An alert today from Stocks Under $10 on The Street.com
Stocks Under $10
Action DSPG VTG AXAS BFRM 11/19/09 - 11:14 AM EST
David Peltier Print This Article Email David
Names on Our Radar
The major stock market averages are trading considerably lower across the board this morning. Once again, the small- cap benchmark Russell 2000 index continues to show more volatility than the Dow Jones Industrial Average and S&P 500, as it is falling by a greater amount in early trading.
We're not making any trades for the model portfolio in this Alert. A few of our One-rated names are approaching levels at which we'd consider putting some funds to work, but it will likely take another day of selling for us to take action.
In the meantime, we wanted to mention some new names to readers that we've been looking at since the end of earnings season. We've done a lot of research in the past several days and these are the stocks that have stood out so far.
First is DSP Group (DSPG:Nasdaq), which is the leading manufacturer of chips for cordless telephones. Although industry demand has been soft of late, the company has continued to generate positive operating cash flow. As we try to get a better sense of DSP's growth prospects in the new decade, it's worth pointing out that the stock is trading at just two-thirds of its tangible book value. The main component of this is cash and investments, which works out to $4.80 a share on the company's debt-free balance sheet. The stock was recently changing hands at $6.05.
We currently have no exposure to the energy patch in the model portfolio, but two names have caught our eye of late. The first is Vantage Drilling (VTG:Amex), which is well positioned to benefit from a rebound in demand for its offshore rigs. The company is already running at full utilization and plans to bring more units online in the coming months. The stock was recently trading at $1.83.
Another energy name on the exploration side is Abraxas Petroleum (AXAS:Nasdaq). The company has a lot of debt on its balance sheet, but is benefiting from rising spot- commodity prices. To reflect this, management is looking to shift some of its production efforts from natural gas toward oil in 2010. Shares recently trading at $1.98. In the health care sector, BioForm Medical (BFRM:Nasdaq) is gaining market share with its dermal filler Radiesse. The aesthetic products market can be very sensitive to the overall economy, and as we become more confident with that issue, it's worth noting that the company has a solid clinical pipeline.
Additionally, Bioform's stock has run up nearly 300% year to date, and was recently changing hands around $3.50. The company also has a pristine balance sheet and we plan to conduct more research on this name.
We will continue to update readers on the new names that are popping up on our radar screen in the coming weeks and send Alerts when we're ready to add any of them to the model portfolio.
David Peltier & the TSC Research Team
David welcomes your questions on Stocks Under $10. Please email David with your questions at email@example.com. However, please remember that Stocks Under $10 is not intended to provide personalized investment advice. Do not email David seeking personalized investment advice, which he cannot provide.
Baltic Dry Index trades to best levels in ~18 months
The BDI extended its rally to trade to its best levels in ~18 months. It rallied for 262 points (6%) to close at 4643, 24% higher than Wednesday's close last week. All subindices were gainers once again, and were led by the Capesize Index... Click here for the table of indices.
Jim Cramer Blog
Ag and Shippers Are the Newest Bull Markets
By Jim Cramer
11/18/2009 7:34 AM EST
During the great narrow bull market that was 2006-2007, anyone who hitched a ride on any bulk or oil carrier, any DryShips (DRYS) or Diana (DSX) , or any Frontline (FRO) or Nordic American Tanker (NAT) , or anyone who bought anything ag-related -- Deere (DE) , Monsanto (MON) , Potash (POT) -- looked like a genius.
Beginning midyear last year, you looked like a moron.
You are now about to look like a genius again. The rates for shipping have turned harder than a Nascar driver avoiding an accident on the turn. When I saw them this weekend I thought it was a mistake. The bulk carrier increases are finally catching up with the Baltic Freight Index, and even the most seasoned of shippers are astonished about the turn. The oil carriers aren't experiencing the same "V" bottom, more of a "U," but Nordic American, which is all double-hulled, thinks rates can only go up right now, as China last week said it would be banning single-hulled ships.
Michael McDonough on the Shippers
This Shipping Pullback Won't Hurt as Much
Ag's a little more difficult because there's still plenty that can go wrong. The fertilizer stocks don't have the ethanol story behind them, and the spur -- a 30% increase in corn prices -- may not be enough to turn the complex around. The companies, particularly Potash, have been famously promotional throughout the downturn and quick to call any spike up the beginning of a new bull market. Chinese orders haven't helped. But I think that this space, at last, is at a bottom worth playing, and the breakout has been furious.
