Sunday, December 15, 2013

Special Situation Ideas for week of 16-Dec-2013


Those looking into some catalyst might want to ponder over these names for the week, that I have come across in my reading.

Whiting Petroleum (WLL): For many years, Whiting Petroleum (WLL) was just another bit player in the domestic oil exploration industry. WLL tended to buy cheaper acreage in marginal drilling formations. As a player of long shots, Whiting's shares historically have traded at a discount. WLL likes to go out to areas people aren't focused on, paying less. As a result, many were long skeptical of WLL's prospects, however it's beginning to look like its efforts are paying off. In North Dakota's Bakken and Colorado's Niobrara, WLL is now seeing success with properties that were once thought to be "fringy." In the Bakken, by experimenting with new well-completion techniques, WLL has been able to squeeze 50% to 75% more in initial production out of new wells, said the CEO in 3Q call. In Colorado, initial results on a small number of wells have been really good. 
Record production led to record cash flow of $450.1 million, up 31% from the year before. WLL is a major player in two of the hottest Lower 48 U.S. oil plays in the last 40 years: the North Dakota Bakken and now the Colorado Niobrara play. In North Dakota, a state that has been very friendly to drilling interests, Whiting has amassed huge acreage. While Continental Resources (CLR) still leads in the Bakken, WLL is coming on strong. With initial production on new wells up 50% or more, WLL can produce astounding results. Meanwhile, WLL's early success in Colorado's Niobrara is also attracting attention. WLL trails Colorado drilling leaders like Anadarko (APC) and Noble Energy (NBL) but  the success they've had in the Niobrara is better than people expected a couple of years ago. But even with promising drilling results in Colorado, rock-smashing Whiting will have to keep an eye on political opposition. North Dakota is safe but Colorado is not. WLL , according to industry estimates might have  amassed 500,000 acres in unidentified areas, with some believe 200K of the 500K is in Michigan.However like other oil producers, WLL is hostage to global oil prices. The prospect of a negotiated settlement to the Iranian nuclear crisis has already put some downward pressure on prices. The success of fracking in North America has created enough new supply to depress natural gas prices. In time, the success of Whiting and other rock-crackers could weigh on oil prices too. But Whiting can still earn a solid return with oil prices in the low 80s.

Comverse (CNSI): CNSI provides telecom businesses with billing, customer-service, and data-management systems with a stock market value of USD 809m. Becker Drapkin Management acquired a 6.1% position in the firm. Becker acquired shares at an average cost of USD 31.92 per share. CNSI has USD 333m cash (including restricted and escrowed funds) with no debt and USD 69m of Ebitda. CNSI is a company with two strong segments - telecom billing and value-added services, but is in the early innings of a turnaround. In FY12, it hired Philippe Tartavull and Thomas Sabol, respectively the former CEO and former CFO of Hypercom, who executed a successful turnaround resulting in the sale of Hypercom to Verifone in FY11. The new management has already reduced costs at Comverse and rebuilt the sales team. Moreover, Comverse has the balance sheet to fuel a successful turnaround. While undergoing an operational turnaround, the company can easily buy back a meaningful portion of its float and emerge a leaner and more profitable company. Becker will definitely meet with management and could even get involved from a board level to advise on the turnaround and capital allocation.

Gentherm (THRM): New Technology adaptation, initiation of dividend (as all preferreds are paid off by Sep-13). Also credit facility, needs to be looked into. 21x P/E; 23% ROE. Developer and marketer of thermal management technologies for a range of heating and cooling and temperature control applications. Automotive products include actively heated and cooled seat systems and cup holders, heated and ventilated seat systems, thermal storage bins, heated seat and steering wheel systems, cable systems and other electronic devices. The Company is developing materials for thermoelectrics and systems for waste heat recovery and electrical power generation for the automotive market that may have applications for consumer products, as well as industrial and technology markets.


ImmunoGen (IMGN): Develops targeted anti cancer therapeutics using similar technology to SGEN it calls "Targeted anibody payload (TAP)". IMGN licenses its technology to Biogen Idec, Sanofi, Amgen, Novartis and Roche. TAP is a simple MaB that carries its lethal payload of anti-cancer drugs to its target site and the drugs are more effective and cause fewer side effects. Might become a takeover target

Sunday, December 8, 2013

Special Situation Ideas for week of 8-Dec-2013

Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online on Barron’s and other publications. 

Ciena Corporation (CIEN): Growing demand for data, leading to growing demand for optical network equipment and infrastructure leaders will help the company grow and perform well in the future.Will likely benefit from its partnership with Verizon, AT&T as they start t accelerate the roll out of 100G technologies. VZ is currently field testing a new technology from CIEN that allows use of specialized software to increase spectral efficiency of the networks - doubling the capacity of its 100G network. Could also be a future takeout candidate.

Berry Plastics Group (BERY): Makes plastic containers and drinking cups, including a cup made of a biodegradable plastic it calls Versalite. Styrofoam cups aren't biodegradable, and paper cups aren't optimal for holding hot liquids; the company was taken private in a leveraged buyout by Apollo Global Mgt, and came public again in Oct-12. It generates $2 a share in fcf, and is paying down debt. Shares trade for $21. If nothing happens, you could make 11% just by deleveraging. But revenue are expected to grow.                      

Valero Energy (VLO): VLO operates as an independent petroleum refining and marketing company. VLO recently  spun off its its retail operations. Makes one of every 4 barrels of product exported from US. It’s a play on refining. With WTI-Brent spread bet. $5 -$8 it’s easier to make products here and export them. The company did well over the financial crises. Furthermore, future crack spreads are suppose to move higher, leading to higher operating margins. Stock traded in the 45, 10x earnings and a 2% dividend yield.

Northfield Bancorp (NFBK) – It’s a possible takeover target. The Avenel, N.J., outfit operates 30 branches in attractive markets in NY's Staten Island and Brooklyn, as well as Union and Middlesex counties in NJ. Given its high-quality customer base, it might pique the interest of a larger acquirer. NFBK has $ 2.7bn in assets, and primarily makes multifamily and commercial real-estate loans. Its credit quality is really good! Jan-12, bank raised $ 355m in a second-step conversion, which dissolved its mutual holding company's majority interest. Therefore, NFBK can't be sold for two years from this January.  At a recent $13, they trade for 108% of tangible book value. The bank could be sold for 125% of tangible book, or about $15 a share.

International Game Technology (IGT) – The story for this firm is interesting. IGT purchased an Internet gaming company, DoubleDown. DoubleDown since then has come to dominate the social-gaming vertical of the Internet. DoubleDown is highly profitable and growing very rapidly. DoubleDown is close to generating $ 100m of OCF; applying valuation standards this alone could be valued at excess of $ 1.5bn. IGT sells at around 7x CF with other parts of IGT valued between 4x to 5x OCF. IGT generates stable cash-flow growth, has 20%+ operating margins and ROE of 25%+,; ideally giving it a valuation of 10x to 11x instead of the current 7x. IGT just did another $ 200m buyback. The traditional slots business is a mature business, probably 2% to 3% growth in the U.S. The combination of everything is on the order of 8% growth and operating cash flow; extraordinarily high growth in free cash flow; the ability to buy shares at an attractive price; a decent dividend; and perhaps a transaction. William Hill (WIMHY)—a gaming company is large enough and has a high-enough stock-market value to buy IGT. It  has been expanding in the U.S. and is now licensed in almost all of the important gaming venues, and so that particular barrier that used to exist with IGT isn't as significant as it used to be. On SOTP the firm should be valued atleast 50% higher than it is right now.

