tag:blogger.com,1999:blog-17427601786028747042024-03-13T07:06:13.215-07:00Kedar's Special Situation Investment IdeasI created the blog to write and share investment ideas within the special situations space.Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.comBlogger78125tag:blogger.com,1999:blog-1742760178602874704.post-28904166173571286732017-09-17T07:35:00.001-07:002017-09-17T07:35:29.535-07:00Special Situations ideas for the week of 17 September 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "verdana" , sans-serif;"><span style="white-space: pre-wrap;">If you need a full analysis/detailed write-up, please email on </span><a href="mailto:kedar@kedarcap.com" style="color: #b87309; text-decoration-line: none; white-space: pre-wrap;">kedar@kedarcap.com</a> . I will NOT respond to anonymous emails.</span></div>
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<b><u><br /><span style="font-family: "verdana" , sans-serif;"><a href="https://finance.google.com/finance?q=NYSE%3ABBY&ei=04e-WeiPJ5TIedSQgpAC">Best Buy (BBY): </a></span></u></b><u style="background-color: transparent; text-align: justify;"><span style="font-family: "verdana" , sans-serif;"><a href="https://finance.google.com/finance?q=NYSE%3ABBY&ei=04e-WeiPJ5TIedSQgpAC">Investment Thesis</a></span></u></div>
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<span style="font-family: "verdana" , sans-serif;"><b><i>Shorting at $65.00 (43.9% upside) over 1 to 2 year investment horizon.</i></b>
BBY offers an attractive risk-return profile for an investor willing to wait
before taking a short position. In spite of fundamental challenges to its
business, an extra week of holiday sales, coupled with major share buybacks and
short term margin improvement, are likely to push shares into making another
year end high. Despite the recent sell off, BBY trades at a historical high
multiple of 6x EBITDA and a forward P/E of close to 13x. This echo’s of a
company whose investors expect it to continue to beat expectations – a
sentiment I do not share. On the contrary, not so palatable results might be in
the cards, as the tailwinds from ‘Renew Blue’ disappear, while BBY is
simultaneously expected to make major reinvestments to find new growth
opportunities, replace older revenue and capture more dollars per customer. The
likely results? Top line growth, profit margins and cash flow will come under
pressure resulting in a definite price correction. </span><o:p></o:p></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-76763148412595953892017-09-11T06:32:00.002-07:002017-09-12T12:46:51.947-07:00Special Situations ideas for the week of 11 September 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif;"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 11pt;">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, WSJ, IBD, and other publications</span><span style="font-size: 11pt;"><span style="white-space: pre-wrap;">. If you have</span></span></span></div>
<span style="font-family: Verdana, sans-serif;"><span style="background-color: white; font-size: 11pt; white-space: pre-wrap;">questions, feel free to write to me on </span><a href="mailto:kedar@kedarcap.com" style="background-color: white; color: #b87309; font-size: 11pt; text-decoration-line: none; white-space: pre-wrap;">kedar@kedarcap.com</a></span><br />
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<span style="font-family: "verdana" , sans-serif;"><b>Market
View: </b>The
August-to-November window of Year Seven has shown a strong downward bias, even
when the extreme case of 1987 is omitted. S&P 500 might correct 6% - 8%
correction, with Russell 2000 down 13% - 14%. We are already halfway there.
With the completion of this sell off, there is a good chance of another up
leg—which could be the bull market’s last. A standard balanced portfolio with
60% in the S&P 500 and 40% in 10-year Treasuries has generated 8% in
annualized return since 1880. The same 60/40 mix over the past 138 years provided
a median portfolio yield of 4.1%, with more than half generated by income.
Today, the yield 2.1%. Stocks were more overvalued in early 2000 with bonds in
the 2016. Today, both are overvalued and returns could be stuck between 3% - 4%
over 10 years. Investors should be on the lookout for technical indicators for
some red flags. A breakdown in markets before the final culmination is a
process, not a quick reaction. In 1990 bull market peaked in 1998, yet the Nasdaq
and the blue-chip indexes went up for another 2 years. The very disjointed
price action of the past couple of weeks could be the beginning of a topping
process. A short-term correction can be followed by a new rebound before the
bull market comes to an end in sometime in 2018. There is already a slowdown in
the auto market with single-family housing close to peaking out. Also, the
banking sector, a barometer for the health of the overall economy is acting as
one would expect toward the end of an expansion phase. FDIC in its quarterly said
that that total loans and leases by banks and other insured institutions rose
by just 3.7% from a year earlier; a third consecutive quarterly deceleration
and is down from a 6.7% pace of growth a year ago. Credit-card charge-offs
soared by 24.5% in the 2Q17 marking the seventh straight increase, however, charge-offs
on loans to commercial and industrial borrowers, however, declined by 9.7%,
possibly due to a recovering energy sector. Add to that the Federal Reserve unwind of its
balance sheet and higher interest rates. With low interest rates far too long,
the level at which the rates begin to bite can be lower than commonly believed.
For example, a 10-year bond yield of 3% or 3.5% might be enough for investors
to dump stocks as opposed to a 5.5% to 6%, in earlier days. Adding to all this is an assumption that
nothing will be done to lower individual tax rates or corporate tax
rates until much later in 2018 while companies are expected to face rising wage
pressures. Moreover, annual nonfarm payroll employment growth has slowed to
1.5%. In the past, when you’ve approached that level, a recession has usually
been on the 12-month horizon.<br /><b><br />DowDuPont (DWDP: NYSE):</b> This story might not be completely over, even though the merger
is complete. There are multiple ways to win as DWDP separates into at least
three companies, each with a number of incremental independent paths to further
increase shareholder value. On the merger level, the story, is still unfolding.
Execution on $3bn of cost synergies and $1bn of growth synergies as the merged
entity then breaks up into at least three companies’ remains to be seen. There
is also an under-levered balance sheet to take advantage of as net debt/EBITDA
stands at 1.5x. Materials Co. -- one of the expected spinoff companies -- is
likely receiving a lower implied multiple due to markets being overly bearish on
the ethylene cycle. This value will be unlocked as the cycle evolves and if
DWDP separates and monetizes the commodity assets. Then comes the Ag Company as
it shows earnings growth in the near future with stability in seed pricing and
some improvement in crop chemistry inventory levels. With Syngenta delisted,
and Monsanto acquired by Bayer, Ag Copany remains the only global publically
traded pure play on seeds, biotech, and crop chemistry. On the Specialty Company,
the CEO Ed Breen’s history, this company can see strategic activity and can be
potentially sold. Given the cost synergies, the combined company trades at 9x
EBITDA which might be a bit low, if an analysis is done based on sum-of-the-parts.</span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-8593419607212633782017-08-20T09:20:00.001-07:002017-08-20T09:20:33.921-07:00Special Situation Ideas for the week of 20 August 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background: white; font-family: Calibri, sans-serif; font-size: 11pt;">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, WSJ, IBD, and other
publications</span><span style="font-family: Calibri, sans-serif; font-size: 11pt;"><span style="white-space: pre-wrap;">. If you have</span></span></div>
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<span style="font-family: Calibri, sans-serif; font-size: 11pt;"><span style="white-space: pre-wrap;">questions, feel free to write to me on <a href="mailto:kedar@kedarcap.com">kedar@kedarcap.com</a><br />
<!--[endif]--></span><span style="color: #333333; font-size: 11pt;"><o:p></o:p></span></span></div>
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<span style="color: #333333; font-family: "Calibri",sans-serif; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="https://www.google.com/finance?q=bks&ei=iK6YWaDpEcHSeIG8sfAN"><span style="color: #c74b15;">Barnes & Noble</span></a> (BKS): BKS is a<strong><span style="border: 1pt none windowtext; padding: 0in;"> </span></strong>retailer
of books and other content and media, including educational products with a
stock market value of $523m. Sandell Asset Management, a well-known activist is
urging the board of BKS to take it private. The fund believes that BKS is
significantly undervalued for several reasons, including the steep drop in
retail valuations in FY17 due in large part to the dominance of Amazon.
BKS trades at a lower EV/EBITDAx than nearly every other publicly traded
retailer despite being the only truly national bookstore chain. Physical
bookstores are not going away anytime soon, and even if they were to decline,
the intrinsic value of BKS is still materially greater than where it trades.
Recent acquisition of Whole Foods by Amazon and of Staples by <span style="border: 1pt none windowtext; padding: 0in;">Sycamore Partners </span>are
two examples of sophisticated investors and operators realizing that retail
companies are better off private than public in this environment. Similarly,
BKS would be a good acquisition for a financial buyer interested in its cash
flow and low leverage, or an internet or media company looking for a retail
presence based on its countrywide footprint of stores. </span><span style="color: #333333; font-family: Calibri, sans-serif; font-size: 11pt;">Recently, Sandell urged Bob Evans Farms to
sell its restaurant business, valuing it at $560m, which was ultimately sold
for $565m. BKS trades at 3.2x FY18 EV/EBITDA, with FY17 EBITDA at 170m. If BKS
goes private, it can be taken private at $12 a share, a big premium to where it
trades currently.</span></div>
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<span style="font-family: "Calibri",sans-serif; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="https://www.google.com/finance?q=stx&ei=lr-YWbGEI4S2e4z3vdAF">Seagate
Technology (STX):</a><span style="color: #333333;"> STX is a provider of
electronic data storage technology and solutions. The Company's principal products
are hard disk drives (HDDs). The company has a market value of $9.5bn. What got
my attention was the recent invitation by the company to <span style="border: 1pt none windowtext; padding: 0in;">ValueAct Capital, a well know
fund, which was invited</span> to serve as an observer on STX’s board.
The stock price has declined to $32 a share from <span style="border: 1pt none windowtext; padding: 0in;">$48.96, as early as March</span>, 2017. The fund holds <span style="border: 1pt none windowtext; padding: 0in;">7.2% stock with an average cost
of </span>$35.04 per share. This is an increase from 4% that it held
in September, 2016.<span style="border: 1pt none windowtext; padding: 0in;"> STX is a </span>good business in a rational industry
with strong cash flow—but the company is misunderstood. The market is focused
on one of the more visible parts of STX’s business, namely the traditional PC
business, which happens to be one of the smallest parts of its operations. It
is the hard-drive business that is fueling it’s growth, and it is hard drives
that are the backbone of the cloud and other distributive storage businesses.
Seagate is one of two big players in this market, and it has valuable
intellectual property. The company’s current chairman and CEO (until October),
Stephen Luczo, was on the Microsoft board with ValueAct partner Mason Morfit, while
director Mike Cannon was on the Adobe board with ValueAct partner Kelly Barlow.
STX has a return on Equity of 52%. Current dividend yield is approx. 8%. At 10x
FY18 earnings, there is upside to the stock price, if STX can streamline costs
and improve end user demand for its product.<o:p></o:p></span></span></div>
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<a href="https://www.google.com/finance?q=NYSE%3AGDI&ei=_MiYWZnLDsTEePSUhsgP">Gardner Denver Holdings (GDI)</a><span style="color: #333333; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin; mso-fareast-font-family: "Times New Roman";">: GDI makes pumps, compressors,
and flow-control devices. In FY12, GDI, then decentralized and inefficient, was
hit by slowing demand for its natural-gas-related equipment and a softening in
its key European industrial markets. In FY13, after a push by activist, it was
sold to KKR for $76 a share. After 4 years of restructuring, KKR took
GDI public at $20 a share. KKR owns almost 75% of the shares. The post-IPO
lockup on selling ends in November. KKR emphasized on developing new management
talent, expanding margins, accelerating growth, and allocating capital more
efficiently. Of its 100 top business managers, 45 are new. Reading into its first
quarterly report, it seems like the strategy is beginning to pay off. Cash flow
rose strongly in each of its three businesses—industrial, energy, and medical.
While the company had a net loss of $146.3m, due to factors related </span>to the IPO, quarterly revenue, at $579m, was
25% above the year-earlier level, and cash-flow margins were up by 4%. GDI
trades at 11x Ebitda compared with 13x for rivals. For example, <a href="https://finance.yahoo.com/quote/GGG?p=GGG"><span style="color: windowtext;">Graco</span></a> (GGG),
fetches 16x Ebitda. The reason for lower multiple might be the market
underestimating GDI’s ability to rebound in energy, its second-biggest market
behind industrial. Its backlog of bookings to billings in the sector is a
respectable 1.3x. Energy is starting to turn up again. Gardner Denver is using
its strong cash flow to pay down debt, invest in core products and
technologies, and make acquisitions. Net debt/ adjusted Ebitda has dropped to
3.8x from 7.3x a year ago. <span style="border: none windowtext 1.0pt; mso-bidi-font-weight: bold; mso-border-alt: none windowtext 0in; padding: 0in;">The
pump market is expected<b> </b></span>to earn $1.42, on $2.44bn of revenue for
FY18. With proper execution, shares can rise more than 40% from where they
trade right now<span style="color: #333333;">.<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-2470876354732851472017-08-06T19:02:00.002-07:002017-08-06T19:02:22.381-07:00Special Situation Ideas for the week of 6 August 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">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</span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. If you have questions, feel free to write to me on kedar@kedarcap.com</span></div>
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<a href="https://www.google.com/finance?q=cstm&ei=isKHWYigLN-Se8WbvrAJ" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">CSTM:</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">It is a </span><span style="background-color: white; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Netherlands-based company engaged in developing aluminum products for a range of markets and applications, including aerospace, automotive and packaging. The company IPO’ed back in 2013 at $15 share, before rising to an all time high of $34/$35. Since then, due to operational issues, financial mismanagement and poor leadership, the stock suffered and traded under $5 per share. To add to the woes was a poor aerospace market. However, recently, CSTM got a new management, which oversaw operational turnaround. The new management team is helped by improving aerospace, auto and can market. </span></div>
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<span style="background-color: white; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The stock, according to bloomberg had </span><a href="https://www.bloomberg.com/news/articles/2017-08-03/constellium-is-said-to-weigh-options-after-takeover-interest" style="text-decoration: none;"><span style="background-color: white; color: #1155cc; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">some recent takeover interest.</span></a><span style="background-color: white; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> From what I have known with my own research, the management was not very keen to sell at this price. Longer term, the company has a bright future, and I can easily see this stock double from here, if held for medium to long time. This stock was part of my portfolio when it was trading at $5 a share. I would advise this company should be seriously looked into.</span></div>
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<a href="https://www.google.com/finance?q=tgna&ei=jcKHWfHsFdWhefjYgoAL" style="text-decoration: none;"><span style="background-color: transparent; color: #1155cc; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">TGNA:</span></a><span style="background-color: transparent; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="background-color: white; color: black; font-family: Calibri; font-size: 12pt; font-style: normal; font-variant: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Tegna Inc. has a portfolio of media and digital businesses that provide content. The company recently spun-off its cars.com segment, and also divested its stake in Careerbuilder, the job hiring portal. What remains with the company is a host of TV stations in important states in the US. With the changing political landscape, especially with the recent election of Mr. Trump, we can only expect increased political spending which will benefit the company. 2018 should start off stronger with the benefit of both the Super Bowl and Winter Olympics at their core NBC stations and could bring the benefits of local consolidation and a stronger than expected political year.</span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-76670244805371157392017-07-16T15:16:00.005-07:002017-07-16T15:16:46.621-07:00Special Situation Ideas for the week of 17 July 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif;"><span style="background: white;">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</span>. If you have questions, feel free
to write to me on kedar@kedarcap.com<o:p></o:p></span></div>
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<b>SHORT</b>: <a href="https://www.google.com/finance?q=BBY&ei=zfFkWfGEDsGnmAGgvIqIBQ"><b><span style="color: #1155cc;">Best Buy (BBY)</span></b></a><span style="color: #333333;">:
Best Buy is a provider of technology products, services and
solutions. It has operations in the United States, Canada and Mexico.<br />
The company reports in 5 distinct segment: Consumer Electronics - home theater,
home automation, digital imaging, health and fitness and portable audio</span></span><span style="line-height: 107%;"> (approx. 33% of rev); Computing and Mobile
Phones - computing and peripherals, networking, tablets, mobile phones
(including related mobile network carrier commissions), wearables (including
smart watches) and e-readers (approx.46% of rev); Entertainment - gaming
hardware and software, movies, music, technology toys and other software (approx.
