Johnson Controls (JCI) with a large insider buy from Director Juergen Tinggren of 12,000 shares at $36.41, a more than $435,000 buy. JCI had two other insiders buy in November from VP of Global Products and COB/CEO, combined more than 47,000 shares. The $37.97B auto parts company trades 12.66X earnings, 1.26X sales, and 1.8X book with a 2.55% yield. JCI is expecting to see revenue growth accelerate in 2018/2019 with double-digit EPS growth. JCI is a leader in building and energy solution with $30B in sales and significant size and scale. They get about $23B from Building Technologies which focuses on HVAC, fire/security, and industrial refrigeration. They get $7B from Power Solutions. The company merged with Tyco in 2016 and they see $1B in cost synergies, $100M in revenue synergies, and more than $1.1 in EPS benefits with years 2-4 focusing on field integration and building out their verticals. JCI sees $4 in EPS by 2020. The company is coming off a weak quarter seeing headwinds in North American margins. Susquehanna downgraded shares to Neutral with a $40 PT on 11/15 seeing weaker pricing/cost and higher investment spending which should pressure margins while weaker end-markets in their Power business could restrict growth. They think the multiple expansion story is very understated relative to peers but timing increasingly looks protracted. Goldman cut to Sell on 12/8 but sees room for improvement if they work on capital metrics, buildings growth accelerates, and they make accretive portfolio actions. Institutional ownership rose 3.4% last quarter while short interest fell 9% last reporting period to 2.86%.
Ramco Gershenson (RPT) with an insider buy filed last night as the President & CEO bought 25,000 shares at $14.58/share, which follows 5,000 shares bought in April at $13.87/share and taking ownership up to nearly 530K shares. RPT shares are nearing a small flag breakout above $14.90 and the weekly shows a volume pocket with room to move back to $16. The $1.17B shopping center REIT yields a 6% dividend. In Q3, RPT posted same-property growth of 1.4% and a 1% rise in annualized base rent to $14.97/square-foot with 93% occupancy. It targets properties in affluent, dense and growing markets. Its tenant distribution includes 21% Apparel, Home Improvement at 13%, Restaurants, Service 13%, Grocery 7%, and Fitness & Spa at 5%. Its top tenants include TJX, DKS, BBBY, RGC, LA Fitness, HD, PETM, ROST, ULTA and MIK. Analysts have an average target of $14.50 on shares and short interest is 5.4% of its float.
Charter (CHTR) with the largest insider buy in over three years this week when CFO Chris Winfrey bought 3,100 shares at $323.61 per shares, a $1M buy. This is the same price level where Director David Merritt bought 1,200 shares in May. The $95.5B company trades 51X earnings, 2.3X sales, and 44X cash. CHTR is expecting 25% EPS growth over the next five years while sales grew 30% Q/Q in October. CHTR missed estimates in Q3 with subscriber losses accelerating as cord cutters continue to take a bite out of the traditional TV companies. Residential Video rose 3%, Internet rose 11%, and Voice was down 16%. They added 212,000 new customer relationships which was down from 275,000 in the same quarter in 2016. In mid-October, the company announced an expanded agreement with Verizon on a channel carriage deal to keep their content on Spectrum Systems. CHTR grew substantially in 2016 after they completed two deals for Time Warner and Brighthouse. The deals carry a lot of synergies as they merge sales, billing, and tech teams as well as expand scale into a more regional focus. The combination will also give them more leverage on programming deals as well as a platform to build their own OTT service with more than $9B to spend annually on content. The company has been in M&A conversations all year and on 11/2 the NY Post reported that Softbank and Charter were discussing a merger. Verizon has also been discussed as a potential buyer. Analysts have an average target for shares of $377 with 8 buy ratings and 12 hold ratings. Pivotal raised their PT to $420 on 10/27 with the firm noting the market is ignoring the wireless opportunity, which they believe CHTR will inevitably utilize to severely disrupt the U.S. wireless business while strengthening their data product. Institutional ownership fell 5% last quarter, Oaktree, Crestview, and Berkshire Hathaway remain top holders. Short interest is 4.5%.
Kansas City Southern (KSU) shares trading back near a level where in August a director, Henry Maier, bought 3,000 shares at $106.19, a more than $318,000 buy and first since 2015. The $11B railroad trades 17.9X earnings, 4.4X sales, and 15X FCF with a 1.37% yield and 13-15% EPS growth. KSU is expecting 10% revenue growth in 2017 and 5.8% growth in 2018, big resurgence after two years of contraction. KSU is coming off a strong quarter, top and bottom line beats, with carload volumes up 6%. Each of their segments saw growth with Chemicals up 13%, Industrial up 9%, Ags up 7%, Energy and Automotive, two smaller segments up double-digits. KSU has seen better volumes in energy from an uptick in activity in the Permian and Eagle Ford, especially frac sand movement from the Upper Midwest. The company is also benefitting from continued growth in Mexican auto production which is forecast to grow 48% from 2016 to 2020. Analysts have an average target for shares of $106 with 8 buy ratings and 9 hold ratings. BAML upgraded shares to Buy last week with a $116 PT. The firm thinks shares are trading at a discount to Class 1 rail peers while having some of the best growth prospects driven by Mexican energy reform and manufacturing growth. The firm thinks NAFTA negotiations and Mexican regulatory overhangs will abate over the next few months and hurricane construction could become a 2018 tailwind. Institutional ownership fell 1.5% last quarter, DSM Capital a buyer of 1.2M shares. Short interest is less than 2%, near 3-year lows and down from the 2016 highs near 6%.
L Brands (LB) with a second big insider buy in the last two weeks on 10/5 after Director David Kollat bought 26,500 shares at $37.56, a more than $995,000 buy and follows 20,000 shares bought on 9/21 by Allan Tessler for $37, greater than $739,000. Tessler bought 3,500 shares in June as well. The $12.42B retailer trades 13X earnings, 1X sales, and 9X cash with a 5.6% dividend and 5-6% EPS growth. LB is expecting annual sales to fall 1.1% this year before returning to growth in 2018, up 2.4%. Comps this past week showed a 2% drop in September with a 5% drop at Victoria’s Secret. The company expects strength in their PINK and Bath and Body Works brands into the 2H while VS remains challenging with traffic weak. LB thinks a lot of their near-term traffic issues are due to exiting the swimwear business and a pullback on promotional activity versus last year, hoping to see better long-term margins. Online is improving up 11% in VS and 16% for Bath and Body Works. The company is making a lot of investments in marketing and in-store experiences to organically grow traffic without cutting prices and faces easier comps in 2018 which could setup for a rebound. Analysts have an average target for shares of $46.50 with 10 buy ratings, 16 hold ratings, and 4 sell ratings. Cowen cautious on 9/20 seeing risk factors in the stock including the likelihood that the company will need to keep bralet pricing in the $20-$30 range to hold onto market share as new competition enters the space. Atlantic Equities upgraded shares to Buy on 9/26 with a $56 PT. The firm thinks a number of changes should drive comps over the next several months and a strong Holiday season could be the start of a year of positive inflection for sales. Goldman bullish on 9/22, more optimistic than they have been in five years on the VS brands into next year. Institutional ownership rose 4.7% last quarter, Appaloosa an interesting buyer of 835,000 shares. Short interest is 9%.
Tiffany (TIF) seeing several insider buys since 8/30 including over $15 bought by Director Francesco Trapani and this week buys from two other directors totaling nearly $1M cumulatively. TIF insiders have been accumulating shares between $89.15 and $91.84, the largest cluster of insider activity in the name on record. TIF shares have traded in a weekly range under $96 and recently pulling back to the 200-MA at $88 where they found support. Shares have a measured target to $106-$107 on a breakout and above the $104 highs from 2014. The $11.69B jeweler trades 21.3X earnings, 2.89X sales, and 3X book with a 2.18% yield and 9-10% EPS growth. TIF has seen sales growth slow the last two year but expecting a turnaround with 2% growth in 2017 and then 4.2% growth in 2018. TIF topped estimates last quarter with comps down 2% but revenue growth in every region including 3% in Europe and 2% in Asia Pacific. Gross margins expanded with better costs and a mix shift to higher-margin items. TIF appointed a new CEO in July and he’ll take over this coming week, Oct. 2, after leaving Diesel SpA. Analysts have an average target for shares of $92.50 with 9 buy ratings and 10 hold ratings, Goldman Sachs recently downgrading to Hold with a $94 PT. The firm higher-end luxury is set to struggle into the Holiday season and new management needs time to revive growth. They think some recent softness in data points to a longer turnaround time for the new CEO. The firm does acknowledge that TIF has some easy Y/Y comps. Cowen positive on 8/25 seeing new products and better digital sales helping lift 2H results. Institutional ownership fell 1.5% but Jana Partners a 5% holder with 5.5M shares and added three board members in February. Jana thinks the company’s balance sheet gives them flexibility to buy back shares while working on operational efficiencies. Short interest is 4.33% of the float, down sharply from late last year when it was 15%.
Sprouts Farmers Market (SFM) with an insider buy from CIO Daniel Bruni on 9/18 of 15,000 shares at $19, a $285,000 investment and follows a buy of 7,000 shares from CFO Bradley Lukow on 8/29. Lukow has bought more than 29,000 share since May of 2016 but Bruni’s buy was the largest on record on the open market. SFM shares have traded weak since July down from $24 but falling into support at $18-$19 from January and February. The $2.54B company trades 17.9X earnings, 0.59X sales, and 15X FCF with 10-11% EPS growth. SFM expects 13.9% sales growth in 2017 and 12.4% growth in 2018 while margins improve. SFM has fallen with Amazon entering the space with their Whole Foods deal but RBC with a note on 8/29 that the former still has better pricing on a basket of comparable items even after initial price cuts. SFM jumped 8% after earnings in August with comps +1.4% and two-year growth of 5.5% while sales rose 15%. The company is investing in innovation, customer engagement online, and helping cut direct store expenses. Analysts have an average target for shares of $25 with 9 buy ratings, 10 hold ratings, and 1 sell rating. Sun Trust positive on 9/14 noting the company is still making strong share gains and sees an improving pricing climate for produce pricing which will help margins in 2018. William Blair refutes some of the WFM claims on 8/29 noting that SFM, which is a leader in produce, is still 29% lower on conventional items. Institutional ownership rose 4.5% last quarter, Pointstate a buyer of 1.4M shares while Jana bought a new 593,000 share position. Short interest is 11% which is near 3-year lows.
RH (RH) with a nearly $1M insider buy this week from Chairman and CEO Gary Friedman, 14,000 shares at $70.94. Friedman is a major holder of shares, over 2.2M. RH shares gapped higher on earnings in late August and just under the July highs at $79.91 while longer-term working out of a big base back near the 2015 highs around $105. The $1.52B home furnishing store trades 19X earnings, 0.68X sales, and 3.25X FCF with 40% EPS growth over the next five years. RH expects 14.3% revenue growth in 2017 and 6.6% in 2018. The company is coming off a strong quarter and raising guidance for the FY with cash flow improving. Analysts have an average target for shares of $62.50 with 5 buy ratings and 12 hold ratings, room for upgrades. Piper took their PT to $71 on 9/7 while Buckingham at $88 the Street High. The firm thinks Q2 results were a game-changer and they see meaningful margin inflection in the 2H of the year and beyond. RH should see SG&A leverage abate in 2017 which will help estimates and supply chain efficiencies should bring costs down. Institutional ownership fell sharply last quarter while short interest remains high, over 55% of the float, but down sharply since May when it was closer to 75%.
Smucker (SJM) with a rare insider buy this week from Executive Chairman Richard Smucker of 10,000 shares at $105.40 average price, a more than $1M buy. The last insider transaction of any size was in March of this year at $139.87, a 3,000-share transaction which was $419,000. Shares have sold off recently following earnings down from $120 in mid-August and having a weak year down from as high as $140 in February. SJM traded well from 2012 to late-2016 and hitting the sizable volume-node from 2015 here as well as the 61.8% Fibonacci of the run at $104.60. The $11.83B packaged foods company trades 12.89X earnings, 1.61X sales, and 20.89X cash with a 3% yield and 7-8% EPS growth. Sales growth has struggled over the last two years but expected to return to positive-growth in 2018 while EPS growing to over $8 per share. The company will be at the Barclays Consumer Staples conference this week. The company is coming off a weak quarter where margin growth slowed, 37.9% vs 39.8% last year. Sales in coffee struggled, down 6%, while their Retail business fell 8%. SJM is undergoing a major cost-savings program targeting $200M in annual synergies by FY18 while adding $100M more by 2020. They expect to see many of their e-commerce initiatives strengthening in FY18 in both coffee and pet food. Analysts have an average target for shares of $126.75 with short interest 4.88%. Wells Fargo cautious on 8/25 noting that the miss was more concerning given the overall weakness in the segment while flattish sales for the year would be a positive, although unlikely at this point. They also note that FY comps get tougher into year-end.
Kennametal (KMT) with a notable insider buy last week from President and CEO Christopher Rossi, a nearly $1M buy of 29,850 shares at $33.45. KMT also had 1,900 shares bought by a VP at $33 and a lot of buying in 2016 from Directors and executives. KMT shares traded as high as $42 in May and June but pulling back recently to the early 2017 levels around $34. Shares are in a strong long-term trend from under $20 in early 2016 and holding the 38.2% Fibonacci at $32 recently on the lows. The $2.8B maker of tungsten carbides, ceramics, and super-hard materials for metal cutting trades 13.39X earnings, 1.35X sales, and 14.7X cash with a 2.3% yield. KMT is expecting steady 4-5% revenue growth up to $2.25B, turnaround after three years of slowing growth. KMT operates in three business segments: Industrial (55% of sales), Infrastructure (36%) and WIDIA (9%). They are coming off a strong quarter up 12%, the highest since 2012, and coming off 24 months of negative organic growth from 2015 to 2016. KMT has been cutting costs and simplifying their business structure and forward catalysts include margin expansion, investing in new equipment, and improvements to E2E processes in 2018. They see $200-300M in savings from improving E2E through 2019. All of their end-markets are showing strength with General Engineering, Transportation, and Aerospace the biggest contributors to sales. Oil and gas rig counts continue to rise which is a tailwind while mining has improved as well. Analysts have an average target for shares of $43.75 with 7 buy ratings and 4 hold ratings. JP Morgan upgraded shares to Buy with a $43 target last week seeing FY18 guidance is very conservative which sets a low bar for the new CEO. Jefferies positive on 6/7 seeing a long-term turnaround underway while internal initiatives are making progress and end-market activity has clearly improved. Appaloosa a top holder of shares, more than 1.3M, and adding last quarter. Short interest is 5.5%.
Aquaventure (WAAS) CEO Douglas Brown has purchased more than 50,000 shares of stock since May in the $14.66 to $17.05 range. WAAS came public last year near $20 and ran up to $25 before recently pulling back but finding support near $14.50. The $420M Company describes itself as a water-as-a-service solutions provider offering point-of-use filterred water systems and related services to over 40,000 customer, as well as desalination and wastewater treatment solutions. WAAS trades 19.9X EBITDA, 7.2X EV/Sales, 1.1X Book and 5X Cash. WAAS posted 13.7% revenue growth in 2016 and targets 6.4% growth this year, and profitability is likely to come in 2020. WAAS is seen as a play on clean water trends and is differentiated as a high margin business model with recurring and contracted revenue model. The Point-of-Use water filtration market generated $4.2B in revenues in 2015 and has been cutting into Bottled Water Unit market share, rising to 23.5% in 2015 from 16.4% in 2010 and expected to reach 31% in 2020. WAAS EBITDA Margins hit 31.5% in 2016, rising from 23.1% in 2014.
E-Trade Financial (ETFC) with a notable insider buy last week by Director James Healy of 5, 000 shares at $41.97, unusual with shares being strong all year and trading near 52-week highs. The $200, 000+ investment adds to his already 35, 000 shares and is the only open market buy in the name since 2005. The $11.2B brokerage trades 16.6X earnings, 5.55X sales, and 1.78X book with 12.5% EPS growth. ETFC saw revenue growth re-accelerate in 2016 with 40% Y/Y jump and seeing 20% in 2017 and 7.7% in 2018 to over $2.5B. The company is coming off a strong quarter with a $1B buyback after announcing a lower leverage ratio. They saw 208, 000 DARTs with 32% in derivatives while new accounts rose 4.7%. In June, the Board, which includes Healy, issued an ultimatum to new CEO Karl Roessner to lay out a clear plan for the company by the end of 2018 or consider a sale. Roessener has considered investments in tech and platform to reinvigorate growth while expanding in derivatives. ETFC faces headwinds from inflows to ETFs and a general lack of drive towards active investing. Analysts have an average target for shares of $41.50 with 12 buy ratings and 5 hold ratings. Sun Trust raised estimates to $49 on 7/24 seeing long-term value in EPS guidance while announcing an aggressive capital return program. Rosenblatt started shares at $43 and a Buy on 7/13 seeing relative valuation, improving fundamentals, and structural growth catalysts expected to drive 14% earnings growth. M&A speculation will also likely keep a relative floor in shares. Institutional ownership fell 1% but Discovery Capital raising their stake to 4M shares and Victory Capital with a 6.25M share position, adding 2.76M. Corvex has a small but interesting position with 1.7M shares, mostly added last quarter, and call options representing a 1M share equivalent. Short interest is 1.42%.
AngioDynamics (ANGO) with a notable insider buy this past week from CEO James Clemmer of 25,000 shares at $15.67, a nearly $400,000 buy. Director Howard Donnelly also bought 5,000 shares for a nearly $80,000 investment. These are the first two open market buys in the name since the company came public. Clemmer was appointed CEO in April 2016 after serving as the President of Covidien’s Medical Supplies business. The $580M medical device company trades 23X earnings, 1.6X sales, and 1.08X book with 15% EPS growth. ANGO focuses on minimally invasive devices for vascular access during surgery to treat vascular disease and other heart ailments. Clemmer is seeking to boost ANGO’s sales growth which has been stuck in low-single digits since 2013 while also expanding margins to be better in line with peers. The company outlined a multi-pronged strategy in April to build within their existing markets and improve results. The company plans to invest in products such as BioFlo, AngioVac, and NanoKnife targeting 11% 3-year CAGR while boosting margins to 60% by 2020. They are also seeking to simplify their footprint while consolidating manufacturing and cutting overhead. ANGO could seek to partner with providers or even larger peers to help improve delivery of their products while maintaining market share and profitability. They see opportunities in acute and chronic patient care with growing markets in PICCs, a recent area of focus for ANGO. Thrombosis is also a growing unmet patient need which the company can easily turn their focus onto and grow share. Analysts have an average target for shares of $18.50 with 3 buy ratings and 2 hold ratings. Barclays lowering their PO to $16 last week. Canaccord positive noting that their cash flow is improving while expecting gross margins to improve throughout the year and M&A could also be a positive driver for shares. Institutional ownership fell 1% in recent filings, Broadfin Capital a top holder with 1.45M shares. Short interest is 5% and rising from around 2% in July 2016.
