Seeking Alpha

Syndicate content
© seekingalpha.com. Use of this feed is limited to personal, non-commercial use and is governed by Seeking Alpha's Terms of Use (http://seekingalpha.com/page/terms-of-use). Publishing this feed for public or commercial use and/or misrepresentation by a third party is prohibited.
Updated: 3 hours 49 min ago

Spectrum A Significant Hidden Asset At Entravision

7 Oct ’14

The FCC in conjunction with investment banking firm Greenhill & Co. issued a presentation to broadcasters titled "Incentive Auction Opportunities for Broadcasters" covering details of the upcoming FCC spectrum auction scheduled for 2015. In the presentation Greenhill and the FCC presented estimated values of spectrum in various markets based on a top-down auction simulation using $1.50 a MHz pop national value (slightly above the $1.28/MHz pop realized in the last FCC TV spectrum auction in 2008). The simulation took into account interference issues which could impact the ability to clear spectrum in certain markets to repurpose for mobile broadband use. This interference analysis leads to some unexpectedly high values in smaller TV markets which are adjacent to major TV markets such as Hartford, Monterey, Palm Springs, Santa Barbara, San Diego (not that small, but close to the most valuable market, Los Angeles). Entravision (NYSE:EVC) owns and operates a station in

How Do You Justify FuelCell Energy's High Valuation?

7 Oct ’14

At the time of this writing, FuelCell Energy (NASDAQ:FCEL) has a market cap well over $564 million (ignoring options and warrants). Revenue is small, book value is small, cash flow is negative, net losses are large, but its backlog is big and potential prospects are even bigger. How do you value this company without the benefit of consistent profits or cash flow to form valuation ratios?

Let's try working a bit backwards. Though not a perfect comparison by any means, solar energy companies SunPower Corporation (NASDAQ:SPWR) and First Solar (NASDAQ:FSLR) trade with P/E ratios of 17 and 25 respectively. Let's be generous and go with 30 for FuelCell Energy.

A P/E of 30 on a $564 million market cap (again ignoring the dilutive effect of outstanding options and warrants) would mean $18.8 million in annual earnings or $4.7 million per quarter on average. Last quarter, the net loss to common

Laughing Gaz(prom)

7 Oct ’14

Silly me, I thought the "gaz" in Gazprom (OTCQX:GZPFY) was methane. But reading this article in Platts, I'm thinking it's nitrous oxide. I had to read it several times before I could catch a glimpse of what Sergei Komlev, head of Gazprom Export's contract structuring and price formation department, was getting at. I now see the basic problem is that he thinks the price of gas in Europe is too low. And the culprit? Speculators! Paper traders! "Virtual gas"!

Come on Sergei, you can't get originality points for that one. Round up the usual suspects and all that.

Anyways, FWIW, here are Sergei's deep, N20 inspired thoughts on the subject:

"Paradoxically, gas price erosion is taking place at a time when physical supplies are tight," Komlev said, adding that some European market analysts had acknowledged that hubs were overflowing with largely "paper" gas.

This became possible with the development

Is It Time For The Gold Bulls To Panic? It All Comes Down To The True State Of The U.S. Economy

7 Oct ’14

Everyone has a plan until they are punched in the face

The quote from Mike Tyson is probably very relevant for those invested in gold, as gold investors are certainly feeling like they have been punched in the face and their whole plan has unraveled.

With another down week for gold (the 7th in a row based on the Tuesday COT London fixes), many gold investors are ready to throw in the towel and dump their gold and mining stock investments. The plan hasn't worked and maybe its time to call it quits on gold and jump on the next Ali Baba (NYSE:BABA).

Is the gold bull dead?

We think the answer is actually fairly simple and it all depends on one thing - the US economy.