5% of rev); Appliances - major appliances, for example, refrigeration,
dishwashers, ovens, laundry, etc.) and small appliances for example, coffee
makers, blenders, etc. (approx. 11% of rev); and Services - consultation,
design, delivery, installation, set-up, protection plans, repair, technical
support and educational classes (approx. 5% of rev). The stock has had quite a run-up in its share price in the last year, a run-up
which was helped by the rise in the stock markets. The top line has remain
largely flat to down, despite this rise. Most of the growth trends impacting BBY
are directly correlated to population growth, housing recovery, and health
living trends. Aside the top line, even the gross profit and operating profit
margins have remained largely flat. So the question is – why a meteoric rise in
the stock price? The answer lies in the rise in EPS mostly, from cost cutting
and buyback in stock. Since FY15, the company has bought back stock and cut
costs, both operating and fixed – a step that has directly impacted its bottom-line.
That coupled with steady rise in housing and a positive trend in job markets has
positively impacted BBY. The positive cash flow generation has been mostly
deployed to keep the dividends and buy back the stock – not the best way to
grow the business. The company has historically traded at 10x earnings
multiple. Putting 13x earnings multiple and assuming the company earns between
$4 - $4.50, the stock can trade as high as $54 a share, which it currently is. This
also assumes an EBITDA north of $2.2bn. The recent announcement in another $3bn
in share buybacks might keep the momentum going for a bit more. However, the
risk to the downside are much higher, given the rise in stock markets, highs in
employment rate, tightening of federal reserve policy and a growth in housing
which is little long in its tooth. This coupled with the day when the magic of
cost cutting and share buyback comes to an end, the stock can tumble more than
25% in the mid 40ies. <o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><b><span style="line-height: 107%;"><br />SHORT</span></b><span style="line-height: 107%;">: <span style="color: #333333;"><a href="https://www.google.com/finance?q=NASDAQ%3AVRNT&ei=a9xrWZChD83Aeqq8i9AB">Verint
Systems (VRNT):</a> </span></span><span style="line-height: 107%;">The Company
with a $2.5bn market cap specializes in customer engagement, cybersecurity,
fraud, and risk and compliance software and services for some 10,000 customers
in 180 countries around the world. The shares have risen nearly 30% over the
past 12 months, yet its weakening track record over the past four years
suggests that investor enthusiasm is misplaced. Revenue growth has dropped
steadily, from 24% in Fy15, which ended Jan. 31, to an 8% decline in FY17. The
sales drop happened despite the company having spent $765mn in that period on
three major acquisitions designed to increase sales. Over the same period,
costs for R&D, among other expenditures, have risen about twice as fast as
revenue. Based on GAAP, the company
reported a loss of 47c in FY17 from an income of 99c in FY14. Although non-GAAP
EPS is only 15x estimates EPS of $2.71 for FY18, GAAP EPS estimate is just 16c
for a P/E of 250x. For a company that has been growing through acquisitions, stock-based
compensation; acquisition expenses; restructuring expenses; amortization of
acquired technology; and impairment charges are real costs and not
extraordinary expenses. The current valuation is priced to perfection. Its
customer-engagement business, which is about two thirds of sales, and its cyber
intelligence business, which is the other third, compete with the likes of Oracle, Microsoft, and
<span style="color: windowtext; text-decoration-line: none;">Salesforce.com</span> (CRM).
If the company does not get bought by a firm expect the price to drop.<br />
<br />
<b>LONG:</b> <a href="https://www.google.com/finance?q=NASDAQ%3AHAIN&ei=GeJrWejsCIeTed6SjOAJ">Hain
Celestial Group (HAIN)</a> : The Company deals with organic and natural foods
and other products. Most recently, Engaged Capital has submitted seven
candidates for election to Hain’s eight-seat board. The fund bought into the company
at an average cost of $34.63 per share. The company has a market value of $4bn.
Engaged was an investor in Hain 2 yrs ago, and had successful activist
engagements at natural/organic companies Boulder Brands and SunOpta. Hain has a
great portfolio of organic brands, but suffered some setbacks, including a
lengthy accounting issue it rectified on its own and slowing of top-line growth
as its retailer mix evolved from natural specialty stores to major grocers.
While Hain has done a great job of acquiring brands, its poor integration of
them has led to profit margins much lower than peers. So the first opportunity
here is operational: A more-efficient supply chain and rationalization of SKUs
could double margins. The second opportunity is strategic. Hain is the last
pure-play organic food company large enough to move the needle for companies
like Pepsi and Kraft. Engaged has had a constructive engagement with
management. The investor nominated seven directors not as a power grab, but to
address the severe lack of relevant experience on the Hain board. There are
also some positive trends that might help HAIN grow. For example, approximate
annual growth in consumption of natural/organic foods over the past ten years
in the U.S. is approx. 10%. In the US, less than 10% of all foods sold is
organic/natural. While Hain has 3,000 SKUs, or stock-keeping units, only about 500
drive 90% of its revenue. If the fund plays its card right, there is a huge
opportunity to drive. <o:p></o:p></span></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-90416248512820129822017-07-04T16:14:00.000-07:002017-07-04T16:14:48.291-07:00<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="background: white; font-family: Calibri, sans-serif;">I have been busy running money for some families, for over 3 years. Decided to take a break and restart the blog while I decide my next move/job.</span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="background: white; font-family: Calibri, sans-serif;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="background: white; font-family: Calibri, sans-serif;">I have done research on few ideas here, others I have read online on Barron’s and other publications</span>.
If you have questions, feel free to write to me on <a href="mailto:kedar@kedarcap.com">kedar@kedarcap.com</a><o:p></o:p></div>
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<span style="background: white; font-family: Calibri, sans-serif;"><br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">MACRO: </span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">The S&P’s 500 is trading for roughly 18x future
earnings. The historical norm is 16x. A price/earnings multiple of that
magnitude historically has suggested limited upside. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Corporate performance in the U.S. has been pretty
good. Revenues were up 7%ish in 1Q17, and earnings were up 14%. Emerging
markets are up about 20%, and even some slow-growing European markets have
performed well. There are other things happening: some deal activity, and a lot
of activist investing. Leveraged buyout firms are flush with capital and ready
to invest. So are private equity firms, which are investing in expensive public
equities. The Federal Reserve will
likely raise rates again. It is a little behind the curve, and the equity
market is a little ahead of itself. Flat or rising rates will limit multiple
expansion, which accounted for two-thirds of the S&P 500’s 98% return in
the past 5yrs.There might be some moderation in the second half. Complacency is
high and volatility is low, so we are set up for a more rugged market in the
second half. Then there is also concern about auto loans, which have climbed to
about $1.2Tn from $820bn in ’07, and student loans, which are now $1.3T, up
from $410bn.</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> <br />
<span style="color: #333333;">The biggest risk is that the Federal Reserve
continues to raise rates as the economy begins to show signs of slowing. The
pace of economic activity is an important thing to watch. So is Washington. The
rhetoric coming out of Washington is that a lot of positive things are
happening. Investors are overly optimistic about what the Trump administration
can accomplish.<o:p></o:p></span></span></div>
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<span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><br />
Internationally, China is delivering 6.5% economic growth like clockwork,
although China is slowing, and that is the key to what will happen in the 2H
and beyond. A few months ago, China appointed a new head of the China Banking
Regulatory Commission to reform the financial sector. Reform means that China
will have to squeeze out excessive leverage and systemic risks, and it can’t do
that without doing some damage. Right now, China has a mini credit crunch. It
is the only country in the world with an inverted yield curve, and not because
the central bank has tightened rates. It is because the system has tightened
due to reforms. The shadow banking system has been squeezed, and the banking
system is short of deposits, so there is a funding problem.</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
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<b><u><span style="color: #2e75b6; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: #2E75B6; mso-style-textfill-fill-colortransforms: lumm=75000; mso-style-textfill-fill-themecolor: accent1; mso-themecolor: accent1; mso-themeshade: 191;"><br />
STOCKS<o:p></o:p></span></u></b></div>
<div style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;">
<b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Bed Bath & Beyond (BBBY)</span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">:
It is based in Union, N.J. The stock is down 12% this year. Amazon.com is going
to take share from everyone, but it can’t kill everything. They do a great job
of selling dorm equipment that can be picked up at a store near campus. As long
as the housing cycle continues, that is good for BBBY. BBBY earned $4.58 a
share in the FY17 ending February. They can make FY18 is $4.30 a share. At $35,
it is at 8.2x. The company just increased its dividend by 20%, and reduced its
share from 245m 5yrs ago, to 145m. BBBY is a better-than-average retailer and
can be a good money maker over 5 years. <br />
<br />
</span><b><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">CyberArk Software<span style="color: #333333;"> [CYBR]:</span></span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">
A leader in the small, but growing, area of privileged access management
security. Its products take aim at hackers attempting to infiltrate corporate
networks. CyberArk has a 25% market share and could grow as enterprises shift
their focus from protecting firewalls to protecting against targeted user
attacks. Unlike a lot of smaller vendors, it is profitable and keeps expenses
low. The company could have strategic value to </span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Check Point Software Technologies<span style="color: #333333;"> [CHKP]. CyberArk could generate $2.25 a share of free
cash flow in 2019. At 25x earnings along with their net cash, stock can go to
$65 a share.</span><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Johnson
Controls<span style="color: #333333;"> [JCI]:</span></span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">
JCI provides building products and technology solutions, including air systems,
HVAC controls, and fire and security solutions. Following the September 2016
merger of Tyco and Johnson Controls, and the spinoff of the auto-parts
business, Johnson became one of the largest multi-industry companies. George
Oliver, head of Tyco, will become the combined company’s CEO next year. The
company will realize more than $1bn, or $1 a share, of cost synergies in the
next 3ys. It could produce about $4 a share of cash earnings in the fiscal year
ending in Sep-19 versus $2.80 in FY16. That could propel the stock into the
mid-$60s in the next two to three years.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Ichor Holdings [ICHR]</span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">:
went public in December. It trades for $23.31. The company is based in
California. It has 25.6m shares, a $597m market cap, and net cash of $10.3m, or
40 cents a share. It was founded in 1999 and later bought by a private equity
firm, which recently sold some stock. Ichor is a leader in the design,
engineering, and manufacturing of fluid and gas delivery systems for
semiconductor capital equipment. Two major customers: Applied Materials and </span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">LAM Research<span style="color: #333333;"> [LRCX. Pro forma revenue can be of $576m this year,
which will be up 42%. Gross profit margins can be 16.8%. Fully taxed, the
company could earn $2.02 a share, versus $1.32 in FY16. Demand in semiconductor
land is being driven by two things: FinFET or Fin Field-Effect Transistor,
which involves putting many more layers on a chip, and 3D NAND flash memory. Customer
spending on semiconductor capital equipment is expected to rise to $36bn this
year, from $33.8bn. </span><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Valvoline<span style="color: #333333;"> [VVV]</span></span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">: makes
automotive lubricants. It was a spin-off from </span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Ashland Global Holdings<span style="color: #333333;"> [ASH]. VVV has 200m shares outstanding. The stock trades
at $22. The company could generate $2.1bn in revenue. Earnings could climb from
$1.20 to $2 a share by 2021.<o:p></o:p></span></span></div>
<div style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;">
<span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">The
company had $1.3bn in debt and VVV could be debt-free by FY21. The company
generates a lot of cash. Stock can double in 5yrs. Dividend is 20 cents a share.
Electric cars don’t have pistons, so they don’t need lubricants. But Valvoline
also sells industrial lubricants and equipment, and will sell other sorts of products
over time. There are 1bn cars in the world, and 250mn in the U.S. Another 100mn
will be produced this year. If 8% of cars are electric in 5yrs, that’s not a
significant impact. <o:p></o:p></span></div>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<b><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">Cott<span style="color: #333333;"> [COT]:</span></span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> There are 139m shares outstanding, and the stock
sells for $13, giving the company a $1.8bn market capitalization. Cott has made
a bunch of acquisitions and has $2.15bn of net debt. It has a growing
private-label business in sparkling water. In recent years, it also entered the
home- and office-delivery market for water and coffee in the U.S., U.K., and
Europe. Cott will generate about $450m of Ebitda this year and $550m by 2021.
U.K. currency-translation problems have caused a bit of an air pocket in the
results, as the pound has fallen to 1.29 to the dollar from 1.60 last year. In
the next few years, the stock will overcome that. We have a price target of
$21.</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
</div>
Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-26757800001371175002015-09-29T09:04:00.002-07:002015-09-29T09:04:54.228-07:00Special Situation Ideas for week of 28-September-15<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.2px;">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<br /></span><br />
<span style="color: #333333; font-family: Calibri, sans-serif; line-height: 22.4px;"><b>Energizer Holdings (ENR):</b> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Energizer
Holdings</span></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">split
into two companies on 1-Jul-15, with smaller battery operation, known as
Energizer Holdings (ENR), and <span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Edgewell Personal Care</span></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(EPC). EPC’s history began when Energizer bought the
Schick-Wilkinson Sword razor business from</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Pfizer</span></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(PFE) in FY03 and later built a business with $2.4bn in
revenue.<o:p></o:p></span></div>
<div style="line-height: 16.8pt; margin-bottom: .0001pt; margin: 0in; vertical-align: baseline;">
<span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">EPC makes 60% of its revenue from razors and shaving cream, and
30% from sunscreen and feminine products. Infant products, including
diaper-disposal system and bottles, chip in the rest. Many of the company’s
brands command high market shares. Edgewell is No. 1 in sunscreen in the U.S.,
and in shaving is No. 2 globally behind P&G’s Gillette. EPC shares
have slid 20% since the spinoff. The
drop was due to high valuation and slower growth prospects in its first full
year as an independent company. Yet, with the shares at a recent $82, it looks
like a good time to buy in. EPC owns well-known brands in shaving, sun care,
and feminine and infant care that include Schick, Skintimate, Edge, Playtex,
Hawaiian Tropic, and Wet Ones. Most of these businesses are high margin, have
high entry barriers, and generate stable cash flows. EPC is also unusual in an
industry where giants like</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Procter & Gamble </span>and
<span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Unilever</span></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">dominate. Its market capitalization is a mere $5 billion,
which makes it an attractive and very digestible asset for a larger player to
acquire. Acquisition multiples in the industry historically have been high. </span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-weight: bold; mso-hansi-theme-font: minor-latin;">Recent Deals Include</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">Unilever’s 2011 purchase of hair and skin products
specialist Alberto-Culver, for 14.4x EBITDA, and the 2010 acquisition of SSL,
the maker of Durex condoms, by</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Reckitt-Benckiser</span> for 18x EBITDA. EPC trades
at 12.3x FY16 EBITDA and the buyout potential limits the stock’s downside. Some
industry analysts price EPC at $121 implying 16x FY17 EBITDA, and 50% upside. In
FY16, starting in September, profits are expected to drop 6% on a 2.5% decline
in revenue. The weakness should prove temporary as much of it relates to the
transition to an independent company. For the past few years, slowly growing
markets, especially in the shaving category, and intense competition have
weighed on the top line. Since FY09, organic revenue growth has amounted to
only 1.3% annually. However, management has been working to jump-start growth
and increased its marketing spending on brands with the highest return
potential. There are signs that the strategy is gaining traction. In addition,
as an independent company, it’s allowing EPC to rationalize its distribution
network and cut costs. In May, Energizer’s board adopted a shareholder-rights
plan, or poison pill, that carries over to EPC and will discourage hostile
suitors until the end of the year. Its chief aim appears to be to give the new
company time to get on its feet. Company characterized FY16 as a “transition
year. EPC has a good amount of FCF with $300mn expected in FY16. It makes about 55% of its sales in the U.S.
