payday loan

Archive

Archive for November, 2009

Tata Motors - License to Dive - TTM

November 23rd, 2009 2 comments

Tata is India’s largest automobile manufacturer and the world’s 5th largest medium and heavy commercial vehicle maker. They are #2 in medium to heavy bus manufacturing as well. They also provide financing for many of their buyers through their TML Financial Services unit. Tata acquired Jaguar and Land Rover from Ford in a (badly timed) $2.8 billion transaction that closed in June 2008.ttm-logo-2

I rarely write about ‘short’ ideas but this one seems to just jump off the page when you consider the fundamentals. Tata Motors closed at $13.78 last week and has jumped up to $14 /share in this morning’s rally (Nov. 23, 2009).

While Tata was able to post moderate profits during the economic boom years of 2005 – 2007, things have been pretty horrible ever since. Here are their per share numbers since 2004 as reported by Morningstar:

FY* Sales C/F EPS Div. B/V
2005 12.57 1.15 0.78 Nil 3.57
2006 14.13 1.22 0.88 0.29 4.76
2007 19.96 1.49 1.01 0.28 5.50
2008 22.87 1.43 0.88 0.37 6.82
2009 32.35 d1.44 d2.99 0.35 1.55
2010** 34.30 d0.35 d0.96 0.13 0.60
* FYs end March 31. ** FY 2010 includes consensus estimates

Earnings predictability appears very low. Value Line estimates a further loss of $0.50 /share for FY 2011 while others see a smaller deficit of about $0.04 /share.

Their risky purchase of Land Rover and Jaguar (in early 2008) added more debt to an already levered balance sheet and it will likely continue to be a drag on corporate results.

Book value has been virtually wiped out since 2008’s peak. The dividend has been slashed and will probably need to be eliminated. Total debt exceeds equity and cash flow has been negative in both 2008 and 2009.

Despite all these negatives TTM shares have risen from their March lows near $3.10 to about $14. They have risk from both the manufacturing side and their financing arm.

Unless you’re a real believer in a quick, world-wide economic rebound TTM looks like a good candidate for outright shorting or through the purchase of puts or the sale of naked calls (for those who are comfortable with this riskier way to play).

Disclosure: Author went short TTM this morning.

Bank of NY Mellon – Taking Care of Business(es)

November 20th, 2009 5 comments

BK:NYSE Nov. 20, 2009 - $26.05

Dividend = $0.09 quarterly = 1.38% current yield.bk-logo
_____________________________________________________________________________________________________
Bank of New York Mellon was created by the July 2007 merger between Mellon Financial and Bank of New York making it one of the world’s largest financial services companies. BNY Mellon is a leader in providing back-office services to other financial firms. The bank’s asset-management and private banking operations serve institutional and high-net-worth individuals globally.

BK took a huge ($2.54 billion) write-down of its investment portfolio in its September quarter.  Management indicated at that time that 90% of the charges had been previously recognized and had already been deducted from their reported capital. Excluding the non-recurring write-offs they earned about $0.54 /share for Q3 with both assets under management and assets under custody both up nicely from Q2 levels.

On continuing operations the consensus views for 2009 and 2010 are now $2.07 and $2.40 respectively. That would put EPS at all-time highs this year and next. Here are BK’s per share (fully diluted) numbers (from cont. ops.) as reported by Value Line:

Year
EPS
Div.
B/V
Avg. P/E
52-Wk. Range
2002
1.24
0.76
9.21
27.1x
20.80-46.50
2003
1.52
0.76
10.87
18.4x
19.30-33.50
2004
1.85
0.79
11.93
16.8x
27.30-34.80
2005
2.03
0.82
12.81
14.9x
26.90-33.70
2006
1.93
0.86
15.34
17.9x
30.80-40.60
2007
2.18
0.95
25.56
19.7x
37.60-50.30
2008
1.20
0.96
22.00
31.8x
20.50-49.40
2009*
2.07
0.51
23.65
12.5x
15.40-33.60
* 2009 includes Q4 estimates

Value Line sees BK’s financial strength as ‘A’ rated and Standard and Poorslists BK as ‘low risk’. At today’s quote of $26.05 the shares trade for < 12.6x this year’s and about 10.9x the 2010 estimates. Compare those multiple to the historical levels from the chart above to see how cheap these shares look right now.

S&P has a 12-month price target of $33 and sees ‘fair value’ at $32.10 /share.  Morningstar agrees and calls fair value at $32 /share. Even 13x next year’s estimate would bring BK shares back up to $31.20 or 19.8% above the current price. Add in the 1.38% current yield and a > 21% total return appears likely over the next year.

Is that $31 level reasonable? BK shares have actually traded well above that price at some point in each of the twelve years. With record earnings expected in 2010 that goal could prove to be too conservative.

