Note from Barron’s from 2/3/2014. We encourage readers to purchase Barron’s for the complete set of news, some of which are highlighted very briefly below.
Akami (AKAM) – is the WD-40 of the internet. Movement to cloud will help. Big opportunity is selling security services. Analysts expect 14% sales gain and eps of $2.15 this year. Price is currently $48.47 and selling at 22.5x earnings, but normally 25x. A similar multiple next year puts the price at $62. CEO bought $1.1m in December when priced at about $45. Q4 earnings release is this Wednesday.
The Cheapest Tool in the Box – Stanley Black & Decker (SWK) – had disappointing earnings last quarter. Recent price $77.87. Now at 14.5x forward earnings less than peers SNA and ITW and at substantial discount based on p/s and p/b. Charles Bobrinskly of Ariel Focus fund thinks stock could eventually be worth $100/share, “Investors have overreacted, by paying too much attention to quarterly results.” Julisuz G. Sas of GSSR has a $93 sum of parts break up value.
Diet Firm’s Shares Could Get Plumber – Weight Watchers (WTW) – meeting attendance down 16% in September and subscribers fell 5% for online offering. NI expected to drop 14% on a 7% drop in revenue on the next report in a few weeks. New CEO has laid out turnaround plan. Mark Boyar likes the shares, thinks stock could come close to doubling over next two years. New CEO plan calls up increased investment in core business, driving innovation and services to corporate customers for employees. Suspension of dividend will be used to improve balance sheet. Boyar see profit at $4/share by 2017, intrinsic value in the low 50s in next two years.
Ford or GM: Which One is the Better Buy? – F is at 11x and GM at 9x this year earnings forecast. GM might be better bet for 2014 but F for the longer run. GM can gain 30% over the next year versus 20% for F, both stocks yield 3.3%. F $14.96, GM $36.08. F has better products and scale. F is further along on consolidating platforms (scale). GM has a newer lineup for this year. GM expected to earn $4.21 this year, +25%, and $5.20 next year. Right now at 7x NY earnings.
Canada’s Hidden Gem – Imperial Oil (IMO) – produces oil mainly from unconventional fields in Western Canada. 70% owned by XOM. 10.7x ’14 eps estimate. Has been hurt by cost overruns and delay of XL pipeline as well as train accidents. Oil sands are also not environmentally friendly. Low dividend and has focused cash on expansion.
Recent price $40.76.
The Trader – Bed Bath & Beyond (BBBY) – $63.85 down over 20% from recent high. Q3 EPS rose to $1.12, +8.7%, falling short of expectations. Lowered guidance for Q4 and fiscal year ’14 to $4.79 to $4.86. Alan Lancz recently bought shares for clients. $3/share in cash and no LT debt. No dividend. Small internet presence.
Roundtable Part 3 – Mario Gabelli – JRN – $9 – owns 13 television stations, 35 radio stations and one newspaper. EBITDA will be about $75m and eps $0.55. MG values the newspaper at 4x EBITDA, TV stations at 8-9x and the radio at 7-8x. Could be worth $13 – $15. Has pension liability that should decline with rising interest rates.
DBD – $33.63 – bloated cost structure and cutting costs. EPS $1.35. If turnaround works shares could double.
CHMT – specialty chemicals – $26 – share count could fall to 70m from 96.5m in the next 3 years. Could sell for $45 in a couple of years. In takeoff stage of turnaround.
NFG – $70 – owns gas utility in Buffalo that is worth $20/share. Has pipeline business that it has not monetized and a growing exploration and production business. Could be worth $100/share.
WFT – needs to clean up its balance sheet.
POST – $50 – CEO is recreating strategy he used at Ralson Purina via acquisitions and synergies. Could have $500m in three years. CEO is great value-adder.
Brian Rogers – AMAT – likes laggards that can turnaround. $17.50 – 2.3% yield. Consensual merger with Tokyo Electron. Will buy back 10% of shares within 12 months. In 2 years, $2-$2.50 of earnings power. Lots of upside with a 12x on that.
CNX – $36.63 – could get to $45 to $50.
CVC – $16.88, could be a $22 stock. 3.6% dividend.
ETR – could earn $5 this year. $61, 12x, yield 5.2%. Low growth, unexciting company with a safe dividend. It wouldn’t take much to earn a total return of 15% in next year or two.
NEM – $23.80 –
PRMSX
Fred Hickey – recommends holding cash to buy things after dislocation. Like gold, CEF, sells at high discount to NAV (6%).
GG – is growing. 2.6% yield, sells below BV of $25.54 at $23.19. Mines are in good locations.
GDXJ – you can get massive moves up in gold stocks.
CCJ – uranium play. Overhang in supply is done.
Scott Black – “key is to buy businesses that generate free cash and will be able to sustain growth.” ESRX – $72.86 – Revenue should be up 10% in 2013, could earn $4.32 versus $3.74 in 2012. Revenue growth could be zero this year but earnings could be $4.92 this year due to shift to generics and better SGA. Company thinks it can grow earnings by 10-20% per annum for next few years. Will benefit as more people come into the system.
ACT – 13x future earnings at 14.3x current. $183.32/share. Earnings can be $9.35 versus $6. Can earn $12.83 (next year??). Has a set goal of 10% annual growth in eps. Has launched many generics recently.
BCEI – small energy exploration and production company in Colorado.
KLAC – $63.62 – a money machine. Great long term pick.
SNDK – leader in flash memory.