Thursday, October 6, 2011

Free Stock Analysis

BlackRock Has Reached Its Bottom, Has Strong Fundamentals

Along with other asset management firms, BlackRock (BLK) has seen a precipitous stock decline since the start of 2010, with its value down by more than one third. The financial corporation now trades at 12x and 10.6x past and forward earnings, respectively, and offers an appealing dividend yield of 3.74%. Despite this attractive valuation, many investors are concerned about BlackRock's beta of 1.56 and macro headwinds. Proportionate client concerns...
The Natural Gas Boom To Fuel El Paso's Growth
In an earlier article that I published, I wrote about my bullish expectations for the natural gas industry, focusing on Chesapeake Energy (CHK). While I view Chesapeake's immeasurable upside as a manifestation for the industry as a whole, it is important to also note the smaller players that could eventually end up major winners.
El Paso (EP) is an energy company that operates two segments: pipeline and exploration & production. Management recently decided to... 
Pentair: Undervalued Given Market Expansion and CPT Acquisition
Industrial manufacturer Pentair (PNR) has strong secular emerging market opportunities that will be enhanced by the Clean Process Technologies (CPT) acquisition, in my view, beyond what management was originally expecting. Integration of the buyout has come smoothly and revealed more synergistic value than the earlier-cited $20M and $10M worth of revenue and cost improvements by 2014. Indeed, CPT is presenting considerable cross-selling opportunities for Pentair in the emerging markets...
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Strong Yen Will Not Deter Honda's Growth
Amidst concerns over yen appreciation and macroeconomic stagnation in North America and Europe, many investors are understandably hesitant about Honda Motor (HMC). The automobile manufacturer has seen its stock price decline by more than one quarter for the year and is now trading near its 52 week low. I find myself in agreement with other analysts that the market has been too...
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Southwest-AirTran Merger Will Fuel Long-Term Value Creation
Southwest Airlines (LUV) is trading at a tremendous discount to intrinsic value considering the recent precipitous stock decline. Since Southwest completed its acquisition of AirTran in May 2, 2011, the stock has been down by more than a third. By the close of October 3, 2011, it was trading at its 52-week low of $7.35. What exactly is going on?...
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Best Buy Faces Margin Troubles, Pressing Challenges
The consumer electronics retailer Best Buy (BBY) has seen its stock price decline precipitously due to investor concerns about poor competitive position, macro challenges, and decreased consumer expenditures. Shareholder value is down by more than one third since the start of the year and the stock is trading around its 52- week low, less than half of the 52-week high. With multiples of 7.5 and 6.2 for past and forward earnings, respectively, the company is just slightly undervalued by most analyst estimates. Given the beta of 1.28...
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J.C. Penney is Overvalued In A Challenging Industry
Having brought activist investors Bill Ackman and Steve Roth on the board and elected Apple (AAPL) store genius Ron Johnson as CEO, J.C. Penney (JCP) must now work on tangibly proving its fundaments and creating value. The market has already factored in these catalysts, in my view, and is now waiting to see if the results accord...

Bears At Family Dollar, Retailer Considers Wrong Alternatives
Discount retailer Family Dollar Stores (FDO) recently named Edward Garden of Trian Partners to the board under the agreement that his fund both withdraw its hostile bid and not acquire more than 9.9% of the outstanding stock without board approval. Trian currently owns 8.29% of the stock, while fellow activist investor Pershing Square owns 9.23%. Bill Ackman believes that the company is...
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Despite Budget Cuts, Lockheed Martin Will Outperform
With mounting fear over budget cuts to the Department of Defense, it has become clear that Lockheed Martin (LMT) and other security providers are destined for higher volatility as the trigger date approaches. While this will make for an obvious case study in political arbitrage, value investing is also relevant given the company's attractive multiples and jaw dropping dividend. The stock is currently trading at...
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Expedia: Undervalued And Well Positioned
With a 21.7% discount to its 52 week high and strong fundamentals, Expedia (EXPE) appears at first to be an attractive value play. The stock trades at 16.5x and 11.6x past and forward earnings, respectively, which is well below top competitor Priceline.com (PCLN). At the same time, the stock only offers a dividend yield of 1.1% and is currently rated by analysts more towards a "hold" than a "buy." I expect that the company...
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