 Take-Two (TTWO) - The intersection of consumer electronics and non-casino gaming is a major growth industry globally, and investors undervalue the power of growth of this immersive gaming. Immersive games is very difficult business to get into—you can make a very nice return, and right now, the company that does a good job of this and happens to be very undervalued is TTWO. In addition to creating games, TTWO has been very aggressive in acquiring its stock. The principal asset of Take-Two is Grand Theft Auto. GTA comes out every 5 yrs and each time a new version is released, the cash flow of this game is more significant than it was the previous time. It is very clear the cash flow from the latest edition of Grand Theft Auto—GTA 5—is going to be over $ 500m during its 5 yr lifetime, and that's $100m a year. At a CF multiple of 10x  puts GTA value around  $1bn; that's more or less the entire value of TTWO. Anything else is a bonus for shareholders. Stock should be worth $22 to $23.

Nestlé: The world's largest food outfit has one of its industry's best growth outlooks, thanks to a big presence in the developing world. The Swiss company aims for 5%-6% annual organic sales growth, and it should come close to hitting that target this year. Analysts believe that Nestlé is capable of high single-digit yearly gains in earnings per share. Nestlé's U.S.-listed shares, at around $72, fetch about 17 times estimated 2014 profits and yield 2%. Nestlé isn't cheap, but it rarely is a bargain, because of the strength of its global portfolio, which includes candy, coffee, bottled water, ice cream, infant formula, and pet food. It owns almost 30% of cosmetics maker L'Oréal, a stake worth $30 billion. Excluding that, Nestlé trades at only a small premium to slower-growing U.S. food outfits like General Mills (GIS) and Kellogg (K).

 Unit (UNT): The company is in the business of contract drilling, exploration and production, and midstream services in the oil and gas industry.  New Mountain Vantage which owns 5.2% of UNT has had discussions with management regarding its corporate structure, capital allocation, maximizing the value of the midstream division, board structure, and management compensation. The fund bought the shares at an average cost of $45.99. UNT’s midstream business grew 35% this year. New Mountain is an active shareholder that is very engaged with management, but most of the time privately. It believes that UNT is trading at a large discount to the sum of its parts. While UNT is primarily an exploration and production business, its midstream business has been growing and has a good management team that can continue growth by competing for larger jobs and entering into strategic transactions. Soon it will make a lot of sense to do something strategic with the midstream business. The company trades at less than 5x Ebitda, which is low even for pure E&P businesses. Midstream businesses trade at double-digit multiples. A separation of the two businesses could ultimately be beneficial to both. New Mountain has a constructive relationship with management and is likely to support them and work with them to enhance shareholder value. But, if need be, as it has shown in the past, it has the experience and conviction to follow through on a proxy fight

Tuesday, November 12, 2013

Special Situation Ideas for week of 11-Nov-2013

Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online on Barron’s and other publications.  These are def. is worth a serious look.

Skyworks Solutions (SWKS): The company was known as Alpha Industries years ago, and made microwave products for the defense industry. SWKS now makes radio-frequency chips in concert with Qualcomm (QCOM), for Apple and Samsung phones. This is a good play on the growth of mobile communications. Minus excess cash, SWKS sells for 9x FY14 expected earnings and revenue is growing by double digits.        
           
Calgon Carbon (CCC): It’s a play water Scarcity around the world of usable water, especially in Asia. Even in the US the largest water reservoir is depleting and the need to water in only going to increase. Also there is demand in Europe. CCC recently did a 50m buyback. The company can also become a potential takeover target. Some of its comps. are Xylem, Pall Corp, Watts Water and EcoLab. Starboard is an activist in the firm, owning 9% of the company and recently filed a 13D.

American Eagle Outfitters (AEO): The stock has fallen 20% in 12 months on revenue fall of 2% and same store sales down 7%. Blamed on women's division. However, AEO has a debt-free BS and $2 a share in cash, and a nice dividend yield of 3.1%. AEO has shareholder-friendly management. Teens are in constant need of wardrobe replenishment and updating. ROE is 18%. Fair value according to some industry insiders is approx. $ 21. AEO stands out in a market where other stocks are at or near record highs.

Prooftpoint (PFPT): On demand data protection systems, including threat protection, regulatory compliance, achieving and governance as well as secure communication           . Might be a takeover target in the future. Firm has good balance sheet. Might be worth a look.


Infinera (INFN): It’s a play on growing demand for data, leading to growing demand for optical network equipment and infrastrcuture leaders. The company is betting on its new Photonic integrated circuit (PIC), used inside optical transport platforms. it has the world’s only commercially deployed large scale PIC, which it believes is a game changer for its cost scalability and speed. Might be worth to take a look at the company.

Tuesday, October 29, 2013

Special Situation Ideas for week of 29-Oct-2013

CSG Systems International (CSGS): The Company enjoys a 2.8% dividend yield, with cash on the balance sheet of 190m and debt of 270m. The company is a Provider of customer care and billing solutions to firms such as AT&T, Comcast and DISH among others. Maybe a potential takeover target in the medium future. Worth a look.
           

Consolidated Water Co.(CWCO): Leading developer of 14 desalination plants in Caribbean and coastal regions. With the current general theme of water scarcity and the need for drinking water, globally, this might be a good play on water infrastructure, especially given the geographical location of CWCO’s plants. The firm has negligible debt on the balance sheet, has cahs with good operation and profit margin.

SandRidge Energy(SD): TPG-Axon launched a proxy fight with SD. It won several seats on the board, and ousted the CEO in June. TPG is SD’s second-largest holder. Mount Kellett Capital that specializes in energy, also owns more than 5% and having more bullish view of natural-gas thinks SD could be worth $15 a share, while Leon Cooperman thinks its about $11 or so. He bought the shares in the $5-to-$6 range. Why is SD so attractive? It is because the New management is upgrading the company's drilling prospects, drilling more productively, and reducing operating costs. There is a large short position in the stock, but Wall Street's view is likely to grow more positive. A buyer eventually could emerge.              