Patrick Industries (PATK) shares falling back to the 200-EMA this week and just below a notable level from May where Director Scott Welch bought 10,000 shares at $73, a sizable investment. Welch bought 5,000 shares on 5/19 at $66.50 as well and has accumulated over 40,000 shares on the open market since 2015. The $1.19B company trades 15X earnings, 0.92X sales, and 27X FCF with double-digit earnings growth. PATK is expected to make over $4.65 per share by 2018 up from $1.92 in 2014. PATK is the leading manufacturer and supplier of building products for the RV, Marine, and mobile home market. They have been consolidating a fractured market with over 35 acquisitions since 2015. RV represents 72% of overall sales and saw shipment growth of 12% in Q1 while mobile home growth rose 23%. The company has been capitalizing on strong retail demand, especially among younger buyers for RVs and a turnaround in marine. Analysts have an average target for shares of $76 with 3 buy ratings and 1 hold rating. Baird started coverage at Outperform on 4/21 seeing strong momentum in the RV market while investments in industrial and marine are adding big, new addressable markets. BAML started shares at Buy on 4/17 seeing record high consumer confidence as a tailwind while strong credit availability should support continued buying. Institutional ownership rose 10.3% in Q1 filings, Tontine Capital a top buyer of 5M shares last quarter. Short interest is 5.25% which is near 3-year highs.
Coty (COTY) has seen a number of notable insider buys recently and this past week Director Peter Harf bought 26,500 shares at $19, a more than $500,000 buy, and General Counsel Greerson McMullen bought 20,200 shares on 6/14 at $19.32. McMullen has bought over 50,000 shares since March and nearly 100,000 shares this year. On 5/31, the President of Coty Luxury bought $1.5M in stock. The $14.2B cosmetics company trades 20.7X earnings, 2X sales, and 1.5X book with a 2.62% dividend yield. COTY is seen more as a 2018 story as they integrate a series of large acquisitions including a transformative deal for P&G’s beauty business which made them the third largest by sales in the world. They’re coming off a strong quarter with 6% revenue growth with Consumer sales rising to $988M, Luxury to $633M, and Professional over $400M. Margins expanded by 150 basis points. Analysts have an average target for shares of $23 with 5 buy ratings, 8 hold ratings, and 2 sell ratings. Societe Generale out with a Buy rating and $21 target on 6/12 and RBC with a $22 target on 6/8. BAML keeps a Buy rating on shares and out positive last Fall noting the P&G deal adds increased scale and a more targeted operational structure which should be a pivotal transformation point. JP Morgan has a Sell rating for shares seeing integration issues and weakness in Q4 trends. Institutional ownership rose 1.4% in Q1 filings, OZ Management and York Capital notable buyers. Short interest is 11%.
Alexion Pharmaceuticals (ALXN) saw two insiders buy stock this past week including the first from a Director or Officer in at least the last five years when Christopher Coughlin bought 2,000 shares at $117.10. Baker Bros., a top biotech hedge fund, also added just more than 2M shares at $116.32 to $117.33. The $25.5B company trades 17.3X earnings, 7.85X sales, and 17.5X cash. ALXN has seen double-digit sales growth each of the last four years but recently settling into 12-15% range but improving EPS with expectations for as much as $6.50 per share by 2018. ALXN is coming off a mixed quarter with 24% revenue growth and better volumes for Soliris. Strensiq, a key drug in their rare disease portfolio, continues to see growing revenues. Key catalysts for the 2H and early 2018 including an October PDUFA for Soliris in gMG, a big move which would position the drug as the only therapy to treat patients with refractory gMG. The company also expects pivotal data for ALXN1210 for the treatment of atypical Hemolytic Uremic Syndrome. Shares jumped this week when the company announced the hiring of a new CFO, Paul Clancy, from Biogen (BIIB) and a move which drew a lot of praise from the Street. Credit Suisse sees him as a biopharma veteran who adds a lot of experience at a critical time in ALXN’s operational history and adds credibility when management needs it most. Analysts have an average target for shares of $162 with 17 buy ratings and 6 hold ratings, CSFB with a $164 price target this week. MSCO upgraded shares to Overweight on 5-25 seeing upside potential from late year catalysts and CEO making progress re-focusing the company and right-sizing their efforts. Institutional ownership fell 4.2% in Q1 filings, Samana Capital a buyer of 1.2M shares and Baker Bros. now own more than 6.5M shares. Short interest is 2.11%.
Newell Brands (NWL) with a notable insider buy this week from EVP and Chief Development Officer Richard Davies of 13,170 shares, a greater than $620,000 buy. NWL has seen a lot of insiders buying since early 2016. The $25.56B consumer goods company trades 15X earnings, 1.68X sales, and 37X cash with a 1.73% dividend yield. NWL is forecasting 11.2% revenue growth in 2017 and 1.2% growth in 2018 to nearly $15B with EPS jumping 13.5% in 2018 to $3.50. NWL announced a $15B deal for Jarden Brands in late 2015 and 2016/2017 has been focused on shedding struggling brands and cutting costs. In February, the company announced it was targeting $1B in synergies from their acquisitions, $500M by 2018 and $500 afterwards. Core sales grew 2.5% last quarter with strength in Live and Learn while Work fell 2.9%. Analysts have an average target for shares of $58 with 11 buy ratings and 3 hold ratings, Jefferies raising their PT to $65 on 5-9. Jefferies reiterating their Buy position on 6-1 seeing improving organic sales growth and valuation as they continue to streamline the business. UBS out positive on 5-9 seeing better e-commerce sales and International distribution driving growth. Institutional ownership fell modestly last quarter while short interest is 3.69%. On the chart, shares are consolidating a nice bull flag post-earnings under $53.50 and above $55 can get some momentum hitting new highs.
Huntington Ingalls (HII) with a notable insider buy this week from CFO and former VP of Business Development Christopher Kastner of 4,183 shares at $189.40, a total purchase of more than $792,000. It is the first open-market buy in the name in at least the last five years and comes into strength with shares nearing new 1-year highs. The $9.09B defense company trades 16.6X earnings, 1.29X sales, and 15X cash with a 1.22% yield and 3-4% EPS growth. HII is targeting over $11 per share in earnings by 2019 after returning $5.25 in 2013. The company is coming off a mixed quarter with a backlog of more than $20B and new awards of more than $600M. Revenues were down 2% due to lower volumes in shipbuilding and margins under pressure due to impact from the Westinghouse bankruptcy as the two have a partnership. Their aircraft carrier program was stronger at their Newport News facility which helped offset some overall weakness. In November, the company completed their acquisition of Camber for $380M which is a pure-play on IT services for defense with major customers including the US Navy and US Army. The deal was part of HII’s strategy to expand their services portfolio by 2020. The company noted that they have also seen improvement recently from some of their oil and gas customers with the stabilization of prices leading to more investments. Analysts have an average target for shares of $195 with 2 buy ratings, 4 hold ratings, and 2 sell ratings. Credit Suisse has a $225 price target for shares and out on 5-4 seeing upside once the Columbia and Virginia class kicks in to help boost a rather flat outlook in Shipbuilding. They see margins at 9-10% and an elevated Navy force structure plan to cause CapEx to rise above current expectations. The firm thinks HII will see some modest FCF pressure as they ramp production in future years as the government appropriates more funds. HII has some notable catalysts with the current administration in Washington which has made clear its intention to increase military spending including boosting the Navy. The Omnibus appropriation’s bill for FY17 including $1.8B of plus-ups for LPD 29. Institutional ownership fell 4.8% while short interest is 2.98% of the float
Del Taco (TACO) with a notable insider buy this week from Director Eileen Aptman of 26,010 shares at $12.97 average, a more than $335,000 buy and first since 2015. TACO had a lot of insider buying in the Fall of that year between $12 and $13 including Aptman who acquired over 120,000 shares at $12. Aptman is the CIO of Belfer Management and prior worked for Goldman Sachs. The $508M restaurant which focuses on quick-service Mexican-American fare trades at 21.85X earnings, 1.13X sales, and 49X book. TACO has seen strong sales growth with expectatiosn for 4% in 2017 and 8.8% Y/Y growth in 2018 to more than $500M. The company trades cheap relative to peer El Pollo Loco (LOCO) on both price/sales and EV/EBITDA with better cash flow and comps. Last quarter, TACO reported 4.2% system-wide comps growth and 4% growth at company-operated locations, a strong outlier among a sector which is struggling with traffic. TACO had $737M in sales last year across 310 company and 241 franchised restaurants. System-wide average check has risen to $7.13 behind eighteen consecutive quarters of SSS growth. The company thinks there is a significant room for store expansion with 300+ locations in their established market and more than 1,150 in emerging or new markets, so potential to see them expand to 2,000 stores. Analysts have an average target for shares of $15 with limited coverage, 4 buy ratings and 1 hold ratings. Jefferies out with a $16 PT on 5-5. Wedbush was out in March noting the company continues to execute above expectations in a tough environment with weather, tax refund delays, and other headwinds impacting the overall space. They think 2017 comps are well within reach. Institutional ownership rose marginally last quarter while short interest is 10.04% of the float but steadily lower since March 2016 when it was nearly 25% of the float. On the chart, shares traded strong in 2016 from $9 to $15 and now forming a weekly bull flag back to the 50% retracement.
Ambac Financial (AMBC) with an insider buy in mid-March from CEO Claude LeBlanc of 20,000 shares at $19.55 average price, near Friday’s close, and a nearly $400,000 investment, his first buy since being appointed in December. LeBlanc was previously the CFO of Syncora Holdings and oversaw asset recovery, strategic alternatives, and global remediation. Shares have traded down from $27 in December to a recent low near $17.50 as they underperform the financial sector which has been strong since November. The $891M insurance company trades 12.72X earnings, 0.52X book and 1.06X FCF with 11% EPS growth. AMBC has struggled with profitability and consistency over the last two to three years and hoping the new CEO transition helps return the company to growth. In November, they started a process to cut operating expenses by reducing headcount and cutting its risk book by almost 10%. Book value remains at a significant premium to shares at $37.94 last quarter. AMBC has been dealing with its exposure to Puerto Rican debt and shares caught a bid last week after reports that PREPA and bondholders had agreed to a new debt deal to restructure $8.9B. The new deal extends maturities to 2047. The company will hold a shareholder meeting in May. Analysts have an average target for shares of $19 with limited coverage but BTIG out recently with a Buy rating and $28 price target. Institutional ownership rose 3.19% last quarter, Evermore Global a buyer of more than 650,000 shares while Venor Capital a top holder with more than 1.7M shares. Short interest is 4% and down steady since July 2015 when it was near 10%. Last August, activist Joseph Pirinea urged the company to hire advisors and explore strategic alternatives to enhance shareholder value, a proposition which could be voted on in May.
Continental Resources (CLR) with a notable insider buy last week from CEO and Chairman Harold Hamm of 32,985 shares at an average cost of $42.90, a more than $1.4M purchase. On 3-24, Hamm bought 41,998 shares at $42.37, a more than $1.7M buy and both are the only two open market buys in the name in at least five years. CLR shares are down almost 25% from the December highs near $60. Shares have pulled back to the 38.2% Fibonacci of the run from the early 2016 lows and under a low-volume gap. A move back above would trigger a longer-term trend shift back to $75-$80. CLR recently saw 2,000 September $40 puts sold to open for $3.30 on 3-14 and has short puts in the June $40 strike from late December. The $16.57B energy company trades 35.24X earnings, 8.3X sales, and 3.8X book with 1-2% EPS growth. CLR has seen revenues fall by double-digits the last two years but looking for 57% Y/Y growth in 2017 and 28.6% growth in 2018 to over $4B with strong margins. CLR is coming off a strong quarter with STACK output rising 38% to 24,400 boe/day. The company affirmed their FY outlook with proved reserves of 1.2B boe, up 4%. The company is also reportedly seeking a sale of 25,000 acres in the Oklahoma Merge field which could reach $325M. Analysts have an average target for shares of $53 with 15 buy ratings and 8 hold ratings. Institutional ownership fell 2% last quarter, PointState Capital a notable buyer of 1.2M shares while Point72 also buying almost 400,000 shares. Carlson Capital owns 1M shares. Short interest is 22.74% and down from almost 36% in February 2016. KLR Group upgraded shares in January citing lower capital intensity and incremental late 2017 production growth. Wunderlich was out positive seeing considerable strength in recent earnings and a strong balance sheet without much debt or equity raises during the downturn.
Ford (F) shares are down over 8% over the past month and on 3-28 a filing showed an insider purchase of 171,379 shares at $11.67 for nearly $2M, the largest insider buy in the name in more than 4 years. The purchase was made by William Clay Ford Jr., the great-grandson of Henry Ford. On the chart shares have pulled back to $11.50 support from 2016 which is also a major 38.2% Fibonacci, a longer term falling wedge from $17.50 resistance in 2013/2014, and a move above $12.90 would likely trigger a trend shift. Ford has also seen sizable accumulation of September $13 calls, around 80,000 have added since 3/13 in the $0.50 to $0.70 range, and currently underwater trading for $0.18. F has also seen more than 20,000 June $11 puts sold to open. The $46.5B automaker is trading less than 7X earnings, 0.3X Sales, 1.6X Book and yields a 5.15% dividend, though the balance sheet a concern with all of the debt. Ford has struggled to grow revenues and sees 2017 down 6.7% Y/Y with EPS down 9.7% after falling 8.8% in 2016. The CFO hosted a presentation of 3-23 outlining the company’s strategy. Analysts have an average target of $13.20 on shares and short interest is minimal at 2.2% of the float. Ford will present March auto sales on 4-3 and earnings on 4-27. On 2-3, Barclays upgraded shares to Overweight with a $15 target expecting shares to re-rate higher in a border adjustment scenario. RBC upgraded to Outperform with a $14 target on 1-27, a name that could benefit from tax reform. Anchorage Capital disclosed a large call option position in Ford last quarter.
II-VI Inc (IIVI) with a notable insider buy from Director Joseph Corasanti of 10,000 shares on 3-15 at $33.50 average price and the first open market buy in the name since last August. It is the largest insider buy in the name on record and comes into strength with shares up more than 82% in the last year and 28.16% in 2017. The $2.37B optical company trades 22.5X earnings, 2.6X sales, and 9.6X cash with 20% EPS growth. IIVI sales growth has been growing since 2015 and looking for 14.4% Y/Y growth in 2017 with a goal of $1B in sales within two years. IIVI is coming off a strong quarter with bookings up 32% to $274M including margin expansion to 40.7%. IIVI is seeing strength in Lase Solutions, Photonics, and Performance Products. Analysts have an average target for shares of $41 with the majority of the Street at a Buy equivalent. B. Riley recently out with a $43.25 price target. Benchmark out positive on 3-16 noting that the recent sell off in the space is unwarranted given Finisar’s warning. Needham was out bullish last fall noting that we’re in an optical super cycle which is being driven by strong demand from China and 100G rollout. Institutional ownership rose 4.47% last quarter, Kingdom Ridge a notable buyer of shares while Barrow Hanley holds more than 3.8M shares. Short interest is 1.35%. On the chart, shares are bouncing back above the 50-EMA after holding gap support at $32.50. New highs are above at $41.
Calavo Growers (CVGW) with two notable insider buys recently into post-earnings weakness. On 3-9, VP of Fresh Operations Michael Browne bought 2,000 shares at $55.50 and on 3-13 Chairman of the Board and CEO Lecil Cole bought 95,000 across multiple transactions for an average price of $56.42, a more than $5.3M buy. They were the first open market buys in the name. The $1.02B company which focuses on distributing avocados and prepared avocado foods to wholesalers, stores, and restaurants trades 21.25X earnings, 1.06X sales, and 4.6X book with a 1.54% yield. CVGW has seen high-single digit sales growth each of the ast four years and guiding to 10.1%/14.6% Y/Y growth in 2017 and 2018. EPS is expected to grow 5.9% in 2017 and 18.1% in 2018 to over $2.70 per share. The company is coming off a mixed quarter but guidance was strong which expects double-digit revenue growth and margin expansion with avocado trends improving after a rough start to the year. The company operates through three divisions: Fresh Products, Calavo Foods, and Renaissance Food Group. The latter has been a strong grower with 29% revenue growth and 260 basis point expansion in margins. The company’s Fresh business has faced notable headwinds with inconsistent supply and pricing. Calavo Foods business grew 8% while margins were pressured by higher fruit costs and avocado volumes. Going forward, some positives for the company include expanding shipping territory for FreshRealm to almost 90% of the country and significant investments in infrastructure which will expand their output to more wholesale and retail outlets. Analysts have an average target for shares of $72.75 with limited coverage but most of the Street at a Buy equivalent. Institutional ownership rose 13% last quarter, Ranger Investment with a small stake and Riverbridge as well but only two holders with over 1M shares. Short interest is 25% and rising sharply since November with the Election and rising fears of a BAT and US/Mexico relations. The company has a number of facilities in Mexico and pricing pressures could significantly impact their business.
The Trade Desk (TTD) with a notable insider buy from Director Kate Falberg of 20,000 shares at $43.38, a more than $867,000 investment and her second since November when she bought 80,000 shares at $25.85, a more than $2M buy. TTD has also seen buys from Director David Wells of 8.000 shares at $35.50 and Thomas Falk last September of 50,000 shares at $18, a $900,000 buy. Falberg was the CFO of Jazz Pharmaceuticals until 2014. The $1.65B software company trades which provides a platform for advertising buyers trades 37X earnings, 8X sales, and 12.4X cash with 25-30% EPS growth. TTD has grown sales each of the last three years with 33.5% Y/Y growth in 2017 and 20.7% growth in 2018, moving from $45M to $327M. The company is coming off a strong quarter with top/bottom line beats and passing $1B gross spending on their platform. TTD saw a big jump in ad spending into new channels such as Mobile and Video as Omni-channel becomes a bigger focus. They continue to grow customer base with 95% retention and 566 active customers last quarter. Analysts have an average target for shares of $36 with 7 buy ratings and 1 hold rating. Needham raised estimates to $48 on 3-3 seeing a blowout report in Q4 and strong growth prospects in 2017/2018 as they continue to grab market share. Institutional ownership rose 188.5% last quarter, Gotham Asset Management, Pier Capital, Dragoneer, and Cavalry Management all opening new positions. Short interest is 20.84% of the float and big jump from January when it was just 2.06% of the float.
Parsley Energy (PE) with a large insider buy from President and Chief Operating Officer Matthew Gallagher on 3-2 of 25,000 shares at $31.25, a more than $781,000 investment. Two other directors also bought shares on 3-2, 6,500 total which valued nearly $200,000. In November, Director AR Alameddine bought 8,000 shares for $34.75, a more than $275,000 buy. PE shares have traded down from $36-$37 in late December to the $30 level but sitting in a long-term uptrend from late 2015. Shares are holding the 38.2% Fibonacci at $29.63 and a move above the 50-EMA at $34 opens up a move back to the recent highs. The $7.66B company trades 24.48X earings, 2.3X book, and 57X cash with little debt and 30% EPS growth. PE has seen revenue growth sharply over the last five years from $121M to over $1B in 2017 with 64.7% Y/Y growth in 2018 to $1.68B. PE is coming off a strong quarter with revenues doubling and raising FY production guidance with better well efficiency and lower costs. The company announced a $650M deal to buy properties in the Midland and Delaware basin in January, one of the hottest areas for growth, and later in February announced another $2.8B buy in the Permian. The company agreed to buy undeveloped acreage from Double Eagle which will add 71,000 net acres to its Midland acreage and raising their total land to 227,000 acres. Analysts have an average target for shares of $37.25 with 23 buy ratings and 5 hold ratings, FBR lowered their price target to $39 on 2-28 and ScotiaBank out positive with a $45 price target on 2-25. JP Morgan was out defending shares on 2-10 noting that the quality of their land acquisitions justifies the dilution and thinks the name will outperform over time. Institutional ownership fell 1% last quarter, Zimmer Partners a top holder with 6.7M shares, their top position. Short interest is 7.47%.