That makes it an attractive target for a company with a large emerging-markets
presence that could enjoy revenue synergies from a combination. Unilever and</span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Colgate-Palmolive</span></span><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(CL) fit the bill. <o:p></o:p></span></div>
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<span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> </span><b style="line-height: 16.8pt;"><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><a href="http://quotes.barrons.com/DWRE"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Demandware</span></a></span></b><b style="line-height: 16.8pt;"><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span></b><span class="apple-converted-space" style="line-height: 16.8pt;"><b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(DMND)</span></b></span><span class="apple-converted-space" style="line-height: 16.8pt;"><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> </span></span><span style="color: #333333; font-family: Calibri, sans-serif; line-height: 16.8pt;">sells cloud-based services to retailers and
consumer-brands companies used to develop and manage e-commerce across various
platforms, including online, in-store, mobile, and social networking.
E-commerce sales are expected to grow about 20% annually through FY18. DMND is
growing faster yet, with annual revenue up an average of 50% over the last five
years. What DMND lacks, however, after nearly a decade in business and three as
a publicly traded company, are profits. Moreover, despite falling from $76 to
$52.17, shares trade at a sky-high 233x projected earnings. Losses have widened
steadily based on GAAP. And Wall Street’s 2015 projections seem optimistic.
Then there are high noncash expenses, such as stock-based compensation packages
which aren’t going to let up any time soon. Furthermore, other expenses are
lately outpacing sales. In the 2Q, subscription sales rose a blistering 45%
from a year ago, but costs grew at a 60% clip. DMND gets the great majority of
its revenue based on a subscription model, taking a small percentage of
customer sales over its platforms. It relies heavily on its ability to add new
clients and create new services to further integrate clients into its system.
But attracting new customers and developing new features has been increasingly
expensive for DMND due to intensifying competition. Some key metrics have
slowed. Annual customer growth fell to 31% last year from 35% in 2013 and 50%
in 2012. The backlog increase dropped to 37% last year from 67% in 2013. While
many companies would love these numbers, the trend is going the wrong way for DMND
valuation. Average subscriber revenue grew 4% in the last quarter from the
year-ago period, much less than the 13% average of the previous five quarters.
That could mean DMND is signing up smaller customers, or prices are eroding. The
biggest caveat to the skeptical thesis is a potential buyout. DMND rivals have
been acquired in the past two years at 5x – 8x annual sales. But even at 8x subscription
revenue that would come to less than $1.5 billion—25% below its current market
value.</span></div>
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<b><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">Autodesk (ADSK)<span style="color: #333333;">:</span></span></b><span style="color: #333333; font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> The
stakes are higher this week as<span class="apple-converted-space"> </span>its
annual investor day on 29-Sep-15. Shares of the design-software pioneer have
lost almost a quarter of their value in 2015, and investors are grappling with
the company’s plan to embrace the cloud, a major transformation that will dry
up earnings temporarily. By the <b>middle
of FY16</b> ADSK will sell its last perpetual license, a fancy term for boxed
software. Thereafter, designers, engineers, and filmmakers who rely on ADSK
will need to buy subscriptions for the products, all delivered via the cloud.
The new business model stretches out revenue over 4 to 5 years, but doesn’t
change upfront costs. Thus the hit to earnings, which could fall substantially
in 2016. This is a multiyear story but the stock could benefit much sooner. ADSK’s
computer-aided design, or CAD, software remains a crucial tool for creating
physical objects, which are now brought to life almost universally through
software. ADSK’s flagship program, AutoCAD, has a leading share of the market.
The company continues to roll out new products, including new ways to manage workflow
at construction sites. The shares could jump 50% in the next 18 months as
investors get more comfortable with ADSK’s transition to the cloud. The change
in revenue model seems to be the right thing to do for the business. The optics
of the revenue makes it look worse than it actually is.<o:p></o:p></span></div>
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could slip 1.1%, to $2.49bn, for the fiscal year ending in Jan-16, as the
company trades one-time software purchases for smaller recurring payments. The
decline means ADSK could lose report negative earnings for the year which are
expected to bottom in fiscal FY17, and then rise from thereon. That’s a long
timeline, but investors are used to looking ahead once they understand an
opportunity. The subscription transition
has been a recipe for success if it’s done correctly. ADSK already offers
products powered by the cloud, and sees a future in which the cloud can offer
the vast computing power required by its resource-intense applications.</span><span style="color: #333333; font-family: Calibri, sans-serif; line-height: 16.8pt;"><b><br /></b></span></div>
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<span style="color: #333333; font-family: Calibri, sans-serif; line-height: 16.8pt;"><b>Vantiv (<a href="http://www.nasdaq.com/article/vantivs-cards-and-services-benefit-from-new-tech-cm523710"><span style="color: #333333; text-decoration: none; text-underline: none;">VNTV</span></a>),</b>
originally a spinoff from Fifth Third Bank, stands to benefit from this
industrywide shift as it operates on both sides of the same market: It provides
a full suite of payment services to merchants on the one hand; and on the
other, it produces the physical cards for financial institutions across the
U.S. VNTV is the second-largest merchant acquirer in the U.S., representing an
18% market share in total payment transactions, overtaking a unit ofBank of
America (</span><span style="color: #333333; font-family: Calibri, sans-serif; line-height: 16.8pt;"><span style="color: #333333; text-decoration: none; text-underline: none;">BAC</span> )
in 2014. First Data ranked at the top. VNTV also ranks as the No. 1 U.S.
merchant acquirer in PIN debit transactions. An acquirer is a bank or other
institution that accepts card payments in the merchants' behalf. On the
financial services side, Vantiv holds a 10% market share in the U.S.,
representing more than 1,400 banking and financial customers. It is the
electronic middleman that enables and links electronically retailers and
point-of-sale systems to the card brands and to the card-issuing institutions.
Major clients includeMacy's (<span style="color: #333333; text-decoration: none; text-underline: none;">M</span> ),Office
Depot ( <span style="color: #333333; text-decoration: none; text-underline: none;">ODP</span> ),Kroger
(<span style="color: #333333; text-decoration: none; text-underline: none;">KR</span> ),Walgreens
Boots Alliance (WBA), In-N-Out Burger,Wendy's (WEN),Comerica Bank (CMA)
andFifth Third Bank (FITB). More recent additions include Rabobank,Capital One
Financial (COF) and the U.S. Postal Service. The time when customers paid for
their purchases by swiping their credit cards and signing a paper receipt is
coming to an end. New cards with a microchip and PIN have made their inroads
into the financial payments market. The transition to chip cards, or what the
industry calls EMV migration, has challenged the industry. October is the
target for the so-called "liability shift." After the shift, when a
transaction takes place, the party with the weaker technology will bear the
cost of the possible hack or fraud. That's why most national merchants,
retailers and banks have been working hard to issue the EMV cards and install
EMV card terminals. Those cards carry a chip and are accessible with a PIN
instead of the classic magnetic cards that require a signature. Chip cards will
enhance the security on that end, the risk may shift to the weaker links in the
industry: small and medium-size businesses and online users. That's where
Vantiv comes in. In addition to being a leader in the EMV transition, Vantiv
also has taken steps beyond it.</span><b style="line-height: 16.8pt;"><span style="font-family: "Calibri",sans-serif; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span></b><span style="color: #333333; font-family: Calibri, sans-serif; line-height: 16.8pt;">Vantiv
has been growing via acquisition. It has made three acquisitions in recent
years. At the end of 2012, it acquired Litle, an independent e-commerce payment
processor for Internet and direct-response marketing transactions. Its customer
base includesOverstock.com (OSTK), Ancestry.com and Wayfair (W). The other two
acquisitions relate to the integrated payment space. The company is certainly
benefiting from a positive secular trend. Payment security at the small and
midsize merchant level is a key driver of growth for the larger, more
sophisticated merchant processors like Vantiv. Vantiv also plans to use its
large cash position to consider offshore acquisitions, grow its core business and
return capital to shareholders. </span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-58137001526378120422015-09-21T06:47:00.001-07:002015-09-22T05:23:16.136-07:00Special Situation Ideas for week of 21-September-15<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.2000007629395px;">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<br /></span><br />
<b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;">TransUnion (TRU)</span></b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;"> TransUnion whose services
include providing credit scores for consumers went public on June 25. TRU TRU
provides risk and information services to businesses and consumers. It offers
consumer reports, risk scores and analytics to businesses, primarily in credit
risk management. Businesses use its information services for a number of
functions, including acquiring new customers, assessing a consumer's ability to
pay for services, measuring and managing debt portfolio risk, collecting debt
and verifying consumer identities.Consumers use its services to view their
credit profiles and access analytical tools that help them understand and
manage their personal information and take precautions against identity theft.
TransUnion has operations in more than 30 countries. TRU has been doing well in
the U.S. amid a strengthening housing market, rising auto sales and a
brightening jobs picture. All of these trends have led to increased demand for
financing and the credit checks. TRU is also positioned well in some good
growth markets internationally, and they've gotten into some other domestic
areas that have growth, like public records data and parts of the health care
market. TRU is one of the 3 largest global credit reporting bureaus, and the
last to go public. Other two are Equifax and Experian. TRU filed for an IPO in
2011 but withdrew the offering a year later after it was sold to Advent
International and a unit of Goldman Sachs TRU’s core service is consumer credit
data, but it has extended into data sets underutilized" by the consumer
credit reporting agencies. They include public records data such as court
judgments, bankruptcies and driver history data, including traffic tickets and
other court records. An improving economy and jobs picture usually means more
consumer debt, which increases demand for TRU products. TRU also owns majority
stake of 55% in Credit Information Bureau CIBIL, biggest credit bureau in
India. TRU is a bit smaller than Equifax and Experian in terms of market share,
but it's still a major player. TRU is well diversified in its customer base. It
offers services to customers in financial services, insurance, health care,
real estate and other industries. Acquisitions have helped TransUnion broaden
its lineup. For example, last year it acquired an 87.5% ownership interest in
Drivers History Information Sales, which collects traffic violation and
criminal court data.</span><o:p></o:p></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Vitamin Shoppe (VSI),</span></b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"> racked up same-store sales growth of more than 5% from 2006 to 2012.
However this year sales at stores open at least a year are expected to grow by
less than 1%, as demand for vitamins and supplements has weakened. VSI also has
had trouble integrating the acquisition of FDC Vitamins. <i><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">At</span></i> about 6.5x EBITDA, below larger rival GNC
Holdings at 9x—the shares look to be discounting ample turnaround potential.A
new CEO, Colin Watts is a veteran of Weight Watchers and Walgreens. Watts
is focused on cutting costs, overhauling stores, and completing the integration
of FDC. Those actions are expected to lead to earnings growth in FY16. With a
negligible $15m of net debt and a 7% free-cash-flow yield, VCI is well
positioned to step up the pace of stock buybacks. Industry analyst put its
value at $47, implying 9x FY16 EBITDA. VSI operates about 700 stores in 45
states; Puerto Rico; and Canada. Vitamin and supplement demand has been weak,
due in part to negativity surrounding an investigation earlier this year by the
NY AG’s office into herbal supplements. VSI, in particular, has seen sales of
weight-management products fall sharply. As Vitamin Shoppe moved manufacturing
from third-party contracts to FDC Vitamins, known as Nutri-Force, sales
disruptions occurred, resulting in some out-of-stock products. Management has
been remedying the issues, and expects any negative impact to be resolved by
the end of FY15. In the next 3 yrs, the company plans to move 40% of the
manufacturing of private-brand products in house, helping increase Gross
Margins. While 20% of VSI sales come from higher-margin private brands, GNC’s
private-label business chips in 55%. Management announced a $100 million
buyback in May, and has $117 million authorized in total, equal to about 11% of
shares outstanding. In April, activist investor Carlson Capital disclosed a
stake in Vitamin Shoppe that now totals 6.6%.<o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Clifton Bancorp (CSBK)</span></b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">, with $1.2 billion in assets, operates 12 branches in northeast New
Jersey. The bank completed its $170 million conversion in April 2014. At a
recent $13.99 the stock trades for 1.04 times tangible book value, a discount
to peers that go for closer to 1.2 times. The dividend yield is 1.7%. Clifton
is the second most overcapitalized bank in the country, with tangible common
equity standing at 30% of total assets. As the bank deploys its capital into
stock buybacks, earnings per share will rise. In time, the stock’s discount
will narrow. In April, Clifton passed the one-year restriction on making share
repurchases that follows an offering, and has since been aggressively buying
its stock. By the end of June, it had bought back 1.5 million shares, reducing
its share count by 5%. More buybacks over the next few quarters are likely.
This year, Clifton is expected to earn $8.5 million, or 33 cents a share, on
$30 million in revenue. Credit quality is pristine. Nonperforming assets are
less than 1% of total assets. Residential mortgages account for nearly 90% of
total loans, but Clifton plans to build out its commercial lending business.
Success there would also provide a lift to earnings and its shares.<br />
<br />
<b>Medallion Financial (Taxi)</b> is a
leading lender to individuals and companies seeking to own and operate yellow
cabs through the purchase of a medallion, which is bestowed by the New York
City Taxi and Limousine Commission and allows drivers to pick up passengers who
hail them on the street. In all, there are only about 13,000 medallions
available, which has at times made them a very secure commodity to lend against.
