Sunday, August 19, 2007

Barron's Summary (TSCM, ANF, CFC, MI, CAB, EMC, NBR, WM, MTN, T, JSDA, MELI)

Barron’s cover discusses Jim Cramer, of (TSCM), and his stock picks that seem to underperform. Article is highly entertaining, so I decided to post it fully. Read here.

An interview with fund manager highlighted, only US listed stock he likes in ANF.

It's time to peruse the financial sector because inexpensive shares are plentiful. Battered stocks like Countrywide (CFC) and MGIC (MTG) could be bargains. Thrifts could be takeover targets. Other mentioned stocks include CIT, GNW, COF, ABK, MBI, BSC, JPM, TRV, WB, WM, MET, ETFC and LEH.

The shares of Marshall&Ilsley (MI) look like a steal at around 44, and could be worth as much as 55. In M&I shareholders get a bank with solid prospects and a slice of a potentially hot tech stock.

The Cabela’s (CAB) stock, which took a thumping during the recent credit-market squeeze, could climb 30% in the next year as store openings, big money makers, continue apace.

EMC (EMC) will benefit directly from VMware's (VMW) rising profits, and will also enjoy gains in the sale of storage-area networks, thanks to virtualization's growth. It could be a $22-23 stock.

Nabors' (NBR) shares look enticing. Bulls think that the stock, now below 30, ultimately could hit 50. A big wild card: the possibility that it eventually will be an acquisition target.

“The Trader” column discusses WaMu (WM), saying that the co will presumably pick up share in a chastened mortgage mkt with healthier lending standards when the dust settles. WaMu also has the liquidity to absorb newly originated loans onto its balance sheet, having pared its loan portfolio by some $28bn and increased core deposits by $5.2bn. A 28% slide this year had sent shares below 33 last week and lifted the co's yield toward 7%. "While I would not call the dividend yield well protected, I see no reason that it would be cut," notes Punk Ziegel analyst Richard Bove. If this holds true, investors might make more money on the WaMu yield than from the overall mkt's gain this year.

“The Trader” also highlights Vail Resorts (MTN), whose shares have skidded nearly 20% since July peak. But Vail has many things going for it. For a start, it is a standout among peers for generating free cash flow. Even in a bad winter, its resorts generate more than $100m in FCF. That figure could rise to $140m in ‘08. That's not the only reason that Rochdale Securities analyst Hayley Wolff likes the stock. Pricing power is strong, and earnings comparisons with prior warm winters have grown easier. The co's private clubs also are cash gems. Full memberships fetch $250K plus dues, with Vail pocketing the cash up front. It currently has $2.40 per share in cash deposits on its books, and that could rise to nearly $7 once two other clubs are completed. Its real-estate unit also is moving into "the sweet spot" of a development cycle, and could soon start returning cash to investors, Wolff notes. In addition, the mkt value of its land is understated on its books. Unlike most hotels or casinos, Vail's resorts straddle choice locations, and a limited supply of agreeable mountains pose daunting entry barriers for rivals. Despite '07's snow deficit, and a projected 1% decline in skier visits, Rochdale expects Vail Resorts' rev to expand 7% and its EBITDA to increase 16%. Friday's bounce took shares to 53, still near the low end of its historical range between 6-9x ‘08 EBITDA. Rochdale's Wolff reckoned the stock could be worth about 70.

The merger of AT&T (T) and BellSouth, now 6 mo’s old, has provided ample opportunity for the co to find cost savings and boost earnings. Still on the to-do list: increasing the top line to ensure long-term organic growth. The savings so far have kept shareholders happy. In the 2Q, AT&T reported 2% pro forma rev growth, but a 21% increase in adjusted EPS, thanks in part to $1.9bn of cost trims and a $3.9bn stock buyback. We'd counter that the current stock price already reflects the $3bn of merger savings AT&T will reap this year, followed by the $5bn planned for '08. "We don't see the upside in the stock," says Sushil Wagle, of J&W Seligman.

Jones Soda (JSDA) made a name for itself with funky drinks such as WhoopAss, but lately, its investors are getting whupped. And Jones could keep falling, as the soda-pop marketer tries to make more inroads into the premium canned-soda business. In June, Starbux (SBUX) dropped Jones sodas. Then, this month, Jones reported underwhelming 2Q results, its 3rd disappointment in 4 qrtrs, as concentrate case sales of Jones Pure Cane Soda came in well below expectations. Mgmt sliced its sales-growth forecast for ‘07 to 30-40% growth, from 50%. Jones still sells for an ultra-rich 125x '07 ests of 8c a share. This seems too high a price to pay for a niche co that is having problems executing on its rollout strategy.

“Technology Trader” discusses MercadoLibre (MELI), saying that there are red flags aplenty. Most of the IPO stock came from selling holders, including all the senior execs. A noncompete agreement with eBay has expired; eBay could set up shop in Latin America tomorrow. Meanwhile, the stock, which came at 18, is now at 31, giving MercadoLibre a mkt cap of more than $1.4bn. The co had ‘06 rev of $52m. Let's say it grows 50% this year and does $80m; that gives you a stock at 17x rev. In contrast, eBay trades for 6x rev. Boost the multiple to 8x for faster growth, and you still get a stock that could drop in half.

1 comment:

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