American Express (AXP) with a notable insider buy this week from Director Joseph Brennan of 4,000 shares at $79.73, a more than $318,000 investment and first in the name since early 2016 when shares were trading near $55. Brennan is the Chairman Emeritus of various funds at Vanguard where he served as CEO from 1996 to 2008. The $73B credit services company is trading 12.8X earnings, 2.23X sales, and 2.92X cash with a 1.6% yield. AXP has seen revenues fall each of the last two years but expecting a return to growth in 2017 and up 4.3% Y/Y in 2018. EPS is expected to grow 10.4% Y/Y in 2018 to over $6.25 per share from under $5 in 2013. AXP is coming off a mixed quarter with card member spending up 7% in Q4 and NII rose 6% adjusting for the loss of the Costco contract. The company has focused on growing US card base which rose to as much as 2.3M in Q3 2015 but slowing rate of growth over the last two quarters. AXP has seen a shifting mix of customers with 40% now B2B, 31% the US consumer, 18% global network services, and 11% International customers. The company has been expanding Internationally with 13% growth in Mexico, 14% growth in the UK, 27% growth in China, and 14% growth in Japan. In the US, they’ve focused more on digital partnerships to drive engagement in younger, Millennial customers with partnerships with Uber, Airbnb, Amazon, and Ticketmaster. 40% of Digital card acquisitions are in this generation which has some of the largest spending power of any generation right now. Analysts have an average target for shares of $75 with 8 buy ratings, 13 hold ratings, and 6 sell ratings. DA Davidson recently raising their price target to $84. Credit Suisse was out cautious on 2-15 highlighting slower loan growth and faster delinquencies. The firm notes that EOP loan growth slowed by 140 basis points to 18.1% with a delinquencies rate of 1.2%. Compass Point defended shares seeing spending power by wealthy customers providing AXP a significant advantage and progress on expense cuts helping ease some skepticism. Piper noted that AXP will face easier comps in the 2H and the consumer finance backdrop is beginning to become better with a more favorable regulatory environment. Institutional ownership fell 1% last quarter, Berkshire Hathaway the top holder with 151M shares, their fifth largest position. Short interest is 2% of the float and down marginally from 2.4%.
Halliburton (HAL) with a smaller but notable insider buy last week from Director Murry Gerber of 5,390 shares at $57.11, a greater than $300,000 investment and only second open market buy in the name since at least 2009. The other was by Gerber as well in 2015 at $39.30. Gerber was the former CEO of EQT Corp (EQT) and currently operates as an independent director at Blackrock. His buy is notable coming in a name which is up more than 74% in the last twelve months but struggling year-to-date moving into the red on Friday. The $47B company trades at 19X earnings, 2.96X sales, and 11.7X cash with a 1.34% yield. HAL has seen revenues fall each of the last two years but eyeing 18.2% Y/Y growth in 2017 and 25.6% growth in 2018 to more than $23.5B. HAL is coming off a mixed quarter with revenue down and warning on weakness in International markets but noting North America has turned a corner. Domestic revenue rose 9% Q/Q driven by better pricing and utilization throughout the US land sector. Analysts have an average target for shares of $58 with 32 buy ratings, 3 hold ratings, and 2 sell ratings. Jefferies raised their price target to $70 on 1-27. Credit Suisse was out on 1-24 naming shares their Top Pick for a recovery despite high expectations and comments on International. The firm thinks HAL holds profitable market share and should drive earnings revisions higher over the year. BMO was out noting that their business has reached a significant turning point with higher prices, better N. American margins driving shares. UBS has a $70 target for shares seeing rising oil prices, increasing frac activity, and industry pricing as tailwinds. Institutional ownership rose 0.75% last quarter, Carmignac Gestion a notable buyer of 4.6M shares and Discovery Capital a new 3.5M share position. Point State significantly increased their position to 3M shares. Short interest is 2.56% of the float.
Murphy USA (MUSA) with a sizable insider buy from Director Claiborne Deming of 15,000 shares at $65.40 average price on 2-7, a more than $980,000 investment and largest buy in the name since February 2016. MUSA’s SVP John Corrigan bought 1,000 shares on 2-7 as well. Deming has served as Chairman of the Board of Murphy Oil since March 2012 and was President/CEO from 1994 to 2008. He is also an advisor to TPH Partners, an energy private equity firm. The $2.57B company trades at 12.85X earnings, 0.22X sales, and 3.6X book with 10-12% EPS growth over the next five years. MUSA is the retail operations of Murphy Oil with fuel products and conveince merchandise. It operates more than 1,400 stores in the Southwest, Southeast, and Midwest. MUSA is seeking to add 60-80 stores to their network and completed a 300 store refresh in November. MUSA has a goal to reach 50 express stores by 2019, a concept introduced in 2015. The company has seen margins expand on merchandise to 15.7% from 14.4% in 2016 and lowering costs at the store level by 1.4%. They’ve also seen a boost in gallons sold of fuel, up 2.6%, which is benefitting margins. Fuel volumes are expected to continue to grow as they build store count. MUSA has been buying back stock and completed $212M of a $500M authorization last year. MUSA shares were under pressure last Fall with the Colonial Pipeline shutdown which impacted their supply. Analysts have an average target for shares of $84 with 3 buy ratings and 1 hold rating, Jefferies with Buy rating and $85 price target in December. Stephens upgraded shares to Overweight with a $82 price target in November. The firm thinks MUSA has a strong advantage given its flexible fuel supply, a defensive operating model and a best-in-breed management team that is committed to creating shareholder value. Jefferies was out with a note in November following an Election sell-off saying that fears of a material change to the renewable fuel standard mandate are overblown. Institutional ownership rose 5.48% last quarter with short interest 11.6%.
Cimpress (CMPR) with a notable insider buy this week from EVP and President of Upload and Print Business Kees Arends of 4,640 shares at $86.20, a more than $399,000 investment. Arends was the CEO of Alubmprinter which was acquired by Cimpress in 2011. Arends bought shares on 11-2 as well, 2,050 for $83.50, a more than $171,000 investment and the only two open market buys in the names from a company officer in the last five years. The $2.67B business services company which does custom printing and signage in North America and Europe trades at 38.98X earnings, 1.38X sales, and 26.55X book. CMPR has seen double-digit sales growth in each of the last two years and expecting 19.7% Y/Y growth in 2017 and 16.8% growth in 2018. The company missed top/bottom line in late January but showing 16% revenue growth, 8% ex-currencies. Gross margins a noticeably weak spot down 8% Y/Y but majority due to FX headwinds and outsourcing issues during the holiday season. CMPR is undergoing a restructuring which will simplify their operation structure. The company acquired National Pen recently, a deal which adds to their SMB customer base and vertically integrated fulfillment operations. The company expects near-term cost and operations synergies as well as shared shipping contracts and sourcing. Analysts have an average target for shares of $87.80 with the majority of the Street at a Hold equivalent, Aegis with a $85 price target recently. Institutional ownership fell marginally last quarter, Prescott a top holder of shares with more than 4.5M shares and Brave Warrior with more than 1.8M shares. Cantillion is the sixth largest holder of stock with 1.47M shares. Short interest is 16.5% of the float but falling sharply since February 2016 when it was over 30%. On the chart, shares are back to the Nov/December range and forming a higher low while also keeping 2-year trend support. Shares have a gap above at $88.25 back to $95.
Comerica (CMA) with a rare insider buy on 1-26 from Director Michael Van de Ven of 5,000 shares at $69.14, a more than $345,000 investment. The buy is the largest open market transaction in at least five years and only the second since a small 256 share buy in November 2015. Van de Ven was appointed to the Comerica board in September 2016 and currently serves as the EVP and COO of Southwest Airlines (LUV). The $11.87B regional bank trades 14.74X earnings, 1.58X book and 1.62X cash with a 1.32% yield. EPS growth is expected to jump 20% over the next five years after a period of stagnant low-single digit growth. CMA revenue is expected to rise 6.9%. CMA is coming off a strong quarter and seeing FY17 loan growth higher Y/Y and on track to hit their stated 2018 goals. CMA has been pressured by activists to sell the bank, potentially to a larger International bank such as Mitsubishi who is seeking growth outside of Japan. In April, CEO Ralph Babb said the company was exploring all their options. CMA has been hindered by weakness in the energy market but could see a recovery as some of their loan exposure recovers. The company has also seen declining ROE but could see better returns on their fixed-income investments with a rising rate environment. Analysts have an average target for shares of $49 with 9 buy ratings, 14 hold ratings, and 2 sell ratings. Citi downgraded shares to Sell on 1-10 while JP Morgan raised shares to Overweight on 1-5 seeing the company benefitting more than peers from a rising rate environment with their asset-sensitive portfolio. Piper upgraded shares on 12-29 seeing more than $5 per share in FY18 with an assumption of 75 basis points in rate hikes. Institutional ownership fell 5.46% last quarter. Harris Associates and Victory Capital top holders of shares. Short interest is 2.64% of the float.
Sinclair Broadcasting (SBGI) with a notable insider buy from Executive Chairman David Smith of 16,500 shares at $29.59, a $488.265 investment and the first open market buy in the name in at least five years. Smith stepped down as CEO of Sinclair in January after 28 years in the position and moved to the Exec. Chairman role. Smith founded the company in 1986 and will focus on local and national news content and the launch of their Next Generation Broadcast Platform which was announced in April. It will focus on their SFN buildout and IP core network infrastructure. The $2.93B owner of more than 170 television stations trades 13.3X earnings, 1.15X sales, and 12.74X FCF with a 2.29% dividend yield. SBGI has seen double-digit revenue growth each of the last five years with EPS climbing to over $2.50 per share. The company delivered a mixed quarter in November but seeing Q4 revenue up more than 25% with media revenues up 34-37% and political revenues over $120M. The company reported strong core advertising growth despite volatility among political ad rates and the Election. SBGI has built a lot of their network through acquisitions over the 26-year history and in August rumors the company was eyeing the Weather Channel. SBGI could benefit from the incoming administration and changes towards the FCC and regulations. Analysts have an average target for shares of $40 with the majority of the Street at a Buy equivalent, Benchmark out with a $44 price target on 11-3. Institutional ownership fell 2.73% last quarter, Clearbridge and Gratia Capital notable holders of shares. Short interest is 9.03% of the float but down from over 30% in July 2015. On the chart, shares have traded in a monthly monthly bull flag stretching back to early 2013 with support at $23.50 and resistance at $37. Shares have been strong since the Election.
American Outdoor Brands (AOBC), the former Smith & Wesson, with two notable insider buys this week from President/CEO James Debney of 10,000 shares at $20.92 and EVP/CFO Jeffrey Buchanan of 10,000 shares at $20.92. These are the first open market buys in the name (either AOBC or SWHC) in at least five years. The $1.17B company trades 8.84X earnings, 1.35X sales, and 6.8X FCF with 15% EPS growth. The company is expecting $920M-$930M in sales in 2017 after consecutive years of double-digit sales growth. The company is split between two segments: Firearms and Outdoor Products. The former saw revenue growth of 57.5% in Q2 with 42% gross margin while the latter grew 97.7% to over $39.1M in sales. NICS background check information continues to show demand for handguns and long guns rising (up 11.5% and up 17.1% respectively). NICS has risen 7.2% annually over the last nine years. The company has been exploring new brands and strategies to diversify away from handguns and bought Taylor Brands in August 2016 which develops knife brands such as Schrade and Imperial. They bought Crimson Trace in August as well which pushes the company into Electro-Optics such as laser sighting and tactical lighting. Analysts have an average target for shares of $25 with 2 buy ratings and 7 hold ratings. Lake Street cut shares to Hold on 11-21 seeing increased uncertainty for firearm sales with the new Presidential administration while Wunderlich downgraded shares to Hold on 10-6 seeing industry demand wane. Institutional ownership rose 6.3% last quarter, Hood River Capital, an $811M fund out of Portland, a notable buyer last quarter and a 1.1% weight of their portfolio. Short interest is 25.9% of the float. AOBC saw 4,000 January $20 calls bought on 1-11 from $0.55 to $0.65.
Abbott Labs (ABT) with a notable insider buy in late December from EVP Brian Blaser of 15,580 shares at $38.45, a nearly $600,000 investment. Blaser’s buy follows a sizable buy from EVP Robert Ford on 12-16 and over 900,000 shares bought COB and CEO Miles White since July. The $58.3B company trades 16.4X earnings, 2.8X sales, and 13X cash with a 2.67% dividend yield. ABT is projecting 5.4% Y/Y sales growth in 2017 with EPS growing 9% to more than $2.40 per share. The company grew the topline 3% last quarter with strength in diagnostics, pharmaceuticals, and medical devices. Nutrition was a weak spot down 1%. ABT reached a deal to acquire St. Jude in April and closed the deal on 1-4 which boosts the company’s presence in cardiovascular with more than $8.7B in combined sales. The deal will be accretive by $0.21 in 2017 and $0.29 in 2018 with $500M in pre-tax synergies by 2020. Analysts have an average target for shares of $46.35 with 15 buy ratings and 5 hold ratings. RBC Capital was out positive in October seeing $2.93 in EPS in 2018, ex-Alere, and thinks lower interest costs and higher synergies a notable tailwind. Leerink was out with a $45 price target seeing the company in the midst of a massive re-shaping of its portfolio towards higher growth assets and shedding lower-margin businesses. Institutional ownership fell 1.12% last quarter, Highland Capital a notable buyer of shares and Senator Investment group a buyer of 2.1M shares. Short interest is 5.26% of the float but a lot likely due to arbitrage with the Alere deal still pending. The company will be at the JP Morgan Healthcare Conference on 1-10.
Natus Medical (BABY) shares trying to hammer on the 50-week EMA and saw an insider buy from President and CEO James Hawkins of 10,000 shares at $38.48 yesterday, a greater than $384,000 investment and first open market insider buy in the name since at least 2005. Hawkins has been the CEO of Natus since joining the company in 2004 and prior was at Invivo Therapeutics since 1985.
BABY shares gapped lower last week following the company agreed to acquire GN Otometrics for $145M in cash. GNO is a manufacturer of hearing diagnostics and balance assessment equipment, disposables & software. The company also cut their Q3 view due to weaker International demand and a voluntary ship hold the company put on certain products. Resumption of shipments will be in Q4 and Q1 of 2017. The $1.31B medical equipment company with a focus on newborn care trades at 21.25X earnings, 3.48X sales, and 13.65X cash with 20-25% EPS growth.
Analysts have an average target for shares of $42.50 with most of the Street at a Buy equivalent. Raymond James upgraded shares to Outperform on 9-13 with a $46 price target seeing a lot of M&A potential with the company potentially adding to Neurology and using their cash to build a long-term revenue stream. Roth was out positive following the GNO deal seeing the deal as a meaningful positive despite short-term headwinds and can help lead to $500M in annual revenues by 2017. Institutional ownership rose marginally last quarter. Eagle Asset Management is the top holder of shares with 2.88M, their 18th largest, and both Fisher Asset Management and Point 72 are owners. Short interest is 2.72% of the float.
QSR Restaurant Brands (QSR) with a large insider buy disclosed last night from Director Roberto Thompson Motta of 22,000 shares at $46.98, a more than $1M investment. Motta is a founding partner of 3G Capital, the Brazilian private equity giant who has previously partnered with Berkshire Hathaway to acquire Kraft and HJ Heinz. In February, fellow Director Alexandre Van Damme bought 78,125 shares at $32.74, a $2.5M investment.
The $10.5B restaurant group with the Burger King and Tim Horton’s brands trades at 25.5X earnings, 2.6X sales, and 6.18X book with a 1.42% dividend yield and 18-20% EPS growth. QSR saw basically flat revenue growth in August but SSS grew at TH by 2.7% and 0.6% at BK. Tim Hortons has seen notable impact from FX headwinds which are seen abating in the 2H and into 2017. BK saw strength in Asia and Latin America which offset weakness in the U.S. Both BK and TH are expanding their store base marginally by 3-4% in 2016 and BK moving into third in the US this year in market share at 11% behind McDonalds and Subway.
Analysts have an average target for shares of $46 with 6 Buy ratings and 5 Hold ratings, Piper recently reiterating their $52 price target and Overweight ratings. OTR Global upgraded shares to Positive in July noting that promotions at both franchises had exceeded expectations and traffic flow had positive momentum. RBC upgraded shares to Outperform earlier this year seeing a big turnaround in Burger King and cost-cutting at Tim Hortons positioning it positively long-term.
Institutional ownership rose 1.85% in recent filings, Pershing Square the top holder with more than 39M shares and their top holding, a 21.68% weight in their portfolio. Berkshire Hathaway holds more than 8.4M shares and Tiger Global another major holder with more than 2.49M shares. Short interest is 2.62% of the float, dropping steady from May 2015 when it was near 10%.
On the chart, shares have been in a strong trend higher since February when shares traded $29-$30 and pulling back recently to cloud support at $44.50-$45. The level also aligns with the 23.6% Fibonacci retracement level for the year with eyes on a return to $48 highs. Shares cleared major resistance at 45 in August after trading range bound since early 2015.
Ulta Salons (ULTA) weak today with the rest of the market selling off but a sizable insider buy from Director Dennis Eck of 11,000 shares on 9-7 at $246.97, a more than $2.7M investment. It’s the first open market buy since March and largest since Eck bought 16,000 shares in September 2014 for $1.9M. Eck was the Interim CEO of ULTA from February to July in 2013 and previously the CEO of Coles Myer from 1997 to 2001.
The $15.13B specialty retailer with a focus on cosmetics and skincare products trades at 32X earnings, 3.5X sales, and 49.75X cash with 20% EPS growth, a standout among retailers over the last year which has been a sore spot. ULTA shares are selling off recently following earnings despite a 22% jump in revenues and bottom line beat as well, their seventh consecutive quarter of double-digit sales growth. Comps gained 14.8% vs guidance just under 13% but down from earlier in the year which was closer to 15%. The company guided in-line for the upcoming quarter but sees FY growth around 20%, the high-end of the prior range. E-commerce has been a major area of strength for ULTA and up 46% on the quarter, a lot of investments in the area paying off and traffic in stores continues to do well relative to the industry.
Analysts have an average target for shares of $265 with 11 Buy ratings and 9 Hold ratings. Piper was out defending shares on 8-31 with a $290 PT seeing concerns about in-line guidance overblown as the company continues to execute on nearly all of its initiatives and ULTA remains an outlier in the retail space with growing double-digit comps. Cowen was out recommending shares seeing room for more improvement in gross margins in upcoming quarters and Deutsche Bank raised their price target to $280 from $225 noting that while there aren’t many near-term catalyst for shares, they continue to post the strong results even with tough comps.