At their peak in 2014, New York City medallions went for $1.3mn. However, Uber
pulled up in 2011, and its influence began to grow with the popularity of
smartphones. Uber’s promise of easy hailing of a car via smartphone and the
possibility of a lower fare have proved extremely attractive to riders—and
devastating to medallion prices. Recently, a medallion was valued at $875K,
down about 30% from the peak. TAXI currently trades at 6x FY16 earnings and
sports a dividend yield of 15.7%. The selling seems overdone, amplifying Uber’s
effect, and obscuring the rest of Medallion’s business. Total yellow-taxi cab
ridership has declined, but it hasn’t plummeted. The number of rides slid 8%,
to 165m, in FY14, from a peak of 179m in YY12. TAXI amid the volatility limited its risk by
tightening its credit standards. In addition, TAXI diversified more than a
decade ago. TAXI began lending to dry cleaners and laundromats, and bought a
firm specializing in high-interest financing making home-improvement loans. The
company also provides credit to recreational-vehicle dealers, and offers some
medallion loans. A year later, TAXI bought an RV and marine lender from Leucadia
National (LUK). Consumer loans accounted for 40% of managed loans and 64% of
Medallion’s earnings in the second quarter. Cab medallion loans, about 70% of
them made in New York, remain a significant line of business at 51% of managed
loans, but account for just 19% of interest income. The loss rate on
Medallion’s total portfolio is 1%. The firm also raised the stock-buyback
authorization to $26 million, to counter a large short position of 3.3 million
shares, or 15% of the float. New York’s cabs have faced all kinds of
rivals—from limousines, to green cabs with limited travel parameters, to rogue
drivers. Uber will take its share of the livery market, but is unlikely to wipe
them out.<o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";">Procter & Gamble (PG)</span></b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"> stock fell in July to $82 from
$94 and it started to look interesting. However, another 15% drop since then,
to $69.94—below the high of the previous bull market—the stock is beginning to
look cheap enough to discount a pretty gloomy future. Given its nearly 4%
dividend yield, PG’s stock could provide a relatively safe, if unglamorous,
return for a patient, income-seeking investor with a long-term outlook. PG
could deliver an attractive return, especially if the broad market’s volatility
continues or worsens. PG’s problems are known. The rising dollar is a drag,
with the household- goods giant getting 60% of its sales from overseas. Yet
that’s probably a short-term head wind, and few investors seem to acknowledge
that a stronger dollar can also help P&G’s cost side. The company has
shaved its brand portfolio significantly since mid-2013, selling noncore assets
and cutting costs. It cut its portfolio to 65 brands from 180 a few years back.
PG trade for 18x FY16 earnings $3.83, a share, not a bargain yet but lower than
the historical ratio of 19x. An investor mentions that he noticed inflection
point with an uptick in the operating margin to 19.7% in the fiscal year ended
in June from 19.3% in FY14. Similarly, returns on equity and assets have inched
up. P&G’s stock isn’t going to be a home run or even a three-bagger, but
for an income investor seeking stable ballast in a future when markets might
not be as cooperative as they’ve been for the past six years, P&G shares at
this level represent a potentially attractive refuge.<o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;"><a href="http://quotes.barrons.com/DLTR"><span style="color: windowtext; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi; text-decoration: none; text-underline: none;">Dollar Tree </span></a>(DLTR),</span></b><span style="font-size: 12.0pt; mso-bidi-font-family: Arial;"> has seen an interesting
trend lately. The discount variety-store retailer. Saw several company insiders
purchasing shares lately, and the stock—down some 20% to $66.65—is worth a
look, given the firm’s various attractions, such as average annual EPS growth
of 15% over the past decade. The stock drop has mainly to do with the $9bn
acquisition of Family Dollar. After some integration pain, that addition will
contribute to Dollar Tree, whose long-term fortunes seem brighter than the
stock price implies. When the integration is in the rearview mirror, the stock
could give a double-digit return. Family Dollar chain needs upgrading to Dollar
Tree’s higher operational and efficiency standards. The market isn’t looking
beyond the speed bump caused by the acquisition. The company continues to
expect $300 million in annual synergies within three years. In recent weeks,
four insiders began buying shares and those purchases are a significant buy
signal, given the number of insiders involved, their track records, and the
size of transactions. An analysis of the longer buying history of the other two
shows that their purchases were followed, on average, by the stock up 12 months
later 93% of the time, and by an average return of 28%. The fundamentals need
to pick up, but that doesn’t seem as unlikely as the market would have it. The
$4 or so EPS consensus for the next fiscal year seems possible once Family
Dollar starts hitting on all cylinders, and the forward P/E is 17 times, lower
than Dollar Tree’s long-term average of 22 times. The shares can potentially
rise 30% over the next 18 to 24 months, with 10% downside risk.</span><span style="font-size: 12.0pt; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman";"> <o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-9996705491570324772015-09-14T08:55:00.001-07:002015-09-14T08:56:28.096-07:00Special Situation Ideas for week of 14-September-15<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif;"><b style="line-height: 16.8pt;"><span style="color: #333333;"><a href="https://www.google.com/finance?q=svu&ei=UO32VejIFMLTeJ2UnLgJ">Supervalu
(SVU)</a></span></b><span style="color: #333333; line-height: 16.8pt;"> operates wholesale
and retail grocery businesses. SVU has cut costs, reduced its debt, shaken up
management, and sold all of the Albertsons stores it acquired in 2006. Additionally,
what can be a positive is a potential spin-off. SVU said in July that it is
considering a move to spin off Save-A-Lot, the company’s deep-discount
supermarket chain. Separating the discounter would enable SVU to focus on its
food-distribution business, which serves about 1,800 stores and accounted for
nearly half of last year’s $17.8 billion in revenue. The stock fell about 7.5%
last week on news that the West Coast supermarket operator Haggen, one of the
company’s newer wholesale customers, had filed for bankruptcy protection in
addition to comments by the CEO that SVU is seeing price deflation. An investor
believes that Save-A-Lot could generate $ 220m in in EBITDA and can be valued at
10x FY16 EBITDA, or $2.2bn, about equal to Supervalu’s total market
capitalization. Save-A-Lot, which owns and operates 431 stores and licenses
903, accounted for 26% of SVU’s revenue last year. SVU’s troubles stated when
it jointly bid for $17.4bn Albertsons deal, in which SVU took 1,100 grocery
stores and $ 6.1bn of debt. This was followd by the financial crises. SVU sold 877 Albertsons stores the following year
to an affiliate of Cerberus for $100 million in cash and the assumption of $3.2
billion of debt. SVU has cut<b><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;"> </span></b>its debt to
$2.2bn from $5.9bn in FY12. It has won back wholesale customers and attracted
new ones with better pricing. It’s remodeling 20% of its retail stores
annually, adding private-label, organic, and pet- and baby-food offerings, and
upgrading its digital platform. Shares could reach $12, more than 40% to 50%
above its trading price.</span></span></div>
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<span style="font-family: Verdana, sans-serif;"><b><span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #333333;"><a href="https://www.google.com/finance?q=pwr&ei=GDfzVZG5B8KleeLEpKAJ">Quanta
Services (PWR)</a></span></b>
is a is a provider of specialty contracting services, offering infrastructure
solutions primarily to the electric power, and natural gas and oil pipeline
industries. PWR has three major divisions: electric power, Oil & Gas and
Fiber Optic. The shares have fallen 14% since the end of 2014. Some of the
reasons for the drop are obvious: Quanta is an engineering company that helps
energy and power companies with their infrastructure needs, and exposure to
energy is a mite unpopular right now. Quanta also has been hurt by bad weather,
which forced it to cut annual profit guidance. And, new contracts have been
slower to come in than the company had expected. There are certain catalysts in
here that require close attention. One of them was the pending divestiture of
its Fiber business. On 30-Apr-15, PWR announced the sale of its Fiber business
to Crown Castle for USD 1bn. The company will use majority of the cash to buy
back its shares. Contrary to popular belief, the Oil & Gas business of PWR
is majorly exposed to the natural gas market. This market should benefit as
more and more utilities are pushed to use natural gas as a result of changes in
regulatory environment. Furthermore, gas exports are expected to increase after
4Q15, which in our opinion will lead to higher demand for capacity resulting in
the need to maintain and to build more pipelines in order to transport gas to
the export terminals. In addition to pipelines within US, there has been
ongoing talk about building pipelines from Canada to the US Gulf Coast. These
negotiations have been in limbo for couple of years that we believe should be
favorably resolved in late FY16, after the presidential elections take place.
In addition to the disposal and higher demand for natural gas infrastructure,
there seems to be an urgent need to construct, maintain and upgrade the US power
electric grid, where PWR plays a major role. Except for the share buybacks, PWR
does not have any immediate catalysts. PWR trades at 10.6x adjusted Fy16
earnings forecasts—below the group’s 12.2 multiple. In the past, PWR, according
to my own analysis can go as high as USD 35 per share.<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-60640941774058402042015-09-07T11:47:00.000-07:002015-09-07T11:47:12.602-07:00Special Situation Ideas for week of 7-September-15<div dir="ltr" style="text-align: left;" trbidi="on">
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<b><span style="font-size: 12pt; line-height: 107%;">AFTER a long hiatus, I
have decided to start writing again. The writing took a break, since I was busy
with trying to establish a small investment partnership. The partnership will
now complete its first 2 years, going on to its 3rd, having survived disastrous
markets over the last 12 months. Happy reading!!! <br /><br /><o:p></o:p></span></b></div>
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<b><span style="font-size: 12pt; line-height: 107%;"><a href="https://www.google.com/finance?q=tgna&ei=ttftVai_LMfAeN71p9gI">TEGNA
(TGNA)</a><br />
<br />
</span></b><span style="font-size: 12pt; line-height: 107%;">TGNA is a media and marketing solutions company that
operates through two business segments: Broadcasting and Digital. TGNA is a
recent spinoff from Gannett (GCI), after GCI decided to separate its paper
publishing business, mainly newspapers. The reason Ilike TGNA is because of certain
key assets it holds. Firstly, it owns “cars.com” which is one of the largest
websites for car dealers and consumers regarding information they need on cars.
This asset should benefit from the recent uptrend in car buying activity, which
is usually followed by incremental purchase of used car. In both instances,
which define the up-cycle and down-cycle in the auto industry, “cars.com”
should generate higher advertising revenues. Secondly, TGNA owns
“Careerbuilder.com”, which should benefit from the change in employment cycle
and increase in people looking for jobs within the US and outside. Lastly, and
most importantly, TGNA owns 46 broadcast stations that are watched by over 33%
of the US population. It’s also the largest owner of NBC and CBS affiliate
stations, amongst others. With the change in viewing patterns, we believe there
is a huge opportunity for TGNA to generate incremental revenue from contract
negotiations related to the licensing fees that TGNA gets paid to transmit
content (transmission fee). With approximately
90% of the contracts up for renegotiation within the next 12-18 months, TGNA
should be able to demand higher fees when these contracts get renegotiated. What
makes a good case in support of higher fees is the upcoming FY16 US
Presidential election, in addition to the upcoming US Senate races in key
states. With TGNA owning TV stations with viewership in certain key swing
states where politicians are willing to spend on pricy TV ads, the firm will be
able to negotiate from a position of strength. In addition to the elections,
further strengthening TGNA’s hand are the FY16 Olympics in Brazil that should
considerably increase TV viewership. What’s more is that both the Presidential
elections and the Olympics are happening in the same year. TGNA believes that
at current rates, it is still grossly underpaid compared to others, such as
ESPN. We believe the shares could rise 30% to 40% from their current trading
price by 4Q16.</span><span style="color: #222222; font-size: 12.0pt; line-height: 107%; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
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<b><span style="font-size: 12pt; line-height: 107%;"><a href="https://www.google.com/finance?q=pdco&ei=udftVYCUI4-9e4m7vdgK">PATTERSON
COMPANY (PDCO)</a><br />
</span></b><span style="font-size: 12pt; line-height: 107%;"><br />Patterson Company is a distributor serving three business
segments: dental, veterinary and rehabilitation supply markets. My original
thesis while establishing a position in PDCO few weeks ago, was that the
company will restructure and eventually go private. Since then, PDCO has made
announcements to reorganize their business and their management has undertaken
certain tangible actions. Of the three business segments, it announced the sale
of its rehabilitation supply business to Madison Dearborn Partners for USD
715m. While selling the smallest of the three divisions, PDCO also made an
announcement to acquire Animal Health International for USD 1.1bn. PDCO said
that it would use the proceeds from the sale of rehabilitation business to pay
down debt. The restructuring has enabled PDCO to double its veterinary business
and become a leading player in dental and veterinary space. The company is approximately
16% owned by its employees with good cash flows and a stable business model along
with a 1.8% dividend yield. I believe the company can be taken private at a
higher price than where it currently trades. There were reports last week that
the firm is exploring alternatives to be taken private, however, if it happens
soon or not remains to be seen. </span><span style="color: #222222; font-size: 12.0pt; line-height: 107%; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
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<b><span style="font-size: 12pt; line-height: 107%;"><a href="https://www.google.com/finance?q=hot&ei=x9ftVbmRAoHKecHLm7gJ">STARWOOD
HOTELS & RESORTS WORLDWIDE (HOT)</a><br />
<br />
</span></b><span style="font-size: 12pt; line-height: 107%;">HOT operates as a hotel and leisure company worldwide. HOT
initially got my attention after announcing a spin-off of its vacation
ownership business to its shareholders. Further analysis revealed that, in
addition to creating two separate companies, HOT was undervalued on sum of the
parts basis to where it was trading. My thesis was also supported by the recent
macro events, including lower fuel prices, which we believe would lead people
to travel and spend more on vacations. With prime properties in the US and
worldwide, HOT was a good name to own in that space. Furthermore, the spin-off
of its vacation rental business will make HOT a pure play hotel operator. The
two separate firms can help HOT unlock shareholder value, either as standalone
entities or as eventual takeover targets thus generating profits for our
partners over the next 12 to 18 months. The current spin-off remains on
schedule, due to be completed in 4Q15. Since we established our position, HOT
has announced that it will move further towards a service heavy model, selling
properties around the globe while retaining property management contracts. The
company also changed its top management, and retained Lazard in April 2015 to
explore financial and strategic alternatives in order to increase shareholder
value. In addition to retaining Lazard, what might further accelerate the monetization
process is the involvement of certain large hedge funds in this name, which
disclosed their positions after we bought the shares. It’s rumored that the
funds are pushing HOT’s management to pursue a sale. There have been reports in
the media that the company might have initiated a sale process, however such
reports are not confirmed. We believe the company is fairly valued closer to
USD 90 a share, more than 20% from where it currently trades. <o:p></o:p></span></div>
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<a href="https://www.google.com/finance?q=htz&ei=19ftVcnJM4PGeez5urgJ">HERTZ
GLOBAL HOLDINGS (HTZ)</a><o:p></o:p></span></b></div>
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<span style="font-size: 12pt;"><br />HTZ
rents and leases cars and trucks in the United States and internationally. HTZ
got my attention because of two major events – an admission of accounting
irregularities by HTZ whereby HTZ was obligated to restate 3 years of its
financials, and secondly, the announcement of a spin-off of HTZ equipment
rental business. A slow but steady selloff in the stock price began after the
announcement by HTZ that it will have to restate 3 years of its financial
statements. NYSE threatened HTZ with delisting if it did not comply within a
given time limit. This coupled with the knowledge that HTZ was struggling to
integrate the FY12 acquisition of Dollar Thrifty lead to a massive stock selloff.