Walgreen (WAG): Walgreen, which has been operating Walgreens drugstores in the U.S. since 1901, is applying its alchemist's skills to its business model, transforming itself into a global drugstore chain with a massive distribution network that will position it for strong growth in its second century. With a 19% market share, Walgreen (WAG) is the second-largest U.S. drug retailer, behind CVS Caremark (CVS), which has 21%. WAG aims to lift sales, enhance its drug-purchasing clout, slash costs, and boost earnings and margins through partnerships with Alliance Boots, the closely held drug chain based in Switzerland, and AmerisourceBergen (ABC), a giant drug wholesaler based in Valley Forge, Pa. A greatly increased distribution system should help WAG cut costs, boost margins, and maintain competitive pricing, should also benefit from macroeconomic developments, such as the adoption of the Affordable Care Act; prescription volume should rise further as the baby boomers age: The number of Americans aged 65 or older is growing three times as fast as the overall population. Investors have warmed upto to Alliance Boots transaction. By FY16, WAG projects, the Alliance linkup will generate USD 130bn in combined revenue creating world's largest pharmacy, handling 10% of global volume. Shares at 14x earnings multiple at $5 gives as $70 and $5.50 or $5.75 a share in FY16, in which case its stock could hit $77 to $80. Another huge plus is the presence of Stefano Pessina, Exe Chair of Alliance Boots known for integrating companies. He now owns 8% of WAG and might own 20% if WAG buys rest of Alliance Boots. The 10-year distribution pact with drug wholesaler AmerisourceBergen to supply branded and generic products, launched last month, should also enhance pricing and margins, as it gives the company three times the buying power. Under the pact, Walgreen and Alliance Boots can purchase up to 7% of AmerisourceBergen in the open market. The two were also granted warrants that, if exercised, could lead to a 23% stake.

Skyworks Solutions (SWKS): The Company was known as Alpha Industries years ago, and made microwave products for the defense industry; now makes radio-frequency chips in concert with Qualcomm (QCOM) of Apple and Samsung phones. A good play on the growth of mobile communications. Minus excess cash, SWKS sells for 9x FY14 expected earnings. Revenue is growing by double digits.

ImmunoGen (IMGN): The company develops targeted anti cancer therapeutics using the technology it calls "Targeted antibody payload". IMGN licenses its technology to Biogen Idec, Sanofi, Amgen, Novartis and Roche. TAP is a simple MaB that carries its lethal payload of anti-cancer drugs to its target site and the drugs are more effective and cause fewer side effects. The company is cash heavy, with $194m in cash and zero in debt. With the current interest in cancer therapy and the fact that larger Pharma companies are looking for technologies, the company might end up being a takeover target over a year or more.


Sunday, October 20, 2013

Special Situation Ideas for week of 20-Oct-2013

Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online on Barron’s and other publications.  These are def. is worth a serious look.

Kulicke & Soffa Industries (KLIC) Shares of the 57-year-old company that  dominates its niche, bonding machinery that's used to provide electrical connections between semiconductors and circuit boards using superfine gold and copper wires. KLIC has 70% of the market for equipment used to bond electrical circuits to circuit boards.It trades around $12, giving it a market value of about $900 mn. It finished the June quarter with $508mn in cash, or about $6.65 a share. This is a company that looks ripe for an activist investor. The profitable and low-profile maker of semiconductor capital equipment is sitting on cash equal to more than half its market value, but refuses to pay a dividend or repurchase stock. The core reason that management hasn't initiated a buyback or a dividend is to maintain optionality on diversification. Nearly all of its customers are in Asia, where the bulk of the world's chips are produced. The knock on KLIC is that it's in a mediocre, economically sensitive business threatened by technology changes. But at  around $12, Kulicke & Soffa looks cheap. Subtract $6.65 in cash per share, and the forward P/E is 3x, according to industry estimates. Pennsylvania law makes it difficult for a hostile takeover, but activists generally seek to influence rather than buy companies. With most stock indexes at or near record levels, it's hard to find a company with the combination of Kulicke's cash holdings and earnings power. It should be said that about 80% of KLIC's cash is overseas. If repatriated under current rules, the cash would be subject to taxes that could reduce Kulicke's net cash position to about $5 a share from $6.65 a share—still a large amount.

Athlon Energy (ATHL) is Forth Worth, Texas-based independent oil and gas explorer has only been operating since 2011 and went public in August, 2013. It currently holds nearly 100,000 net acres with an average working interest of 93% in the area the Permian Basin. It lies in western Texas and stretches across into southeast New Mexico, is having an oil exploration and production rebirth. The basin has one of the world's thickest deposits of rocks from the Permian geologic period. ATHL's horizontal drilling technology offers incremental opportunities on the same acreage. ATHL dipped its toes into horizontal drilling in August. It plans to drill four horizontal wells by the end of the year in addition to seven vertical rigs that it will be running this year. Industry analysts say that by adding horizontal drilling, a company can recover 10 times as much oil as it does with vertical wells. But while a vertical well can cost approximately $2mn, the cost of a horizontal well can range closer to $6mn to $8 mn.

Management stated that the $554mn in liquidity raised at its IPO will be used for future drilling activity. From each vertical well, a company can produce about 140,000 barrels of oil equivalent (BOE) over the life of the well , in comparison, a horizontal well's lifetime production can be as high as 600,000 to 700,000 BOE. A third of ATHL's 2014 production growth to come from horizontal drilling. About 65% of Athlon stock is owned by the private equity firm Apollo Global Management (APO). Management is considered strong with a solid financial background.
Prior to Athlon's formation, CEO Reeves, a certified public accountant, served as CFO at Encore Energy Partners (ENP). Before joining ATHL in 2013, CFO William Butler was a managing director at the investment banking firm Stephens, and before that he was treasurer at XTO Energy, which later became a subsidiary of Exxon Mobil (XOM). Athlon also has solid hedges in place for the price of oil, at more than $92 per barrel of oil for 2013 and 2014. For the second half of 2013, oil hedging represents 92% of 2013 and 84% of 2014 estimated production. ATHL has the right real estate at the right place in the Permian where companies are moving from vertical drilling to horizontal drilling

Targa Resources: This is a midstream energy company and process oil and gas. Targa is growing EBITDA 20% to 25% a year for the next several years, and the overall U.S. energy industry is growing roughly 10% to 12% a year. Growth is disproportionately faster near shale regions. Targa has near on of the basins- assets in the Permian Basin, the Eagle Ford Shale, or the Marcellus Shale. This company can organically delever its balance sheet through FCF. Net debt/ Ebitda  under 5x which is expected to be 3.7x in 2 yrs. Become an investment grade firm in 2yrs and market not pricing that upgrade. Currently yielding 5%. Growth profile of this company is phenomenal. Investors can also own Targa bond that matures in November 2023, with a coupon as 4.25%.                                                  














Sunday, October 6, 2013

Special Situation Ideas for week of 7-Oct-2013

Those looking into some catalyst might want to ponder over these names for the week. I have done research on few of them, the other I have read online on Barron’s and other publications.  These are def. is worth a serious look.