Institutional ownership fell 2.85% in recent filings, Blue Ridge Capital a notable holder with over 1M shares, their seventh largest, and Columbus Circle Investors with 1.1M shares, their top position. Short interest is 3% of the float and down from over 6% in early 2016. On the chart, shares have sold off from around $275 following earnings with the 38.2% Fibonacci from the recent run off $150 sitting at $230. ULTA is a very strong uptrend since 2009.
Spectrum Brands (SPB) shares strong today up 2.6% and follows a big insider buy last night from Executive Chairman David Maura of 4,350 shares at $114.52, a $498,162 investment and following buys from Maura in February of 2,000 shares. SPB has been in a strong uptrend since 2012 when it traded near $20/$25. Shares pulled back to the 50-EMA recently and 23.6% Fibonacci off the January lows, a rare dip, and now moving back towards the highs at $119.75. The $6.77B personal products company with divisions in global appliances, auto care, home and garden, home improvement, and pet supplies trades at 19.96X earnings, 1,36X sales, and 4X book with a 1.34% yield and 9-10% EPS growth. SPB reported a nice quarter in April, top and bottom line beats, with strength in pet supplies and home improvement. The company guided to a strong 2H noting the seasonal nature in many of their businesses. FCF is guided to grow 10%+ this year with sales up 8-9% to over $5B. Jefferies was out positive on 5-10 noting the company remains a top pick with better International growth and operational efficiency. The firm has a $143 PT with Latin America a big driver for auto care business. Oppenheimer has an Outperform rating for shares noting strength in their home and garden businesses should be buoyed by the milder spring weather and a stabilizing housing market gives their HHI business a nice tailwind. Institutional ownership rose 6.83% last quarter, notable holders include Brahman Capital with 1.986M shares, their 6th largest holding, and Rovida Advisors who own 1.16M shares, a 26% weighting. Tourbillion Capital owns over 566,000 shares. Short interest is high and rising, 14.97% and up from around 3.6% in 2015.
Brink’s (BCO) with a large insider buy today from President and CEO Doug Pertz of 83,696 shares at $29.87, a $2.5M investment and first open market buy from a company insider in at least five years. He also has options which vest based on share performance in June 2019, one third with the stock above $37.34, one third with the stock above $44.81, and one third with shares above $47.79. Pertz was recently named to his position after the retirement of Thomas Schievelbein in May and formerly was the President/CEO of Recall before its acquisition by Iron Mountain in 2016. Recall shares doubled during the period when Pertz ran the company. BCO shares bounced into the 50-EMA recently but falling back towards recent lows, a name which was hit hard on earnings in May after trading as high as $35. On a longer-term view, shares have been in a strong uptrend since 2014 when shares traded $19 and recently pulling back to the rising trendline at $28. The $1.44B security company trades at 13.37X earnings, 0.48X sales, and 4.28X book with a 1.39% yield although a bit of a debt heavy balance sheet. EPS fell 16% over the last five years. BCO affirmed their FY view on 5-3 seeing sales of $2.9B with weakness in the US and Mexico offset by momentum in Latin America. BCO’s new CEO was brought aboard in large part due to pressure from activist investor Starboard Value who has a greater than 12% stake in the company. In January, the two reached an agreement to add three new members to the Board and put in place an early succession plan for Schievelbein. BCO is under fire to improve logistics and margins which have lagged over the past several years. Two of Starboard’s appointed board members come with years of experience from TNT Express and Dun and Bradstreet, expected to help with route logistics and operations. BCO has set a goal of 7% margins by 2017 and could be forced to explore a sale if unable to turn the business around. Imperial Capital boosted their price target on 5-20 and noted that Swedish-based Loomis could be a possible buyer of their Latin America business while G4S in the UK also could buy some assets although neither likely the acquire the entire business given their relative size. BCO was initiated Buy at BB&T on 4-12 with a $38 price target. Institutional ownership fell 2.78% last quarter. On 5-2, GAMCO disclosed a 6.12% stake. Scopia Capital is the second largest holder with 3.9M shares. Sagard Capital has a 1.465M share position, heavily concentrated at 14.65% weighting. Short interest is 2.48% of the float, nearing 3-year lows and down from almost 15% in April 2015.
Trinseo SA (TSE) a lesser followed name but relative strength this year and over the last month seeing two small insider buys into strength recently, notable with shares up 71.35% on the year. Today SVP and Performance Materials President Hayati Yarkadas bought 2,100 shares at $48.82, a $102,522 investment and on 5-13 SVP of Corporate Development and Business Services Jeffery Denton bought 1,200 shares at $43.66. TSE had some small insider buying in March 2015 between $18.68 and $19.91. The $2.29B company manufactures synthetic rubber, latex, and plastic products. TSE has a very diverse set of products it manufactures including tires for automobiles, latex for coated papers used in kitchens, carpet and artificial turfs, and many others. TSE manufactures synthetic rubber and performance latex for building and construction, medical equipment, packaging, and electrical and lighting including LED. Shares trade at 7.30X earnings, 0.59X sales, and 0.86X PEG with over $9/share in cash. EPS grew 28% over the past five years and guided to 15-20% growth through 2020. TSE topped estimates in early May with strength in performance materials. Revenues were down 12% with lower sales volumes in Europe (which comprised over 60% of sales) as well as FX headwinds from the weakening Euro. TSE is on pace to deliver $5.25/$5.45 in EPS for FY16, raised in March with improvement in their polycarbonate and structural polymers business from their 50/50 JV with Americas Styrenics. TSE doesn’t get a lot of sell-side coverage but Jefferies reiterated their Buy rating and $50 PT on 5-5 and Citigroup raised their estimates to $45 in April. Goldman Sachs has a $44 price target for shares. Institutional ownership fell 6.38% last quarter but notable buys from Luminous Management who added 766,000 shares, Soros Fund who added 450,000 shares, and OZ Management. Leon Cooperman, Two Sigma, Shellback, and Sir Capital all own small positions. Lakewood Capital is the fourth largest holder of stock with 1.1M shares. Short Interest is 18.22% of the float but down from over 40% at the start of the year. On the chart, shares have been very strong this year and broke out of a big monthly bull flag in March but hitting its measured move this month. TSE hasn’t closed beneath the 20-EMA since February. Potential areas to target on a pullback would be the 23.6% Fibonacci at $43 which also aligns with the rising 50-EMA.
Medicines Co (MDCO) with a large insider buy last night from EVP and Chief Corporate Development Officer Christopher Cox of 53,340 shares at $37.55, a more than $2M buy and second since May when Director Fredric Eschelman bought 300,000 shares at $33.68. MDCO is also seeing bullish flow today with 1,000 July $41 calls opening as a position in the June calls rolls out, staying bullish, and has the July $40/$50 call spread in open interest 3,000X6,000. MDCO shares have been grinding higher since February after pulling back to the 61.8% Fibonacci of the two-year trend and higher this week off the 8-EMA at $36.50. Shares broke out of a consolidation recently and a nice re-test earlier this week with a measures short-term move to $41. The $2.69B generic drug company trades at 10.77X sales and 4.02X book. MDCO topped revenue estimates in May and announced the divestiture of its cardiovascular assets to Chiesi for up to $792M including milestone payments. The deal is expected to close in Q3. Revenues for newly launched products totaled $10.9M in Q1. MDCO has a number of big R&D programs nearing data in late 2016. On 6-2, the company announced that they had completed enrollment in Phase 2 ORION-1 study of RNAi therapeutic for the treatment of high cholesterol with data expected by year-end. They also have a Phase 3 trial TANGO 1in CARBAVANCE for the treatment of complication UTI in the pipeline with completion expected in June and data in the 2H of the year. They also have data from MILANO-PILOT study into atherosclerotic plaque burden due this Summer and launching Phase 3 testing in 2017 for ABP-700. On 5-13, Jefferies was out positive noting that MDCO could rally $4/share on a catalyst rich 2H and sees both Carbavance trials successful leading to FDA approval. The firm has a $43 price target for shares. Cowen started shares at Outperform with a $45 price target. Institutional ownership fell almost 2% last quarter, Corvex a top holder with 3M shares and Sarissa Capital owns 1.7M shares. Short interest is troubling at 35.4%, and rising sharply over the last two years. Leerink on 4-14 highlighted MDCO as a potential M&A name once the cycle picks back up.
Signet Jewelers (SIG) with two insider buys today as CEO Mark Light bought 2,897 shares at $86.22, a nearly $250K buy and Chairman of the Board Todd Stitzer bought 3,480 shares at $86.25, a more than $300K investment. The buys are the first open market transactions in the name since the company has come public. SIG shares have been in a strong trend lower recently falling from $150 in November and plummeting these past two weeks after a negative report in Grant’s. Shares have a long-term uptrend line to defend at $85 from the 2009 lows. SIG has seen some notable bullish flow recently with the July $90/$95 call spread opened 3,000X6,000, the January $90 calls bought 2,000X on 6-3, and more than 4,500 January $95 calls opened on 6-2. The $6.74B jeweler trades at 8.86X earnings, 1.03X sales, and 0.86X PEG with a 1.21% yield. Earnings grew 20.4% over the last five years and expected to settle into the 15-17% range by 2020. The company reported a mixed quarter in May, SSS up 2.4% and guiding to 3.2-3.5% growth for FY17. E-commerce was up 11.2% with margins up 1.7%. The company announced it had retained Goldman Sachs to conduct a strategic review of its credit portfolio. On 6-2, Grant’s was out with a negative report on the company noting that employees had swapped diamonds in favor of less expensive stones after a repair. The company responded to the allegations noting that while swapping does occur it is exceedingly rare and dealt with by the company. The report comes amid a series of cautious notes from Pacific Square research about the company’s consumer financing and potentially souring of a series of nonperforming loans. Pac Square has also highlighted some opaque revenue recognition methods as inflating EPS over the last two years. In January 2014, Corvex Management opened an active stake in SIG and recently raising it to 8.3%. BAML was out positive yesterday noting that the company’s market share is undervalued and that recent allegations sound a lot more damaging than they actually are to the bottom line. They note that 99% of the 4M repair and service transactions a year are completed without any negative feedback. Goldman Sachs removed the company from their Conviction Buy list on 5-27 and downgraded to Neutral with a $119 PT with concerns about comps decelerating. Short interest is 8.15% and rising from 2% in October. Institutional ownership fell 3.72%, Corvex a top holder and Select Equity owns 7.5M shares. Third Point started a 1M share position last quarter.
PBF Energy (PBF) with a large insider buy from CEO Thomas Nimbley of 50,000 shares for $27.40, a $1.37M investment, and then another purchase from President Matthew Lucey of 10,000 shares at $27.50, a $275,000 buy. The two buys are the only open market buys on record in the name. On 5-11, the December $40/$22.50 bull risk reversal was opened 5,000X for a small credit. PBF shares have been weak with refiners selling off since mid-April but hitting key support at $26 stretching back to mid-2015. Shares are tagging trend support from the 2013 lows as well with a measured move back to $34. The $2.8B refiner trades at 6.21X earnings, 0.22X sales, and 1.69X book with a 4.36% yield. Earnings grew 6.9% over the last five years and forecast to remain steady at 6% growth through 2020. PBF showed a 6.5% YOY revenue decline in April, topping estimates and making some small acquisition within recent months of Chalmette which expand the company’ reach out of the East Coast into the South, something investors have been pushing for a while. JPM was out positive on both deals impact in April noting they position PBF as one of the best values in the group with strong FCF and a clean balance sheet which will allow them to add new plants if opportunities arise. PBF is buying the Torrance refinery from Exxon for $537M although waiting for the site to return to operation before sale is completed. On 5-10 the site has returned to activity at 20% normal. The deal should close by mid-year. Deutsche Bank was out positive the group on 5-26 noting that crude at $60-$65/bbl would be the sweet spot for refiners. RBC Capital initiated shares at Sector Perform on 4-12 with a $33 price target while JPM Morgan initiated Overweight with a $40 price target. Short interest is 6.49% of the float, steady with the 3-year average. Institutional ownership fell 2.68% last quarter, notable buys from Victory Capital, Luminous Management, and Kingdon Capital. Baupost is the top holder of shares with 10.6M, their 6th largest position while Snow Capital owns 2.5M shares.
Advanced Auto (AAP) with a large insider buy from Jeff Smith, head of activist firm Starboard Value, of 400,000 shares on behalf of the fund at $155.68, a $62.2M position. Smith’s buy follows a purchase of 150,000 shares on 5-25 at $152.73 and raises the fund’s position to 2.258M shares, their fourth largest, and the sixth largest shareholder in the name. Smith was named Chairman in mid-May. AAP has seen some bullish flow in recent weeks with 1,000 June $150 calls bought on 5-18 at $3.30 and 1,000 January $155 puts sold to open at $16.90, sizeable trade. The $11.34B auto parts store trades at 17.4X earnings, 1.17X sales, and 4.29X book with a small yield. Earnings are set to grow 11.17% over the next five years after growing 10% since 2011, flat to modest growth and lagging peers AutoZone and O’Reilly which have both seen near 20% growth. The company missed top and bottom line on 5-19 noting comps down 1.9% in Q1 after being down 2.5% in Q4. Margins fell slightly with inventories up 8%. The company is guiding to FY SSS contraction of 3-5%. AAP hired former Frito-Lay CEO Thomas Greco as CEO in April and saw their CFO resign on 5-19. Starboard first got involved with AAP in September. The firm sees shares worth $350 with improved operating margins, revenue growth and a more aggressive capital return plan including a buyback or dividend hike. They also see Worldpac, a commercial parts distributor for high-end imports, as an undervalued asset. The business was acquired through their acquisition of CarQuest. Starboard sees room for revenues to double with its superior market position. Lastly, they see opportunities for AAP to use tack-on M&A to increase their scale and reach given the fragmented DIFM market. RBC was out positive on the name on 5-20 noting that weather has been a huge challenge for stores in Q1 but should turn in the Summer. Goldman Sachs raised shares to Buy on 5-6 with a $181 price target with strength in margins through cost-efficiency and better FCF generation. Institutional ownership rose 3.42% last quarter, Longview Partners a top holder with 4M shares and Fir Tree with 1.07M shares, their fifth largest position. Victory Capital owns just under 1M shares. Short interest is 5.94% of the float down from over 8% in July. On the chart, shares have traded in a long weekly base back to mid-November after a big gap-down following earnings. Shares touched $135 support in mid-May after earnings but bought up steady ever since before pulling back recently to the 8-EMA at $150. Over $157.50 would break a short-term downtrend with $162.50 and then $175 targets. A gap back to $195 opens above those levels. Major support below is at $140.
First Data (FDC) with another large insider buy today from Director Joseph Plumeri of 250,000 shares at $12.44 average after he bought 250,000 shares last Thursday for $12.30, more than $6M invested value in the two buys. On 5-19, Director Scott Nuttall bought 100,000 shares at $10.62 and in February CEO Frank Bisignano bought 115,990 shares at $10.31. The recent insider buys follow more than 4,000 October $11 puts sold to open on 5-24 and today 2,500 June $12 puts were sold at $0.20 to open. The $11.28B provider of payment processing systems trades at 8.22X earnings, 0.98X sales, and 36.25X cash with earnings forecast to grow 23.5% over the next five years, an underperformer in a hot group with secular tailwinds. FDC IPO’d at $16 in October and shares in a steady trend lower ever since hitting $8.50 in February following earnings. The company was taken private by KKR in 2007 who owns about 60% of shares at a $14/share average, 10% higher than today’s levels. FDC has had concerns about its heavy-debt and marginal revenue growth (growth of 3-4% each of the last two quarters) relative to peers like Vantiv and Global Payments. FDC’s biggest business is global merchants which sells credit-card processing systems to retailers. The company hired a new CEO in 2013 and he’s pushed the company towards paring down its balance sheet, improving FCF and building new partnerships such as a deal with Apple Pay in 2014. FDC has invested in tech to boost offerings to banks as well. FDC acquired small payments startup Clover in 2013 moving it into POS for small businesses and better compete with Square and PayPal. FDC was downgraded to Hold at Stifel on 4-26 noting the slowing domestic growth is a headwind for near-term improvement. Nomura, Compass Point, and Stephens initiated at Neutral in mid-April. Institutional ownership rose 0.16% last quarter. Notable buyers include Brahman Capital who added a new 5.22M share position, their 11th largest, and Alyeksa Investment Group who added 1.6M shares to their position. Stone Point Capital is a top holder with 19M shares, their largest positon, and Leon Cooperman owns 15.5M shares. Short interest is 12.46% and down from 18.5% in mid-April. On the chart, shares have room back to trend resistance at $13.50 in the short-term and forming a bottom since February. Shares are above their short-term MA with RSI and MACD both strong. Shares have a low-volume area at $13.75 which measures back up to a big volume area at $16 from the IPO.
CF Industries (CF) with a large insider buy for the second day this week as Director Robert Arzbaecher bought 17,275 shares at $28.10, a $485,386 investment. On Tuesday, SVP of Manufacturing Chris Bohn bought 12,500 shares for $27.92, a $349,056 investment. Insiders have bought more than 65,000 shares since 2-24 including an $800K+ buy from President and CEO Anthony Will. CF cleared a six-month downtrend in early March and re-testing the prior lows and trying to bottom at the $27 level since mid-January. Recent options flow has been leaning bullish with 1,000 November $20 calls bought on 5-23, 2,000 January $30 calls bought on 5-11, and over 2,000 January $30 puts sold to open. The $6.92B agricultural chemicals company trades at 10.6X earnings, 1.59X sales, and 1.7X book with a 4.07% yield and over $11 in cash per share on hand. The company recently abandoned its merger with OCI over tax inversion pressure, a positive with weakness in the nitrogen market since the deal was initially announced. Stifel was out noting that the deal had become dilutive. The deal frees up cash for CF to continue with their aggressive capital allocation plans which are targeting $12B in returns to shareholders over the next four years. CF reported a 4.9% revenue gain YOY in May, strength in Granular Urea and their Ammonium Nitrate businesses. CF is the top name in nitrogen fertilizers and in late May the USDA report showed farmers adding more nitrogen and nutrients to soybeans despite wet weather. CF also made a deal with CHS Co-Op last year who took a 9% stake in the company at a premium which values CF at $107. Sell-side sentiment is pretty one-sided with estimates cut at Cleveland Research, Scotiabank, BAML, RBC Capital, and Cowen with in recent months. The latter with a note on 4-14 noting that nutrient prices and margins still continue to trend lower and upside from a Brazil recovery is a tough investment. Piper Jaffray sees the cyclical business environment as weak and with volatility in commodity prices, the business likely to remain under pressure after the Spring demand passes. Insittutional ownership rose 3.82% last quarter, Passport Capital a notable buyer of 1.9M shares to raise their position to 11.1M, their fourth largest position. In November, Passport’s John Burbank presented CF as a long idea against short Potash and Mosaic at the Invest for Kids conference. The $5.9B Anchor Bolt Capital owns 2.38M shares, their 12th largest position. Short interest is 10.89% of the float and rising since November when it was under 3%
Stewart Information Services (STC) with a large insider buy yesterday from Director James Chadwick of 55,000 shares on behalf of Ancora Advisors and Merlin Partners, a more than $2M investment. Chadwick’s buys are the first in 2016 for the name and following a $1.1M buy in June 2015 from him as well. Officers in the company haven’t bought shares on the open market since 2011. Chadwick is a portfolio manager at Ancora’s Alternative Investments arm and experienced in activist situations in small and mid-cap companies.
