pop game, Glu Mobile (NASDAQ: GLUU ) sank an incredible amount. The stock fell all the way to a low of $1.98 with the recent market selloff, but my recommendation remained firm that large opportunities existed for a big rebound. Read the full article on Seeking Alpha.  Disclosure: Long GLUU. Please review the disclaimer page for more details. 

NetApp: Sustained Transformation

NetApp continues to rebound as investors absorb the initial disappointment with guidance. The dilutive impact of the SolidFire deal sets the company up for growth in FY18. The stock trades at an incredible value after the Q4 plunge. Similar to a lot of large technology companies, NetApp (NASDAQ: NTAP ) remains in a constant transformation loop. The company builds new storage products that struggle to maintain overall revenue levels as legacy products lose steam. The transformation though continues to leave the stock trading at multi-year lows while the company produces strong free cash flows. Despite weak guidance, the stock is actually bouncing higher on hopes for stability going forward and the possibility of a boost from the purchase of fast growing SolidFire.  Read the full article on Seeking Alpha.  Disclosure: Long NTAP. Please read the disclaimer page for more details.

Freeport-McMoRan: Game Changer

Freeport-McMoRan monetizes part of the Morenci mine at an attractive valuation to reduce the debt crunch. Even after the recent rally, the stock is down substantially over the last two years. With plenty of other copper assets, the debt fears should quickly fade as the S&P downgrade likely signaled the panic lows for those fears. The news that  Freeport-McMoRan (NYSE: FCX )  reached an agreement to monetize part of a copper mine was a game changer for the stock. Though the company took copper and gold out of the official company name, investors made a big mistake taking a focus away from those two commodities. The stock is now surging towards $7.50 following a massive rally. At this point, one has to wonder if the rally doesn't need a pause, but investors need to remember where the stock came from in the last couple of years.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

T-Mobile: Not Enough

T-Mobile reported a big Q4 earnings beat. The stock saw limited traction due to the valuation and questions regarding valuation. My recommendation remains neutral on the stock, with the only reason to own it for a short-term momentum play. T-Mobile's (NASDAQ: TMUS )  quarterly results  again provided some industry leading numbers around user and service revenue growth. The aggressive domestic mobile provider even smashed earnings estimates, though the stock got limited traction.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

FireEye: Bad Scenario

FireEye provided 2016 guidance that includes ongoing reductions in organic growth and still elevated operating costs. The cybersecurity specialist is busy buying smaller firms to boost growth. The stock is difficult to own for the long-term based on fundamentals, but offers a short-term trade option. When a stock declines after reporting earnings while the market surges, one knows the results were a big disappointment. In the case of FireEye (NASDAQ: FEYE ), the cybersecurity specialist reported mixed  Q4 results  and 2016 guidance.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Will Epic Stores Provide An Epic Opportunity?

Epic Stores offers a growth opportunity in a sector that benefits from a weak economy. The resale sector has recently outgrown the general retail sector even during economic expansion. The stock is highly risky due to the need to secure additional growth capital and ongoing quarterly losses. The company needs to prove it can profitably scale operations before aggressively investing in the concept due to capital needs. As the stock market falls and investors debate whether the global economy is headed towards a recession, the dollar and thrift stores offer an intriguing recession play. If the economy does slow down, these type of stores should benefit from consumers with tight budgets looking for quality products at a discount.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

CenturyLink Still Offers A Better Yield

CenturyLink smashed Q4 estimates and increased guidance for 2016. Despite a big rally, the stock still offers a higher dividend yield than the large domestic wireless providers. The recommendation is to continue owning CenturyLink until the yield falls into the range of the telecom giants. The market rejoiced the that  CenturyLink (NYSE: CTL )  reported a  blowout EPS  number for Q4. The telecommunications provider had seen the stock collapse with the market despite a large dividend that was supported by cash flows.  Read the full article on Seeking Alpha.  Disclosure: Long CTL. Please read the disclaimer page for more details.

LendingClub Stock: Cheap, And Likely Getting Cheaper

LendingClub reported solid Q4 earnings and guided up for 2016. Fears over the impact to the online lending marketplace in the next recession appear misplaced. The stock is cheap, but likely gets cheaper. The interesting news of the week is that a beaten down online lending marketplace plans a $150 million share buyback. Due to a large level of pessimism, LendingClub (NYSE: LC ) falls into my general theme of stocks beaten down to extreme lows despite obvious growth potential.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. please read the disclaimer page for more details.