Penn National Gaming (PENN): Penn will split on Nov. 1 into a real-estate investment trust called Gaming & Leisure Properties (GLPI), and an operating company that will lease properties from the REIT. By Jan-14, PENN holder will receive a total of 1.35 G&LP shares and a special $3.33 cash dividend, plus more from the REIT.  The operating company could be valued at 8x this year's estimated cash flow of $1.95 a share, or $15.60 a share, while G&LP could command as much as 13.8x estimated cash flow of $2.93, or $54. Add the special dividend, and the parts could be worth north of $70 a share, or 30% more than the current stock price. Another growth factor might be the consolidation of the regional gaming industry, whose markets have been suffering. PENN management has said it received many expressions of interest from potential sellers. The U.S. has more than 100 privately owned gaming operations, many run by aging owners who might want to cash out. PENN CEO Peter Carlino, owns a 14.5% stake. One thorny issue for Penn and G&LP is excess capacity in regional gaming. It the top of the market in 2007, Carlino arranged to sell Penn to a consortium led by Fortress Investment group. The deal fell apart, but Fortress kept some shares and Penn got some cash, which it used to buy a distressed M Resort in Henderson, Nev. When the split is completed, the Carlino family will own just under 10% of the operating company and a higher percentage of the REIT; and Fortress, 9.9% of each entity.

PICO Holdings (PICO): own a water-resources company, a West Coast home builder, and a canola-seed crushing company.  PICO seeks out undervalued assets. Over the years, it has evolved from an insurance business into a company with three core divisions. Vidler is PICO's largest division, accounting for 45% of book, as of June 30. UCP contributes 26%, and its 88% interest in Northstar, 13%.
Its assets, which are leveraged to the housing recovery and the growing demand for water in the Southwest, could be worth much more than the market is giving them credit for.  Industry estimates the stock could be worth about 50% to 75% more.
Of all the divisions, Vidler could hold the most potential. Much of the division's water rights are located in states where there are water shortages, like Nevada and Arizona. The Southwest is seeing its population grow faster than the national average. As housing recovers, home builders will need to secure water for their properties. Municipalities also buy water rights. In February PICO entered into an option agreement with Lincoln County water district in Nevada to sell 7,000 acre-feet of water rights for $12,000 per acre-foot, well above the company's cost. PICO acquired the developer in 2008, and throughout the downturn it bought up residential lots at bargain prices in hard-hit markets like Central Valley and Monterey Bay, Calif. Meanwhile, the Northstar canola refinery is poised for growth. The operation could benefit from rising consumption of canola in the U.S. Canola oil's lower fat content compared with other oils has made it attractive to health-conscious consumers. PICO can be valued at $30 -$35 a share. Additionally, CEO has 838,000 options with an exercise price of $33.76. The options expire in December 2015. 

NCR (ticker: NCR):  The stock has since surged more than 77%, however hedge fund Marcato Capital Management sees the potential for a 50% rise in the next year.
NCR is riding a number of growth waves that have taken annual revenue from $5.3 bn in 2011 to an expected $6.3bn in FY13. Its primary business is ATM’s which have benefited from the upgrades in technology by U.S. banks to permit ATMs to optically scan checks tendered by customers for deposit. NCR also has a major presence abroad and will benefit from major rollouts of ATM systems in emerging nations like China. It now gets 50% of its revenue from overseas. NCR is also at the forefront of the movement toward self-checkout equipment, having signed a large contract with Wal-Mart Stores (WMT). This has revived growth in its point-of-sale business. Airlines now operate kiosks that sell and issue tickets to passengers, and restaurants, bars, and movie theatres are all employing NCR equipment to help manage electronic sales via credit cards and other payment systems. NCR is expected to earn $3.10 a share in FY14 on revenue of $6.7bn. With a P/E 15x, that would justify a stock price of over $63.

Genworth Financial (GNW): GNW’s mortgage unit could benefit, as the Federal Housing Administration ceded market share to private entities in providing mortgage insurance. The FHA has significantly raised prices in the interim, giving Genworth and rivals like Radian Group (RDN) a chance to firm their pricing and possibly gain share. FHA once had a 74% share of this market, which has since dropped to 64% and is projected to fall toward 60% by year end. GNW, the No. 4 insurer, has maintained a 13% share. GNW EPS is projected to rise to $1.12 this year from 81 cents a year ago. Revenue is down to $9.5bn this year from $10bn last year. Shares can be priced at $20
HD Supply Holdings: Former Unit of Home Depot. Carlyle, Bain and Clayton own 19% each. HD owns another 9%. Post IPO, none of PE have sold their shares, which are at purchase price that is approx. $20 a share. NEED TO LOOK AT HOW DEBT IS BEING PAID DOWN. maturieis are for 2017, 2019 and 2020. Also benefitting from tax losses. Stock can go to approx. 42% in 2/3 years.                 

Infinera (INFN): Growing demand for data, leading to growing demand for optical network equipment and infrastrcuture leaders. The company is betting on its new Photonic integrated circuit (PIC), used inside optical transport platforms. it has the worlds only commercially deployed large scale PIC, which it believes is a game changer for its cost scalability and speed. Worhtwhile company to look into for medium term investors.


Personal Note: I have sold my HES CALLS expiring in Jan-14 at 40% profit. I still hold BWLD puts expiring March 2014.

Tuesday, October 1, 2013

Leidos - A New Spin-Off To Play The CyberIntel And Healthcare Sectors

I have posted an article on Seeking Alpha which goes into details about how to profit from going long Leidos International (LDOS). It’s for medium to long term investors.

If anyone reading do invest in special situations, this might make a good read. Either you can click here or go to Seeking Alpha and check out "Kedar special situations" Its under long ideas for Leidos International (LDOS).  

If you are unable to access it tonight (since the article was exclusively published early morning for Seeking Alpha – Rich subscriber base), you should be able to access it tomorrow after 11am.


Personal Note: I sold my HES calls expiring in Jan-14 at a 40% gain and I am long BWLD puts, expiring March-14.


Thank you

Tuesday, September 17, 2013

Special Situation Ideas for week of 17-Sept-2013

Those looking into some catalyst might want to ponder over these names for the week. I have  done research on few of them, the other I have read online, on Barron’s and other publications.  

CST Brands: Valero Energy (VLO), spun off its retail business called CST Brands. The spinoff could be a winner for investors. CST is no lightweight, operating one of the largest fuel and convenience-store networks in North America. CST has 1,875 stores in the southwestern U.S. and eastern Canada. The company is asset-rich, as it owns 80% of its properties. It has a solid balance sheet, and generates roughly $100 mn a year in free cash flow. Management will use the company's ample free cash flow to reduce its $640 mn in net debt and pay dividends. It declared an initial quarterly payout  6.25 cents a share, for an 0.8% annual yield. CST's real estate could be worth nearly $1 billion and CST could choose to monetize the properties.
CST is on its own, management can expand the higher-margin merchandise business instead of focusing on the sale of more fuel. One of the largest opportunities for profit growth lies in boosting sales of private-label coffee, snacks, beverages, and other products. Private-label goods, currently underrepresented in U.S. stores, carry higher gross profit margins than branded products. The company's Canadian stores carry no private-label merchandise. CST also plans to expand the sale of fresh foods, another high-margin category, extending service from the morning to later in the day. CST carries a broad merchandise selection in its stores, including beverages, cigarettes, snacks, and fresh foods such as cheeseburgers, kolache pastries, and tacos. It also sells gas under the Valero, Diamond Shamrock, and Ultramar brands. Fuel accounts for 84% of sales, but only 49% of gross profit.
In the past three years, new stores in the U.S. have generated a nearly 90% increase in merchandise gross profit, compared with older outlets. Management plans to build 22 stores this year, and 37 in 2014.
CST's earnings are sensitive to fuel margins, which depend on wholesale gas prices. A drop in wholesale gas prices results in higher retail-gas profit margins. Conversely, rising wholesale prices crimp retail margins. Margins can be volatile on a quarterly basis, but tend to be more stable on an annual basis.
In the next 18 months, as CST benefits from its independence, the stock could climb 20%.