The price fell from USD 28-USD 30 per share to the current share price of USD
17. The sell-off was made worst by reports that car rental firms will have
issues increasing car and equipment rental rates in the short term, while
simultaneously facing competition from services such as Uber. Contrary to the
popular belief, we bought the shares thinking that over the next 12 to 18
months HTZ should be able to resolve issues and regain its footing, leading to
a recovery in its share price. Since our initiating the position, HTZ announced
the appointment of a new CEO, John Tague, who is a former United Airlines
executive. This appointment comes in addition to 2 Carl Icahn nominees as directors
on the board. Carl Icahn is a known activist investor who owns more than 11% of
HTZ stock. The CEO’s appointment was followed by certain other key
appointments. In addition to appointment of John Tague, HTZ appointed Tyler
Best and Tom Kennedy as its CIO and CFO. Both worked for a firm that was owned
by Cerberus Capital and housed brands such as Alamo and National. These guys
cut costs, restructured the company, and sold it to Enterprise for a price
reportedly more than five times what Cerberus had paid. With this new management, HTZ’s goal is to
right the wrongs and grow its core business. To that extent, HTZ took the first
step and successfully restated 3 years of its financial statements, putting
aside the threat of NYSE delisting and thus engaging many demotivated
investors. Management then went on to reaffirm its $1bn share buyback program
and announced that it is looking into exiting certain non-core businesses. HTZ
also announced that it has furthered its cost cutting initiatives by, increasing
its goal of cutting costs by an additional $100M to a total of $300M. Furthering
the cost reduction goal is HTZ’s long awaited announcement to fully assimilate
Dollar Thrifty acquisition and finally integrate and streamline its IT systems
by year-end. Aside from the current ongoing turnaround that should unlock
shareholder value, investors often seem to ignore HTZ’s 16% stake in</span><span style="font-size: 12pt;"> China Auto Rental,</span><span style="font-size: 12pt;"> China’s
leading car-rental company. This stake could be worth $900 to $1bn. What
remains a key risk to our thesis is the execution by management. This execution
risk is mitigated by the involvement of two well-known activists, Carl Icahn
and Jana Partners, both of whom own substantial stakes in the company. We
believe that on the sum of the parts basis, HTZ could be worth north of $25 a
share, which is approximately 30% to 35% higher than where it currently trades.<b><o:p></o:p></b></span></div>
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<b><span style="font-size: 12pt; line-height: 107%;"><a href="https://www.google.com/finance?q=axll&ei=5dftVcDbIILGe5vXtpAJ">AXIALL
CORPORATION (AXLL)</a><br />
</span></b><span style="font-size: 12pt; line-height: 107%;"><br />
Axiall is a manufacturer and international marketer of chemicals and building
products. The company operates in three basic segments: Chlorovinyls, Building Products
and Aromatics. AXLL was formed in FY13, after the company, formerly known as
Georgia Gulf merged with PPG’s commodity chemicals business. AXLL got our
attention due to number of factors, chief among them is the business
reorganization AXLL is undergoing, and the involvement of activist shareholders
pushing the company to divest assets or put itself up for sale. This push for
sale becomes especially relevant in light of AXLL being the subject of a
takeover offer few years ago by Westlake Chemicals. Since we established our
position, AXLL announced the appointed of an interim CEO who has taken certain
tangible actions. First among them is his reiterating the timeline on the sale
of the smallest of the three AXLL segments. The management believes that the
divestiture of the Aromatics segment will happen by 3Q or 4Q of FY15. In addition to this announcement, management
announced in the most recent earnings call that it is exploring strategic
alternatives for its Building Products segment, including a sale. In response
to the question on the sale of the entire company, the CEO commented that
“every option is on the table”. We believe that if the two divestitures of
Aromatics and Building Products segment are executed properly, then it opens
the door for the sale of the remaining company. There have been recent trends
indicating consolidation in the Chlorovinyls sector – a segment that will
remain after AXLL disposes the other two business divisions. This sector was
marred in the past due to overcapacity, which impacted revenues and negated any
positive impact from lower raw materials costs. However we believe that the
recent sector M&A (eg: Olin merging with DOW’s Dow chlor-alkali division), will
lead to capacity reduction in this sector. Sold or not, the remaining AXLL segment
should report much better relative performance in late FY16. The execution risk
by the management remains, however, once again involvement of several vocal activists
mitigates that risk for us. We believe the real value of the company is
somewhere in the high 30s, closer to $38 to $40 a share.<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-29649135180805430692014-06-08T18:44:00.002-07:002014-06-08T18:44:44.710-07:00Special Situation Ideas for week of 8-June-14<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.200000762939453px;">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</span><b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><br /><br />Boise Cascade<span class="apple-converted-space"> </span>(BCC):</span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> BCC, the country's second-largest manufacturer of plywood and
engineered wood products, is another promising—and undervalued—housing play. While
the U.S. housing recovery has been slower than many expected, the market is far
from dormant. After a storm-battered winter, housing starts rose 13%
month-over-month in April, meaning that there could be lots more improvement
ahead. Madison Dearborn Partners bought the company in 2004, when Boise also
owned timberland and a paper-packaging business. Madison sold off the
timberland and paper-packaging operations before taking Boise public in
February 2013 at $21 a share. BCC has more than 4,500 customers, including
wholesalers, lumberyards, and big retailers such as<span class="apple-converted-space"> </span>Home Depot<span class="apple-converted-space"> </span>(HD). BCC could become a takeover
target. Last year,<span class="apple-converted-space"> </span>Louisiana-Pacific<span class="apple-converted-space"> </span>(LPX), a big producer of oriented
strand board, offered to buy its smaller rival,<span class="apple-converted-space"> </span>Ainsworth Lumber<span class="apple-converted-space"> </span>(ANS.Canada), but later dropped the
bid after facing tough opposition from regulators. BCC's larger competitors
include Georgia-Pacific and<span class="apple-converted-space"> </span>Weyerhaeuser<span class="apple-converted-space"> </span>(WY). Boise is in solid financial
shape, with net debt of $216 million and expected free cash flow this year. At $26.50,
BCC trades for an EV/EBITDA of 5.9x. Some in industry think that BCC’s share
price can raise to $38. Management has said its priority for its cash is
acquisitions, but according to analyst, management is open to the possibility
of returning cash to shareholders. A buyback or a dividend would likely boost
the stock.<o:p></o:p></span></div>
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<b>Office Depot (ODP): </b>ODP shares have
fallen 89%, losing $10.1bn in valuation as strong competition from online
retailers such as Amazon.com<span class="apple-converted-space"> </span>(AMZN).
On 1-Nov-13 ODP merged with OfficeMax, for $1.2bn and few days later, hired a
retail turnaround specialist, Roland Smith, as chairman and CEO. He's brought ODP
back to profitability. The CEO seems like a perfect for the task ahead: basic
blocking and tackling. ODP plans to close 400 stores, about 20% of total by
FY16 and expects to realize $675m in annual savings.<span class="apple-converted-space"> CEO wants to narrow </span>focus, eliminating
low-volume items. A detailed retailing plan should be ready by 3Q14. North
America deliver 41% of revenue, but only 9% of profit. </span><span style="color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 16.8pt;">ODP can double its EBITDA to $800m by FY16. Additionally, 75%
of ODP's store leases come up for renewal within five years, offering big
savings. Some investors think stock could rise to $8 and some think it can
double from where it is. And there's always the possibility of a sale to
Staples. The FTC included online competition in its total market assessment
when it blessed the merger of Office Depot and OfficeMax. With online rivals
like Newegg keeping the competitive pressure on, the door's open to a merger of
the superstores.</span></div>
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<span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> </span></h4>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">MeadWestvaco<span class="apple-converted-space"> </span>(MWV):</span></b><span style="font-family: Calibri, sans-serif; font-size: 11pt;"><span style="color: #333333;"> MWV is a global packaging company</span><span class="apple-converted-space"><span style="color: #333333;"> with 5 different lines of business, which
presents a great opportunity for an activist to restructure and create value. On
2-July-14, Starboard filed a 13D, in which it declared a 5.6% in MWV.</span><span style="color: red;"> <b><a href="http://www.sec.gov/Archives/edgar/data/1159297/000141588914001724/ex991to13d06297133_05222014.pdf">In the letter,</a> </b></span></span><strong style="color: #333333;"><span style="border: 1pt none windowtext; font-weight: normal; padding: 0in;">Starboard Value</span></strong><span class="apple-converted-space" style="color: #333333;"><b> </b></span><span style="color: #333333;">is
urging the board to improve operating margins, explore a separation of certain
noncore assets, and improve capital allocation. Management announced a </span><strong style="color: #333333;"><span style="border: 1pt none windowtext; font-weight: normal; padding: 0in;">$125m </span></strong><span style="color: #333333;">cost-cutting plan</span><span class="apple-converted-space" style="color: #333333;"> however
Starboard thinks it needs </span><strong style="color: #333333;"><span style="border: 1pt none windowtext; font-weight: normal; padding: 0in;">$300m in cost
cutting. The fund thinks MWV can attain </span></strong><strong style="color: #333333;"><span style="border: 1pt none windowtext; padding: 0in;">$69 per share. </span></strong><span style="color: #333333;">MWV
has five businesses: food/beverage; home, health and beauty; industrial;
specialty chemicals; and community development and land management. There two
main paths to value creation here are margin improvement and selling or
spinning off the specialty chemicals business, which is not synergistic with
the company's core business. Other ways to create value would be to sell land
assets and use $500m of debt and increased free cash flow generated from cost
cuts to buy back shares. The entire company could also be sold to one of
several strategic investors that would realize great operational synergies and be
able to monetize the company's $1.5bn overfunded pension by merging it with
their underfunded pension. The fund is also keep a close eye on the recently
announced CEO succession plan, which will be key in shaping the future of the
company.<o:p></o:p></span></span></div>
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<b>EOG Resources (EOG):</b> EOG was spun
out of Enron in 1999. Today, it is a leading E&P participant in several
prolific shale plays, including the Barnett Shale, near Fort Worth, and the
Eagle Ford Shale in southern Texas. EOG is<span class="apple-converted-space"> </span>one
of the biggest and best-run companies in the oil patch, is having a great FY14.
Its crude-oil production surged 42% in the 1Q, beating estimates and can see a
32% jump in earnings this year. This may result from EOG recently increased
output of oil and equivalents at the expense of natural gas. Helping to drive
the gains are four new plays in Colorado, as well as increased output from
existing shale plays. The Rocky Mountain sites could increase the predicted
longevity of drilling inventory by 10 years. It also has substantial acreage in
the Marcellus and Haynesville shale plays, and is well positioned to take
advantage of any rise in natural-gas prices. EOG's EV/EBITDA is 6.9x roughly in
line<span class="apple-converted-space"> </span>Chesapeake Energy<span class="apple-converted-space"> </span>(CHK) and<span class="apple-converted-space"> </span>Devon Energy<span class="apple-converted-space"> </span>(DVN), however EOG deserves a loftier
multiple than the group, given its significant drilling inventory, superior
production growth, lower debt ratio, and hefty 15.6% return on equity, compared
with an average of 9.5% among peers. EOG shares could climb another 20% to $126
as production rises, winning the company a richer valuation. <o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">Canadian Natural Resources (CNQ):</span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> Canadian tar sands developers have generally encountered a difficult
environment over the last two to three years because of the large headwinds,
such as difficulty in transporting the fuel, logistical problems, quality of
fuel and technology needed to extract oil from the sands. However, with the
increased focused on technology and interest from Asia, amongst others
catalysts, could this be a signal that fortunes in the tar sands sector are
about to improve? A good way to play this turnaround ight be CNQ that has tripled
on a split-adjusted basis since FY05. However it has languished for most of the
past two years between the high 20s and high 30s. CNQ broke-out to a new
three-year high in the low-$40s, though it is still 23% below its all-time
high. Although the tar sands are not environmentally-friendly, CNQ possesses a
number of attributes which offset this risk. CNQ is not exclusively a tar-sands
investment, as it has a well balanced portfolio across natural gas (29% of 2013
total production), North American light crude/NGLs (10%), international light
crude/NGLs (5%), North American heavy oil (27%) and oil (tar) sands (29%). The
company’s proved oil and natural gas reserves exceed 5 billion barrels of oil
equivalent, and its Horizon oil sands project has a 40-year-plus reserve life.
The company’s operating cash flow target this year exceeds its planned capital
spending by C$2.3bn and its long-term debt-to capital ratio was 28% at the end
of the first quarter (including the current portion of long-term debt). Not
surprisingly, given its cash generation and strong balance sheet, the company
repurchased 10.2m common shares in FY13 and 2.1m shares this year, out of 1.1bn
shares outstanding.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 16.8pt;"><b>Personal Note: </b>As I stated a while ago, </span><span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 107%;">CalAmp</span><span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 107%;"> </span><span style="color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 107%;">(CAMP)</span><span style="color: #333333; font-family: Calibri, sans-serif;"><span style="font-size: 11pt; line-height: 16.8pt;">, is worth a serious look. The market for M2M hardware, software for fleet logistics and insurance telematics is </span><span style="font-size: 15px; line-height: 22.399999618530273px;">poised</span><span style="font-size: 11pt; line-height: 16.8pt;"> to be in a secular uptrend for years to come and CAMP is well positioned to take advantage of it. Those looking to invest longer term, will do well, to take a serious look into this company.</span></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com15tag:blogger.com,1999:blog-1742760178602874704.post-22361755068749437922014-06-06T13:54:00.000-07:002014-06-06T13:54:29.786-07:00Ideas For The Week of 6-Jun-14<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.200000762939453px;">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</span></div>
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<span style="color: #333333; font-family: "Arial","sans-serif"; font-size: 11.5pt;"><b>Time Inc (TIME): </b>Time Warner (ticker: TWX) decided to spin off Time
Inc. which started trading </span><span style="color: #333333; font-family: Arial, sans-serif; font-size: 11.5pt; line-height: 16.8pt;">trading on when issued basis.
The shares will be distributed on June 6, with the ticker: TIME. At USD 21, or about 10x FY14 EBIT before
restructuring charges of $2.13 a share. That estimate is from Morgan Stanley
analysts carry a fair-value range for the stock of $23 to $25 a share. Time's FCF
yield is above 10%, reflecting modest capital expenditures of around $35
million annually. The company is targeting an annual dividend equal to 30% of FCF.
Considering the prominence of its publications
and a venerable history dating back to its founding in 1922, Time has a modest
market value of $2.4 billion, making it a possible takeover candidate down the
road. Under its new CEO, Joseph Ripp, the company is moving to address these
issues and cut costs, including workforce reductions and real-estate savings.
