Brian Nelson

Is BHP Jumping Into the Potash Market?

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Earlier this week, rumors intensified regarding mining giant BHP (click ticker for report: BHP) and the firm’s prospective entry into the potash market. Because demand for potash (see image below) tends to be a bit more stable than the company’s other resources (namely iron ore), we can see why BHP would be interested in entering the market. Image Source: Potash As it is currently structured, the potash market is dominated by a few large players, namely Canpotex and Belarus Potash Company. Canpotex is comprised of Potash Corporation (click ticker for report: ), Mosaic (click ticker for report: ), and Agrium (click ticker for report: ), while the Belarus Potash Company (BPC) represents the Russian equivalents. These two producers form a … Read more

Does ShopHouse Justify Chipotle’s Valuation?

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Key Takeaways: ·       Chipotle’s internal growth is slowing. ·       Chipotle’s ShopHouse concept is expanding, but we think it could divert attention from the core business. ·       We could open a bearish position in Chipotle in the portfolio of our Best Ideas Newsletter. After its price finally came down to earth in late 2012 (falling to under $250 from over $400 per share), shares of quick-serve burrito restaurant Chipotle (click ticker for report: ) have rocketed back toward the $400 level. Shares have jumped 23% year-to-date, even though the company’s same-store sales growth totaled just 1% in the first quarter. Shares now trade at a premium to our fair value ($338 per share is the high end of our fair value range). With comparable … Read more

Cooper Tire & Rubber Receives a Generous Takeover Bid

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Early Wednesday morning, American tire company Cooper Tire & Rubber (CTB) announced that it agreed to be acquired by India-based Apollo Tyres for $35 per share ($2.5 billion) in cash. Not only did we peg Cooper’s fair value at $35 per share, the firm also appeared on our list of  The 25 Cheapest Stocks on the Market over $10, perhaps marking one of our best stock calls thus far this year. Apollo paid a 43% premium over the previous day’s closing price, right in line with our above-market fair value estimate. We think Apollo’s offer was fair, and we think the newly-combined entity will be a stronger company. Fears of Cooper’s heavy pension obligations and concerns about intense competition from … Read more

Lululemon’s CEO Departure: Sell-off Justified?

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Luxury athletic apparel maker Lululemon (click ticker for report: ) announced strong first-quarter results Monday that were obscured by the announcement of CEO Christine Day’s departure. We doubt anyone on the Street saw this announcement coming (as evidenced by the large sell-off), and we are a bit surprised at the timing. Although the company has had some quality control issues during the past few months, and we’ve seen the firm chase demand (not have enough inventory), we don’t think Day was at all forced out. She’s presided over a boom in the company’s revenue and profitability over the past five and a half years. Still, Day’s “personal reasons” for leaving come at a strange intersection. Many growth investors believe Day … Read more

First Solar Is Wise to Raise Capital

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First Solar’s Wild Ride Without question, solar modules and systems maker First Solar (click ticker for report: ) has been among the most controversial stocks in our coverage list during the past few years. The stock recently popped back above the $50 level on positive earnings guidance for 2014 and 2015, after nearly falling into the single digits last summer.  Though we’ve recently increased our fair value estimate for the solar maker to $47 per share (at the time of this writing) as we’ve warmed up to its mid-decade outlook (which looked better than what we had previously anticipated), management made a wise (and opportunistic) decision to raise equity capital at current levels via the announcement of a secondary offering yesterday. … Read more

iOS Gets a Facelift: Apple’s Worldwide Developers Conference

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Day 1 has passed at Best Ideas Newsletter holding Apple’s (click ticker for report: ), and we were hit with a barrage of news. The most pertinent issue of the day was the introduction of iOS 7, the iPhone and iPad’s new operating system. It is the first major overhaul of iOS, and it signals the company is serious about bringing positive changes. In addition to a new mobile operating system, Apple unveiled iTunes Radio, a streaming music service to compete with the likes of Pandora (click ticker for report: ) and Spotify. Lastly, the firm unveiled its newest Mac Pro—one of the most innovative products we’ve seen from the company in the last year. iOS 7 Image Source: Apple … Read more

Google Getting Social About Maps

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Best Ideas Newsletter holding Google (click ticker for report: ) is on the brink of making a big splash in the map space, as it is reportedly set to acquire social map application Waze for $1.3 billion. This comes after months of speculation that Apple (click ticker for report: ) and Facebook (click ticker for report: ) were also bidding to acquire the Israeli-based tech company. Although Google Maps remains a highly-regarded product, Waze is a step in a different direction. Waze differs from other map applications because it harnesses user-submitted data (largely via GPS) to provide real-time traffic and driving updates. The application provides data on traffic flow, accidents and other specific events that could slow traffic, information on … Read more

Overvalued and Dangerous Dividend: Iron Mountain Crushed by REIT Conversion Update

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It is not too often that a firm in our coverage universe finds itself on both the Top 25 Most Overvalued Stocks list AND Dividend Yields to Avoid list, but that is exactly where Iron Mountain (click ticker for report: ) has been for a while now. However, it wasn’t until the IRS issued a tentatively adverse ruling to the company’s REIT (real-estate investment trust) conversion request that a catalyst emerged to send the stock tumbling back toward our fair value estimate. Why Did the IRS Delay the Ruling? During the past few years, we’ve seen a large number of companies rush to become REITs in order to capitalize on more-efficient tax policy, as well as to satisfy the desire for yield from investors. REIT conversions have been one of … Read more

Ciena Surges on Robust Telecom Spending

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After Cisco (click ticker for report: ) CEO John Chambers hinted at an acceleration in enterprise spending, network specialist Ciena (click ticker for report: ) reported much stronger than anticipated second quarter results Thursday. Revenue jumped 6% year-over-year to $508 million, smashing consensus expectations. Non-GAAP operating profit was halved to $0.02 per share, but that was better than the expected loss. On a GAAP basis, the firm still lost $0.27 per share. Cash flow for the year isn’t great as the company greatly expanded its accounts receivable, but we figure this will even out as the year progresses. What drove growth during the quarter? We’ve identified a few factors. Capital investment from the American wireless carriers is returning, even if the … Read more

Dividend Increases for the Week Ending June 7

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Below we provide a list of firms that upped their dividends for the week ending June 7. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports, please click here. Firms Raising Their Dividends This Week Acme United Corporation (ACU): now $0.08 per share quarterly dividend, was $0.07. Altera Corporation (ALTR): now $0.15 per share quarterly dividend, was $0.10. Concurrent (CCUR): now $0.12 per share quarterly dividend, was $0.06. Cracker Barrel (CBRL): now $0.75 per share quarterly dividend, was $0.50. DuPont Fabros Technology (DFT): now $0.25 per share quarterly dividend, was $0.20. FEI Company (FEIC): now $0.12 per share quarterly dividend, was $0.08. Helmerich & Payne (HP): now $0.50 per … Read more