Timber: More of a long term plays. The product will get expensive given that its in high demand and the weather to say the least is not helping at all. There have been tones of forest fires, termite attacks, deforestation going on in the world. The space might also look into consolidation or mid tier companies might become potential takeover targets. Two companies that pique my interest are : Rayonier (RYN) yielding 3.5% and trading at 13x EV/EBITDA and Potlach (PCH), yielding 3% and trading at 13x EV/EBITDA.

Canadian Energy Services: Develops nonsulfur-based chemicals and fluid systems used in drilling. Firm is developing impressive new products, including a solution that neutralizes pipe-corroding brine. Could see its stock price, now around $16, on the Toronto Exchange, double or even triple. Meanwhile, shares yield 4.2%.             

Diebold Incorporated: Diebold got a new CEO Andy Mattes earlier this month. Firm can capitalize on an ATM-upgrade cycle in the U.S., driven by new features such as check-deposit automation, videoconferencing amd video functionality (BAC is testing and will use firm and NCR), and the expansion of ATM use abroad. Also helped by regulatory changes for ATM’s. Impending cost cutting of 100M -150M. yields 3.6%. Strong cash flow. 77% of its revenue from the sale and servicing of ATMs, and most of the remainder from security products and services - 50% of the NorthAm mkt and 25% of global. Business has been bad after financial crisis due to banks reducing costs. 47% revenue overseas – another positive. Another positive is sales of vaults as well as electronic-security products.

FutureFuel Corp: Good Balance Sheet, no debt, 2.7% yield. Firm is involved in Biofuels and Chemical manufacturing. Sale agreement with PG locked in until 2016.; Interesting to see, if the firm can be taken over or undergo secular growth?

Recent News: Philips : Philips raised most of its financial targets and announced plans to return 1.5 billion euros ($2 billion) to shareholders, saying it would reap the benefits of a two-year revamp to focus on healthcare, lighting and consumer appliances.


Also, there have been round of spin-offs in the last few months. Those looking at these situations should be paying closer attention! 

Thursday, August 29, 2013

ManTech International - A Contrarian Play On Sequestration And Afghanistan Drawdown



I have posted an article on Seeking Alpha which goes into details about how to profit from going long ManTech International (MANT). It’s for medium to long term investors.
 
If anyone reading do invest in special situations, this might make a good read. Either you can click here or go to Seeking Alpha and check out "Kedar special situations" Its under long ideas for ManTech International (MANT). 

If you are unable to access it tonight (since the article was exclusively published early morning for Seeking Alpha – Rich subscriber base), you should be able to access it tomorrow after 11am.


Personal Note: I am long HES calls expiring in Jan-14 (up 15% to date) and I went long BWLD puts, expiring March-14 (up 15% to date). 

Thank you

Monday, July 22, 2013

Great way to play the Healthcare Market

Those looking into some catalyst might want to ponder over this name I read online on Barron’s.

Trinity Biotech (TRIB)

Price:  USD 19.36
Market Value: USD 392m
Est 2013 Revenue: USD 89m
Est 2013 Net Income: USD 18m
Est 2013 EPS: USD 0.80
Est 2014 EPS: USD 0.97
Est 2014 PE*: 15 (Stripped of cash)
Dividend Yield: 1.20%
Business: Trinity Biotech (TRIB), an Irish maker of medical-testing equipment.

Catalyst:
  • Diabetes has reached epidemic proportions around the world. There are 250 mn diabetics living today, and by 2025 the number could soar to 380 mn.That has created a large opportunity for companies that make testing equipment to diagnose the disease. TRIB has seen strong demand for the Premier Hb9210, its diabetes-testing instrument, since it was launched in 2011. The Premier boasts noted advantages over existing devices, including speed, accuracy, and easy-to-use touch-screen technology.
  • In 2012, its first full year of sales, Trinity shipped 202 of the Premier devices, which sell to hospitals and labs for about USD25,000. This year, Trinity estimates it will ship 320 or more devices, aided by its recent entry into China, a potentially large market for the device, with an estimated 54 mn undiagnosed diabetics.
  • Trinity makes tests and clinical instruments that detect for Lyme disease, syphilis, legionella, diabetes and autoimmune disorders like lupus. The company is perhaps best known for its point-of-care tests for AIDS used in Africa and the U.S.Last year, clinical instrumentation accounted for 77% of revenue, with point-of-care testing chipping in the remainder.In addition to growth from Premier, Trinity could also benefit from its lineup of new rapid point-of-care tests. They include tests for syphilis, herpes, strep pneumonia and cryptosporidium, and are expected to come to the market this year. Sales could ramp up in 2014.
  • Trinity is also making progress with its point-of-care cardiac test to determine if a patient has had a heart attack. With an estimated world-wide market of USD1 billion a year, the potential is large. Trinity acquired the test in March 2012 when it bought Fiomi Diagnostics, and reported in April, that the test has begun clinical trials in Europe for regulatory approval. Approval, if it occurs, could come as soon as the end of this year.
  • Trinity has a solid balance sheet, with USD73 mn in net cash. Free cash flow for 2012 is USD17 mn. Management is committed to returning some of its cash to shareholders in the form of dividends and stock buybacks. According to industry, TRIB can be worth USD25 by the end of 2014.



Tuesday, July 16, 2013

Special Situation Ideas for week of 15-Jul-2013

Those looking into some catalyst might want to ponder over these names for the week. I have  done research on few of them, the other I have read online, on Barron’s and other publications.  These are def. is worth a serious look.

Utility sector: As usual, people think this is a boring sector to dwell into. However, as power plants switch from coal into a more renewable energy mix, there might be an potential M&A opportunities in this sector, specifically with those firms that are into renewable space. This is not the time for huge LBO’s of buyouts especially In the sector that’s regulated on the revenue side. However, some small and mid cap names are worth a look, at they not only bring a client base but help the acquirer reduce cost and increase margins. Some names do come to mind : Hawaiian Electric (HE) - Approx 5% yield and capturing and generating solar energy in addition to non-renewable. Portland Electric (POR): approx. 3.6% yield and huge in renewable sector; Avista Corp (AVA); approx. 4.6% yield and into wid, landfill Gas and Hydro.

Intuit (INTU): This technology company might be poised for a huge dividend increase. The firm just sold its financial services unit to Thomas Bravo for USD 1bn and plans to sell its healthcare business. With USD 2bn in cash and USD 500m in debt, the completion of second divestiture, might either propel the firm o return cash to shareholders of make accretive acquisition. Its worth a look!