The $846M property and casualty insurer trades at 11.24X earnings, 0.42X sales, and 1.36X book with a 3.32% yield. STC provides title insurance to residential and commercial real estate and benefits a strengthening market. STC has seen some slowdown recently in energy hit areas like Houston but continuing to see business stabilize from 2008/2009 levels. Earnings are forecast to grow 5% by 2020 but slowing from over 17.4% growth recently. STC has been targeted by Phil Goldstein’s Bulldog Investors who own 1.135M shares and in February 2015 urged the company to explore a sale and other value added moves including collapsing the company’s dual class structure which the company did in January. Goldstein feels that management wasn’t invested enough in the company’s performance to make changes and a more active c-suite will help drive returns.
STC has been working on a turnaround since 2012 and cutting costs have yet to lead to margin gains and EPS continues to fall. Other notable holders of stock include Foundation Asset Management with 1.4M shares, Basswood Capital, and Victory Capital. Short interest is 2.11% and declining steady since 2014 when it was closer towards 15%. Keefe Bruyette initiated shares Market Perform last August with a $42 price target. On the chart, shares are forming a big rounded bottom around $32.50 level and above the daily Ichimoku cloud for the first time since November. Shares have room back to $39.50/$40 short-term with new highs over $43.29.
New Media Investment Group (NEWM) shares are down 13.8% YTD, but in the past week has seen two large insider buys. On 5/10 the CFO bought 25,000 shares at $16.10 and on 5/16 the CEO bought 60,000 shares at $15.90, a net purchase of more than $1.35M in stock.
On the chart NEWM shares have a double bottom at $14.50, and resistance sits near $16.75 for a base breakout to test longer term trend resistance at $17.50 as well as weekly cloud resistance.
The $717.9M owner of media assets including 124 daily newspapers, niche publications, and websites trades 10X Earnings, 0.58X Sales, and 1.13X Book with an 8.2% dividend yield. Short interest has risen to 7.35% of the float. NEWM is targeting 6^ revenue growth in FY16 and just 2.7% growth in 2017, but EPS growth of 98.1% in 2016 followed by 53.6% growth in 2017. M&A has seen some activity in this space with Gannett (GCI) raising its offer for Tribune Publishing (TPUB) yesterday. NEWM operates in over 490 markets across 32 states reaching 22M people on a weekly basis. More than 50% of its revenues come from acquisitions that have been owned for less than a year, leaving room for operational improvements. NEWM is targeting a return to same store organic revenue growth in 2017 as digital and other revenue sources emerge to a larger contribution. NEWM continues to target acquisitions in the US newspaper segment looking for dominant providers of local news in markets with strong established brands.
Matrix Service Company (MTRX) saw a notable insider purchase last week as Director Jim Mogg bought 10,000 shares at $15.15, a $151,500 purchase, the largest insider purchase at MTRX since January 2008. Mogg is also a Director at ONEOK Partners, Bill Barrett, and ONEOK Inc. The purchase came with MTRX shares down 25% YTD.
Matrix’s services include construction and restoration at Utility facilities, storage solutions for Crude, LNG, and NGL, Refinery plant maintenance/turnarounds, Upstream services, chemical and tank cleaning, bulk material handling, and fertilizer production facilities. MTRX reports results in 4 segments, Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial.
In the Electrical Infrastructure segment, drivers for the power generation industry include new-build natural gas combined cycle construction, Report and coal to gas switching, and accelerating the transition to cleaner sources of power generation. In Power Deliver, an aging infrastructure sets up for new-build infrastructure to support renewables and new natural gas. In the Storage Solutions segment, positive drivers include a Contango market and the lifting of the crude export ban, and in Gas & Gas Liquids the North American conversion from an importer to exporter calls for more infrastructure, and demand trends from low prices causing a need for additional chemical and NGL processing plants. The Industrial segment remains challenging with lower commodity prices causing capex cuts in Mining & Minerals, Iron & Steel, and Fertilizer.
The $416.9M provider of engineering, infrastructure, construction and maintenance services to the Oil, Gas, Power, Industrial and Mining markets trades 10.6X Earnings, 0.32X Sales, 1.34X Book and 5.68X cash value with a debt-free balance sheet. EPS is 2015 at $0.63 was a 52.6% drop Y/Y, but expected to jump 78.7% in 2016 and 20% in 2017 to $1.35, surpassing its record EPS year in 2014. Backlog in FY15 grew to $1.42B, up from $916M in FY14, a record year in revenue, new project awards, working capital performance and backlog. New projects account for around 55% of revenues while recurring at around 45%. In Q1 MTRX saw a sharp jump in revenues from Electrical Infrastructure and Storage Solutions, while Oil Gas & Chemical and Industrial saw declines. MTRX did sharply cut its FY16 guidance for EPS and Revenues due to lower commodity costs.
At 9X FY18 earnings, MTRX trades cheap to a peer average of 11.8X, and at 3.4X EV/EBITDA it is cheap to a peer average of 5.4X. MTRX is performing better than peers in terms of Sales and EPS growth, so the discounted valuation does not appear appropriate, though it does trail peer margin levels. A comparison table is shown below:
MTRX also is trading at the low end of its historical multiples, which considering the commodity price environment is fair, but seeing stabilization in commodities that should position MTRX for better times ahead.
MTRX has a strong seasonal bias, averaging a +5.88% return in Q4 and +13.35% return in Q1 over the past 5 years, and the same tendencies seen in the 10 and 15 year averages as well.
On the chart, MTRX shares recently traded down to the lowest level since 2013, and down more than 50% from hitting above $37 in Summer of 2014. A chart with quarterly candles is shown below, and shows MTRX coming into long term trend support at the recent low while also retesting a former base breakout, an optimal level of entry for a trader with a long term time horizon, and shares are also deeply oversold.
In conclusion, Matrix Service (MTRX) shares are trading at an extremely cheap valuation considering its cash position and debt-free balance sheet, coming into a long term optimal entry level at trend support, and seeing a positive signal from an insider stock purchase. MTRX deserves to trade back towards $20/share if the commodity price environment stabilizes at these levels, and if commodities actually start to rise again, I can see MTRX earnings at least $1.50/share and deserved of a 15X multiple, giving an end of year target of $22.50, 45% upside from current levels.
Zix Corp. (ZIXI) on 3-16 with a notable Insider Purchase as CEO David Wagner bought 60,000 shares at $3.57, a $214,398 purchase that boosted his ownership by 48% to 185,000 shares. It was the first purchase by him as CEO (appointed on 1-19-16) and the first notable insider purchase in nearly two years. The insider trade comes with shares down 26.77% YTD.
ZIXI is a $209M maker of email encryption, data loss prevention, and other software. Shares trade 13.3X forward earnings, 3.82X Sales, 3.65X Book, 15.25X FCF and 7.28X Cash with no debt, so valuation very attractive for a name seeing sales growth each of the past five years. ZIXI posted earnings on 2-16 with 10.9% year/year revenue growth, but Q1 and FY16 guidance came in below Street expectations. Dougherty lowered its target on shares to $5.50 from $6.50 following results. ZIXI announced last October that it joined the Intel Security Innovation Alliance where Intel will refer ZIXI its customers requiring high-end email encryption solutions.
On the chart ZIXI shares are pulling back to long term uptrend support and setting up for a bounce in the $3.25/$3.50 zone, overhead resistance at $4.40 and $5. ZIXI has a 3 year average return in Q2 of 10.77%, and a name that has strong seasonal tendencies in Q4, a 14% average return the last two years.
Newell-Rubbermaid (NWL) with a large insider buy from former EVP Mark Tarchetti of 12,380 shares at an average price of $40.77, a net invested value of more than $500,000. It raised his ownership to more than 176,000 shares and was the largest single insider buy in the name since August of 2007. NWL had a small insider buy from Director Domenico De Sole in February of 5,670 shares, a $200,000 buy. Tarchetti was the former Chief Development Officer of NWL and left the company in December 2015 to pursue alternative interests.
The $11.03B manufacturer of commercial and consumer products with brands like Sharpie, Graco, Calphalon, and Rubbermaid trades at 16.75X earnings, 1.86X sales, and 40X cash with a 1.84% yield and 8-9% earnings growth. The company had an in-line quarter in January showing sales growth of 11.5% from Sharpie and 13.9% from Graco while all other segments showed weakness YOY. The company announced a $15.4B deal for Jarden (JAH) in December which will create a consumer-products powerhouse with more than $16B in sales. JAH brings iconic brands like Mr. Coffee, Oster, Breville, Coleman, and First Alert into the fold. The deal will give the NewCo scale and size with expectations to kick-start growth at the two companies which have seen EPS fall in recent years. NWL has undergone an aggressive cost-cutting plan since 2011 jettisoning brands and underperforming products to focus on their core and the JAH deal will strengthen them in areas where they can cross-promote like infant products and coffee. Raymond James was out with a note on 2-1 indicating that the synergies from the deal should come in above the $500M the company initially forecast. The firm upgraded shares to Outperform with a $43 price target. Shares were initiated Buy at Gabelli on 2-8 with a $59 price target. RBC sees $60/share value for the company following the deal.
Institutional ownership rose 9.25% last quarter. Notable holders include DSM Capital with 4.5M shares and Maverick Capital with 4.1M shares. Point72 initiated a new 611K position. On the chart, shares have moved off of the February lows and clearing all major moving averages last week. The 8, 13, and 20-day EMA are all curling higher and forming an inverted head and shoulders with a measured move to $45. NWL shares have been in a strong trend higher since 2011 and moving off the 38.2% Fibonacci recently at $35. On a daily timeframe, shares are forming a channel down from the spike highs which measures back to $44.
On 3-11, the OTM April $46 calls were opened 13,000X
TASER International (TASR) with a large insider buy from Director Hadi Partovi of 100,000 shares at an average price of $19.85, a nearly $2M purchase. The buy was the first from an insider in 2016, the most recent being in August of 2015 when Partovi bought 20,000 shares. His ownership is 267,406 shares. The purchase comes after shares of TASR jumped more than 11.5% on earnings recently, a rare move by an insider to purchase into strength. TASR shares have traded in a long rounding base dating back to November and clearing key resistance
with the move. The 38.2% Fibonacci from the May and June highs measures back to $22.20 while the 50% and a big area of volume is near $25.
TASR has seen buyers recently in the June $18 calls with more than 3,800 accumulating.
The $1.06B maker of electrical weapons and body-worn cameras trades at 40.6X earnings, 5.38X sales, and 9.7X cash with limited debt and earnings growth of 14.5%, slowing from the early stage growth recently. The company recently topped expectations with sales of their taser weapons up 15.4% and their AXON body cameras up 47% YOY. The company has seen sales rise for their body cameras and more departments employing them following the unrest in Ferguson and Baltimore involving police. The company announced new orders from Washington D.C. Metro Police, Omaha, NE, Chandler, AZ, and Irving, TX among others. In December, the company announced new orders from eighteen different agencies including Scottsdale, Dekalb, and the Georgia County Sheriffs. In November, the company received a major order from the London Police for 22,000 AXON body cameras. TASR is currently in a patent suit with Digital Ally (DLGY) who claims the company’s AXON body camera line infringes on the company’s IP. In January, the USPTO rejected TASR’s efforts to discredit the validity of DGLY’s patents. DGLY filed suit the next day in Kansas court alleging that TASR willfully violated the patent and seeking monetary damages and a permanent injunction. TASR filed a motion to dismiss on 3-4.
Institutional ownership fell 15% last quarter. In November, Jana Partners alluded to the company as an existing short position for the firm, noting the lack of actual market potential versus expectations. Short interest is 22.56% of the float but off from the September highs when it was 32.75%. JPM was out positive on the company following earnings recently noting that upcoming contract announcements and the company’s Analyst Day in May which will update the order log are both notable catalysts. They keep an Overweight rating and $25 PT for shares.
Delphi Automotive (DLPH) with an insider buy from Director Timothy Manganello of 4,800 shares at $62.50, a $300,000 investment, and his second purchase since last August when he bought 6,600 shares at an average price of $75.21, a $496,386 value. Manganello’s purchase follows President and CEO Kevin Clark who, on 2-12, bought 17,000 shares at $59.11, a greater than $1M buy. The three purchases represent the only open market buys in the DLPH since it came public in 2011. Manganello joined the board of Delphi in March of 2015 and before he was
Executive Chairman of BorgWarner (BWA), a company he had been with since 1989.
Shares of DLPH have fallen below their 2014 lows recently and forming a big monthly hammer above the 50% Fibonacci retracement from the 2011 lows. On a daily timeframe, shares bottomed recently at $56 and forming a bullish pattern with a break above $68 moving into a low-volume gap which measures back to $80.
The $18.5B maker of vehicle components such as electronic architecture, passenger safety, and displays trades trades at 9.48X earnings, 1.22X sales, and 26X FCF with a 1.74% yield and 16.5% earnings growth. DLPH is coming off a good quarter with top and bottom line beats against Street estimates and 2.6% revenue growth with strength in Asia, Europe and N. America due to a massive cost reduction strategy outlined in early 2015. In July, the company announced a $1.67B acquisition of HellermanTyton Group, a maker of electrical architectures, and
closed the deal in late December. DLPH has been impacted by weakness in China and recently a major emissions scandal from Volkswagen which sent waves through the entire group. The company sold off with BorgWarner (BWA), Gentex (GNTX), and others but has one of the lowest exposures to the embattled company with just 10% of revenue. The company is positioned in a major emerging trend for vehicles, autonomous driving, and an area that nearly every major player wants to be involved in for the next 5-10 years. Boston Consulting thinks self-driving cars can
be a $42B market by 2025 and HIS estimates that by 2035 one if every ten cars will be autonomous. DLPH recently completed a coast-to-coast trip in April in a collaboration with Audi. The car, powered by DLPH technology, travelled 3,400 miles in which it went 99% autonomous. DLPH thinks the hardware necessary to make the vehicle operate will cost as low as $5,000 in the coming years. The trip helped put DLPH on the map with automakers and could lead to partnership and collaborations which will propel shares into the future. On 1-14, the President announced an initiative to invest $4B in vehicle automation.
Institutional ownership fell 1% last quarter. Longview Partners keeps shares as their top holding, more than 8.6M, and a 5% weight on their portfolio while Winslow Capital added a new 3.2M stake last quarter. Short interest is 2.09%. Barclays keeps shares at Overweight with a $105 PT
Innophos Holdings (IPHS) with a notable insider purchase on 2/25 as Director John Steitz bought 10,000 shares at $26.95, the first insider buy in the name since 2008 when the CFO bought 15,000 shares at $35.18. Steitz is the CEO of Addivant, a leading global supplier of antioxidants, polymer modifiers, and UV stabilizer solutions. Steitz was formerly the President of Albemarle (ALB). In March of 2015 SK Capital, a private investment firm focused on the specialty materials and chemicals sector, hired Steitz.
The purchase comes as IPHS shares have fallen to the lowest level since July 2010, hitting as low as $22.06 in January, down sharply from $61.10 highs just a year ago.
The $545M maker of performance-critical and nutritional specialty ingredients with applications in food, beverage, dietary supplements, pharmaceutical and industrial markets trades 11.3X Earnings, 0.69X Sales, 1.63X Book and 18.9X FCF with a large 6.79% dividend yield. IPHS is coming off a very weak Q4 report, missing EPS estimates sharply and revenues fell 12.3% year/year, the Company citing the weak fertilizer market and overall weakness in most of the markets it serves, expecting flat volumes in 2016 from 2015, but raw material costs trending favorably. IPHS posted operating margins of 5% versus expectations for 11%. IPHS operates in a business with high barriers to entry and has few competitors in target markets. It’s GSTP segment, accounting for 9% of revenues, is a unit the Company is evaluating options, and may be sold. IPHS announced a new CEO back in November after Randy Gress decided to retire.
IPHS currently trades 6X EBITDA, and back in 2014 FrontFour Capital Group sent a letter to IPHS saying shares do not reflect the true value of the “dominant franchise”, and at that time IPHS was trading 8X EBITDA, citing the strong free cash flow nature of the business and makes five recommendations, including accelerating stock repurchases and exploring strategic alternatives for the entire Company, seeing a high interest for potential acquirers due to stricter food regulations, riding global middle-class and strong financing markets. It also notes a deal at 11X EBITDA, similar to Balchem’s deal for Sensory Effects, results in an $80/share value.
IPHS saw institutional ownership drop 5% in Q4 and lacks any notable large concentrated holders.
On the chart shares have put in two monthly hammers and look to confirm a bottom if can push above $31 resistance from November-December period.
WisdomTree (WETF) with a large insider buy from Founder and CEO Jonathan Steinberg of 200,000 shares at an average price of $10.74, a more than $2M investment and the only open market buy in the name on record dating back to 2011. Steinberg founded WETF and has served as CEO since 1988 and President since 2012.
The $1.6B asset manager trades at 20X earnings, 5.88X sales, and 6.4X book, a bit rich in valuation but carrying little debt and yielding 2.77% at these levels. EPS is set to grow 11% in the next five years, strong relative to peers. AUM slid 2.7% last quarter to $51.6B, although up more than 30% YOY and industry-leading growth, with strength in European-listed ETFs showing 11% AUM growth. Revenue grew to $76.5M, up 54%. WisdomTree benefits from the growing inflows into Exchange-Traded Funds (ETFs) and in a late January note from Credit Suisse estimated that 80-90% of ETF flows over the next ten years will be in existing products from WETF, iShares, Vanguard, and more and the market hit $2.1T in assets last year. The firm sees WETF as having a deep moat to any new entrants and with the company’s shares off more than 60%
from 2015 highs, their growth story is potentially attractive to a buyer looking to capitalize on passive investing. The company’s non-traditional indexing – smart beta — has grown in popularity in recent years with almost 20% of money entering ETFs in 2015 being put into these strategies. This adaptive strategy allows WETF to differentiate itself from bigger players like Blackrock and Vanguard. WETF’s ETFs have notable exposure to the currency markets.
Institutional ownership rose 1.12% last quarter. Short interest is 22.5% of the float, sharply higher from April 2015 when it was under 5%. WETF was a popular name for put buyers throughout the Summer, accumulating positions into strength before shares broke but have been relatively quiet since August with no notable options activity. On the chart, shares have traded in a downtrend since early 2015 and forming a monthly hammer off the 61.8% Fibonacci from the 2009 lows at $10.25. Monthly cloud support is at $10.
Hawaiian Holdings (HA) with a large insider buy recently from Director Gregory Anderson of 20,000 shares at an average cost of $39.87, a more than $797,000 investment. It was the largest open market buy from an individual insider on behalf of themselves since at least 2005 and first since 2013. Anderson joined the Board in 2002 and is currently the CEO of Legacy Senior Housing. Anderson’s buy is one of the rare occurrences of an insider buying into strength with shares of HA breaking out to new highs yesterday. HA has seen notable volume accumulation on the move higher recently with RSI getting extended over 70. ADX/DI shows a strong bullish trend developing with as measured move to $50 as shares clear a big weekly bull flag. MACD is getting a bit extended as well, likely a strong candidate to buy on a re-test of $40.