Time incurred $63 million of restructuring charges in 2013 and it expects
another $150 million in the first half of this year. The layoffs reflect
increasing austerity at an organization once known for being a cushy place for
journalists. Time is moving its headquarters from the Time-Life building in
midtown Manhattan, in the hope to save $50m yearly from lower rental expense,
although it expects to incur $120m to develop the new space.</span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 11.5pt;"><b>Gannett<span class="MsoHyperlink"><span style="color: #115b8f;"> </span></span></b><span style="color: #333333;"><b>(ticker: GCI)</b> at recent $28, is trading under 11x
earnings. GCI’s majority of profits come from local TV stations, thanks to a
$2.2bn deal last year for Belo Corp. Meanwhile, all of Gannett's 80 local
papers, from the Argus Leader, in Sioux Falls, S.D., to the Great Falls
Tribune, in Montana, now have a pay wall in front of their Websites. The
strategy has helped stabilize revenue at the publishing unit, just as an
improving economy, political ads, and licensing fees are boosting broadcast
operations. Total sales are likely to rise 15% this year to $6bn. Broadcast is
an increasingly larger part of the company. GCI paid $215m for six Texas TV
stations; the purchase comes five months after the company closed its much
larger Belo deal, which brought 17 big-market stations into the fold. In all,
the company will have 46 stations across the country. This year more than 50%
of GCI’s $1.5bn in Ebitda will come from television. Local station groups are increasingly
insisting on big payments from pay-TV operators to carry their signals. The
so-called retransmission fees were at the center of last year's dispute between<span class="apple-converted-space"> </span></span>Time Warner Cable<span class="apple-converted-space"><span style="color: #115b8f;"> </span></span><span style="color: #333333;">(TWC) and<span class="apple-converted-space"> </span></span>CBS<span class="apple-converted-space"><span style="color: #333333;"> </span></span><span style="color: #333333;">(CBS), which owns local stations in large markets. CBS
ultimately forced the cable company to double its payments to $2 per subscriber.
In 1Q, GCI's own retransmission fees jumped 66%. GCI still benefiting from its
investment in CareerBuilder.com. On a sum-of-the-parts basis, Gannett's is
probably worth $34 -- 20% and could reach $40.<o:p></o:p></span></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-49738672957014229022014-04-27T18:34:00.001-07:002014-04-27T18:35:36.064-07:00Special Situation Ideas for week of 27-Apr-2014<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.200000762939453px;">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</span><br />
<span style="background-color: white; font-family: Arial, sans-serif; font-size: 13px; line-height: 18.200000762939453px;"><br /></span>
<b style="line-height: 16.8pt;"><span style="font-family: Calibri, sans-serif; font-size: 11pt;">CalAmp Corp. (CAMP)</span>: </b><span style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 16.8pt;">CAMP develops and markets
wireless communications products and solutions for various applications
worldwide. It operates in two segments, Wireless DataCom and Satellite. The
Wireless DataCom segment offers solutions for mobile resource management applications,
machine-to-machine communications space, and other emerging markets that
require connectivity anytime and anywhere. The company has been unduly punished
due to certain short term factors coming into play and has fallen almost 45% in
the last 2 months. CAMP has been growing revenues at a pace of 30% YoY. The
firm has consistently increased its gross and operating margins. A move into
software, in addition to hardware sales should help CAMP improve margins on an
ongoing basis. CAMP currently trades at 15x forward earnings. It has almost no
debt and $30 mn in cash, almost 10% ROE and 30% ROIC. The shares have been
discarded by short term oriented investors, however should rally in 2H14. The
company is up for generating revenue from 3 insurance telematics contracts
coming into play in 2H14. Additionally, legislation is Brazil on stolen vehicle
recovery, where CAMP is a major player, should be enacted in 1H15. This will
start generating revenue for CAMP in 2H14, as auto companies start complying. Additionally,
its contract will Caterpillar will actually start generating profits in 2H14. This
might turn out to be a huge opportunity. Short team weakness in 1Q1 due to
lower than expected revenue from solar contract is supposed to be more than
made up for, in the later part of the year. Additionally, its business to
provide hardware to trains reported weakness in FY11 and FY12 and bottomed out
in Fy13. It’s also due for a rebound in FY14. With the recent acquisition of
RSI, CAMP is also becoming a player in the municipal and state government markets,
giving its sticky customer base. CAMP has a history of generating incremental
revenue and EPS. With certain major catalysts coming into play in 2H14, CAMP
shares can almost double from here.</span></div>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><a href="http://quotes.barrons.com/VIVO"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Meridian Bioscience</span></a></span></b><b><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span></b><b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(VIVO) </span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">is a stock that
defensive-minded investors might consider, he says. It's 20% below its high
reached just last Jan. 10, for what appear to be timing issues more than
anything else. The main cause of this quick shellacking was a disappointing
quarterly result. On Jan. 22, the company reported that in its fiscal first
quarter ended Dec. 31, sales fell 1%, to $44.8 million, and net income to $7.4
million, or 18 cents per share, from $8.5 million, or 20 cents. On the revenue
side, the company was hurt by delays in shipments and ordering patterns, a
seasonal shift in influenza, fewer hospital admissions and higher spending.
Meridian indicated that these were timing issues and that most of the shortfall
would be made up in the second quarter, which it will soon report. The company
stuck to its fiscal 2014 EPS guidance of 98 cents to $1.03. Despite its
relatively small size, Meridian has a pretty good history of competing with
much bigger testing firms. It's a leader in some commonly used tests, such as
for C.difficile, an infection commonly acquired at hospitals and health-care
facilities by patients given certain antibiotics. Meridian is also switching
its products to its "illumigene," or molecular technology process,
that looks at the DNA of the pathogen and is faster, cheaper, and easier to use
than the traditional immunoassay methods, which measure the immune response to
a pathogen.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">Meridian
has four molecular tests approved by regulators and is awaiting a decision on
three more. The illumigene kits are a kind of "razor and blade"
system. The new system is simpler and more economical, with no major capital
requirements for hospitals, labs, clinics, and doctors. That provides a
"sustainable competitive advantage. VIVO has good balance sheet, a nearly
4% dividend yield, a history of 25% returns on equity, and strong market
positions in diagnosing gastrointestinal, serological, parasitological, and
fungal diseases. <o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><a href="http://quotes.barrons.com/SYMC"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Symantec</span></a></span></b><b><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span></b><b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(SYMC),</span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> which produces data
security software, has fallen by about 10.81% from for $23.34 a share last
November. Despite the selloff that followed the firing of its CEO in March, the
company can grow its earnings at about 15% a year over the next five years as
it implements the former CEO's plan to reorganize the company and cut costs.
Based on the calculation of five-year forward normalized earnings of $3.30 a
share, it will reach a fair value of $33 eventually.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">AerCap Holdings<span class="apple-converted-space"> </span>(AER)</span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">, an aircraft-leasing company has nearly doubled from $21.31 on
Dec. 10, 2013, to $40.16 following an announcement that it would acquire a
larger private competitor, International Lease Finance Corp. The latest rise is
just a small part of the value realized. AerCap's return on invested capital is
about 15%. At $7.50 a share in five-year normalized earnings, fair value can be
$65 a share.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><a href="http://quotes.barrons.com/ZTS"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Zoetis</span></a></span></b><b><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span></b><b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">(ZTS)</span></b><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"> - Is down about 15% from highs, on mostly one-time issues.
Management guided analyst estimates for 2014 down, forecasting 2014
"adjusted" EPS at $1.48 to $1.54 and revenue of $4.65 bn to $4.75 bn,
below previous analyst expectations of about $1.62 and $4.77 bn, respectively.
ZTS's non-GAAP adjusted results exclude traditional nonrecurring items such as
acquisition costs, restructuring charges, and initial public offering expenses,
but not stock compensation. The roughly 10 cents per-share guidance shortfall
has hurt the stock and was due to both operational and nonoperational issues.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">About
5 cents derives from foreign exchange, and the rest from pork and cattle
life-cycle issues, among other things. For example, the U.S. pig population has
been hit hard by the porcine epidemic diarrhea virus, which killed more than 4
million piglets over the past year. These are generally short-term industry issues
and aren't nearly as important as the beneficial long-term trends for animal
health and medicines. There is an emerging global middle class with a diet
moving more toward protein and the consumption of meat. Getting medicine to
market in animal health is much more straightforward than the human-drug
approval process, and there are no intermediaries like pharmacy-benefit
managers to worry about. ZTS's steady and stable 5% to 6% long-term secular
sales growth and 10% EPS gains seems like a good story in this market. As ZTS
gets its legs it should be able to expand operating margins to about 30% from
25% over the next five years. ZTS trades at about 20x FY14 EPS. Also Eli Lilly
agreed to acquire</span><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;"><a href="http://quotes.barrons.com/NVS"><span style="color: #333333; mso-bidi-font-family: "Times New Roman"; text-decoration: none; text-underline: none;">Novartis</span></a></span><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"> </span><span style="color: #333333; font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: Arial; mso-hansi-theme-font: minor-latin;">' (NVS) animal-health division for about $5.4 bn, which is 4.3x
sales or a 25-to-30 P/E. The same ratios applied to Zoetis result in a $35 to
$40 price, 15% to 30% higher than Friday's close of $30.16.Zoetis offers a
solid business with pricing power and good financial characteristics, and one
that's not an Internet business.</span><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><o:p></o:p></span></div>
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<b style="font-family: Calibri, sans-serif; font-size: 11pt; line-height: 16.8pt;"><span style="color: red;">Personal Note: </span></b><span style="color: #333333; font-family: Calibri, sans-serif; font-size: 11pt; line-height: 16.8pt;">I am long CAMP. I bought it around $24 and bought more stock when it fell to $18.</span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com4tag:blogger.com,1999:blog-1742760178602874704.post-28847368392311442952014-03-10T18:08:00.002-07:002014-03-10T18:08:17.412-07:00Special Situation Ideas for week of 10-MAR-2014<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Verdana, sans-serif;"><b><u><span style="font-size: 11pt;">URS
(NYSE: URS):</span></u></b><span style="font-size: 11pt;"> </span><span style="font-size: 11pt;">This is an interesting time to take a look at a
company, that’s a play on US and internal infrastructure. The company operates
in 4 major sectors – Government (roads, bridges, water infrastructure, nuclear,
among others); Oil & Gas, Power and Industrial. The firm has underperformed
its peeps for a while, however, the firm does not look like it’s badly managed.</span></span><br />
<span style="font-size: 11pt;"><span style="font-family: Verdana, sans-serif;">The company trades at 11x earnings, with a 1.9%
yield. I believe that this and next year should see capital spending,
especially on infrastructure and capital spending, especially on Industrial,
and Oil & Gas sectors should pick up in the next two years.<o:p></o:p></span></span><br />
<span style="font-size: 11pt;"><span style="font-family: Verdana, sans-serif;">Another interesting thing that has happened in
the last month, is the involvement of some very well-known hedge funds in this
business, among them Jana Partners, which has declared a 9.9% stake in the
company at an average cost of $47.46 per share. <b>Jana Partners</b> is having
discussions with the company regarding capital and corporate structure. <b>March
14 </b>is the new<b> </b>deadline
for submitting director nominations. This deal is a little different from the
usual activist situation for Jana; it started out as a passive 13G investment
that was converted to a 13D after the company announced poor financial results.
For now, it's an amicable engagement, with the company agreeing to extend the
deadline for stockholders to nominate directors so it can continue negotiations
with Jana. Despite generating $1.5bn of FCF and completing $5.3bn of
acquisitions since 2006, the company has grown its EV by only $2.5bn. These
acquisitions left the company with many separate businesses that haven't been
integrated, and with strong cash flow significantly in excess of earnings. <a href="https://www.blogger.com/null" name="U30551109403NBH"></a>So, the activist opportunities here are to use free
cash flow to buy back stock, divest some of the businesses that haven't been
working out, and/or take advantage of the FCF to sell the entire company or do
a leveraged buyout. Because URS' long-time chairman/CEO is expected to retire
this year, and his logical successor recently resigned, now is likely a good
time to proceed, since activist agendas are much easier to implement when the
management team is in transition. <o:p></o:p></span></span><br />
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<span style="font-family: Verdana, sans-serif;"><b><u><br />Chemtura (CHMT):</u></b> This is a FY10 post-bankruptcy play. The firm
filed for bankruptcy pressured by rising raw material costs and declining
sales. It eventually emerged in FY10 with a liquidation value of $750M. It had
4 segments, Consumer division, and Industrial Performance Product (IPP),
Industrial Engineering Product (IEP), and Agricultural division. Recently, the firm got out of consumer unit,
by selling it for USD 315M. The company
is in the process of selling its agricultural unit, which is expected to be
sold around $800M - $1bn. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">The company
has discussed using the cash from divestitures, to return it to shareholders
and deleverage the balance sheet. The company is expect to generate FCF of $72M
In in FY14, and currently has net debt of approx. $350M, with $550M in cash. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">The firm has
been going through some major restructuring and cost reductions since FY10,
that are expected to bear fruit in FY14. In addition, IEP unit, which has been the most
problematic is expected to have hit a bottom is should begin to improve going
forward. The IEP+IPP division generated $310M in EBITDA and I expect them to
generate $282M this year and improve going forward. Agro solutions generates
about $75M in EBITDA. At 8x EBITDA, I
believe that investors get agriculture division for free, if they can buy this
company at $25 range. The stock can easily be valued at more than $35, in a
year. The kicker is the management. The CEO of CHMT was appointed by the Debtors
committee, and is the former CEO of Hercules. He was instrumental in the sale
of the company to Ashland in FY08. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><b><u><br />BroadRidge Financial (BR):</u></b> Given the current market environment,
everything thinks about investing in such a firm that would largely remain
unaffected by the daily gyrations that markets go through. I recommend to look
at BR. BR is a service company that provides trade processing and Investor
communications business to the financial service industry. It services 4 major
clients, mutual funds, Corporates, Banks and broker dealers. The firm controls
90% of the proxy market, approx. 33% of equity processing and 55% fixed income
processing market in the US. There are huge regulatory hurdles to enter and
compete with BR, putting it in a good position. Additionally, the company is
technologically savvy and disruptor in the space. It also is helping its
clients save cost (eg: it does fixed income processing for its clients at 25%
cheaper cost than institutions can do internally). Since it’s the leading firm in the US, its
innovation should only produce modest growth. Its also going into buy side, a
new area for BR. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">The kicker
comes from its recently announced JV with Accenture, to scale its capabilities
and products into Europe and Asia. With its credibility already working for
Major US institutions, it should not have trouble cracking those markets and
providing the next leg up in terms of revenue generation and profits. It
already counts SocGen as its client and is growing in Europe. BR comes with a
solid balance sheet. It has $300m of net debt and approx. $300M of FCF. The
firm sports a 2.2% dividend yield and trades at 17x earnings. It stands to
benefit, as major banks and broker dealers cut costs and look for a credible
partner to provide them with the same quality services and BR might just prove
to be that. If it continues to execute, BR stock can easily be $50+ in 1 to 1.5yrs.<o:p></o:p></span></div>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 11pt;"><br />
</span><b><u><span style="font-size: 11pt;">GameStop
(GME):</span></u></b><span style="font-size: 11pt;"> </span><span style="font-size: 11pt;">After
reporting weak sales of videogames during the holiday season, GME fell 18% to
$37.50. The market reaction creates an opportunity for investors. The shares
now trade for 10x FY14 earnings. Plus, the company has $5 a share in cash on
its balance sheet and no debt. The stock yields 3%, and last year the company
bought back 7% of its shares. GME has no debt on the balance sheet, healthy
cash flow and sports a 3% dividend yield. GME remains the dominant seller of
videogames, with a roughly 50% market share, and sits at the center of a lucrative
ecosystem involving new and used games. <a href="https://www.blogger.com/null" name="U305265485991GH"></a>GME's sales
of new-game hardware nearly doubled during the holiday period as <a href="http://online.barrons.com/public/quotes/main.html?type=djn&symbol=SNE"><span id="ataglance_stock_DWC_label"><span style="color: windowtext; text-decoration: none; text-underline: none;">Sony</span></span></a>
introduced its new PS4 and <a href="http://online.barrons.com/public/quotes/main.html?type=djn&symbol=MSFT"><span id="ataglance_stock_DWC_label"><span style="color: windowtext; text-decoration: none; text-underline: none;">Microsoft</span></span></a>
rolled out its Xbox One. Software sales, however, fell 22.5%, which GME attributed
to reduced sales of games for the older Sony and Microsoft consoles, but the
Street worried that the report signaled a slide in the disc portion of the
business. <a href="https://www.blogger.com/null" name="U30526548599VWH"></a>One reason that software sales might have
been weak is that consumers bought millions of new PS4s and Xbox Ones—which
cost $399 and $499, respectively—leaving little money to spare for new games,
which usually cost about $60 apiece. Given the high upfront investment,
new-game sales may follow.<a href="https://www.blogger.com/null" name="U305265485997NH"></a> However, there seems to
be a strong <a href="http://en.wikipedia.org/wiki/2014_in_video_gaming">pipeline
of games in FY14</a> and FY15. According to some industry estimates, this stock
can be valued at $55 to $60 a share on modest new and used software sales
growth and flat hardware sales.</span><span style="font-size: 11pt;"> <o:p></o:p></span></span><br />
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<span style="font-family: Verdana, sans-serif;"><b><br />Insulet Corporation (PODD):</b><span style="color: red;"> </span>Insulet (PODD), an insulin-device maker that
has risen 130% over 2yrs. But there is a problem – PODD is a one-trick pony,
selling OmniPod and has yet to make a profit since 2005, the time it had the
tubeless-pump market pretty much to itself. There are other big companies with
deeper pockets, such as Medtronic (MDT) and Roche Holding (ROG). There are
about 1.5 million to 1.7m Americans with Type 1 diabetes, of which 25%-30% use
some kind of pump, rather than manual injections. Medtronic has been talking
about a "patch pump" for a while, but investors should pay attention
to the September settlement that terminated its patent-infringement lawsuit
against Insulet. PODD can use some patents of Medtronic but in return,
Medtronic is licensed to use some of PODD’s, including the one for automatic
needle insertion, an important OmniPod feature. The settlement precludes
Medtronic from making a replica of the OmniPod, but doesn't stop it from
producing a similar product—that is, a wearable, disposable tubeless pump with
automatic needle insertion. Profit expected by 2014 and 2015. This company
might make a good short.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><b>Personal Note</b>: I am long, CHMT, URS, GME and BR.</span><span style="font-family: Calibri Light, sans-serif;"><o:p></o:p></span></div>
</div>
Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-20071851416897195672014-02-08T17:50:00.001-08:002014-02-09T06:23:09.950-08:00Special Situation Ideas for week of 10-Feb-2014<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Arial","sans-serif";">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. <o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Constellium (CSTM):</span></b><span style="font-family: "Arial","sans-serif";"> CSTM is a producer of specialized aluminum products.