Maple Leaf Foods (MFI): IN light of the recent Canadian M&A, this firm might be worth taking a look at. The company has not only been cited repeatedly as a takeover target, there were rumors it was  looking to divest. If not for takeover, the fundamentals of the firm support organic growth in food sector, given the demand and consumption. Also, 33% owned by M. McCain, the CEO and 11.4% owned by canadian activist - west face capital. There is a chance, the firm might get sold in the future.

Citigroup (C): There was a good article this week on Citigroup (C) , which I believe is worth a read . Some in industry believe the stock is worth USD 70s to low-USD 80s: Some of the key points it made were as follows:

·       Management change : 17-April-12, Chairman Michael O'Neill, a former Marine known for turn around in banks and  a new CEO, Michael Corbat, a former banker.
·         Truly global franchise, which is almost impossible to replicate: Citi is in 160 countries. All told, about 58% of Citigroup's revenue comes from outside North America. In contrast JPMorgan Chase (JPM) gets just 19% , while Bank of America (BAC), a mere 13%.
·          Bank is sitting on USD55 bn in deferred tax assets, or future tax write-offs, which will be increasingly valuable in using its capital more effectively. Helps improve earnings and create leeway for future stock buybacks and dividend increases.
·         Citi has received permission to buy back USD1.2 bn of its shares through the first quarter of next year, a relatively modest amount but an important symbolic victory.
·         Corbat plans to lift return on assets to 90 to 110 basis points from the 62 basis points recorded in 2012 (a basis point is one-hundredth of a percent). He's aiming to boost ROE to more than 10% from 5% in 2012, and to attain an efficiency ratio at Citi  in the mid-50% range, compared with 60% in 2012. Keeping with his promise, CEO has cut 11,000 jobs worldwide, sold or scaled back consumer-lending operations in Turkey, Romania, Paraguay, Uruguay, and Pakistan, and sold a consumer-finance unit in Brazil to focus on faster-growing business lines.  Also paid USD1bn to move past the financial crisis claims from Freddie and Fannie.
·         Many believe the bank is overcapitalized. Additionally,  Latin America contributes 13% to overall revenue -- Citigroup's corporate and retail banking revenues are increasing at double-digit clips compared with domestic growth that's been flat, excluding Citi Holdings.
·         The level of problem assets in Citi Holdings , a.k.a. the bad bank stands at USD149 bn, well off its peak of about USD800 bn in 2008. Just unlocking the capital connected to Citi Holdings could add as much as USD10 a share to his price target of USD60.


Personal Note: I am still long HES CALLS expiring in Jan-14. In addition, I have still held on to my DELL LEAPS.

Sunday, June 9, 2013

Special Situation Ideas for week of 10-June-2013

The following are the name I have done research on read online, on Barron’s and other publications. 

NetScount Systems (NTCT): The firm designs, develops, manufactures, markets, licenses, sells and supports market application and network performance management and service assurance solutions for the Internet protocol (IP) based service delivery environments. The major plus is that NTCT is into analysis of data and trends. Every major mobile operator uses their technology and they provide analysis of network and real time analytics. No debt and USD 137m in cash. 20% operating margins and 12% profit margins. They can become a  potential takeover target.

Quanta Services (PWR): Services PWR provides include the design, installation, upgrade, repair and maintenance of infrastructure within each of the industries it serves, such as electric power transmission and distribution networks, substation facilities, renewable energy facilities, natural gas and oil transmission and distribution systems and telecommunications networks used for video, data and voice transmission. The major driver for the firm will be infrastructure spending. With the state of infrastructure in the US and the upgrades needed globally and in United States, this might be either a takeout target or a long term secular growth story. Firm has no debt, 366m in cash with 9% operating margin and 11% ROE. Worth  digging into.                     

Old National Bancorp (ONB) and Berkshire Hills Bancorp (BHLD): Both will ride the wave of consolidation that will happen in the US via consolidation in the financial sector and will benefit by acquiring small rivals or distressed assets. This will happen, because US is over branched for one (7100 banks in US with approx. 100k branches, with 90% banks in US with assets under USD 1bn) and two, banks especially medium size ones are overburdened with regulatory costs. ONB has been acquiring branches in Indiana and other regions. BHLD has good management, its CEO is a protégée of Larry Bossidy, a plus and it can acquire UBNK (UBNK’s CEO is 70+).  Plus, they are both under 1.5bn, so targets themselves!

Quality Distribution (QLTY) is the largest tank-truck operator in North America. QLTY operates a large network of 2,800 tractors, 5,200 trailers, servicing terminals, and other energy-related equipment. While it owns most of the trailers and some tractors, it relies on a network of independent trucking affiliates for most of the trucks, drivers, and terminals. Quality handles the sales and the back-office support, and gets a cut of shipping revenue. It also gets a fee for renting out its trailers.Quality's core chemical-logistics business accounts for 67% of revenue. The company also operates an intermodal tank-transportation business that ships liquids overseas. It chips in 16% of annual sales, and the energy business contributes the remainder.

Key Points:
Because of Quality's asset-light model, capital expenditures are low and it helps QLTY generate substantial free cash. FY13 estimated free-cash-flow yield is a hefty 18%. QLTY transports chemicals for the likes of Dow Chemical (DOW) and DuPont (DD), and could rally next year, partly aided by rising chemicals shipments.
Most of Quality's problems can be traced to an ill-timed acquisition spree in FY11-FY12 spending about USD 110mn to buy trucking-logistics companies, which service the hydraulic-fracturing energy market. This segment was negatively affected by the downturn in the gas drilling market. Management has already taken action to address weakness in the energy business. Part of its strategy involves shifting tractors and trailers from the gas-heavy Bakken and Marcellus shale deposits to more oily deposits like Eagle Ford. The equipment will be used to transport crude oil. Furthermore, QLTY announced in May-13 that it had struck an agreement with a trucking affiliate to take over management of three terminals in the Marcellus and Utica shales. The company will sell equipment to the affiliate, which will lower Quality's costs and boost its profitability.
Industry estimate QLTY to earn USD24 mn this year, down from USD 50 mn in FY12. EPS could total 79 cents, on revenue of USD 947 mn. FY14 EPS could rise to USD1.05 a share, on higher revenue. QLTY has a leveraged balance sheet, with net debt of USD 405mn stands at 4.5 times estimated Ebitda. But the debt is manageable given free cash flow, which could hit USD 42mn this year. FY12 interest expense was USD1.12 a share. Management appears committed to paying down debt, and a reduction in debt could be a meaningful driver of earnings.

Personal Note: I recently bought long position in HES CALLS expiring in Jan-14. There is also a wave of spin-off’s for those like me, who look at special sits. I told in my last post, that the coming time will be feast for special situation investors. Its my personal feeling that this market will trend up, atleast for a year after a slow correction in the summer.

Monday, May 20, 2013

Saturday, April 27, 2013

Wild Buffalo Don't Fly On Wings: The Short Case For Buffalo Wild Wings



I have posted an article on Seeking alpha which goes into details about how to profit from going short Buffalo Wild Wings (BWLD). It’s for medium to long term investors. 
 