The Strong US Economy

Many of the reasons why pundits are calling for gold to go down lie directly or indirectly with the

4 Items To Watch For In Yum Brands Earnings Tuesday

7 Oct ’14

Lowered Earnings Guidance Is Mostly Priced In

Investors of Yum! Brands (NYSE:YUM) shouldn't be surprised if earnings disappoint on Tuesday. Last month, the company cut their guidance on third quarter FY 2014 earnings due to expectations that same-store sales for their China division would drop 13% mostly due to the bad publicity surrounding the meat suppler scandal involving Shanghai Husi Foods back in July. Its negative effects hurt both KFC and Pizza Hut chains within Yum! Brands' China division - the biggest revenue stream for the company today.

Back in July, Yum! Brands was trading well-above $80 per share. However, the stock dropped over 14% following the meat supplier problem. The stock dropped another 3% following their third quarter guidance, falling below $70 per share briefly.

The good news is that much of the bad news has been factored into the stock. With Yum! Brands now trading at around

McDonald's Management Needs To Get Off The Sauce

7 Oct ’14

I still think McDonald's (NYSE:MCD) management must have been hitting the sauce hard when it approved the launch of spicy yet sauce-less Mighty Wings. I'm a converted bear turned bull on McDonald's (though I haven't bought yet) as I continue to believe McDonald's is just one decent product launch away from reversing its negative domestic same-store sales trends. Consider Sonic Corporation (NASDAQ:SONC) as an example.

A lot of arguments against McDonald's these days criticize the chain as sort-of old school and not appealing among millennials. As I've mentioned in other articles, the country isn't suddenly turning against unhealthy fast food as all of McDonald's major unhealthy fast food competitors are finding growth as long as they continue to come up with creative, clever new menu items once in a while as McDonald's too has done nearly nonstop for decades until recently.

As yet another example, take a look at Sonic.

Honda Motor: Unrelenting Pressure From All Sides

7 Oct ’14

Honda Motors (NYSE:HMC) is facing multiple headwinds in its business units. The motorcycle division's ongoing earnings stagnation is a key concern while the auto segment is facing unrelenting margin pressure due to competitive pressure in most of its key markets. While FX headwind has mitigated in the near-term, pressure on both auto and motorcycle will likely to depress share price in the near-term, hence I recommend investors to switch out of HMC and into Toyota (NYSE:TM) on the prospect of better FCV demand.

(click to enlarge)

Motorcycle facing weak demand and increased competition

Motorcycle demand is facing a cyclical rather than structural issue. Honda's motorcycle sales rely mostly on emerging economies such as Brazil, Thailand and Indonesia, but the demand has been volatile recently due to soft financial conditions. Volume in key markets are either flat or down and a near-term reversal of the trend is not evident. The bigger

Diversification Sucks

7 Oct ’14

Let's face it. Being a diversified investor is terrible.

1) You will always be worse than the best performing asset class (and you will always compare your performance to the best asset class, because your brain is terribly designed for investing). For this reason your portfolio's performance will always seem mediocre.

2) You will always be worse than the current "darling" stock of the street. Maybe it's Netflix or Tesla. Or rewind 15 years and it's Amazon and Cisco. Doesn't matter. You'll wish you had some of that, and ignore the fact that you also avoided owning things like GT Advanced Technologies, Apple's glass screen supply partner who just filed for bankruptcy.

3) You will always hate something in your portfolio. Really, really hate it. Emerging markets have been a drag on a diversified portfolio for years now. Who is happy that they have owned emerging markets for the last

Really Scared Money: Which Oversold Oil Stock Bargains To Buy Now

7 Oct ’14

There has been a nearly hysterical sell-off in many oil stocks over the past three weeks or so. In my opinion, this is way overdone and quite possibly has been exacerbated by potential market manipulation from hedge funds and high frequency traders. First of all, there are some good reasons for oil to have dropped by a few dollars per barrel in recent weeks. One huge reason is the rapid rise in the U.S. Dollar which has primarily occurred due to the belief that the Federal Reserve is going to tighten policy while Europe possibly considers quantitative easing. The other reason oil has softened is because recent economic data from Europe has been weak and could potentially put the region into recession. Much of this weakness has to do with the crisis between Russia and Ukraine and the ensuing sanctions from Europe and the U.S. These sanctions are hitting countries