The company went public in 2013 at $15 a share, and is not well known. The firm
is 9% owned by Rio Tinto, 20%+ by Apollo, 10%+ by FSI (arm of the French
Govt.), about 5% some by the management and the rest is public. For a more detailed view, you can read <b>CSTM’s F-1</b> (<a href="http://www.sec.gov/Archives/edgar/data/1563411/000119312514022443/d664180df1.htm">Click
here</a>).<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">CSTM converts
aluminum into specialty products. It earns a conversion spread [the difference
between aluminum and finished-product prices] and has minimal exposure to the
underlying aluminum prices. It produces aluminum plate for aerospace customers,
can stock for beverage manufacturers in Europe, and sheet and crash-management
parts for automotive manufacturers. CSTM is a play on structural changes in
both the aerospace and automotive markets. The demand for lighter, stronger
materials that are environmentally friendly will significantly increase
aluminum usage in the years ahead. CSTM enjoys long-term relationships with key
customers including Airbus, Boeing, Audi, and Mercedes. These companies require
suppliers' plants to be certified, which provides barriers to competitors.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">In aerospace,
CCTM is the global leader in plate and one of only two producers with certified
production plants in both North America and Europe. CSTM signed a 10-year
contract with Airbus to use Airware on the A350, and deliveries should start in
2015. Overall, this market is expected to grow by about 10% a year.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">CSTM is also
the largest producer of aluminum sheet for a vehicle's core body structure,
known as Body-in-White, for the premium European auto makers. Next year could
mark a significant step-change in demand in North America, with the rollout of
the new Ford [F] F-150. Demand in NorthAm could grow to 450K tons by FY15 and a
1 mn tons by 2020 from less than 100K in FY12. The firm announced on 23-Jan-14
that it had formed a joint venture with UACJ to supply Body-in-White to North.
America.] This is being driven by federal fuel-economy regulations mandating an
average of 55 miles per gallon for corporate fleets by 2025.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">CSTM has 105mn
shares outstanding. Net debt is USD 225mn. The company is headquartered in the
Netherlands and reports financials in euros. Yet, the shares are listed in New
York. CSTM is expected to earn about $2 in 2013 with potential to earn more
than $2.50 a share in t2 to 3 years. It could start to pay a dividend this
year. Firm can go upto USD 35 in 2 years The company estimated that the
replacement value of its assets is north of USD 8.2bn, which compares to an
enterprise value of USD 3bn today.<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";"> GAP Inc. (GPS):</span></b><span style="font-family: "Arial","sans-serif";"> Most of the street is bullish on the
stock with people expecting 17% gain in addition to a 2.1% dividend yield. At
12.6x earnings, GAP sells at discount to all of its domestic peers, despite
having the best margins; competitors being ANF, ARO, ANN, H&M, Inditex. GAP
stores, baby gap and gap kids: 40% of sales, old navy: 38%; Banana republic: 18%;
rest by intermix, athleta (competes with lulu lemon) and Piper lime. Operating
margins have climbed to 13% from 10%, 3 years ago. Growth will come from stores
of Athleta (1st store in FS in FY11), Piper- lime with first store in in Soho,
NY in Fy12. GAP’s Athleta is benefitting from Lulu lemon’s mishaps.
International expansion should also help the company and justify multiple
expansion. Additionally, company has history of buybacks. Fisher family, which
controls 40%, is not selling, so slowly the firm is going private because of
buybacks. Once the firms is seen as a global player, then at 15x earnings,
which is S&P 500 multiple, share should be valued at $49 based on FY15
earnings of $3.27. The company has a ROE of 40%+; 13x P/E; holds USD 1bn cash
on the balance sheet with USD 1.25bn debt.<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";"><br />Timken (TKR):</span></b><span style="font-family: "Arial","sans-serif";"> TKR manufactures, markets and sells
products for friction management and mechanical power transmission, alloy
steels and steel components. The big story here is the imminent spin-off of the
company in Summer of FY14. TKR will spin-off its more cyclical steel business
from its bearings business which should yield much better return for the long
term shareholders. The company yield
about 1.6%. There are two activist investors involved who have pushed for the
spin-off. There was a huge pension overhang on the company, which is not a
factor anymore. IN the most recent conference call, the company stated that its
pension are now fully funded, which in addition to other cost restricting
efforts, should free up the cash flow, to be reinvested or returned to
shareholders. On the SOTP basis, TKR post spin should trade at USD 69 a share,
which is a hefty return from the current $55.
Activist Presentation (<a href="http://www.sec.gov/Archives/edgar/data/98362/000110465913029264/a13-10050_1px14a6g.htm">click
here</a>)<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Few Other Names:</span></b><span style="font-family: "Arial","sans-serif";"> As i wrote earlier, FY14 will be a
volatile year for stocks, and unless something unforeseen happens, i think
market this year will trade sideways to modestly up. However, in this stock
picker market, we are better off investing in defensive value plays with good
dividends that are playing into a growth theme and has some support. Here are
few names worth revisiting: <a href="http://valuestocks-kedar.blogspot.com/2013/04/special-situation-ideas-for-week-of-8.html">Hess
(HES):</a> I wrote about this a while ago, and its coming back into the price
range, where this might again be a good buy.
Another two names that are worthy of a look for long term shareholders
is <a href="http://seekingalpha.com/article/1664302-mantech-international-a-contrarian-play-on-sequestration-and-afghanistan-drawdown">ManTech
(MANT)</a> and <a href="http://seekingalpha.com/article/1722842-leidos-a-new-spin-off-to-play-the-cyberintel-and-healthcare-sectors">Leidos
(LDOS)</a> which spun off SAIC in FY13. Another name for those, looking to play
the energy efficient space, might do themselves a favor by reading a really
good article on <a href="http://news.investors.com/business-the-new-america/020514-688993-cree-shines-with-brightest-led-lights.htm">Cree
(CREE)</a> which was written in IBD.<o:p></o:p></span></div>
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<b><span style="color: red; font-family: "Arial","sans-serif";"> Personal Note:</span></b><span style="color: red; font-family: "Arial","sans-serif";"> </span><span style="font-family: "Arial","sans-serif";">I am invested in GAP, LDOS, MANT, CSTM
and TKR.<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-26642109622832629162014-02-02T14:21:00.001-08:002014-02-02T14:21:11.962-08:00Thoughts on the 2014 markets<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Arial, Helvetica, sans-serif;">US markets have done pretty well over the last two years,
and by that reason, to some, the emerging and EU markets look much more
promising for this year. That might be
so, however, for an investor sitting in the United States, it’s sometimes very
difficult to calculate the risks that come with investing in the emerging
markets. <br /><br /><o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">EU has done very well, over the last year. If you heard Mark
Lasrey, someone I greatly respect, then there have been many turnaround
opportunities in Europe which could have generated double digit returns.
However, Europe has faced its own crisis, with unemployment still very high in
some of the so called richer countries. Spain, France, Italy in particular are
worth mentioning. Germany has performed relatively well over the last year or
two – however it’s still tied to Europe in many ways. UK is doing well, but its
more due to the easy monetary policies of the central bank. Global companies
such as Nestle, however, are always a sure and safe bet. <br /><br /><o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The emerging markets have presented us with lot of opportunities
as well, however, it’s very hard to gauge the political risks that comes with
investing there. Recent slowdown in China, political opposition in Bangkok,
sudden changes in rules ( for example gold) regarding imports in India,
problems in Pakistan and Afghanistan, volatility in the Philippines should
provide us with a note of caution – especially those sitting in US trying to
play the emerging markets. Vietnam and Singapore might be good cases of
investments, however, you better be visiting those places before putting your
money to work.<o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Middle-east is a story that speaks for itself. The markets in Brazil, Argentina, and
Venezuela are not doing that great.<br /><br /><o:p></o:p></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">So this brings me back to the US and this year seems to be
an interesting market – interesting because the Federal Reserve has started to
taper and there is a change in guard. Stan Fisher is coming back as the
vice-chair of the Federal Reserve and he has been a proponent of intervention
in the past and so is Janet Yellen. I believe that those focused on the US
markets investing for the medium term should focus on special situation
equities. I believe FY14 will present
good opportunities for turnarounds, spin-off’s, and restructurings.