Avoid Williams Companies

Williams trades near lows as a key executive departs ETE. Negative news swirls around a key customer in Chesapeake Energy that questions the stable cash flows from the pipeline business. The recommendation remains to avoid the stock with the business model under pressure and no guarantees on the cash portion of the ETE deal. After another tumultuous week,  Williams Companies' (NYSE: WMB )  shareholders find the stock trading close to new multi-year lows. My  previous warning  was that a restructuring of the cash portion of the  Energy Transfer Equity (NYSE: ETE )  deal was needed despite the statements from the Board of Directors.  Read the full article on Seeking Alpha.  Disclosure: No positions mentioned. Please read the disclaimer page for more details.

Zynga: Don't Fear Q4 Earnings Release

Zynga plunges prior to the release of Q4 earnings. The stock trades at valuations reminiscent of Glu Mobile prior to the recent post-earnings rally. At this valuation, Zynga doesn't need any catalysts for a rally; however, a couple of new games provide the opportunity for a big hit at last. The market is spooked by some of the large selloffs after stocks report weak Q4 numbers or provide tepid forward guidance. The key though is to understand where the stock comes from heading into the earnings release. Read the full article on Seeking Alpha.  Disclosure: Long ZNGA. Please review the disclaimer page for more details. 

Occidental Will Survive, For Now

Occidental continues to hold up well due to a strong balance sheet. The company still needs to work on improving cash flows to ensure the dividend can survive the current oil price slump. The stock has more downside risk with cash flows in the current negative position. With the cutting of the dividend by ConocoPhillips (NYSE: COP ) , all of the major oil companies are under extra scrutiny now. Dividends that were previously unquestioned will now need cash flows to justify paying them going forward. Read the full article at Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Glu Mobile - QuizUp Potential

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Along with the Q4 release was news that Glu Mobile (GLUU) purchased game developer Plain Vanilla Corp. The company paid $7.5 million in a convertible note for a minority stake in the maker of the game QuizUp . The deal apparently gives Glu the opportunity to purchase the company in the next 15 months at a pre-agreed price. The deal involves Glu Mobile helping Plain Vanilla develop a QuizUp television program for NBC Universal. Also, Glu is going to help Plain Vanilla monetize the mobile game that isn't being done currently. Based on the revenue generated by fellow trivia game Trivia Crack , QuizUp has tons of potential for generating sizable revenues. Currently, Trivia Crack makes roughly $50,000 on a daily basis with the iPhone in the U.S. Of course, Trivia Crack has slightly higher download rankings so these numbers might not be achievable. Source: ThinkGaming.com Based on recent history, Glu Mobile is relatively successful in turning these deals for small game dev

Freeport-McMoRan: Keep Paying Attention To Copper

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Not too surprisingly, Freeport-McMoRan (FCX) has rallied while oil keeps plunging. Too many investors confuse the stock for the oil operations, but the company is still primarily focused on copper. The company will not only survive, but thrive if copper prices stay above $2/lb. At the current price of roughly $2.10/lb, Freeport-McMoRan should be free cash flow positive. As I highlighted in my last Seeking Alpha article, the risks of bankruptcy were largely overblown. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Occidental: Still Producing Too Much Oil

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Though oil continues plunging, the oil giants continue producing more. For Q4, Occidental Petroleum (OXY) had roughly flat production. The worst part is that OXY plans to grow production by 2% to 4% in 2016. The stock has held up somewhat strong, but the inability to turn off the spigot remains troubling. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Tableau: Opportunity Surfaces

Tableau Software beaten down on weak guidance. The biggest problem with the stock was a high valuation that didn't price in the expected revenue slowdown. The valuation represents a bargain for the business analytics sector. In an incredible move, Tableau Software (NYSE: DATA ) is trading down almost 50% based on soft 2016 guidance. My warning for several months now was that the stock needed a valuation rerating before investors became involved in this story. Read the full article on Seeking Alpha.  Disclosure: No position mentioned. Please review the disclaimer page for more details. 

Glu Mobile: Opportunities Abound, Execution Struggles Persist

Glu Mobile easily surpassed Q4 estimates despite the Katy Perry game flopping. Sustaining games and new investments provide a huge opportunity going forward. The valuation of the stock is already pricing in further game failures not supported by beta tests. Glu Mobile's (NASDAQ: GLUU ) Q4 earnings release and conference call were filled with unanswered questions and promising opportunities. The most immediate takeaway was that the stock overshot on the pessimism with the drop to $2 and is surging over 30% following the news. Read the full article on Seeking Alpha.  Disclosure: Long GLUU. Please review the disclaimer page for more details.