The $2.2B regional airline trades at 8.85X earnings, 0.95X sales, and 0.44X PEG with strong free cash flow and earnings growth over 30% as the company expands to new routes and benefits from crude prices below $30. The company reported a strong quarter in January, beating top and bottom line estimates, with load factor for the quarter improving and capacity growth between 2.5-5.5%. HA reported RPM rose 5.2% in January. BAML upgraded shares to Neutral on 1-28 with a $40 price target, the firm noting strength from leisure travel which continues to drive revenue growth. Deutsche Bank raised shares to Buy on 1-27 and Sterne Agee raised their price target for shares to $58, a Street High, on 1-27 with the strong Japanese tourism industry helping demand.
Institutional ownership rose 1.22% last quarter. Short interest is 4.64% of the float, nearing a 5-year low and
down from over 24% in September 2013.
Prudential (PRU) with a large insider buy from Director Douglas Scovanner of 7,400 shares at $62.56, a $462,944 investment and first open market buy in the name since 2013. It is the largest insider buy since 2007. Scovanner is the ex-CFO of Target (TGT) where he spent two decades and current Executive Vice President of Finance for Hudson’s Bay Company. He has held management roles prior at Coca Cola (KO), Ford Motor (F), and the Fleming Companies and joined the PRU board in November 2013.
The $29B insurer trades at 6.32X earnings, 0.71X book, 1.48X cash and with best in class FCF among the major insurers. Shares yield 4.2% at these levels with earnings forecast to grow in the mid-single digits. The company recently reported a weak quarter, particular weakness in both their Retirement Solutions and Investment Management and Individual Life and Group insurance businesses. Overall, PRU showed a 16.3% decline in revenue YOY. The company followed peers Metlife (MET) and Lincoln Financial (LNC) with weak quarters.
The insurers are a big play on the rising rate environment and slammed recently as talk grows of a slower-than-expected sustained rise given the economic outlook. 10-year Treasury yields have fallen and short-term futures have priced in a cut by Fed as recently as last week. The FOMC’s Minutes released on 2-17 showed the committee is reluctant to raise rates again in the near term until they receive clarity on the economy and inflation. In August 2014, Prudential’s CEO said that a sustained rise in rates was the most important thing to the insurer and a better understanding of the pathway to a normalized environment would lift a major overhang from their outlook.
In mid-January, peer Metlife (MET) announced plans to break itself up and many of said it could persuade Prudential (PRU) to consider a similar strategy. MET’s plan follows conglomerate General Electric’s (GE) massive restructuring last April. Analysts see the benefits for PRU as it would help alleviate any oversight or pressure from the Federal Reserve on capital allocations and strategy as the insurers become too big. PRU was downgraded to Neutral at Bank of America/Merrill Lynch on 1-10. Deutsche Bank reiterated their Buy rating on 2-12 with a lowered price target of $89. Institutional ownership fell 1.7% last quarter with Viking Global taking a new 1.2M share position. PRU has 1.05% of the float short.
On the chart, shares are working on a major monthly hammer and bouncing in a big volume area from 2010-2013 where shares coiled. A close above $67.50 this month would be key and open up for a move back into prior support at $75.
Anixter International (AXE) with a large insider buy from President and CEO Robert Eck yesterday of 8,000 shares, a more than $315,000 investment with shares down 47% in the last six months. It is the first open market buy from a company director since 2012 and largest since 2005. Anixter has been part owned (15%) by Sam Zell for more than 30 years and who currently holds a board seat. Zell most recently bought 1.85M shares on 8-31 at $60.60, a more than $112M investment.
The $1.31B industrial equipment company trades at 8.45X sales, 0.21X sales, and 1.12X book but earnings contracting and expected to fall 6% over the next five years. AXE distributes cabling and electronic wiring for video surveillance, fire/life safety devices, finance, transportation, and many other industries. The company reported a strong quarter in February, revenue up 26.9% YOY, with strength in their Network & Security Solutions business and an 8.9% jump in Electrical and Electronic Solutions. AXE is transitioning into a pure-play on electrical products buying Tri-Ed in 2014 and the Power Solutions business from HD Supply (HDS), a deal expected to be accretive in 2016. The company also sold its fasteners business to American Industrial Partners for $380M. Zell has tried unsuccessfully multiple times to push AXE to sell itself, most recently in February 2014. French-based Rexel was one of the known bidders while private equity Carlyle Group also was involved. The sale process fell flat in August and AXE turned around and became a buyer instead acquiring Tri-Ed.
Institutional ownership in AXE fell modestly last quarter. Notable holders include Ariel Investments, Joel Greenblatt’s Gotham Asset Management, and the $20B Channing Capital. Short interest is 2.32%, down from over 15% in Summer 2013.
On the chart, AXE peaked in 2014 with the talk of a sale to Rexel at $110-115 level and have traded almost straight down since into the 76.4% Fibonacci from the 2008 lows, a deep pullback in shares. The 13-day EMA at $43.20 is resistance now and a close above would the first since late November around $68. The 20-day EMA at $44 is the next big resistance before IchiMoku cloud at $48-50 range.
Wyndham Worldwide (WYN) with three large insider buys yesterday from President and CEO Stephen Holmes, CEO of Wyndham Vacations Franz Hanning, and Director James Buckman. The three purchases totaled 36,600 shares and more than $2. 3M invested value. They were the first open market buys in the name since 2008 when Hanning and Holmes bought shares.
WYN shares have traded in a prolonged downtrend, off more than 25% in the last year, but trying to base recently above $62 and the 38.2% Fibonacci from the 2009 lows at $59.25.
The $7.51B hotel operator trades at 11.52X earnings, 1.38X sales, and 28.99X cash with a 2.6% yield. The company recently reported a strong quarter, revenue growth of 6.5% YOY which topped expectations, and eyeing 10-12% EPS growth over the next five years. WYN had revenue gains in their two largest business segments, Hotels up 17.6% and Vacation Ownership up 5.7% with a modest fall in Destination Networks. Service and membership fees rose 10.6%. The company also announced a $1B increase to their buyback authorization.
The travel industry saw a rash of M&A activity in 2015 and sets up for more consolidation in the year especially after Marriott bought Starwood Hotels, a name which Wyndham had long been rumored to have interest. Intercontinental (IHG) has been reportedly exploring a sale or merger and as has Radisson owner Carlson.
Shares of WYN were initiated Neutral last Thursday at Credit Suisse with a $63 price target, the firm seeing headwinds in lodging trends, particularly in China and oil-producing regions. Institutional ownership rose 1.85% last quarter, the 7th largest position for Wedge Capital at 1.9M shares and the 11th largest position of $3.9B Lionstone Capital. Short interest is high, 10.6% of the float, and rising sharply from around 1% in April 2014.
Union Pacific (UNP) with a large insider buy today from Director Michael McCarthy of 50,000 shares at an average price of $78.07, a nearly $4M investment in the name with shares hitting new 52-week lows today. The action comes after more than 4,000 May $80 calls were bought to open on Friday from $3.90 to $4.25. It is the first open market buy since 2012 and largest since at least 2006. Mr. McCarthy was elected to the UNP board in 2008 and has served as head of the McCarthy Capital, an investment management firm, since 1986.
On the charts, shares on UNP hit fresh 52-week lows this morning so a contrarian play here to buy into technical weakness and an extreme low-point in sentiment. Shares are down 33% YTD and over 20% in the second half. The 61.8% Fibonacci from the 2011 lows is at $71.60. The $66B railroad operator trades at 12.6X earnings, 3.24X book, and 61X cash with a 2.85% dividend yield at these levels. UNP recently reported an in-line quarter with with record operating ratio due to superior pricing power even with volumes declining. The company recently announced that Q4 earnings would fall short of last year’s results as volumes continue to drop. Industry-wide, rail operators have been warning of the impact from a slowdown from their energy customers. October rail data came in largely negative with traffic across the board down for the year. BAML was out downgrading shares on 12/4 to Neutral.
HP Enterprise (HPE) with a large insider purchase from Director Michael Angelakis, former VP and CFO of Comcast. On December 2 he bought 34,000 shares at an average price of $14.76, a $501,840 investment through a joint account with his spouse. It was the first open market purchase in HPE since it was spun out of Hewlett Packard.
HPE was formed in November when Hewlett Packard split and comprises of the company’s servers, storage, and networking businesses. HP’s PC and printing business remains as HP Inc. The $27.35B company trades at 7.45X earnings, 0.52X sales and 0.68X book value with a 1.5% yield. Earnings are expected to grow in the low single-digits with headwinds from growing challenges among the IT market and competition from NetApp (NTAP) and EMC.
HPE has been discussed in M&A circles since news of the split first surfaced and especially after peer Dell purchased EMC. CEO Meg Whitman has already acknowledged that acquisitions will be part of the company’s strategy going forward but unlikely to strike a large, transformative deal. FBR was out with a note on 12/3 indicating that if the company was to do a larger deal they see possibility for a merger with BOX or Qlik Tech (QLIK) as logical. The company announced an expanded partnership with Microsoft on December 1st wherein HPE serves as the preferred partner for Microsoft Azure and other hybrid cloud services.
Credit Suisse was out after Q4 results noting that margin expansion should continue in the 7-9% range as their customer base grows and cost reduction programs take effect. The firm keeps a $19 price target for shares.
On the chart, shares opened at $18.50 and sold down to $13.50 where they formed a nice base in November. Shares have moved higher following earnings and stalling out at the 50% Fibonacci around $15.80.
Analog Devices (ADI) with a large insider purchase as Director Bruce Evans bought 10,000 shares at $60.60, a $605,990 purchase. Bruce joined ADI’s board in June, currently a Managing Director at Summit Partners. This is the largest insider buy ADI has seen to date.
The $19.23B Semiconductor has been a best of breed play with its consistently strong earnings reports, and now trades 16.9X Earnings, 5.6X Sales, 3.82X Book and yields a 2.6% dividend. In its Q4 report on 11-24 ADI posted 20.2% year/year revenue growth and bear EPS estimates by a wide margin. ADI has also been mentioned as one of the potential suitors for Maxim Integrated (MXIM).
Citi upgraded ADI to Buy with a $66 target back in September. Sterne Agee reiterated a Buy after it reported and notes increased volatility due to larger Apple exposure, and raised its target to $71.
Institutional ownership in ADI rose 1.76% in Q3, a #3 holding for Cantillon Capital.
On the chart ADI shares have formed a large cup and handle below the $64 level, a move above measures to a $76 target.
Genuine Parts Co. (GPC) with an insider buy on Friday as the CEO Thomas Gallagher bought 3,000 shares at $86.86 for a $260,580 net purchase. On 7-22 the CEO also bought 4,000 shares at 87.71 and on 1-15 purchased 5,000 shares at $95.25, building a large position.
The $12.95B maker of automotive replacement parts trades 17.4X Earnings, 0.84X Sales, 4.1X Book and 20.3X FCF with a 2.87% dividend yield and single-digit EPS growth. GPC posted Q3 results on 10-19 that came in light on revenues and it lowered its FY15 EPS guidance. Automotive Parts accounts for 53% of revenues, Motion Industries at 31%, S.P. Richards Office Products 11%, and Electrical at 5%. GPC tailwinds include the steady trend in rising vehicle registrations and average age of vehicles is now at 11.4 years, the highest level in over 15 years.
On 10-20 Gabelli upgraded GPC to Buy with a $102 target noting management’s initiative to lower costs is driving stronger profitability. On 9-30 GPC was cut to Sell at Goldman.
Institutional ownership rose 1.76% in Q2.
Spectranetics (SPNC) with a large insider buy last night from President and CEO William Drake of 38,000 shares at an average price of $13.24, a $503,283 investment. It raised his direct ownership to more than 126,000 shares and was his first open market purchase since November 2012. SPNC has seen heavy insider buying since late July with eight different officers purchasing more than 103K shares of stock in total.
The $582.04M medical equipment company is not yet profitable with shares trading at 2.39X sales and 14X cash with $253M in debt. Sales have grown 12.3% over the past five years with EPS guided to grow mid-double-digits. SPNC has been a beleaguered stock YTD down more than 60% as earnings and guidance have been very weak. The company cut their FY view in July after reporting more that 40% revenue growth yet most coming from the acquisition of AngioScore. Growing competition is also notably impacting sales for their marquee product AngioSculpt, an angioplasty balloon catheter for coronary and peripheral artery diseases. They also highlighted weak early adoption rates among hospitals for the product and higher inventory may pressure earnings into the future amid uncertain ordering.
The company reported a 4.9% YOY revenue growth on 10-22 with narrowed guidance. CEO Drake noted that they’re seeing a stability in the scoring balloon business. Vascular intervention was up 12%, Lead Management up 5% with Laser the laggard down 26%. Shares were initiated with a Buy rating and $24 price target on 9-22 at Benchmark. On 7-24, Canaccord noted that expectations had been reset for the company and that the company isn’t losing share but rather needs to improve upon their execution. They maintain a $26.50 price target.
On the chart, shares gapped down hard on earnings in July but have found a base around $11.25 recently and actually moving higher on 10-22 earnings. Resistance above would be at the high volume node around $16-17. Shares tested their 50-day EMA on Monday. An intermediate-term target above would be the 50% Fibonacci from the March highs to the October lows which is at $23.75.
Institutional ownership is down 2.23% last quarter with notable holders including Oak Ridge Investments who hold 3M shares, their 22nd largest position. Point72 disclosed a 5.2% passive stake on 10-9. Short interest is 16.33% of the float and up sharply from March of 2014 when it was around 4%.
Papa John’s (PZZA) with a large insider buy as Director Kent Taylor purchased 8,590 shares at $57.71 for a net purchase of $495,759. This is the largest insider purchase in PZZA since March of 2005 with shares at $36.45, and the first notable purchase since 2009, one Director purchased 1,000 shares at $51.41 in 2013 as well.
The $2.24B pizza Company trades 23.78X Earnings, 1.36X Sales, and 23.2X FCF with a 1.22% dividend yield and 12-15% EPS growth, premium valuation. On 11-3 PZZA posted EPS in-line with estimates, but revenues missed the consensus and were -0.3% year/year. PZZA posted 3% North America comps and 8% International. PZZA is refranchising in the China market and plans to sell its existing China operations. PZZA is on the forefront of a tech push with the highest digital sales mix in its category, over 50%, and mobile representing over 50% of digital sales. PZZA sees a significant growth opportunity Internationally for “many years to come” with 150-200 units per year for several years. PZZA also is benefiting from lower commodity costs, specifically cheese prices.
PZZA was upgraded this morning to Overweight at KeyBanc seeing the growth fundamentals intact with online ordering and international business. The 20% decline since results is seen as a buying opportunity.
PZZA has 9.34% of its float short, which is at a 5 year high and up from 6.3% in May, peak short interest was in 2004 at 22.6%. Institutional ownership at 73% is at the lower end of the 10 year range, though up from 68% in June.
On the weekly chart PZZA shares have breached the cloud but support likely to come in near $53.50 and utilizing the extension off 2014 and 2015 tops, can see channel support coming in near the same level.
FTI Consulting (FCN) with a large insider buy filing that came through late Friday as the CFO David Johnson bought 15,000 shares at $35.95, a $539,248 purchase. This is the first notable insider buy since 2010.
The $1.52B business advisory Company works in complex economic, legal, and regulatory environments. FCN trades 14.5X Earnings, 0.87X Sales, 1.28X Book and 12.1X FCF, a fairly cheap name with double digit EPS growth projected 3-5 years forward. FCN is under new management the last two years with a major overturn and shifting from capital riven to an organic growth strategy. FCN gets 26% of revenues from Forensic and Litigation Consulting, 25% from Corporate Finance and Restructuring, 25% from Economic Consulting, and 12% each from Technology and Strategic Communications Consulting.
On 10-29 the Company posted results worse than expected and lowered its outlook. Analysts have been fairly quiet in the name, Deutsche Bank reiterated a $37 target and Neutral rating recently.
FCN has institutional ownership of 98% and short interest is 7.44% of the float, the lower end of its 5 year range.
On the chart FCN shares hit support off 2012 and 2014 lows on the recent sell-off, and will look to recover from this $33-$34 zone.
Fire-Eye (FEYE) with two large insider buys this afternoon from CFO Michael Berry of 13,500 shares at an average price of $22.68 and Chairman and CEO David Dewalt of 22,500 shares at an average price of $22.65. They were the first open market buys in FEYE since the company came public in 2013. The company has also seen some bullish positioning in longer-dated options recently with an opening sale of 2,000 January 2017 $25 puts on 11-2, buyers of 1,500 December $34 calls on 10-29, and more than 4,000 March $33 calls bought on 10-16.
The $3.58B cyber-security company has seen shares get hit by more than 28% on the year and down this week on earnings which came in weaker-than-expected. Revenue came in up 45% versus the same quarter a year ago but missed consensus slightly. Billings came in up 28% at $210.6M but again short of estimates. Both metrics were guided lower by the company for the FY. Deferred revenue grew over 60% with revenue from products +24% and subscriptions +60%. The company is not yet profitable but shares trading at 6.7X sales and 3X cash.
Concerns have grown recently regarding competition in the space and FEYE’s recent quarter shows that growth is slowing from the near parabolic rate it has seen in the past. Deutsche Bank out on 10-14 noting that reseller checks had shown that Palo Alto Networks (PANW) products were taking share and also from Cisco’s (CSCO) less expensive alternatives. CFO Michael Berry, a buyer above, noted that the company also saw weakness in customer accounts this quarter particularly in Europe due to growing macro factors.
Cyber-security is set to be one of the biggest focus areas of the next several years and brought to the forefront recently with legislation in the Senate and rising cyber-attacks across major companies. DA Davidson noting that FEYE could be a unique position to take advantage with their growing endpoint solutions software and should benefit from their partnership with Visa to offer threat intelligence to merchants and card issuers.
Institutional ownership rose modestly last quarter. Short interest is 13.38% of the float and down from 52-week highs over 20% in early January.
Nielsen (NLSN) with a large insider buy yesterday from Director James Attwood of 20,000 shares at an average price of $47.75, an investment of $955,000. It is his first open market purchase and the first in NLSN since February of 2012. Attwood is the current head of Telecommunications, Media and Technology group for The Carlyle Group. He has been a non-executive director at NLSN since 2006.
The $17.42B company specializes in media and marketing analytics, best known for its retail measurement services. It’s Buy business provides data on market share and sales volume, particularly in merchandising and promotion in marketing. The company’s Watch business provides viewership data for television, radio, digital and mobile. Shares trade at 16.29X forward earnings, 2.82X sales and 48.65X cash with a 2.34% yield at these levels. Earnings are forecast to grow 10% over the next five years. The company carries some notable debt, more than $7.4B, with around $360M in cash.
The company recently reported a weaker-than-expected quarter with revenue down 2.5% YOY with weakness in their Buy segment (-7.1%) versus strength in their Watch segment (+3%). Currency headwinds making a significant impact with revenues up 5% in constant currency basis. On 9-28, the company announced a partnership with Facebook (FB) to create joint FB/television ad campaigns with their proprietary software. They also announced at Advertising Week’s conference that their Total Audience Measurement is set to debut by year-end. TAM will read across all platforms daily, giving advertisers, buyers and networks new and better metrics with which to work. TAM comes at a critical time for the company as they are faced with growing competition from the merger of Rentrak and ComScore.
