Yanzhou Coal (YZC): All fired up
"Any coal-producing company located in and selling to China is going to be printing money," says Tony Sagami.
In his Asia Stock Alert, he explains, "And in my opinion, the best to profit from that sooty need is Yanzhou Coal (NYSE: YZC), a fully integrated company that does it all; the company mines, prepares, processes, sells and transports coal." Here's his bullish review.
"The concept of investing in coal may not sound very exciting, but it is when you realize we’re talking about the primary source of power for a country with 1.3 billion people.
"Yes, the environmental crowd hates it because it’s dirty; produces greenhouse gases and acid rain; and no coal strip mine will ever win a beauty prize. Despite all this, coal does account for 25% of the world’s energy needs. And, coal accounts for over 70% of China’s electricity.
"Further, coal consumption in China is growing; and the country is building coal-powered power plants at a breakneck pace.
"Why? Because they’re much cheaper to build and operate than any other power-producing option. Any coal-producing company located in and selling to these countries is going to be printing money.
"China is activating one new coal-fired plant every week of the year. To put that in perspective, every three years, China’s adding the equivalent of another whole United States’ worth of coal consumption — with no stopping point in sight.
"The reason for the high demand is simple: Per unit of energy delivered, coal costs about one-fifth as much as oil.
"Meanwhile, Yanzhou Coal is blessed in that its mines are close to its customers. A big chunk of the company’s coal deposits are located in northeastern China, the epicenter of China’s industrial hub.
"That proximity translates into lower transportation costs and, ultimately, a lower price for its customers. That also makes it very expensive for any competitors to weasel into Yanzhou’s business.
"In addition to China, 15 new coal-fired power station projects are under construction in the North America, Central America, and the Caribbean. 12 new power station projects are in the works in Germany, Belgium, the Netherlands, and the U.K.
"Overall,you have a world that is hungry for coal. So I don’t see any path for the price of coal other than upward.
"We also note that after electricity, the second thirstiest consumer of coal is the steel industry. Between coal-fired power plants and steel production, the demand for coal from Yanzhou Coal is going to be steady and reliable for decades to come.
"Finally, I love a bargain. And with Yanzhou Coal now trading at roughly one-half of its 52-week high set last summer, that’s exactly what I see. The stock is definitely cheap, trading at only six times trailing earnings as well as paying a 24 cents per-share annual dividend."
AECOM (ACM): Stimulus gains
"AECOM Technology (NYSE: ACM) is set to take advantage of stimulus money and the global push to expand energy and infrastructure projects," says Ian Wyatt in Top Stocks Insights.
"The company is a global provider of professional technical and management support services to the transportation and energy industries, serving clients in more than 100 countries.
"The American Recovery and Reinvestment Act, which was signed into law on Feb. 17, will provide an excellent source of new project funding. Funding from this act, $170 billion, will go toward projects for highway, rail, school modernization, energy and water infrastructure.
"The company is primarily focused on the environmental and transportation end markets. These markets are diversified across all major continents. The United States represents the largest concentration of projects, with Asia and Canada close behind.
"Why we like AECOM:
- Growing sales and expanding EBITDA margins.
- Backlog continues to experience growth.
- Strong funding for infrastructure projects.
- Second-quarter 2009 performance was excellent.
- Gross revenue was up 29% to $1.5 billion.
- Service revenue increased by 29% to $966 million. This segment also experienced margin expansion.
- Net income was up 20% to $43 million, or $.40 EPS.
- Backlog increased 30% to $9.2 billion.
- AECOM confirmed fiscal 2009 guidance to be $1.60 to $1.70 EPS.
"AECOM continues to expand margins and grow its revenue stream. The company is poised to take advantage of the global push to expand energy and infrastructure projects.
"Most of this expansion is a result of government stimulus projects designed to boost the economy. We are optimistic about AECOM's ability to keep winning new projects in new markets.
"The shares currently trade at 18 times a current year EPS estimate of $1.68 and 15 times next year's EPS of $2. Both of these multiples are significantly greater than the industry average. Shares of ACM are worth a premium.
"This is one of the fastest-growing companies in the technical services industry. Accordingly, we believe shares should be trading at a least 18.5 times forward EPS, which is closer to our EPS growth projection. This results in a $37 price target."
Yanzhou Coal (YGZ): All fired up
"Any coal-producing company located in and selling to China is going to be printing money," says Tony Sagami.
In his Asia Stock Alert, he explains, "And in my opinion, the best to profit from that sooty need is Yanzhou Coal (NYSE: YZC), a fully integrated company that does it all; the company mines, prepares, processes, sells and transports coal." Here's his bullish review.
"The concept of investing in coal may not sound very exciting, but it is when you realize we’re talking about the primary source of power for a country with 1.3 billion people.
"Yes, the environmental crowd hates it because it’s dirty; produces greenhouse gases and acid rain; and no coal strip mine will ever win a beauty prize. Despite all this, coal does account for 25% of the world’s energy needs. And, coal accounts for over 70% of China’s electricity.
"Further, coal consumption in China is growing; and the country is building coal-powered power plants at a breakneck pace.