Additionally, I also expect that FY14, given the political climate around the
globe, will be a year in which stock markets as well as commodity markets will
undergo a lot of volatility. Therefore, those who are looking to do well this
year, are better off investing in companies that are light on debt (especially
those firms whose debt is coming due in FY15, given the cost of debt will rise),
have some yield with good margins and solid business model. Furthermore, the
same companies, if they have a catalyst attached to them such as major divestitures,
restructuring/turnarounds will perform better than the markets in general. This
year might not be the year to bet on risky stocks that have done well in the
past just because there was ample liquidity created by the federal reserve. I
would say, in general, it will be a good year to play names and focus more on
solid balance sheets rather than income statement!</span><o:p></o:p></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com2tag:blogger.com,1999:blog-1742760178602874704.post-5414949488954500712014-01-15T17:43:00.000-08:002014-01-15T17:43:27.382-08:00Agilent's November Spin-Off To Create Upside For Investors<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span><div class="MsoNormal">
<span style="font-family: Georgia, Times New Roman, serif;">I have posted an article on Seeking Alpha which goes into
details about how to profit from going long Agilent (A). It’s for medium to
long term investors.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">If anyone reading do invest in special situations, this
might make a good read. Either you can <a href="http://seekingalpha.com/article/1944241-agilents-november-spin-off-to-create-upside-for-investors?source=notify_popup">click
here</a> or go to Seeking Alpha and check out "Kedar special
situations" Its under long ideas. <o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">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.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;">Thank you</span><o:p></o:p></div>
</div>
Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com3tag:blogger.com,1999:blog-1742760178602874704.post-47397717693317970702013-12-15T19:11:00.003-08:002013-12-15T19:12:35.643-08:00Special Situation Ideas for week of 16-Dec-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Calibri; font-size: 11.0pt;">Those looking into some catalyst might want to ponder over
these names for the week, that I have come across in my reading.<o:p></o:p></span></div>
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<span class="company"><b><span style="font-family: Calibri; font-size: 11.0pt;">Whiting Petroleum</span></b></span><span class="apple-converted-space"><span style="font-family: Calibri; font-size: 11.0pt;"> </span></span><span style="font-family: Calibri; font-size: 11.0pt;">(WLL): For many years,<span class="apple-converted-space"> </span><span class="company"><b>Whiting
Petroleum</b></span><span class="apple-converted-space"> </span>(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<span class="apple-converted-space"> </span><st1:state w:st="on">North
Dakota</st1:state>'s Bakken and<span class="apple-converted-space"> </span><st1:state w:st="on">Colorado</st1:state>'s<span class="apple-converted-space"> </span><st1:place w:st="on">Niobrara</st1:place>, 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<span class="apple-converted-space"> </span><st1:state w:st="on"><st1:place w:st="on">Colorado</st1:place></st1:state>,
initial results on a small number of wells have been really good. <o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11.0pt;">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<span class="apple-converted-space"> </span><st1:state w:st="on"><st1:place w:st="on">North Dakota</st1:place></st1:state>, a state
that has been very friendly to drilling interests, Whiting has amassed huge
acreage. While<span class="apple-converted-space"> </span><span class="company">Continental Resources</span><span class="apple-converted-space"> </span>(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<span class="apple-converted-space"> </span><st1:state w:st="on">Colorado</st1:state>'s<span class="apple-converted-space"> </span><st1:place w:st="on">Niobrara</st1:place><span class="apple-converted-space"> </span>is
also attracting attention. WLL trails Colorado drilling leaders like<span class="apple-converted-space"> </span><span class="company">Anadarko</span><span class="apple-converted-space"> </span>(APC) and<span class="apple-converted-space"> </span><span class="company">Noble</span><span class="apple-converted-space"> </span><span class="company">Energy</span><span class="apple-converted-space"> </span>(NBL) but<span class="apple-converted-space"> </span> 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<span class="apple-converted-space"> </span><st1:state w:st="on"><st1:place w:st="on">Colorado</st1:place></st1:state>, rock-smashing
Whiting will have to keep an eye on political opposition.<span class="apple-converted-space"> </span><st1:state w:st="on">North Dakota</st1:state><span class="apple-converted-space"> </span>is safe but<span class="apple-converted-space"> </span><st1:state w:st="on"><st1:place w:st="on">Colorado</st1:place></st1:state><span class="apple-converted-space"> </span>is not. WLL , according to industry
estimates might have<span class="apple-converted-space"> </span> amassed
500,000 acres in unidentified areas, with some believe 200K of the 500K is in<span class="apple-converted-space"> </span>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<span class="apple-converted-space"> </span><st1:place w:st="on">North America</st1:place><span class="apple-converted-space"> </span>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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri; font-size: 11.0pt;">Comverse (CNSI): </span></b><span style="font-family: Calibri; font-size: 11.0pt;">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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri; font-size: 11.0pt; mso-bidi-font-family: Arial;">Gentherm (THRM): </span></b><span style="font-family: Calibri; font-size: 11.0pt; mso-bidi-font-family: Arial;">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.</span><span style="font-family: Calibri; font-size: 11.0pt;"><o:p></o:p></span></div>
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<b><span style="font-family: Calibri; font-size: 11.0pt; mso-bidi-font-family: Arial;">ImmunoGen
(IMGN):</span></b><span style="font-family: Calibri; font-size: 11.0pt; mso-bidi-font-family: Arial;"> 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</span><span style="font-family: Calibri; font-size: 11.0pt;"><o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com3tag:blogger.com,1999:blog-1742760178602874704.post-70121904257584412582013-12-08T17:19:00.001-08:002013-12-08T17:19:57.075-08:00Special Situation Ideas for week of 8-Dec-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<b><span style="font-family: Calibri;">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. </span></b></div>
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<b><span style="font-family: Calibri;"><br />
</span></b><b><span style="font-family: Calibri; mso-bidi-font-family: Arial;">Ciena
Corporation (CIEN): </span></b><span style="font-family: Calibri; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;">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.<b><o:p></o:p></b></span></div>
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<b><span style="font-family: Calibri;">Berry Plastics Group (BERY): </span></b><span style="font-family: Calibri;">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. <b> <o:p></o:p></b></span></div>
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<b><span style="font-family: Calibri;">Valero Energy (VLO): </span></b><span style="font-family: Calibri;">VLO operates as an independent petroleum refining
and marketing company.</span> 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.<b><span style="font-family: Calibri; mso-bidi-font-size: 8.0pt;"><o:p></o:p></span></b></div>
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<st1:city w:st="on"><st1:place w:st="on"><b><span style="font-family: Calibri;">Northfield</span></b></st1:place></st1:city><b><span style="font-family: Calibri;"> Bancorp (NFBK)</span></b><span style="font-family: Calibri;"> – 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! </span><span style="font-family: Calibri;">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. </span><span style="font-family: Calibri;"> </span><span style="font-family: Calibri;">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.</span></div>
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<b><span style="font-family: Calibri;">International Game Technology (IGT) – </span></b><span style="font-family: Calibri;">The story for this firm is interesting.<b> </b>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 <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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 <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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. <o:p></o:p></span></div>
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<span style="font-family: Calibri;"> </span><b><span style="font-family: Calibri;">Take-Two (TTWO) - </span></b><span style="font-family: Calibri;">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.</span></div>
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<b><span style="font-family: Calibri;">Nestlé:</span></b><span style="font-family: Calibri;">
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 <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> food
outfits like General Mills (GIS) and Kellogg (K).<o:p></o:p></span></div>
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<span style="font-family: Calibri;"> </span><b><span style="font-family: Calibri;">Unit (UNT): </span></b><span style="font-family: Calibri;">The company is in the business of<b> </b>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</span></div>
</div>
Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-60438686898339395552013-11-12T08:22:00.001-08:002013-11-12T08:22:58.472-08:00Special Situation Ideas for week of 11-Nov-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-size: 12pt;">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.<o:p></o:p></span></div>
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<b><span style="font-size: 12pt;">Skyworks Solutions (SWKS): </span></b><span style="font-size: 12pt;">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. <o:p></o:p></span></div>
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<span style="font-size: 12pt;"> </span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<b><span style="font-size: 12pt;">Calgon Carbon (CCC): </span></b><span style="font-size: 12pt;">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.</span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<b><span style="font-size: 12pt; line-height: 115%;">American Eagle Outfitters (AEO):</span></b><span style="font-size: 12pt; line-height: 115%;"> 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.<o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; line-height: 115%;">Prooftpoint (PFPT): </span></b><span style="font-size: 12.0pt; line-height: 115%;">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.<o:p></o:p></span></div>
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<b><span style="font-size: 12pt; line-height: 115%;">Infinera
(INFN): </span></b><span style="font-size: 12pt; line-height: 115%;">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.</span><b><span style="font-size: 12.0pt; line-height: 115%;"><o:p></o:p></span></b></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-18333508435805297752013-10-29T20:30:00.002-07:002013-10-29T20:31:21.359-07:00Special Situation Ideas for week of 29-Oct-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Calibri;"><b><u>CSG Systems International (CSGS):</u></b></span><span style="font-family: Calibri;"> The Company enjoys a </span><span style="font-family: Calibri;">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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;"><u>Consolidated
Water Co.(CWCO):</u></span></b><span style="font-family: Calibri;"> Leading developer of 14 desalination plants in <st1:place w:st="on">Caribbean</st1:place> 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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;"><u>SandRidge
Energy(SD)</u>:</span></b><span style="font-family: Calibri;"> 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. <st1:place w:st="on"><st1:placetype w:st="on">Mount</st1:placetype> <st1:placename w:st="on">Kellett</st1:placename></st1:place> 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. <o:p></o:p></span></div>
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<b><span style="font-family: Calibri;"><u>Walgreen
(WAG):</u> </span></b><span style="font-family: Calibri;">Walgreen, which has been operating Walgreens drugstores in the <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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 <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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 <st1:country-region w:st="on">Switzerland</st1:country-region>, and AmerisourceBergen (ABC), a
giant drug wholesaler based in <st1:place w:st="on"><st1:city w:st="on">Valley
Forge</st1:city>, <st1:state w:st="on">Pa.</st1:state></st1:place> 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 <st1:city w:st="on"><st1:place w:st="on">Alliance</st1:place></st1:city>
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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;"><u>Skyworks
Solutions (SWKS</u>):</span></b><b><span style="font-family: Calibri; font-size: 8pt;"> </span></b><span style="font-family: Calibri;">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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;"><u>ImmunoGen
(IMGN):</u></span></b><b><span style="font-family: Calibri; font-size: 8pt;"> </span></b><span style="font-family: Calibri;">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. <o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com1tag:blogger.com,1999:blog-1742760178602874704.post-88807865364483390312013-10-20T21:11:00.000-07:002013-10-20T21:11:12.991-07:00Special Situation Ideas for week of 20-Oct-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Calibri; font-size: 11.0pt;">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.<o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11pt;"><b><u>Kulicke & Soffa Industries
(KLIC)</u></b></span><span style="font-family: Calibri; font-size: 11.0pt;"> 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 <st1:place w:st="on">Asia</st1:place>, 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. <st1:state w:st="on"><st1:place w:st="on">Pennsylvania</st1:place></st1:state>
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.<o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11pt;"><u><b>Athlon Energy (ATHL)</b></u></span><span style="font-family: Calibri; font-size: 11.0pt;"><b> </b>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 <st1:place w:st="on"><st1:placename w:st="on">Permian</st1:placename> <st1:placetype w:st="on">Basin</st1:placetype></st1:place>.
It lies in western <st1:state w:st="on">Texas</st1:state> and stretches across
into southeast <st1:state w:st="on"><st1:place w:st="on">New Mexico</st1:place></st1:state>,
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.<o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11.0pt;">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.<o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11.0pt;">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<o:p></o:p></span></div>
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<span style="font-family: Calibri; font-size: 11pt;"><b><u>Targa Resources:</u></b></span><span style="font-family: Calibri; font-size: 11.0pt;"> 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 <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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 <st1:place w:st="on"><st1:placename w:st="on">Permian</st1:placename> <st1:placetype w:st="on">Basin</st1:placetype></st1:place>,
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%.
<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-78841539686433792722013-10-06T18:19:00.001-07:002013-10-07T11:55:35.665-07:00Special Situation Ideas for week of 7-Oct-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Calibri;">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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;">Penn National Gaming (PENN):</span></b><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488867375LJB"></a><span style="font-family: Calibri;"> 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. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30486418520WGD"></a> 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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488867375FPG"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30486418520ODG"></a> Another growth factor might be the consolidation of
the regional gaming industry, whose markets have been suffering. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30486418520NUC"></a>PENN management has said it received many expressions
of interest from potential sellers. The <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> has more than 100 privately
owned gaming operations, many run by aging owners who might want to cash out. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U3048886737598G"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U304888673750GG"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488867375FWF"></a>PENN
CEO Peter Carlino, owns a 14.5% stake.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488867375GKB"></a> One
thorny issue for Penn and G&LP is excess capacity in regional gaming. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488867375L4G"></a>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 <st1:place w:st="on"><st1:city w:st="on">Henderson</st1:city>,
<st1:state w:st="on">Nev.</st1:state></st1:place> 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. <o:p></o:p></span></div>
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<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30486418520QAB"></a><b><span style="font-family: Calibri;">PICO Holdings (PICO):</span></b><span style="font-family: Calibri;"> own a water-resources company, a West Coast home
builder, and a canola-seed crushing company. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800MBH"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800F3B"></a> PICO seeks out
undervalued assets. Over the years, it has evolved from an insurance business
into a company with three core divisions. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800C1B"></a>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%.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U304888768008HG"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800LQC"></a> Industry estimates the stock could be worth
about 50% to 75% more. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800W9D"></a><o:p></o:p></span></div>
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<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800HAF"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800FCH"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800USD"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800NQF"></a><span style="font-family: Calibri;">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 <st1:state w:st="on">Nevada</st1:state> and <st1:state w:st="on"><st1:place w:st="on">Arizona</st1:place></st1:state>. 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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U304888768004SG"></a> In February PICO entered into an
option agreement with <st1:placename w:st="on">Lincoln</st1:placename> <st1:placetype w:st="on">County</st1:placetype> water district in <st1:state w:st="on"><st1:place w:st="on">Nevada</st1:place></st1:state> to sell 7,000 acre-feet of water
rights for $12,000 per acre-foot, well above the company's cost.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800JAF"></a> 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 <st1:place w:st="on"><st1:city w:st="on">Monterey
Bay</st1:city>, <st1:state w:st="on">Calif.</st1:state></st1:place><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800XN"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800CJ"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800L4E"></a>
Meanwhile, the Northstar canola refinery is poised for growth. <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800P1D"></a>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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30488876800FRC"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U304888768002SC"></a> 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. <o:p></o:p></span></div>
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<b><span style="font-family: Calibri;">NCR (ticker: NCR):</span></b><span style="font-family: Calibri;"> <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489430300M8"></a>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.<o:p></o:p></span></div>
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<span style="font-family: Calibri;">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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489430300ZO"></a> Its primary business is ATM’s which
have benefited from the upgrades in technology by <st1:country-region w:st="on"><st1:place w:st="on">U.S.</st1:place></st1:country-region> 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 <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region>.
It now gets 50% of its revenue from overseas.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U3049056968260"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="PAGE1"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30490569682R7C"></a><a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30490569682CZH"></a> 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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U304894303009F"></a> 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.<o:p></o:p></span></div>
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<b><span style="font-family: Calibri;">Genworth Financial (GNW</span></b><span style="font-family: Calibri;">):<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342I7E"></a> GNW’s mortgage unit
could benefit, as the Federal Housing Administration ceded market share to
private entities in providing mortgage insurance.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342UGD"></a> 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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342GPD"></a> 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.<a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342OCB"></a> <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342KUE"></a>Shares can be priced at $20 <a href="http://www.blogger.com/blogger.g?blogID=1742760178602874704" name="U30489432342OVB"></a><o:p></o:p></span></div>
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<span style="font-family: Calibri;">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. <o:p></o:p></span></div>
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<b><span style="font-family: Calibri;">Infinera (INFN):</span></b><span style="font-family: Calibri;"> 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.<o:p></o:p></span></div>
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<b><span style="color: red; font-family: Calibri;">Personal Note:</span></b><span style="font-family: Calibri;"> I have sold my HES CALLS expiring in Jan-14 at 40%
profit. I still hold BWLD puts expiring March 2014.<o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com2tag:blogger.com,1999:blog-1742760178602874704.post-1500847333632320902013-10-01T08:10:00.000-07:002013-10-03T06:53:46.737-07:00Leidos - A New Spin-Off To Play The CyberIntel And Healthcare Sectors<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif;">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.</span></div>
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<span style="font-family: Verdana, sans-serif;">If anyone reading do invest in special situations, this might make
a good read. Either you can<span class="apple-converted-space"> </span><b><a href="http://seekingalpha.com/article/1722842-leidos-a-new-spin-off-to-play-the-cyberintel-and-healthcare-sectors"><span style="color: red;">click here</span></a></b><span class="apple-converted-space"> </span>or
go to Seeking Alpha and check out "Kedar special situations" Its
under long ideas for Leidos International (LDOS). <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">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.<o:p></o:p><u1:p></u1:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><b><u><span style="color: red;">Personal Note:</span></u></b><span class="apple-converted-space"> </span>I sold my HES calls expiring in Jan-14 at a 40% gain and
I am long BWLD puts, expiring March-14. <o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">Thank you</span><span style="font-size: medium;"><o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0tag:blogger.com,1999:blog-1742760178602874704.post-2097053033422775002013-09-17T08:44:00.000-07:002013-09-17T08:44:18.049-07:00Special Situation Ideas for week of 17-Sept-2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-size: 12pt;">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. <o:p></o:p></span></div>
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<b><span style="font-size: 12pt;"><a href="https://www.google.com/finance?q=NYSE%3ACST&ei=1HI4UrDDDpbulgPcAg">CST
Brands:</a> </span></b><span style="font-size: 12pt;">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.</span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="font-size: 12pt;">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.</span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="font-size: 12pt;">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.</span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="font-size: 12pt;">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.</span><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
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<span style="font-size: 12pt;">In the next 18 months, as CST benefits
from its independence, the stock could climb 20%.<o:p></o:p></span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><u>Timber:</u></span></b><span style="font-size: 12pt;"><u> </u>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 : <b>Rayonier (RYN)</b> yielding
3.5% and trading at 13x EV/EBITDA and <b>Potlach
(PCH),</b> yielding 3% and trading at 13x EV/EBITDA.</span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><u>Canadian
Energy Services:</u> </span></b><span style="font-size: 12pt;">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%. </span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><u>Diebold
Incorporated:</u> </span></b><span style="font-size: 12pt;">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.</span><b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></b></div>
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<b><span style="font-size: 12pt;"><u>FutureFuel Corp:</u> </span></b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">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?<b><o:p></o:p></b></span></div>
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<b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><u>Recent
News:</u></span></b><span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"><u> </u>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. <o:p></o:p></span></div>
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<span style="font-size: 12.0pt; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Also, there have been round of
spin-offs in the last few months. Those looking at these situations should be
paying closer attention! <o:p></o:p></span></div>
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Kedarspecialsituationsinvestinghttp://www.blogger.com/profile/14458100958000357320noreply@blogger.com0