NLSN will be at the J.P. Morgan Ultimate Services Conference on 11-10 and the RBC TMT Conference on 11-11.
Institutional ownership fell modestly last quarter, down 1.08%, but buys from DSM Capital and Tesuji Partners. Short interest is 5.48%, rising steady since June of this year when it was around 3%.
Healthways (HWAY) saw three directors buy stock yesterday, a total of 19,760 shares between $11.38 and $11.42. Combined the buys were more than $225,000. They were the first open market purchases in the name since November 2013.
The $425.76M company trades at 36.5X forward earnings, 80X cash and 0.55X sales with earnings guided to grow around 15% over the next five years. The balance sheet carries a bit of debt, more than $251M versus just $1.76M in cash. The float is small, just 36M shares, with 9.35% sold short albeit nearing 3-year lows and down from more than 28% in January 2014. Institutional ownership fell modestly last quarter.
The company posted a better than expected quarter on 10-29 with a sizable earnings beat and revenues up 5.8% YOY. They also announced a significant restructuring plan after a tumultuous year in which it fired its COO and recently replaced its CEO amidst a push from activist investor North Tide Capital. The restructuring will narrow the company’s focus from five end-markets to two primary segments: Population Health Services and Network Solutions. The company will also divest its Navvis subsidiary. The process is set to be completed by early 2016 and likely will impact the company by $20-25M over the next two quarters but generate savings of more than $40M in FY16. HWAY sees growth from expanding its customer base into 2016 with new deals and expanded contracts with existing customers.
New CEO Donato Tramuto was openly critical of his company’s performance on the recent conference call, noting it was unacceptable how the company had lost focus. Piper was out positive in August on Tramuto noting that his industry experience and time as Chairman of the company’s board should make for an easy transition. The firm keeps a $25 price target for shares.
On the chart, shares are trading near three-year lows bouncing off $10 support last week. They are off more than 50% from their March highs after a big guidance cut in June. Ichimoku cloud resistance sits at 12.50 and above could see a big trend shift which would target the 38.2% Fibonacci at $15 and then the 50% level at $16.65.
ITT Corp (ITT) with a large insider buy today from Director Geraud Darnis of 10,000 shares executed on 11/2 at an average price of $38.83, an investment of $388,292. It was the first open market purchase in the name since November 2013 and Darnis’s first open market buy in the name since being named to the board on 10-22. Darnis is the President & CEO of United Technologies (UTX) Building and Industrial Systems business with plans to retire in January 2016.
The $3.56B industrial operates in four segments: Industrial Process which manufactures pumps and valves, Motion Technologies which makes brake pads and shocks, Interconnect Solutions which makes engineered connectors and cable assemblies, and Control Technologies which provides flow control and actuation. The company reported an in-line quarter on 10-30 with revenue coming in a little light overall, strength in Motion Tech which was +4%. Interconnect and Control Tech showing weakness -11% each. The company sees organic revenues down between 1-3% in FY15, impacted by exposure to both oil & gas industries as well as changes in China macro.
Shares trade at 14.76X forward earnings and 1.4X sales with limited debt and 1.18% yield at these levels. Earnings are forecast to grow 8% over the next five years. ITT was downgraded yesterday to Sell at UBS with a $36 PT, down from $41. The firm sees weakness in orders to the company’s Industrial Process business impacting revenues throughout 2016 as much as 25%. The company is restructuring the business and consolidating facilities but likely to not turn around for some time.
Short interest is 1.07% of the float and down from more than 7.4% in June of 2012. Institutional ownership fell modestly.
Shares are nearing breakeven for the year after forming a big double-bottom around the $33 level in Sept/Oct. A clean break over the $40 level would measure to new 52-week highs. Support below is at the rising 50-day EMA around $37.25.
Eastman Kodak (KODK) with a large insider purchase as the CEO Jeff Clarke bought 20,000 shares at $12.18, a $243,542 purchase. This is the first notable insider purchase by an officer since October 2013 when shares were purchased below $10. KODK shares are down more than 40% YTD.
The $536M maker of various hardware and software for print/film usages trades 0.29X Sales, 3.45X Book and 1.03X Cash, though with a debt-laden balance sheet. KODK has 8.33% of its float short which is near a 10 year high, and up from 5.89% in May.
KODK reported earnings on 10-22 and revenues were down 21.5% Y/Y. Things currently look very bad for this once iconic brand, but the Company is undergoing a transformation and in its latest report a few highlights included 41% volume growth for SONORA Process Free Plates, 32% volume growth for FLEXCEL NX Plates, 27% revenue growth in the PROSPER Portfolio, and 11% growth in the Software and Solutions division. Print Systems, Enterprise Inkjet Systems, and Consumer and Film divisions all saw revenues fall year/year.
KODK is increasing transparency with a 7 division structure to improve execution and also cutting costs including a 26% reduction in Worldwide Headcount. KODK is also seeking some asset monetization including potential sales of Intellectual Property Portfolio of 5,000 patents and the sale of its Brazil Industrial Park property.
A detailed version of KODK’s transformation plan can be found here:
On the chart KODK reached new lows last week and have bounced back, also hitting the lower end of a long term weekly channel down pattern.
Actuant (ATU) with some notable insider buys filed after the close on 10-28 as 4 Executive Vice Presidents across various business segments bought stock in the $21.14 to $21.75 range for a net purchase of nearly $1,550,000. The CEO bought 5,000 shares at $27 back in December as the last notable purchase.
The $1.32B Industrial operates in three segments: Industrial, Energy, and Engineered Solutions. ATU lists its key market growth drivers as Energy Demand, Global Infrastructure, Food/Farm Productivity, and Natural Resources / Sustainability. In 2015 ATU expects EBITDA of $191M and targets $300M by 2018. ATU currently trades 14X Earnings, 1.05X Sales, 1.95X Book and 12.7X FCF with a 0.18% dividend yield. ATU announced a new CEO in August and mentioned in its Q3 report the Company continues to seek acquisitions.
On 10-8 JP Morgan upgraded shares to Neutral from Underweight with a $21 target. Barclays started shares on 9-25 at Neutral with a $19 target.
ATU currently has 7.4% of its float short, up from 3.35% in late May, but below 2013 levels above 12.5%. Institutional ownership in ATU was down 2.55% in Q2.
On the chart ATU shares were able to hold near 2011 lows and rebound, more than cut in half from 2013 highs. ATU shares look to have made a key channel trend bottom, and could start a longer term push much higher.
ATU is generating cash flow but exposed to very weak markets currently, and on a sum of the parts basis it could make for an attractive long term investment at these levels.
Conn’s (CONN) with a large insider buy last night from President and CEO Norman Miller of 20,333 shares at an average price of $24.89, a more than $500,000 investment. It was his first open market purchase since taking the role in early September and raised his ownership to 90,214 shares.
On October 5th, Douglas Martin, a Director with the company and member of their Credit Risk and Compliance group, purchased 12,000 shares at an average price of $24.25.
The $956M electronics store trades at 9.77X forward estimates, 0.61X sales and 0.94X PEG. Sales rose 12.2%. Stifel cut their estimates for the stock in mid-September as concerns over the company’s credit financing business is weighing on company’s overall results. The firm cited a rise in 60-day delinquencies and average account balances as signs of caution which would negate any meaningful improvement in sales.
The company announced in September plans to securitize $1.4B in debt. Institutional ownership fell 3.75% last quarter. Luxor Capital, Samlyn and Tourbillon remain large holders of stock. Short interest is very high, more than 35%, but declining since March when it was 55%.
On the chart, shares have fallen from their highs near $42 in July back down to the $24 level which was the prior breakout level back in the early months of the year. RSI is showing a positive divergence and any move higher would initially target the 50-day EMA at $29.
Agenus (AGEN) with two insider buys last night by Chairman and CEO Garo Armen of 100,000 shares at an average price of $5.03, a net investment of $503,000 and CFO Charles Ballantyne purchased 10,000 shares at an average price of $5.05, a $50,500 purchase. These were the first open market purchases in the name since 2011.
The $373M biotech is not yet profitable with shares trading at 27.6X sales and 2.67X cash with more than $1.65 per share in cash on hand.
MIlestones the company expects in the the fourth quarter include a decision from the EMA on GlaxoSmithKline’s (GSK) malaria vaccine RTS,S which AGEN receives royalties and also expects to file an New Drug application for their modulator antibody program with Incyte (INCY). Institutional ownership rose 67.25% last quarter. Short interest is 17.2%, up sharply from March when it was around 8%.
Box Inc. (BOX) with a large insider buy as Director Josh Stein bought 20,000 shares at $12.90, a $258,100 purchase. BOX has also seen recent accumulation in March 2016 $12 and $15 calls with 1,927 and 2,223 in OI respectively. BOX’s short interest also recently hit a new high, now 45% of its float. BOX will host an Analyst Day on 9-30.
The $1.55B cloud-based enterprise content collaboration Company trades 5.2X EV/Revenues. BOX shares are near new lows but have been announcing product improvements, partnerships and new initiatives and Q2 showed steps in the right direction with subscriber additions, though the Company remains 5-6 quarters away from showing a profit.
Pac-Crest upgraded shares to Overweight with a $24 target a month ago seeing a compelling reward/risk. In June Box announced a big partnership with IBM.
McGraw Hill Financial (MHFI) large insider buy today from Michael Chinn, President of SNL Financial, a company that was recently acquired by MHFI for $2.2B. Chinn purchased 11,000 shares at an average price of $94.78, a more than $1M investment. It was his first open market buy.
The $25.6B company trades at 18.8X forward estimates, 4.9X sales and 15X FCF with a 1.4% yield. Earnings are expected to be in the low double-digits over the next five years. The company’s purchase of SNL is expected to boost their S&P Capital IQ platform.
Mack Cali Realty (CLI) with a notable insider buy as Director Jonathan Litt purchases 210,000 shares at $19.95, a $4,189,350 trade. This purchase is very interesting because Jonathan Litt is an activist for Land & Buildings and has 22 years of experience as a global real estate strategist. Litt was successful in 2012 in pushing BRE Properties to sell the Company (bought by Essex Property Trust).
Litt’s battles for changes at REITS has been notable, refer to the following article http://www.multifamilyexecutive.com/business-finance/investor-litt-strikes-for-change-at-underperforming-reits_o
Mack-Cali has a $1.77B market cap and is focused in the Northeastern part of the US. New leaders at CLI have chalked out a 3 year strategic transformation plan to take advantage of promising opportunities on the Hudson Waterfront, the “Gold Coast.” An article outlining its plans can be found at http://www.wsj.com/articles/for-mack-cali-jersey-waterfront-is-just-the-ticket-1442309401
CLI trades 1.09X Book value and yields a 3% dividend. Institutional ownership rose 2.55% in Q2. Citi upgraded shares to Buy on 9-11 and Stifel upped to Buy in June with a $23 target.
On the chart shares have been in a clear downtrend since peaking in 2077 above $55/share, but look to be basing in 2015 and a move above $23 would shift the trend, an interesting turnaround story with an activist involved that look attractive down at this level.
CSS Industries (CSS) has seen Director Rebecca Matthias purchase two lots of 10,000 shares, one on August 3rd and one on September 14th, more than $550,000 in stock bought taking ownership to 29,000 shares from 9,000 shares. These were the first insider purchases in the name since November 2012. CSS shares recently pulled back around 15% with the market, but remain up 100% since 2012.
The $255M Company makes seasonal social expression products for mass market retailers such as ribbons, bows, gift tags, gift bags, and other craft products. CSS trades 17X trailing earnings, 0.87X Sales, 0.98X Book and 13.56X FCF with a 2.6% dividend yield. CSS also has a strong balance sheet, trading 3X cash value with no debt.
There is very little information out there on CSS regarding its business but in Q1 sales were down 8.3% year/year but guided Q2 sales higher on the heels of its Hollywood Ribbons acquisition.
Pacira Pharmaceuticals (PCRX) with an insider buy from Senior VP and CFO James Scibetta of 5,000 shares at an average price of $61.37, a $306,850 investment. It raised his direct ownership to 10,504 and was his first open market buy since February 2011. It was the first insider buy for PCRX since May when shares were trading near $93.83.
The $2.33B drug company trades at 42.9X forward earnings, 10X sales and 15.2X cash with big earnings growth expected over the next five years. The company recently reported an in-line quarter with revenues up by more than 25% YOY, although below consensus. The company’s main drug, Exparel, generated $57M in sales, but has become the focus of an FDA investigation due to promotional practices by the company. In September, the company received a warning letter from the FDA regarding how it marketed the pain medication claiming that the company overstated its effectiveness. In April, DOJ subpoenaed the company for documents. On its most recent conference call, executives updated investors and noted that they were now working with the agency on a high-priority basis.
Canaccord was out yesterday with a positive note on shares naming it their best near-term trading idea as they believe optimism surrounding the company’s lawsuit with the FDA will lift shares. They have a Buy rating and $76 price target for shares. In a recent note, Goldman Sachs identified PCRX as one of their favorite takeover names in an already hot sector for M&A. The firm thinks Exparel is underappreciated by the market and their monthly sales data should top expectations. PCRX plans to expand the label for usage of Exparel to oral surgery and post-surgical analgesia in early 2016.
Institutional ownership rose 6.3% last quarter. Hoplite Capital added a new 1.26M share position last quarter and Soros added a new position with more than 500,000 shares. Short interest is 17.5% of the float, relatively steady since April of 2014.
On the chart, shares have been in a notable down trend since March falling from their YTD highs around $120. They recently broke out of a big falling wedge as RSI diverged from price over the last several months and can run back to the 23.6% Fibonacci in the near-term at $70 and ultimately the 50% retracement at $87.90. MACD has turned bullish as shares attempt to break through the Ichimoku cloud resistance, a place where shares were rejected in both March and June.
Intersil (ISIL) with a notable insider trade as the President and CEO bought 38,000 shares at $10.47, a $398,050 trade. This is the first notable insider buy since November 2012 when a Director bought 50,000 shares at $7.26.
ISIL is a $1.39B market of power management solutions for the Semiconductor industry, and shares trade 15.7X Earnings, 2.57X Sales, 1.48X Book and a healthy no debt balance sheet and offering a 4.56% dividend yield. ISIL shares are down 25.25% YTD. A year ago Infineon bought International Rectifier in a $3B deal, and ISIL is one of the names thought to be the next potential target in the power management group. ISIL gets 34% of revenues from consumer and computing and 66% from industrial and infrastructure. ISIL’s next event is a 9-17 presentation at the Deutsche Bank Tech Conference.
In late July ISIL reported Q2 earnings in-line with estimates, but revenues were light and fell 10.4%, also lowered guidance for Q3 significantly. A day later Stifel lowered its target on ISIL to $16. ISIL was a name mentioned in a June Reuters article discussing potential targets for Texas Instruments.
On the chart ISIL shares recently touched a key $9.50 level of support, and will look to get back above $11 to gain some upward momentum.
Avnet (AVT) with a sizeable insider purchase from Director James Lawrence of 46,700 shares at an average price of $42.60 per share, a nearly $2M investment. It was his first open market buy since August 2014 when he bought more than $7.9M in stock around these same levels. It raises his stake to 285,048 shares. Mr. Lawrence re-joined the board at Avnet in 2011 after having previously served from 1998-2008.
The $5.73B electronics company trades at 8.33X forward earnings estimates of $5.11, below the mid-point of its 5-year price-to-earnings range. Avnet has transitioned away from electronic components to services, a higher margin business Avnet also turned its focus to growing through acquisitions with 17 deals since 2012 but nothing since it purchased MSC in December of 2013. With the wider reach, sales have grown to nearly $28B and are expected to jump 2.1% next year. Shares trade at 0.21X sales, 1.23X book and 17.8X free cash flow with almost $7 per share in cash. They yield 1.6% at these levels. The company expanded their share buyback in mid-August by an additional $250M.
Shares were upgraded to Buy at Cross Research in late June. Brean, who keeps shares Buy rated, raised their price target to $50 on 8/6. Institutional ownership fell 1.28% last quarter with a sizeable new buy from activist Blue Harbour of 2.845M shares (their 11th largest position). Short interest is 2.8M shares, 2.1% of the float, and slightly higher from July of last year.
On the chart, shares are trading in a tight range between $46 and $42, dropping sharply in Oct 2014 and recently to tag the $36 level which was prior monthly support. Currently, shares are working on breaking above the weekly Ichimoku cloud and 20/50 Week EMA. A high volume node is being formed at $42.50/43. A breakout above $45.50 would signify a major trend shift and measures to $57.
Praxair (PX) on 9-9 with a large insider buy as the CEO Stephen Angel bought 5,000 shares at $103.55, a $517.785 purchase. This is his first large purchase since February 2009 when he bought 7,000 shares in the $55 to $61 range.
The $29.8B industrial gas Company trades 16.3X Earnings, 2.57X Sales and 6.05X Book with a 2.74% dividend yield and saw EPS in 2014 down 2.4% year/year, but expected to rise 9% in 2015. PX is the industry leader in operating margin, ROC and OCF and 54% of sales in North America. Key end markets include manufacturing, metals, energy, and chemicals. In Q2 PX posted revenues that were down 12% year/year noting weaker industrial activity in China and Brazil as well as weaker metals, energy in the US and also cut its outlook. In July PX authorized a new $1.5B buyback. PX is a Company that could look to accretive M&A as a positive catalyst.
PX has not seen much analyst coverage lately, back in April Deutsche Bank reiterated a positive view with a $138 target. Institutional ownership was down slightly in Q2. PX shares are attempting to base above the $100 level and $97.50 was a very supportive level in 2012.
Chemours (CC) President and CEO Mark Vergnano bought 72,600 shares at $9.25 for $671.296 while two Directors bought a combined 12,000 shares at $9 to $9.18 as well. The $1.65B spin-off from DuPont focuses on titanium technologies, fluoroproducts and chemical solutions with Teflon its flagship brand. CC shares were more than cut in half since June but have been basing the last two weeks. CC now trades 7.8X trailing earnings, 0.27X Sales and 4.11X Book with a 1.32% dividend yield. CC is the global leader in TiO2 with Coatings and Plastics the major end markets. The fluorproducts division has key end markets like AC, refrigeration, auto, aerospace, and telecom. CC is undergoing a major transformation with plans to reduce costs, optimize the portfolio with evaluating strtaegic alternatives for the Chemical Solutions unit, grow market positions and refocus investments.
Albemarle (ALB) President and CEO bought 4,533 shares at $44.01 in a filing today, nearly a $200,000 purchase, and his first purchase on record. In January and February two Directors bought a total of $520,000 worth of stock closer to $48.
ALB is a $4.8B specialty chemicals Company trading 10.4X Earnings, 1.57X Sales, and 1.51X Book with a 2.71% dividend yield. ALB announced a big merger with Rockwood (ROC) in July of 2014, a $6.2B deal. ALB operates in three segments, Refining Solutions, Chemetall Surface Treatment, and Performance Chemicals and claims to have the World’s best raw material reserves for bromine and lithium. Lithium has been an area of strength, notably in Q2 with volume growth in battery grade products and pricing up 3% YTD. ALB is a sneaky play on Tesla (TSLA) batteries which has a high amount of lithium content and ALB expects to capture 50% of Lithium growth which is expected to double in 2020 from 2015 levels.