"Why? Because they’re much cheaper to build and operate than any other power-producing option. Any coal-producing company located in and selling to these countries is going to be printing money.
"China is activating one new coal-fired plant every week of the year. To put that in perspective, every three years, China’s adding the equivalent of another whole United States’ worth of coal consumption — with no stopping point in sight.
"The reason for the high demand is simple: Per unit of energy delivered, coal costs about one-fifth as much as oil.
"Meanwhile, Yanzhou Coal is blessed in that its mines are close to its customers. A big chunk of the company’s coal deposits are located in northeastern China, the epicenter of China’s industrial hub.
"That proximity translates into lower transportation costs and, ultimately, a lower price for its customers. That also makes it very expensive for any competitors to weasel into Yanzhou’s business.
"In addition to China, 15 new coal-fired power station projects are under construction in the North America, Central America, and the Caribbean. 12 new power station projects are in the works in Germany, Belgium, the Netherlands, and the U.K.
"Overall,you have a world that is hungry for coal. So I don’t see any path for the price of coal other than upward.
"We also note that after electricity, the second thirstiest consumer of coal is the steel industry. Between coal-fired power plants and steel production, the demand for coal from Yanzhou Coal is going to be steady and reliable for decades to come.
"Finally, I love a bargain. And with Yanzhou Coal now trading at roughly one-half of its 52-week high set last summer, that’s exactly what I see. The stock is definitely cheap, trading at only six times trailing earnings as well as paying a 24 cents per-share annual dividend."
Infrastructure gains with Jacobs (JEC)
"Professional services firm Jacobs Engineering Group (NYSE: JEC) is our latest "prime time" stock selection," says value investor Charles Mizrahi, editor of The Hidden Values Alert.
"Jacobs provides a broad range of technical, professional, and construction services for a large number of industrial, commercial, and government clients around the world.
"The company concentrates on selected industry groups and markets, including oil and gas exploration, production, and refining and programs for various national governments.
"The company also focuses on building projects in the fields of health care and education as well as civic, government, and other buildings); infrastructure; technology and manufacturing; consumer products; and pulp and paper, among others.
"JEC’s net profit margin has been trending higher: from 1.5% in 2000 to 3.7%. The company has very little debt: $40 million on $2.6 billion of shareholder equity. It has a strong balance sheet: shareholder equity/total assets are 59%.
"The company has $772 million in cash on its balance sheet, which may be used for intelligent acquisitions. JEC is a well-run business, and a price of $35 or lower per share represents a very good value.
"If JEC can grow earnings at only 12% per annum and maintain a P/E of 10, the stock will handsomely reward investors during the next five years."
JC Penney (JCP)
JC Penney (<a href=http://www.zacks.com/stock/quote/jcp>JCP</a>) reported first quarter earnings per share that were at the high end of the company's guidance of $0.09- $0.11. Management anticipates a challenging environment for the rest of the year. <p> Through the middle of May, JC Penney did not see any dramatic change in trends from the first quarter. For the second quarter, JCP expects sales to decrease 7%-10% with a net loss of $0.14 to $0.25 per share. For the full-year, JCP expects compstore sales to decrease 9% and earnings per share of $0.50 to $0.65. <p> The stock is trading at 40 times our 2009 EPS estimate of $0.66. We think that valuation is too optimistic given the retailer's weak sales trends and difficult consumer spending environment. Our target price is $16, which is about 15x our fiscal 2010 EPS estimate.Alternative Energy
We favor companies offering photovoltaics (PV) and large-scale concentrated solar power (CSP) and nuclear systems over other forms alternative energy such as biofuels, geothermal or hydropower. Our Buys include Entergy, FPL Group, Evergreen Solar, Energy Conversion Devices and SunPower.EnCana Corp. (ECA)
EnCana Corp.'s (<a href=http://www.zacks.com/stock/quote/eca>ECA</a>) better-than-expected first-quarter 2009 results were driven by robust production growth and strong cost controls. Natural gas production was up 4% to 3.9 Bcf/d, strongly positioning the company to achieve full-year guidance. <p> EnCana also benefited from lower operating costs. We continue to like the company for its industry-leading inventory of long-lived unconventional oil and gas assets. Additionally, EnCana remains focused on capital discipline and free cash flows. <p> With about two-thirds of its volumes this year hedged at very attractive price points, the company is expected to generate around $1.6 billion in free cash flows. Keeping in view the company's year-end 2008 proved reserves and upside potential from unbooked resources, our per share net asset value estimate comes to $64.60. Our new $64 price objective, raised from $54 before, is at approximately 100% of our NAV [net asset value] estimate.Zcom Networks Closes Acquisition of Kortel Communications, Inc.
LOS ANGELES, CA--(Marketwire - May 26, 2009) - Zcom Networks, Inc. (
DoMark International, Inc. Completes Acquisition of Victory Lane and Receives Preliminary Term Sheet for $16 Million in Funding
ORLANDO, FL--(Marketwire - May 26, 2009) - DoMark International, Inc. (
Victory Lane is a unique and exclusive Lifestyle Development on 3,000 acres approximately 75 miles from Savannah, Georgia, which includes exclusive home sites, a 4.5-mile grand prix circuit, a Davis Love III designed golf course and a 6,000-foot private runway.