If anyone reading do invest in special situations, this might make a good read. Either you can click here or go to Seeking Alpha and check out "Kedar special situations" Its under short ideas for NetSuite (N).

Thank you

Sunday, April 7, 2013

Special Situation Ideas for week of 8-Apr-2013



Those looking into some catalyst might want to ponder over these names for the week. I have  done research on few of them, the other I have read online, on Barron’s and other publications.  These are def. is worth a serious look.


Hess Corporation(HES) – This firm might present a good opportunity for investors looking to benefit from two definite catalysts – ongoing divestitures and shareholder activism by Elliott Associates.

On 4-Mar-13, in a press release, HES outlined several initiatives; to transformation HES into a pure play exploration and production (E&P) company after divesting upstream and downstream assets . Part of this initiative is also to increase the dividend to USD 1.00 per share, an increase of 120% and to buyback USD 4bn of stock (16% of HES market cap), dependent on asset sales. HES has already divested certain assets to date, which includes ones in Eagle Ford for USD 265m, its ACG fields USD 1.0bn and its  Russian subsidiary, Samara-Nafta, to OAO Lukoil for USD 2.05bn.

However, this announcement comes after Elliott filed with the SEC on 29-Jan-13, asking for nomination of its own 5 directors and for the breakup for the company after divesting HES’s downstream and midstream assets. A detailed plan with the SEC on 13-Mar-13,  in which Elliott values downstream and midstream assets at USD 3bn-3.5bn and USD 2bn-2.5bn respectively.  It also calculates that value of HES shares to be between USD 97 to USD 128 per share, a substantial premium to where they trade today, at USD 71.00. The value realization is possible, if HES executes on Elliott’s plan to breakup of HES into two entities, divest assets and gain operational efficieny.

However, HES has refused to breakup the company and instead has decided to follow its own course of action. HES’s future will be decided at the AGM which will be held on 16-May-13.  Shareholders can chose to either vote for Elliott’s directors, paving the way for a breakup of the firm, or they can vote for HES’s nominees and stay with the current plan leading to a pure play transformation, an increased dividend and USD 4.0bn share buyback plan.  No matter what the outcome, this seems like a good trade with a definite catalyst for investors looking to trade energy names.

Valero Energy (VLO) - Continuing with the energy theme, this is another name worth a serious look. Valero Energy (VLO) that said it will spin off its retail operations.

Nabors Industries (NBR): I wrote about  Nabors Energy on my Seeking Alpha blog a while ago. Here is the link to the writeup - Nabors(NBR) . Recently it was reported that NBR’s biggest shareholder convinced the management and thereby got the right to up its stake just below 15% in the company. NBR has also agreed to additional board appointments and what’s more important is that the firm has agreed to undertake a strategic review of the company. The poison pill NBR had expires in July 2013. Firm was rumored to be a takeout candidate. Its actively looking into and is divesting assets and restructured its operation in 2012. Recent DB research note suggests the firm’s fair value at USD 25 per share – which was my best case scenario. My base case was $18.00 a share, still 14% above where it trades today.

Brookfield Property Partners(BPY)BPY is suppose to be spun-off from from Brookfield Asset Management (BAM) on 15-Apr-13, and will contain BAM’s commercial real estate holdings, to become one of the world’s largest property companies. What makes this opportunity interesting is BAM’s history of successful spin-off in the past. For example, shares of Brookfield Infrastructure Partners (BIP), in which BAM owns 28%, have doubled since they began trading in 2008. Additionally, BAM owns 68% of Brookfield Renewable Energy Partners (BRPFF), whose stock is up 260% since early 2001. On 15-Apr-13, BAM plans to distribute 7.5% of BPY to BAM shareholders of record March 26 in the form of a tax-free special dividend of one BPY unit for each 17.42 BAM shares held. BPY is targeting a distribution growth-rate target of 3% to 5% annually and expects to pay USD 1 per unit annually which will yield 4.7%. BPY is suppose to benefit from a recovering U.S. economy, and further expansion into Brazil and Europe will drive growth. The firm according to some in the industry should be valued at USD 30 a share.

On a Personal Note: I think its always good news, when you make money and help people make some too! My SLE spin-off, DE Master Blender got an offer at a 33% premium to its trading price. My HSH is up 30% and I am long DELL LEAPS, which have made money for me so far. Last long I wrote about was Gentex (GNTX) I believe it’s worth another look for those looking at investing in decent firms. Also, a recent short I wrote is something I believe people should keep on their radar. It was on NetSuite (N)

I personally expected volatility in this month and going forward and believe there will be better opportunities to buy. However, its hard to fight so much liquidity getting pumped into the market, helping the market move higher without strong underlying fundamental. I think the coming times will be a feast for special situation investors! Stay tuned!


Wednesday, February 27, 2013

Special Situation Ideas for week of 27-Feb-2013


Those looking into some catalyst might want to ponder over these names for the week. I have not done extensive research on them, but this is a way for me to share names on my list that others can work with since I have too many ideas to work on.  These are def. is worth a serious look.

ADT Corp (ADT):  Read it in Barron's. Makes for a good read. ADT was  spun off from Tyco International in Sep-2012. The firm is trying to move beyond normal security business by using its access to 6.43M homes. The growth might come from ADT’s efforts to have its current customers use its equipment to monitor their children, lock doors, control thermometers, turn on lights, and start dinner prep. Moreover, these functions can us operation remotely via new ADT technology – something that will ease the adaptation. The technology is currenylu sold to only 4% of its customer base, leaving large leg room for growth. Management's revenue growth targets for 2013 are 5%-to-7%. Subscription-based, recurring revenue is 92% of total sales.  Firm has a 25% share of the home-alarm business and 14% of the small-business segment. Firm plans to buy back $2B of shares over next 3 years, with $600M in 2013.

Computer Task Group (CTGX): It’s an information technology (IT) solutions and staffing company with operations in North America and Europe. Tech and Healthcare constiture approx 64% of total revenues. Given the impending M&A cycle, it should be noted that IBM is CTG’s largest customer with 30% of revenue, making this mid-cap name a potential takeover target.; P/E: 21x, no debt, ROE 14%, Margins 5% with EPS growth 20%.

MasTec, Inc (MTZ): It is an infrastructure construction company operating mainly throughout North America across a range of industries. Its customers are primarily in the utility, communications and government industries. The Company’s core services are the engineering, building, installing, maintaining and upgrading of infrastructure for communications, utility and government customers.  I have spoken about the upgrade cycle long due in the US and this might be a name to look into for potentially playing that theme. I work about Xylem a while ago, as a play on water infrastructure. It can also be potentially taken out, if the upgrade cycle starts. MTZ does not trade cheap, with  forward P/E: 16x with  ROE of 12%. My concern is the debt on the firm, that should be looked into.

Tessera Technologies (TSRA): The battle is heating up between Starboard and the company. The most recent board feud in addition to the pressure from the activist may bring this company back into play, thereby making it an interesting trade. I wrote about Tessera (TSRA) a while ago and might be worth revisiting.