Sun Trust upgraded ALB to Buy on 8-7 with a $61 target. On 7-8 BB&T started ALB at Buy with a $72 target noting that visibility should improve into 2016 as its portfolio transformation completes, and has leading market share in all four of its core businesses.
In Q2 filings Discovery Capital sold over 1.074M shares, exiting its entire stake, and Renaissance and Two Sigma were also sellers of the stock.
On the chart ALB shares have been sold off hard and the longer term price by volume shows $42 as initial support, while stronger support in the $32-$35 range. It looks to have more downside, but the long term opportunity is there, so at $35 I think it makes a nice add.
MasTec (MTZ) has seen five insider purchases since August 21st for $11,500,000 of stock with the CEO, CFO and two Directors making the purchases. These are the first notable insider buys in MTZ since November 2007.
MasTec is a $1.32B construction/engineering Company operating in five segments: Communications, Oil & Gas, Electrical Transmission and Power Generation, and Other. Communications accounts for 44% of revenues and Oil & Gas at 38% and has posted a 21% CAGR since 2007 for revenues and 24% CAGR for EBITDA. Margins have taken a hit in 2015 returning to the lowest level since 2008. The Company notes key growth drivers include expected long-haul pipeline award surge in late 2015 or early 2016, 4G LTE wireless deployment with multiple customers, 1-Gigabit fiber deployment, and wind energy growth.
MTZ shares trade cheap at 10.8X Earnings, 0.29X Sales, and 1.29X Book, though Debt/Equity at 1.19. MTZ has 8.8% of its float short, but trending lower after peaking at 19.45% in June 2013. In August MTZ significantly cut its FY15 EPS guidance and the stock has been weak with a recent review of its accounting.
FBR Capital in early August added MTZ to its Top Picks List with a $28 target seeing 2015 as a throwaway year, growth set to accelerate for the pipeline business, attractive valuation, and a snapback in the communications business.
Institutional ownership in MTZ grew 3.84% in Q2 with Balyasny taking a large 2.957M share new stake, making it the 4th largest holder.
In the options market on 7/7 the January 2016 $17 calls were bought to open 2,400X at $3.90 and on 7/22 another 2,300 were purchased at $3.10, open interest currently at 4,885.
On the chart MTZ shares are basing above the $15 level that was supportive in 2011/2012 and also is channel up support, and shares with potential to push back up to $22 and breakout with upside to $30+, especially if the Oil & Gas end-market shows improvement. MTZ also makes a lot of sense for an activist to target and look to spin-off the strong Communications business.
MTS Systems (MTSC)ï»¿ sees Director David Johnson purchase 5,000 shares at $60.33 for $301,650, largest purchase since February 2014 when he bought 5,000 shares at $70.41. MTSC shares touched support from 2013 and 2014 this week and bounced, in a strong longer term uptrend. The $874M Company makes test systems and position sensors for auto, rail, and aerospace industries, an interesting niche Company. MTSC shares trade 16.8X Earnings, 1.55X Sales, 16.6X FCF and 3.44X Book with a 2.05% yield, healthy on valuation. The Company presents on 9-15 at the Automotive Testing Expo in China. Wunderlich rated shares a Buy with an $85 target back in March noting the Company is transitioning into its next stage of growth with a better product mix ahead. Two Sigma and Renaissance Tech were notable buyers in Q2.
Kapstone Paper (KS) Chairman and CEO Roger Stone purchased 100,000 shares at an average price of $20.91, a more than $2M investment. It was his second insider purchase in the month of August and raises his owned share total to 3,197,320. The $1.98B paper and packaging company trades at 9.32X forward earnings, 0.83X sales and 2.4X book with a 1.94% yield. Earnings grew 33% this year and expected to settle in the high single digits over the next five. The company reported earnings in late July with stronger-than-expected revenues on a slight EPS miss. On 8/10, the company announced that Stone would be taking a leave of absence for health reasons. Shares have come under pressure since June after PPW cut West coast linerboard and medium prices by $10-20/ton, a move that Jefferies called surprising at the time and likely leads to short-term inventory struggles. Macquarie downgraded shares after the cut to Neutral with a $26 price target. KS was also the focus of hedge fund Perry Capital last year as they said that most of hte major paper and packaging companies could adopt an MLP structure to unlock value through tax savings and dividend yields. The company said in October that it was considering the idea and had recently sought eligibility ruling from U.S. regulators. Perry exited their stake last quarter. Institutional ownership fell 1.24% last quarter. Point72 added a new stake while Greenlight Capital, a long-term holder of shares, sold about 1/3 of their stake. Short interest is 1.6M shares, down from 3.1M in February, and 1.97% of the float.
Air Products (APD) Chairman and CEO Seifi Ghasemi purchased 20,000 shares for an average price of $134.71, a more than $2.69M investment. The $28.45B chemicals company trades at 17.7X forward estimates, 2.8X sales and 3.75X book with a 2.45% yield. EPS are expected to grow double-digits over the next five years. APD has seen some bullish call buying recently with 2,000 September $150 calls bought on 8/19, 1,000 September $135 calls on 7/29, and more than 5,000 December $135 calls bought on 7/17. Shares were upgraded to accumulate at Global Hunter on 8/4 as the firm sees strong margins growth in their last earnings across all business segments. They have a $165 price target for shares. Institutional ownership fell 1.21% last quarter. Pershing Square remains the top holder of stock with more than 20.5M shares, their 2nd largest holding. Short interest is 3.15M shares, 1.47% of the float, and steady over the last year.
Mead Johnson (MJN) Director Howard Bernick bought 5,000 shares at $79.95 for $399,737 to bring his total to 43,322 shares held. Bernick is formerly the CEO of Alberto-Culver which was acquired for $3.7B by Unilever in 2010, a hair and skin beauty care Company.
The $16.14B maker of infant formulas and other nutritional products trades 19.65X Earnings, 3.75X Sales, and 34.9X FCF with a 2.07% dividend yield. MJN shares are down over 20% YTD and the Company has $1.5B in cash. In its latest earnings report sales fell 7% with currency impact and -3% in constant currency. Asia and Latin America were a drag on the quarter. MJN will hold an Investor Day on 11-4-15. MJN has long been seen as an acquisition target for Danone, but that idea cooled in December when Danone decided to keep its medical nutrition unit. The deal would make sense for Danone to have a greater presence in the baby food business where it trails Nestle S.A. Another potential buyer could be Abbott (ABT) who is investing in China where MJN has a strong presence, and is already a player in the baby formula business. Two Sigma, Renaissance Tech and Carlson Capital were notable buyers in Q2 and York Capital remains a top holder.
On the chart MJN shares are already the most oversold they have been in history on the weekly RSI, and re-testing back near a key March 2014 breakout level, though meaningful support is further down at $72.50.
A massive trade on June 22nd 2015 when 40,000 January 2016 calls were bought at $2.85 and 40,000 January 2017 $120 calls were sold at $1.05 in a spread. On 8-13 the January 2016 $90 calls traded 2,000X to open. On 7-14 the November $90 puts were sold to open 2,000X at $5.55 and on 7/15 1,000 November $90 calls were bought to open $2.85.
Sealed Air (SEE) with an insider purchase last night after the close as Director Kenneth Manning purchased 3,000 shares at $54, a $162,000 investment. His ownership jumped from 118,048 shares to 123,074. His last purchase was in November 2014. Manning’s investment is the second insider purchase in SEE this month.
The $11.1B packaging company trades 20.6X forward earnings, 1.5X sales, and 14.8X free cash flow with a 0.96% yield. EPS have grown the last two years from $0.65 to $2.26 this year. Expectations are for $2.61 in FY16, a 15.5% increase YOY. The company reported strong results last quarter and raised FY EPS guidance above the prior range and Street consensus. The company saw declines in sales in all three business segments (% of total sales): Food Care (47.4%), Diversey Care (30%), and Product Care (21.3%). Adjusted EBITDA grew in Food Care (10%) and Product Care (9.2%).
On the chart, shares are flagging into the high-end of a rising channel which measures back to $52 on a pullback, IchiMoku cloud support and near the rising 100-day EMA. RSI is weakening and MACD crossed over recently. Institutional ownership fell modestly last quarter but saw a large opening buy from Third Point Capital, 4.85M shares, their 14th largest position. Viking Global and Hoplite Capital both hold large positions in the company.
On 7/29, a trader bought 5,000 September $52.50 calls to open.
Cerus Corp (CERS) Chief Scientific Officer Laurence Corash purchased 159,600 shares over a period of three days from August 12 to the 14th. The net investment was more than $773K. It was his first open market purchases since 2011. The $492M biotech develops blood systems to treat blood-borne viruses such as HIV, West Nile, SARS, and Hepatitis. The company commercializes INTERCEPT for platelets and red blood cells. In December, the FDA approved INTERCEPT for use with plasma as well. CERS filed with the FDA in March for the use of the INTERCEPT system with platelets in 100% plasma and expects approval in early Q1 of 2016. They also plan on submitting supplemental NDAs in 2016 for triple-dose platelet sets and the treatment of random donor platelets.
Boston Scientific (BSX) saw a notable insider buy last night after the close as co-founder (now retired) John Abele purchased 100,000 shares between $17.27 and $17.59, a weighted average price of $17.50. The sum total of his purchases was $1.75M. The purchase was done through a limited liability company of which Abele holds 100% membership interest.
The $23.6B medical device company trades at 16.6X forward earnings, 3.2X sales and 3.5X book with earnings expected to grow 16% in 2016. The company recently purchased American Medical Systems’ men’s health and prostate business for $1.6B in cash. The business did $400M in sales last year. The company recently reported an in-line quarter with revenues down 1.6% on weakness in their Rhythm Management business while Cardiovascular and MedSurg both were modestly higher YOY. The company lowered FY EPS view slightly as they continue to deal with rising legal costs stemming from one of the company’s implantable devices.
Boston Scientific cleared two long-term hurdles this year. In February, the company settled with Johnson & Johnson on a $7.2B lawsuit which originated with the company’s 2006 acquisition of Guidant. BSX paid $600M to settle and took a charge in Q414. Shares jumped more than 12% after the settlement was announced. The second was in March when the FDA approved the company’s Watchman device for use in patients with atrial fibrillation to prevent stroke. The company had been seeking approval since 2009.
BAML was out positive on 7/23 saying any weakness in shares is a buying opportunity based on the strength of their pipeline into the 2H. The firm has a $21 price target. RBC was out 7/21 confident long-term on the strength of the defibrillator sales and OUS DES stents. They see EPS growth in the low teens. Technically, shares have traded in a tight range since March and are currently basing at the low-end of a down-sloping channel. A break above $18 would trigger a move higher with a measured target of $20.
Institutional ownership fell 1.4% last quarter. Notable buyers of stock include Point72 which added more than 1M shares last quarter. Short interest is 23M shares, 2.08% of the float, and down from 52-week highs of more than 38M a year ago.
Artisan Partners Asset Management (APAM) with a notable Insider trade as Director Stephanie DiMarco bought 50,000 shares of stock near $46.40 for more than $2.32M.
DiMarco is the co-founder and former CEO of Advent Software which was acquired SS&C (SSNC) earlier this year. She was one of the most successful young women CEO’s in Tech.
Artisan Partners (APAM) has a $3.4B market cap and provides investment services for pensions and other organizations. APAM trades 14.3X Earnings, 4.08X Sales and 13.3X FCF with a strong 5.18% dividend yield. APAM is seeing improvements in flows and has a strong long term performance record. As of 7-31-15 APAM has $108.7B AUM and posted earnings on 7-28 that matched expectations. On 7-21 CSFB upgraded shares to Outperform. Goldman rates shares a Buy with a $53 target.
On the chart APAM shares are consolidating below $47.50, a uniform pullback off $60+ in early 2014 and now formed a long base above $42.50.
SunEdison Semiconductor (SEMI)ï»¿ is seeing notable Insider purchases this morning with the CEO Sadasivam Shaker purchasing 50,000 shares in the $13 to $13.50 range for $660,000 and also now the VP of Global Sales bought 4,000 shares valued at $52,432.
The $540.5M Co. is the maker of silicon wafers that was one of the many companies spun-off from Sun Edision (SUNE). SEMI shares are down 30.5% YTD but look to be forming a base and seeing indications of momentum turning. SEMI now trades 0.65X Sales and 0.83X Book. Greenlight Capital added 1M shares to its stake in EMI in Q2.
BJ Restaurants (BJRI) with a notable insider purchase as Director Patrick Welsh bought 10,500 shares to $46.61, a $489,365 trade that follows an initial purchase of 21,500 shares on June 2nd at $46.04 for $989,757. Welsh is one of the Directors elected from an activist battle in 2014 with Luxor Capital and PW Partners. Welsh appears to be buying these shares on behalf of PW Partners, a 10% owner.
The $1.19B casual dining Company trades 25.9X Earnings, 1.36X Sales, and 3.62X Book and grew EPS 32.9% in 2014. In July BJRI missed revenue estimates narrowly, posting 5.7% year/year growth, while EPS came in at $0.47 vs. $0.39 estimates. BJRI has 158 restaurants in 19 states and comp sales have been rising since Q4 2013 to back above 3%, but were as high as 8% in 2011. BJRI has the leading position in the industry on guests per square foot of space. BJRI is looking at eventually having 425+ restaurants, a very small market position currently when seeing Texas Roadhouse (TXRH) has 451, Outback at 679, and Applebee’s at 2,017. BJRI’s cost initiatives are also driving margin expansion.
Stifel rates shares a Buy with a $64 target. On the chart BJRI shares have formed a large monthly cup and handle pattern below $52.50, one that measures to an upside target of above $75 on a breakout.
Two Sigma, Millennium, and Renaissance Tech were notable sellers of BJRI in Q2. BJRI has 17.24% of its float short, up from 12% at the end of January, but also down significantly from July 2010 levels of 28.75%.
Welsh was recently featured in a Forbes report.
Hertz (HTZ) with three notable insider purchases this morning as President and CEO John Tague purchased 100,000 shares at $18.06, Senior EVP and CFO Thomas Kennedy purchased 25,000 shares at $18.24, and EVP and CIO Tyler Best purchased 27,450 shares at $18.32, nearly $3M between the three and the first sizeable purchases by insiders since November 2014.
The $8.34B rental and leasing company trades at 16X forward estimates, 0.77X sales and 3.49X book. Earnings fell considerably this year as HTZ recently completed a restatement of their financials for more than three years after a long period of lax oversight. After a transition year, EPS is expected to ramp to double-digit growth as new management re-focuses on operations. The company also announced a significant buyback and a timeline for the separation of their HERC business.
Goldman Sachs was out positive on 8/13 following earnings with a $23 price target. The firm sees the HERC spin as a significant positive as the business is a drain on net fleet capex and carries no synergies to the core rental car business. They envision cash flow from the spin-off leading to a boost in their share repurchase or accelerated debt repayment. They expect HTZ to outperform rival Avis Budget (CAR) over the next several years.
Short interest is 48M shares, 11.96% of the float, and steadily rising since 2014. Institutional ownership rose modestly last quarter. Notable holders of stock include Carl Icahn, Jana Partners, Glenview Capital, Fir Tree, York Capital, and Greenlight Capital.
Hertz has seen significant bullish options flow, especially with the Institutional holders it has and expectations for change. Most recently, on 7/17, a trader bought 5,000 October $20 calls.
A. Schulman (SHLM) Director James Mitarotonda purchased 40,000 shares of stock at $34.96 which follows a purchase of 50,000 shares in late July at $36.05, more than $3M of stock purchased in the last few weeks. Mitarotonda is the CEO of Barington Capital which is an investment firm that invests in undervalued companies that could appreciate significantly in value as a result of a change in corporate strategy, a firm that saw a lot of publicity when it went after Darden Restaurants, a successful activist push.
SHLM is a $1.05B supplier of plastic compounds and resins to the packaging, construction and other markets. Shares trade 11.8X Earnings, 0.45X Sales and 2.32X Book with a 2.29% dividend yield, clearly undervalued for a Company that grew EPS to $1.82, up 60.7% Y/Y in 2014, and targeting EPS of above $3 in 2016. In an August investor presentation SHLM is targeting $4.50-$4.75 in EPS in 2018, and with a Median P/E of above 20, that puts SHLM’s value at above $80 just a few years out.
SHLM operates in six product area (% of sales): Custom Performance Colors (6%), Engineered Composites (8%), Masterbatch Solutions (28%), Engineered Products (35%), Specialty Products (11%), and Distribution Services (12%). In terms of end markets SHLM is diverse (% of revenues): Packaging (36%), Mobility (19%), Construction (7%), Electronics (9%), Agriculture (5%), Sports/Home (5%), and Personal Care (4%).
SHLM made an $800M acquisition in March of HGGC’s Citadel Plastics with $25M of expected synergies. Citadel operates in two segments, Engineered Plastics with end markets of consumer, electrical, Construction, Healthcare and Transports, as well as Engineered Composites with similar end markets.
Global Hunter upgraded SHLM to Buy this morning. Gabelli rates shares a Buy with a $48 target. In March KeyBanc upgraded shares to Strong Buy with a $58 target, poorly timed. Institutional ownership in SHLM rose 3.4% in Q1.
On the chart the purchase looks well timed as well as SHLM shares are touching longer term trend support on this correction.
Sotheby’s (BID) with one of the larger insider purchases this week as the CEO bought 61,950 shares of stock at $38.45, net $2.38M purchase. Tad Smith was named as the Company’s new CEO back in March, formerly President of Madison Square Garden.
BID shares are down 12.77% on the year and the $2.61B global art dealer trades 13.8X Earnings, 2.78X Sales, and 3.02X Book with a 1.07% dividend yield. BID posted earnings on 8-7 that sharply missed Street estimates due to a change in timing of the summer evening sale of Contemporary Art in London. On June 22nd Williams Capital raised its target on BID to $56 noting strong trends in the art auction market.
Sotheby’s top holder is Third Point LLC with a $281M position, its 11th largest, and Marcato Capital the 2nd largest holder, two activist funds that have been pushing for changes. Activists are seeing poor capital usage and an inability to shift with changing market dynamics, such as an Internet presence and strategy. BID is projected to earnings $2.36 EPS in 2015, and a 2014 presentation by Third Point sees earnings power well above $4/share.
On the chart BID shares have pulled back to key trend support on the monthly in what may turn into a large ascending triangle, resistance at $45.50 and $53. This insider purchase could be the start of a turnaround.
Merrimack Pharmaceuticals (MACK) a notable Insider Buy this morning as Director Michael Porter bought 20,000 shares at $10.16 and Director John Dineen bought 100,000 shares at $10.15, over $1.2M net stock purchased.
The $1.16B Bio is down 7% YTD and has 24.4% of its float short, rising from 19.5% at the end of Q1 and not far off a 5 year high that was 30% in 2014. MACK has a 10-24-15 PDUFA for MM-398, a drug for metastatic adenocarcinoma of the pancreas, and was granted priority review.
Mizuho rates MACK a Buy with a $16 target. Institutional ownership in MACK jumped 18.66% in Q1.
On the chart MACK shares have violated an uptrend and the 50% Fibonacci down at $9 looks to be solid support. A move back above $11.50 would clear the downtrend that began when shares topped in April near $13.80.
MACK options activity has been very quiet, so something to watch into the key event.