Want a way to play with a built in margin of safety? Consider this buy/write combo for the next 14 months:

Read more…

Tutor Perini Corp. [NYSE:TPC] – A Constructive Pick

November 17th, 2009 1 comment
Tutor Perini Corporation offers diversified general contracting, construction management and design-build services to private clients and public agencies throughout the world. They provide general contracting, preconstruction planning and project management services, including the planning and scheduling of the manpower, equipment, materials and subcontractors required for a project. TPC also offers self-performed construction services including site work, concrete forming and placement, steel erection, electrical and mechanical, plumbing and heating, ventilation, and air conditioning (HVAC).
___________________________________________________________________________
tpc-logo
TPC shares have retreated from a 52-week high of $26.60 to today’s quote of $17.40 making them attractive again. An all-time high of $75.43 was hit during 2007 when better economic times permitted record EPS of $3.54.

In reporting their Q3 earnings of $0.54, TPC management indicated expectations of $2.60 /share for 2009 and $2.40 - $2.60 for 2010. Government sponsored projects will likely provide about 40% of 2010 revenues versus 20% of this year’s due to increased stimulus- related projects.

Here are the per share numbers from past years as reported by Value Line:

Year Sales C/F EPS B/V Avg. P/E
2004 73.01 1.55 1.39 6.34 9.9x
2005 66.58 0.37 0.20 6.86 NMF
2006 114.59 1.85 1.54 9.18 17.2x
2007 171.50 3.94 3.54 13.65 13.9x
2008 117.14 1.72 2.07 23.56 14.3x

At the current price TPC trades for just 6.7x this year’s and< 7.3x the low-end estimate for 2010. It doesn’t seem farfetched to expect TPC shares could again trade for about 10x the $2.40 estimate for 2010 bringing a 12-month price target about 38% above the current price.

Read more…

Investment Technology Group – POSIT-tively Cheap

November 13th, 2009 5 comments

Investment Technology Group’s primary business is providing electronic trade execution to financial institutions. The company services the whole execution process from pre-trade analytics to post-trade processing. The company operates in the United States, Canada, Europe, and Asia-Pacific. ITG’s flagship POSIT system enables clients to trade confidentially amongst themselves using proprietary algorithms to match buy and sell orders without human intervention. The frantic pace of trading in 2006 – 2008 pushed ITG’s revenues and earnings to all time highs in each of those years. 2009’s depressed market volumes have contributed to lower sales and earnings for 2009. Zacks now sees 2009 EPS of $1.56 versus 2008’s record level of $2.61. Consensus views for 2010 range around $1.85 - $1.90.

As would be expected, ITG shares tumbled from a 2008 peak of $53.30 to a November 2008 low of $13. The shares climbed steadily to hit a recent high of $28.90 before plunging back to this morning’s quote of $19.60. 
itg-logo
Here are ITG’s per share numbers from continuing operations as reported by Value Line: 

Year Sales C/F EPS B/V Avg. P/E 52- Week Range
2003 7.47 1.38 0.89 8.08 19.0x 10.90-24.70
2004 7.97 1.43 0.95 8.83 15.5x 11.90-20.20
2005 9.47 1.93 1.50 10.72 16.6x 16.60-40.90
2006 13.68 2.59 2.05 13.88 22.6x 34.40-59.10
2007 16.82 3.39 2.48 16.20 16.8x 35.40-48.70
2008 17.61 3.90 2.61 18.17 13.3x 13.00-53.30

At $19.60 /share ITG sells for< 12.6x this year’s depressed earnings and about 10.6x the 2010 expectations. Those are very low valuations compared with all the historical multiples seen in the chart above. 

Value Line is using a normalized P/E of 20x in computing their 3 – 5 year target price. I’m going with a more conservative 15.5x multiple in calculating my 12 to 15-month target of about $28 - $29. That would still support a 45% move from the current quote.

Is that a reasonable expectation? I think so and Morningstar concurs. They give ITG a 4-Star (out of 5) rating and assign a ‘fair value’ of $27 /share. S&P gives ITG their highest ranking for ‘fair value’ with a present estimate of $26.50 /share.

Read more…

Knight Capital Group – Buying on the Dip

November 12th, 2009 No comments

 

NITE shares had hit a multi-year high of $23.11 in October before somewhat weaker than expected September EPS knocked their shares back to today’s $16.40 price. 
Zacks now expects Knight to earn $1.43 this year and $1.60 in 2010. nite-logo

Here are NITE’s per share numbers from continuing operations as reported by Value Line:

Year Sales C/F EPS B/V Avg. P/E
2004 5.71 0.51 0.36 7.79 31.3x
2005 5.57 0.51 0.34 7.93 26.5x
2006 9.18 1.73 1.49 9.29 10.5x
2007 9.89 1.59 1.24 9.67 12.4x
2008 11.46 2.28 1.94 11.40 8.4x
2009* 10.65 1.80 1.43 11.55 12.6x

* 2009 data includes Q4 estimates

The company is almost debt-free with over $400 MM in treasury cash far exceeding total debt of about $140 MM. Value Lineassigns NITE a ‘B++’ financial strength. 