Sunday, February 10, 2013

Special Situation Ideas for week of 11-Feb-2013


Those looking into some catalyst might want to ponder over these name for the week. I had two of these names on my list (HCA and HSP), and Barron’s confirmed my thoughts. Here is a summary from Barron's. These def. is worth a serious look.


HCA (HCA): Potential Short: Catalyst - OverLeveraged with unknown obamacare benefits priced in
HCA (HCA), the country's biggest publicly traded hospital operator, have soared almost 70% since 2011, and 23% this year alone. One main factor has been the remarks that the Affordable Care Act, or Obamacare, will add substantially to its earnings in 2014.
However,  given the uncertainties of Obamacare reimbursement for hospitals, and HCA's fourth-quarter results, which were more checkered than they seem at first blush, this run might not last. Leverage is rising; profit margins are falling; and earnings before interest, depreciation, and amortization fell from year-earlier levels.
A negative for the shareholders I the funding of special dividends, a total of $4.50 per share last year, nearly $2B, mainly through debt, giving big gains to Bain Capital Partners and KKR (KKR), part of the private-equity group that brought HCA public in March 2011, after taking it private in 2006. That group sold about 32 million shares in December for around $1B, but Bain and KKR still own about 40% of HCA.
Management guidance for 2013 that was weaker than expected and expressed caution about what Obamacare will mean for profits – putting a question mark on the run up in HCA’s share price. Same-facility inpatient revenue per admission fell 1%. That probably reflects pricing weakness.Emergency visits rose 12.7%, but it’s a  lower-margin business. Apparantly provisions for doubtful accounts soared 67% in the fourth quarter, to $1.1 billion, from the year-earlier total. Debt, due to special dividends, increased by $2B, to $29B, higher than HCA’s $28B in total assets.  When interest rates jump, or Obamacare isn't as remunerative as HCA's stock price indicates it will be, times could get tougher.

Wendy's (WEN) : Potential Long: Catalyst - Takeover target, Business restructuring
In the past 18 months, Wendy's (WEN) has gone back to its roots as a high-quality burger maker, introducing new menu items and more focused marketing, and rolling out a dramatic remodeling of its stores. The results are notable, with same-store sales rising for six of the past seven quarters. They were up 4.9% in the past two years. Wendy's EV/EBITDA is 8.4x. while its competitors trade at 10x. The discount is likely to narrow as Wendy's transformation unfolds. At 10x 2014 est.EBITDA, Wendy's would be worth $7.20. The stock yields 3.2%.
WEN has 6,560 stores, with 78% franchised and the rest company-owned. Almost 90% of the stores are in the U.S., with the greatest concentrations in Florida, Ohio, Texas, and Georgia. In 2008, Wendy's was acquired for $2.4B by Triarc, a holding company controlled by activist investor Nelson Peltz. The current CEO, Emil Brolick, joined Wendy's in September 2011 and knows it well, having worked closely at Wendy’s  before leaving for Yum! Brands. Brolick turned around Yum's Taco Bell unit, and most recently served as chief operating officer of Yum. Last April he hired Craig Bahner, a Procter & Gamble (PG) veteran, as chief marketing officer.
Wendy's has made significant changes to its menu and marketing plan. The new products have met with success, and Wendy's has gained share in large hamburgers and large chicken sandwiches. But some price-conscious customers have taken their business elsewhere. Management recently launched a value-based menu, called "Right Price Right Size," and will ramp up marketing of it this year. Remodeling Wendy's aging stores is another part of its strategy. The remodels include such features as lounge seating, fireplaces, flat-screen TVs, Wi-Fi, and digital menu boards.
Sales in the newer-looking stores are up 25% since remodeling. The company plans to remodel 200 stores this year, and open 120 new units. In 2015 it is targeting 1,300 new and remodeled outposts. The changes are showing up in profitability and sales with December quarter, company-run restaurants enjoyed profit margins of 15.9%, compared with 15% a year ago. Cash stands at $454M to debt of $1.46B. FCF is  expected at $15M in 2013. Peltz and associates control 27% of Wendy's stock. Given his involvement, a sale of the business is a strong possibility. One logical buyer: Yum! Brands, which doesn't own a burger business.

Hospira (HSP): Potential Long: Catalyst - FDA inspection, takeover target, biosimilars
Nearly three years after the FDA mandated that it improve quality control at one of its top drug-manufacturing plants, Hospira (HSP) is getting ready for an inspection of the Rocky Mount, N.C., facility, possibly in 1H13. A clean bill of health from the FDA could clear a path to boost the plant's production, which has been scaled back amid the remediation efforts. It also would enable Hospira to focus more resources on promising markets, including generic substitutes for biotech treatments whose patents are expiring. Overseeing the plant's cleanup and the company's revamped strategy is CEO Michael Ball, who joined the firm in March 2011 from Allergan (AGN).Hospira makes generic injectable drugs including morphine and antibiotics. CEO wants to increase HSP’s presence in France, Germany, and Japan as well as the emerging markets of China and Brazil.
After the FDA inspection, North Carolina is expected to come online and that will give the firm good lift. Gross profit margins, at 30%, will probably rise as the costs of upgrading its facilities decline, plant efficiencies improve, drug shipments increase, and prices rise. The facility is important as it accounts for 25% of the company's $4B in sales.  Due to uncertainty surrounding Hospira's inspection, stock has been negatively impacted. Shares are down about 43% since November 2010 high. That has created an opportunity. HSP enjoys world's No. 1 market share—37%—in the generic injectable-drug market, a highly specialized class of drugs that require advanced handling techniques. The complexity of making these drugs creates a high barrier to entry. Hospira enjoys limited competition and higher margins as a result. About 63% revenue comes from these drugs. HSP also ranks No. 2 in the market for intravenous-delivery systems and pumps with a 17% share. The systems and pumps kick in about 24% of revenue; other products like IV solutions comprise the rest.
Whats not priced in the stock is the growth potential from a new drug group known as biosimilars. HSP is the leading U.S.-based producer of these drugs and among the world's top three, along with Teva Pharmaceutical (TEVA) and Sandoz, a division of Novartis (NVS). Estimated $40B of the biologics are scheduled to lose their patent protection through 2020, providing lots of new opportunity for HSP and its rivals. Its estimated that the biosimilar market will reach nearly $4B by 2015 from $243M in 2010. HSP's biosimilar for Amgen's Epogen, is in Phase III clinical trials with the U.S. FDA. The last patent on Epogen is scheduled to expire in 2015, which is when the U.S. market for a biosimilar version is set to begin. HSP is also selling Nivestim, a version of Amgen's Neupogen, which boosts infection-fighting white-blood cells in cancer patients, in Europe and Australia. Biosimilars enjoy support of pharmacy-benefit managers because of the tremendous cost savings they represent for their customers. Hospira's  market value is about $6B makes it a potential acquisition target for big-pharma companies such as Merck (MRK) andPfizer (PFE).