Deere's the most controversial of all, as it was a darling that has repeatedly failed to execute its own pullback, making Caterpillar (CAT) management look like geniuses. But that's helped create a low bar for Deere even at the 52-week high we got yesterday, and that should help immensely when it reports next week.
Two brand-spanking-new bull markets for those who have missed the rest, ag and shipping. Thanks to Dan Fitzpatrick and Stephanie Link from RealMoney and Action Alerts PLUS for explaining how well they can work.
Random musings: A big thank you for all who came to Barnes & Noble last night for the signing. It was electric!
10:55 CSTR Coinstar: Redbox offering downloads with CinemaNow could bridge physical and digital rental worlds - Merriman (28.40 -0.17)
Merriman notes that at the Merriman Curhan Ford Investor Summit in New York yesterday, CSTR management provided details that Redbox is currently testing a partnership with Sonic Solutions' (SNIC) CinemaNow product. Through this trial, some of Redbox's more active customers can purchase prepaid rental packages that include both physical DVD rentals through the Redbox kiosks as well as digital movie downloads through CinemaNow. The firm believes there has been some concern with investors lately about the move within the movie rental industry away from physical DVDs toward digital downloads -- and that Redbox's kiosks could get left behind. However, the firm notes that they have always taken the stance that there are distinct groups of consumers that will prefer both rental mediums and companies will need to offer both to be truly successful -- like Netflix (NFLX) has proven. Should these initial trials with CinemaNow evolve into a more widespread offering to consumers, the firm believes that it could help Redbox address a much larger rental population, while enhancing revenue growth and margin expansion.
05-Nov-09 12:38 ET WFT Weatherford: Mexico Oil Minister Kessel says it will increase drilling at Chicontepec-- Bloomberg (17.75 +0.02)
Note WFT was hit hard last week on PEMEX comments about cutting back drilling. Comments made at a Bloomber forum.
Action Alerts PLUS
Action MRO WFT BP 11/03/09 - 11:28 AM EST
Jim Cramer Print This Article Email Jim
Adding to Two Energy Stocks
Marathon Oil (MRO:NYSE) reported a stronger-than-expected earnings report, beating both the top and bottom lines (revenue and earnings). The stock isn't rallying on the news, and after you have received this Alert, I'll buy 200 shares at around $32.14. I am also going to add 200 shares to Weatherford (WFT:NYSE) at $17.68 as well.
MRO beat expectations by 4 cents at 61 cents on better revenue of $14.47 billion vs. $13.7 billion expectations. The company grew production at 5% for the quarter, and it is now up 9% year to date, which is at the upper end of the large integrated industry; that's why I like this stock. E&P income was $491 million, down from $869 million last year, due to the lower commodity price realizations, but that was better than plan, and full-year guidance was raised.
Importantly, costs fell 10% in this segment, and this shows management's commitment in turning this division into a first-rate E&P company. Refining and marketing continues to be challenging (for the industry), with lower margins and income for the quarter, but MRO offset the weakness with 9% lower costs, and importantly, it continues to outperform its peers, especially in the domestic market. The call is later this afternoon, and the story remains on track as the company transforms itself into a respectable upstream company with better-than-average production growth while continuing to take share in the refining segment.
Separately, BP (BP:NYSE) and China National Petroleum signed a 20-year contract with Iraq's state-owned South Oil Company to expand production in Iraq's largest oilfield, the Rumaila. This is the only deal reached so far from the licensing auction in June, and it is part of the Iraqi Oil Ministry's plan to raise cash by boosting production in this oil-rich country. Both companies will invest around $15 billion over the life of the deal, with expected output to triple from the current 1.05 million barrels a day.
I highlight this for two reasons -- it shows that BP continues to find hot growth areas around the world to further improve its production profile, and it shows how resource-rich this country is. This is important for WFT, the largest oilfield company in Iraq. With oil prices stabilizing at the $70-$75 level, integrated oil companies will begin to spend more on projects around the world, and that will lead to increased capex programs and further business for the oilfield service companies.
With a two-year lead in Iraq, WFT is well positioned to benefit over the long run. Some estimate that this project could be worth over $1 billion for the company (WFT continues to downplay it Â– smartly -- with guidance of $200 million to $400 million). Expectations remain low for the company, and the stock is the cheapest in the group. I'll continue to buy on weakness.
