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.

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