October 30, 2007

PDL BioPharma

From a MF write-up:

PDL BioPharma's [Nasdaq: PDLI] drug Nuvion, a novel treatment for severe ulcerative colitis, which is a large market with zero competition. As first mover, Nuvion -- once it gets the nod from the FDA -- should nab a decent share of a huge market and become a blockbuster.

October 26, 2007

Sears Holdings: Long Term

Barron's did a piece this weekend on Sears Holdings (SHLD) [Click to launch this SmartLink] . In it the author detailed several value metrics which shed light on why Chairman Eddie Lampert apparently cannot buy shares fast enough this summer at these prices.

Here is the gist of the article:

Time Frame:
- It took retail veteran Allen Questrom five years to revive then dead JC Penny (JCP) [Click to launch this SmartLink] from 2000 to 2004. Lampert purchased Sears in 2005.

Retail Operations
- Margins are only at 4.7%, half those of competitors JC Penny, Target and Kohl's
- The Lands End "store-in-a-store" concept will increase margins
- Kenmore appliances (high margin) are now being moved into Kmart locations
- Lampert could increase cash flow $3 billion a year lust by delaying payments to suppliers like other retailers do.

Real Estate:
- Sears owns 518 of the 861 legacy general merchandise stores located in the best malls in America. Those not owned currently pay well below market rents.
- Kmart leases 1,194 out of 1,333 locations at rock bottom rates and the 100 year agreements essentially give Sears ownership control of the location.
- The company recently added to its "land bank" when it absorbed excess Macy's (M) [Click to launch this SmartLink] and Mervyn's locations.
- Bill Ackman, who recently took a stake in the company says that at the current share price of $132, the market essentially values this rich real estate at $33 per sq. ft.. By comparison, Target (TGT) [Click to launch this SmartLink] sells for $341 /sq. ft, Home Depot (HD) [Click to launch this SmartLink] for $277/ sq. ft, JC Penny for $144/ sq. ft, Kohl's (KSS) [Click to launch this SmartLink] for $319 /sq. ft and Simon Properties (SPG) [Click to launch this SmartLink] (Ackman uses this because he argues Seas Holdings is a conglomerate much like Simon) for $698/ sq.ft.
- The management of Target has made it publicly know that it has the desire to take over "hundreds" of Sears current locations either on or off mall.
- Mall owners would pay dearly to take over Sears locations and put in stores like Cheesecake Factory (CAKE) [Click to launch this SmartLink] , Barnes and Noble (BKS) [Click to launch this SmartLink] or PF Chang's (PFCB) [Click to launch this SmartLink] . There is nothing to stop Lampert and Sears from becoming their own leasing and development operation with these locations.

Back in February I said that "Sears Holdings is in the infancy of what it will eventually become" and the Barron's article, if nothing else should illustrate the tremendous options Lampert has at his disposal to enhance shareholder value.

How could you bet long term against this guys track record?

October 24, 2007

Syneron Medical

Is a MF Rule Breakers Pick:

Syneron's gum in the gears
This former five-star stock certainly did surprise investors. Last week, the company announced preliminary results for its third quarter, and they weren't pretty. The company said that revenue would come in at $33 million and net income would fall in the $7 million to $8 million range. This was less than investors had been expecting, and it was particularly disappointing considering management raised its full-year guidance to 25% top-line growth in reporting a positive second quarter. Management blamed the shortfall on manufacturing delays and lowered full-year guidance back to the 20% growth target they had set earlier in the year.

The stumble was a costly one for the stock, which hasn't been able to muster a particularly high P/E ratio given some past questions over execution. However, assuming these really were unusual manufacturing issues, Syneron's story is still intact. The company has been at the leading edge of new light-based technologies that can be used to perform cosmetic fixes that were previously more difficult and costly. Earlier in the year, the company signed an agreement with Procter & Gamble (NYSE: PG). The agreement hasn't yet contributed to the company's bottom line, but it should provide both financial benefit and increased exposure when it does ramp up.

The stock has been far from what I expected this year, but the long-term prospects still look good. And manufacturing problems aside, the company has continued to perform well this year. A number of CAPS players have also rallied around the stock since the recent drop, including mrsudbury, who said that Syneron has "strong brand exposure with little debt on [its] balance sheet" and claimed that it "has been beaten up unnecessarily by impatient investors."

Force Protection

Is a MF Rule Breakers Pick. Article from Zacks:

Force Protection is winning contracts left and right. It recently won the second biggest contract in its history. This is showing up in higher earnings. The company's second quarter beat expectations by almost 42%. Over the past month, next year's earnings estimates have risen seven cents to $1.53 per share. Analysts expect that earnings will soar over 151% next year. FRPT has no debt and a 17% ROE.

Full Analysis

Force Protection, Inc. (FRPT) and its subsidiaries engage in the manufacture of ballistic and blast protected vehicles. The company's products are used to protect personnel during transport, removal of unexploded ordnance, route clearance, humanitarian de-mining, and other missions that require protection from landmines and hostile fire.

Its products include The Buffalo series, which is designed for route clearing activities; and The Cougar series for troop transport, explosive ordinance disposal, command and control, artillery prime mover, recovery and ambulance duty, urban patrol, route clearance support, utility transport, and special unit activities. The company also offers The Cheetah series for reconnaissance, forward command and control, and urban operations.

Earlier this week, the company announced that it received a contract valued at $376 million to build 800 vehicles for the Marine Corps' Mine Resistant Ambush Protected vehicle program. The order for the four- and six-wheel Cougar model vehicles is scheduled to be completed in April.

They will be built by Force Dynamics LLC, a joint venture between Force Protection and a division of General Dynamics Corp. Force Protection Chief Operating Officer Raymond Pollard said the order was second biggest in the company's 10-year history.

The company reported robust second-quarter results in early-August. Force Protection said it earned $32.8 million, or 17 cents a share, in the second quarter, up from $10.2 million, or a penny a share, a year earlier. Net sales rose to $134.7 million from $56.1 million. Analysts expected 12 cents per share.

FRPT also sold 212 of its medium-size Cougar trucks, used for troop transportation. Altogether, the company said it produced 229 vehicles in the recent quarter, compared with 285 produced for all of 2006.

The U.S. military has said it wants to purchase thousands of these trucks -- better known as MRAP, or mine-resistant ambush-protected, vehicles -- to use in place of the more vulnerable Humvee. Recently, the Defense Department requested the transfer of $1.2 billion in existing funds for an additional 2,650 MRAP vehicles, bringing the total size of its order to 6,415.

October 17, 2007

IPG Photonics

IPG Photonics is a MF Rule Breakers pick. Current shares trade at $22 with a five year growth estimate of 29.5%.