Investing with the ‘stars’
"Golf has Tiger Woods, novelists have Tom Clancy, and the investment community has stars such as Bruce Berkowitz, Bill Nygren, Charlie Dreifus, and Mario Gabelli," states Paul Tracy.
In his The Street Authority Market Advisor he suggests, "These money managers are at the pinnacle of their craft." Here, he takes a look at these "celebrities" and some of their current top stock holdings.
"These money managers have all amassed prodigious gains over the years for their shareholders.
"Over the past few months, these gurus have come out with ringing endorsements for certain stocks. This isn't empty talk -- they are putting their money where their mouth is.
"Thanks to regulatory filings, interviews and shareholder reports, we can look over their shoulders and see where these elite investors are currently finding the most promising opportunities.
"Bruce Berkowitz is the lead manager of the Fairholme Fund, which has delivered a cumulative gain of 150% since inception 9 years ago. By comparison, the S&P 500 has backtracked -28% over the same time frame.
"When asked recently to name the one key metric that he uses to evaluate investments, Berkowitz didn't hesitate to say 'it's all about the amount of cash a company generates that can be passed to owners in relationship to the price.'
"Lately, he has plowed more than 50% of his fund's assets into health-care (particularly big pharma), aerospace and defense.
"His rationale is that there is ultimately nothing more important than the health and well-being of our families, and defense and health-care spending eat up a large percentage of the federal budget.
"His largest portfolio holding is Pfizer (NYSE: PFE), and recent buys include Boeing (NYSE: BA), General Dynamics (NYSE: GD), and Northrop Grumman (NYSE: NOC).
"Bill Nygren is lead portfolio manager of the Oakmark Fund, which has racked up double-digit annualized gains for the past 18 years. Nygren is confident that, over time, undervalued stock prices will always rise to reflect the value of the underlying company.
"In general, he prizes excess cash flows and relies on discounted cash flow (DCF) modeling for valuation -- buying stocks trading below 60% of fair value and then selling once they reach 90%. Nygren runs highly concentrated portfolios, so only his best ideas make the cut.
"Several stocks have passed his meticulous screening process lately, including Illinois Tool Works (NYSE: ITW), Texas Instruments (NYSE: TI) and advertising giant Omnicom (NYSE: OMC). But perhaps most noteworthy is a new stake in Microsoft (NASDAQ: MSFT).
"Nygren explains that Microsoft has always been an excellent company, but this is the first time that it has slipped into value territory. Back in 1999, the firm churned out profits of $0.70 per share and the stock peaked above $60.
"Today, it earns more than twice that much and there are fewer shares outstanding, yet they trade at less than one-third the price. In addition, Microsoft has over $20 billion in cash and offers a yield above the 10-year Treasury.
"There's a good reason why Charlie Dreifus was just selected Morningstar's 'Domestic Stock Fund Manager of the Year.' He captured that prestigious award by losing less than -20% in a year when many other small-cap stock funds lost more than -40%.
"During the last bear market from 2000-2002, his shareholders enjoyed a +53% gain, while the Russell 2000 sank -41%. What would you expect from an investor who refers to margin of safety as "the central concept in investing."
"Dreifus avoids flashy 'growth-story' stocks and sticks to boring companies with unassailable balance sheets and lofty returns on capital -- not unlike Warren Buffet.
"Dreifus is drawn to cash-rich companies that are trading for less than liquidation value. And he fishes in the micro/small-cap waters, where such bargains are more plentiful.
"Lately, Dreifus has been focusing his efforts on consumer-oriented stocks like children's apparel retailer Gymboree (Nasdaq: GYMB).
"Mario Gabelli is yet another Buffett disciple whose value roots can be traced back to Ben Graham. He employs many of the same research-driven tactics -- from dissecting a company's filings to interviewing its managers.
"Gabelli has developed a proprietary methodology that evaluates the real-world value of a company's balance sheet assets and future cash flow stream to determine its 'Private Market Value' (PMV).
"Since the inception of his flagship Gabelli Value Fund in 1989, this approach has quadrupled a $10,000 investment into more than $45,000 today (or roughly $80,000 before this selloff.)
"And thanks to a recent Barron's Roundtable discussion, we know exactly what his sights are set on now.
"Gabelli points out that there are 240 million cars on the road, many of which have been in service longer than six years (the point that repairs and maintenance become inevitable).
"Because consumers are holding off on new vehicle purchases right now, auto parts distributors like O'Reilly Automotive (NASDAQ: ORLY) are looking interesting.
"Elsewhere, he likes Dr. Pepper Snapple Group (NYSE: DPS), which churns out frothy cash flows and could be a buyout candidate.
"Maine & Maritimes (NYSE: MAM) is another favorite. The electricity transmission/distribution company stands to benefit from investments in green power, and a new line carrying wind-generated electricity to the New England power grid will put a charge in earnings."