Oversold, 15.4% Dividend Payer Armour Residential REIT Looks Attractive

7 Oct ’14

ARMOUR Residential REIT (NYSE:ARR) is an Agency mortgage REIT. It invests in Agency hybrid adjustable rate, adjustable rate, and fixed rate RMBS. It has been selling off recently due to the "David Tepper mediated" spike in interest rates and the recent overall market pullback. Agency RMBS, especially fixed rate Agency RMBS, usually go down in value when interest rates go up. It is unclear whether the overall market pullback is over yet. However, the proclamation by David Tepper that the bond rally was over is proving to be premature. This means that Agency RMBS may hold or may even increase their values in the near term. This in turn is a positive for ARR, which pays a great dividend of 15.4% annually. If it can maintain or increase its book value at the same time it does that, it is an attractive stock to own in these uncertain

Reserve Bank Of Australia Passes On The Chance To Knock Currency While Its Down

7 Oct ’14

The Reserve Bank of Australia (RBA) delivered its pronouncement on monetary policy for October, and I half expected the RBA to shake things up. I stood ready to play a breakdown that did not happen. The RBA's statement was not all boilerplate, but it gave absolutely no indication that the RBA might target easier policy anytime soon to address economic growth that will be below trend over "the next several quarters." The RBA continues to imply with its words and actions that a turn-around is on the horizon despite a notable decline in wage growth and an unemployment rate that still has "some time yet before [it] declines consistently."

Against my expectations, the RBA also gave no follow-through to what I thought were some potentially ominous changes its September policy statement. I review them here:

  1. Weakening property markets in China are still a likely challenge in the near-term. I

Yahoo: The Bottom Line Problem

7 Oct ’14

In my latest article about Yahoo (NASDAQ:YHOO), I wondered if the stock's run thanks to the Alibaba (NYSE:BABA) IPO hype was over. Now that investors could invest in Alibaba directly, Yahoo was no longer needed as a proxy investment. Additionally, EPS estimates were declining, and analysts were mostly downgrading the stock. While Yahoo shares have held up fairly well recently, those EPS estimates continue to decline. Today, I'm going to look at this issue, as I believe it is one that investors need to be aware of.

In the following table, you can see analyst estimates for Yahoo as of Monday. Remember, these are non-GAAP estimates, which for revenues subtract traffic acquisition costs, "TACs".

(Source: Yahoo! Finance estimates page)

I bring up these estimates because the 2015 EPS average is down two cents since my latest article. That might not seem like much, but if you look at

McCormick & Co: Earnings Beat, Improved Guidance Drive An Increase In Fair Value Estimate

7 Oct ’14

McCormick & Company (NYSE:MKC) reported earnings and revenues for the third quarter that moderately exceeded my expectations, and issued an upward revision to their EPS guidance for the remainder of the year. I am increasing my fair value estimate for the stock to $71 and while I view shares as only slimly undervalued, I reiterate my stance that only a small margin of safety would be required for this steady performer.

MKC data by YCharts

Third Quarter Performance and Outlook:

McCormick reported improvement in consolidated sales of 3% year-over-year, driven in a large part by sales volume and improved product mix.

Consumer Business: Sales of consumer products increased 2% year-over-year (1.5% on a constant-currency basis), with operating income improving by 2% year-over-year, driven by improved sales in EMEA and Asia/Pacific areas primarily, as sales in the Americas actually declined. In the Americas, improved sales from higher pricing and a bevy

My K.I.S.S. Dividend Portfolio: 3rd Quarter 2014 Update

7 Oct ’14

I have been a dedicated Dividend Growth Investor (DGI) for about two years now. Even though I have already set up a fairly large DGI portfolio, I am still reading and learning about it, and constantly looking for ways to improve my investing. My KISS portfolio has dividend income as its main focus, but it also has simplicity as one of its main goals. I believe I can develop a system that is very easy to implement, but that also delivers acceptable results (acceptable to me!). As I read books and Seeking Alpha articles and comments, and as I do my own research and back tests (which I often write articles about), I am always looking for ideas that I can add to my system, or modify what I already am doing. Any modifications I do would be to either improve my results, or to make my system simpler, without