When these trades are complete, I will own 2,300 shares of MRO, or 2.58% of the portfolio, and 1,900 shares of WFT, or 1.17%.
Click here to trade alongside Cramer!
Weatherford International (WFT:NYSE, $17.53, 1,600, 0.99%): INDUSTRY SECTOR Â– ENERGY: I bought 400 shares this week when the stock pulled back on speculation that Pemex (Mexico's largest oil company) might cancel WFT contracts in April. First, this wouldn't include the company's existing contracts, and Pemex is on record as saying the current work that WFT is doing is crucial for its growth in 2010. WFT has 42 rigs currently in the Chicontepec reservoir in Mexico, and that is expected to increase to 53 in 2010. Second, I don't own WFT for Mexico but for its international exposure in Russia, Iraq and the Middle East/Asia region. WFT is the only oil-service company that has shovel-ready technology (rigs/drills/lifts) in Iraq, and it has a three-year advantage on the competition. This is a resource-rich area, and that alone will help WFT grow above average vs. its peers (20%-30% internationally versus 11% for the group), and this could be a $1 billion opportunity over time. Third, WFT has underperformed on a relative and absolute basis, trading at a 30% discount to Schlumberger (SLB:NYSE) and 19% to Halliburton (HAL:NYSE), its two largest competitors.
That's funny :)) he has 1600 shares...that's what is important. he accumulates slowly. <g>
I guess % wise it's about the same, but it fell 3 points...and is now up .70 on the day...Pemex accounts for 20% of their business .
Anyway the rumors weren't true about Pemex cancelling! This fiasco made me miss other trades. Makes you wonder!
Building a Position in a Cheap Energy Stock
After you have received this Alert, I am going to sell 100 shares of Chevron (CVX:NYSE) at around $77.59 and buy 200 shares of Weatherford International (WFT:NYSE) at around $17.80. I'm up 20% on CVX and will take the gain to buy a much cheaper energy stock in WFT.
Weatherford is underperforming the energy group today on rumors that Pemex (Mexico's largest oil company) might cancel WFT contracts in April. First, this wouldn't include the company's existing contracts, and Pemex is on record as saying the current work that WFT is doing is crucial for its growth in 2010. WFT has 42 rigs currently in the Chicontepec reservoir in Mexico, and that is expected to increase to 53 in 2010.
>>>>>Second, I own WFT not for Mexico but for its international exposure in Russia, Iraq and the Middle East/Asia region. WFT is the only oil-service company that has shovel-ready technology (rigs/drills/lifts) in Iraq, and it has a three- year advantage on the competition. This is a resource-rich area, and that alone will help WFT grow faster than its peers (20% to 30% internationally, vs. 11% for the group), and this could be a $1 billion opportunity over time.>>>>>>>>>>
Third, WFT has underperformed on a relative and absolute basis, trading at a 30% discount to Schlumberger (SLB:NYSE) and 19% to Halliburton (HAL:NYSE), its two largest competitors. I'll take advantage of the weakness to build this in the fund.
After my trade, I will own 1,700 shares of CVX, or 4.52% of the portfolio, and 1,600 shares of WFT, or 0.98%.
October 29, 2009
13:11 EDT WFT theflyonthewall.com: Weatherford contracts not cancelled by Pemex, says Sterne Agee
Sterne Agee said they spoke with Weatherford management and said news reports of canceled contracts have no validity.
12:10 EDT WFT theflyonthewall.com: Weatherford mentioned positively at Deutsche Bank
Deutsche recommends using the weakness on the PEMEX news as a buying opportunity
PDE has declined over a point following the 11:29 headline saying that PEMEX met its equipment needs for next year and may not renew WFT contracts. In its latest 10-K, WFT had no individual customer who accounted for more than 10% of consolidated revenues... However, we'd note that PEMEX was a 20% customer of PDE in 2008, so the weakness in PDE shares is likely a reflection of a read-through from the WFT news that PEMEX could reduce business at other suppliers as well.
October 27, 2009
13:57 EDT AKS theflyonthewall.com: AK Steel mentioned positively at JP Morgan
JP Morgan rates AK Steel an Overweight with a $29 price target.
Did the board miss this?