Knight’s P/BV is now just 1.4x versus an industry average of 3.07x and the S&P 500’s 3.42x ratio. NITE has sold above 2x book value on many occasions over the past decade.

Value Line sees a long-term multiple of 14 in calculating their 3 – 5 year target price. Based on next year’s estimate of $1.60, that would bring NITE shares to $22.40 within 12-months. That would translate to a 36.5% gain from the current quote and yet would be less than the actual high set just last month. Morningstar is in basic agreement with a published ‘fair value’ for NITE of $21 /share. 

Here’s a nice buy/write combination for the next 14+ months that can generate outstanding results with only moderate risk.

Read more…

InteractiveBrokers and OptionsXpress -Benefitting from a Market Rebound

November 10th, 2009 2 comments

 

Both IBKR and OXPS are major players in the once-again booming options markets, as well as in equities, futures and FOREX. As risk aversion declines their businesses are expected to see gains in both absolute account numbers and trading volumes. 
ibkr-logo
Both companies sport clean balance sheets and solid profitability with substantially better results expected for 2010. Each stock is down dramatically from their bull market valuations and now trades at nice discounts to the better-known industry competitors Charles Schwab and TD Ameritrade based on P/E and P/BV.
oxps-logo
I believe this translates to a great opportunity for investors seeking good-quality shares that have yet to reflect the improving market conditions. Compare the values available for IBKR and OXPS versus AMTD and SCHW based on current prices.  

Company 11/9/09 Close 2009 Est. 2010 Est. 2009 P/E 2010 P/E Price/ B/V
IBKR $17.14 1.10 1.47 15.6x 11.7x 1.2x
OXPS $15.85 1.06 1.29 15.0x 12.3x 2.9x
AMTD* $20.38 1.05 1.25 19.4x 16.3x 3.5x
SCHW $17.83 0.72 0.89 24.8x 20.0x 4.5x
 
*AMTD reflect FYs ending Sep. 30

Using a very conservative assumption of just 16 times next year’s projections, leads me to the following target prices for these four stocks.

Read more…

Alliance Bernstein L.P. – Up from the depths but still worth buying.

November 5th, 2009 2 comments

 

AllianceBernstein Holding L.P. is a limited partnership company. They provide research, diversified investment management and related services globally to a range of clients. Its principal services include Institutional Investment Services, Retail Services, Private Client Services and Institutional Research Services. Clients include institutions such as corporate and public employee pensions, endowments and governments. AB also serves various retail clients; private clients, trusts, estates, partnerships, and other entities. They also provide distribution, shareholder servicing, etc. to its sponsored mutual funds.alliance-bernstein
Both the profits and unit price of AB went way down last fall and winter along with the general market. Fundamentals dictated a drop but the extent appears to have grossly overshot to the downside. Alliance Bernstein units peaked at $94.90 in early 2007 and fell as low as $10.10 at the nadir last March. 

Earnings troughed in the March quarter but have recovered steadily since then. Q1 came in at $0.07, Q2 at $0.41 and the recently reported Q3 picked up to $0.67. Full year 2009 estimates have risen over the past month from $1.38 to $1.70 while analysts are now at $2.05 for 2010 versus a month-ago expectation of just $1.71.

The units have surged along with the earnings upgrades. AB has climbed back to $26.02 right now and that is after going ex-dividend for a $0.67 quarterly distribution today. 

Here are the per unit figures for AB as reported by Value Line:

Year Sales C/F EPS Distrib. Dist/C-F Avg. P/E Range
2000 10.21 4.10 3.12 3.18 89% 14.4x 29.30-56.70
2001 12.03 4.96 2.77 2.84 89% 17.8x 37.40-59.30
2002 10.96 3.72 2.19 2.30 104% 16.9x 23.20-50.80
2003 10.87 4.04 2.12 1.97 92% 15.6x 25.80-39.30
2004 11.92 4.17 2.43 1.19 54% 14.9x 31.50-42.30
2005 12.72 4.51 3.02 2.80 92% 15.7x 40.20-58.50
2006 15.25 5.24 3.82 3.56 93% 17.7x 55.40-82.90
2007 17.38 5.79 4.33 4.75 108% 19.8x 71.30-94.90
2008 13.33 4.10 2.79 3.45 122% 17.6x 11.50-78.00

As a master limited partnership Alliance Bernstein must pay out the bulk of its profits to its unit holders as cash distributions. Over the past decade AB has paid out $27.48 per unit (including 2009’s declared $1.44) for an average annual distribution of $2.745 /unit.

That period from 2000 through 2009 includes the NASDAQ bust of 2000, the extreme bear market of 2002 as well as the 2008-2009 melt-down. It includes the boom years of 2003 and 2005 – 2007. As such I feel it represents a pretty good indication of what investors can expect over a full cycle or two of ‘normalized’ market action.

Read more…

This blog is monetized using Are-PayPal WP Plugin
Powered by WishList Member