The Imminent Demise Of The American Economy

7 Oct ’14

If and when you see that in 2014 S&P 500 Companies Spend Almost All Profits on Buybacks and Payouts, in a Bloomberg report, how can you not be scared about the future of the financial world? And given the power finance has gathered over the real world, how can you not be scared about your own future? I'm open to suggestions, but I don't see it. Because I think that what we're looking at here is the imminent demise of the corporate world, and therefore the financial world, and the entire US economy as we know it.

Companies need to invest their earnings into projects that will generate profits, into the development of products and services that they can sell to the world out there. If they instead use their earnings to buy back their own shares, they're on a fast track to oblivion, because they can't keep on

Volatility Returning To Currency Markets

7 Oct ’14

Monday the dollar gave up much of Friday's gains that were driven by stronger than expected US employment situation report. We haven't seen such volatility in currency markets in some time. What happened?

(click to enlarge) Source: Investing.com

On one hand we have a developing story in the Eurozone as a number of economists continue to believe that the ECB will have to undertake government bond purchases. The central bank will probably need to increase the Eurosystem balance sheet by at least €1 trillion in order to be credible. But it will be impossible to purchase enough ABS and covered bonds without drastically distorting the markets. These markets and the TLTRO program just aren't sufficiently large to achieve such balance sheet expansion without a more traditional QE program that involves purchases of government bonds.

However Mario Draghi dampened expectations for a full QE program at the last ECB press conference.

Does Park Electrochemical Corporation Have Any Upside After The Latest Results?

7 Oct ’14

Last week, Park Electrochemical Corporation (NYSE:PKE) announced its results for the last quarter and the results continued to disappoint the investors. After falling about 6% since the results, the stock is down 23% since the beginning of the year. Many people believe that the bad news is already known and baked into the share price, which should provide the investors with some upside potential, and this is up for discussion.

Last quarter's results

Park Electrochemical generated $42.35 million in revenues and $5.02 million in profits for the last quarter and $91.17 million in revenues and $13.17 million in profits for the last six months. Last year, the company had generated $44.50 million in revenues and $8.05 million in profits for the same quarter, and it generated $87.93 million in revenues and 12.97 million in net profits for the same six-month period. Compared to the same quarter of last year, the

2008 Redux?

7 Oct ’14

While we can look back to the 2008 global financial market meltdown and cite any number of warning signs that became so painfully obvious in hindsight. Perhaps the clearest warning sign that trouble was just around the corner began in July of 2008 when virtually all commodities entered into a steep tailspin which they would not pull out of for at least another 8 months:

(click to enlarge)

Platinum (top), WTI crude oil (center), and copper (bottom) offer a sampling of the steep downside reversals that commodities as a group suffered beginning in July 2008.

Perhaps what was most interesting about the commodities collapse of summer 2008 was the consistent commentary that the bullish thesis for commodities (China, BRICs, global growth, etc.) was still very much intact even as prices continued to tumble. As it turned out the commodities meltdown foreshadowed much deeper problems in the global financial system which

While Investors Watch Bill Gross, They Ignore T. Rowe Price's Strengths

7 Oct ’14

With the 10-year US Treasury trading with a current yield of about 2.4%, my feeling is that the government bond market is very fully valued. I'm reluctant to suggest that the government bonds are in a bubble, but I want to look elsewhere for capital appreciation and income.

James Grant, of Grant's Interest Rate Observer, recently echoed my conclusions:

"...the buyer of a bond at par can do no better than getting his money back and earning some interest along the way, the prospect for gain is inherently limited. Risk ought to be at the front of the mind of the creditor. There are no 2 or 3-baggers in investment-grade bond investing. You have to be mindful of what can go wrong, and it seems that the world over, thanks to these policies by central banks, bond investors are not looking at risk, or feel they can't afford to