Stocks and Sectors

Trader Mark submits:

Fun fact: Half of the world’s lithium is in Bolivia, of all places. Always looking for the "next big thing," I had looked into lithium investments in the past due to the potential large scale increase in usage, but outside of Sociedad Quimica Y Minera de Chile (SQM) – a hybrid fertilizer / lithium play – I could not find any really decent sized investment candidates. [Jul 11, 2008: Let's Talk About Sociedad Quimica Y Minera de Chile] Judging from the performance of the stock of late, it seems to be lumped in much more with the fertilizer stocks, which are one group that really has not done much at all in this month long rally. (Click to enlarge)

Outside of SQM, I believe there might be a name or two associated with lithium on the pink sheets. FMC (listed in the story below) is a much broader chemical company so not really a pure play.

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U.S. Concrete, Inc. (RMIX)

Q4 2009 Earnings Call

March 10, 2010 10:00 am ET

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Rohan C. Pease submits:

Big players are tossing around large stakes of Fortescue Metals Group (FSUMF.PK), the Aussie-based miner controlled by Mr. Forrest and the third largest iron ore producer in the land of Oz. Reports out of Australia today indicated that Phillip Falcone of Harbinger Capital in New York had unloaded a portion of his stake (now less than 5%, approximately half of his original position), Mr. Falcone has been one of Mr. Forrest’s longest supporters. Leucadia has joined the selling as well, unloading a stake they acquired in 2006. Many take this as a sign that FMG might dissapoint in the near term, however RBS upgraded the stock yesterday from "Hold" to "Buy" citing rising iron ore prices. RBS has a target of $5.80 adjusted for currency conversions. Which side is right, Hedge Funds or Institutions? Neither, I side with RBS. However, I believe their target price is way too low, my year end target is $8.00.

I wanted to update my pro forma income statement for Fortescue Metals Group to reflect increased iron ore prices and slower expansion growth for the company. Back in August, FMG was anticipating $6B of fresh financing from China, funds that were diverted from Rio Tinto (RTP) when they announced a joint venture with BHP Billiton (BHP). The terms were supposed to be disclosed as of the end of September, though the deal eventually fell through and FMG didn’t secure the financing. Originally I had put together a pro forma income statement for the rapidly expanding FMG, which had stated that it would like to see annual production exceed 100 Million tonnes starting around 2012. Obviously, the timeline has been extended as FMG now must fund expansion thru internal cashflow. Flipside is that they have good cashflows and with benchmark prices about to reset much higher (reports indicate 40% – 80%) this will provide a nice boost for infrastructure spending.

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Mark Riddix submits:

Chicago Bridge & Iron (CBI) has had a 22% rise since I first recommended buying the stock in December of 2009. The company recently reported results for the full year 2009. For 2009, total revenue was $4.6 billion dollars. Net income came in at $174.3 million dollars and earnings per share were $1.79. Chicago Bridge & Iron picked up over $3.4 billion in contracts in the fourth quarter and $6.1 billion dollars in new contracts for the full year. According to CEO Phillip Asherman, CB&I has over $300 million in cash and a backlog of $7.2 billion in orders.

The stock still looks like it has upside. The balance sheet is solid and shares still look cheap, selling at just 13 times this years earnings. CB&I is selling at a .41 price to sales ratio. To be fair, Chicago Bridge & Iron’s price to book ratio is definitely not cheap, with a value of 2.7. Management appears to be doing a solid job managing a 24.4% return on equity for 2009. The company tempered investor expectations for 2010 by guiding earnings downward. Any upside surprise in earnings for the current year and shares should rise. The real earnings story for CB&I is in 2011, when the average EPS is $2.15, meaning that the stock is trading at just over 10 times next year’s earnings.

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Hard Assets Investor submits:

By Brad Zigler

Normally at this time of year, seasonal cotton traders would be looking forward to peeling off a monthlong position in the July delivery that’s proved to be a fairly reliable winner. A purchase in the second week of February ordinarily—that is, 80 percent of the time—turns a $1,150-per-contract profit. Or rather, turned a profit.

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Hickey and Walters (Bespoke) submit:

The stock market is up about 65% since the 3/9/09 low, but oil has actually outperformed stocks over this time period with a gain of 72.64%. Below we highlight the performance of ten major commodities over the last year. As shown, copper is up the most with a gain of 108%, while orange juice ranks second with a gain of 101%. Of the three main precious metals, platinum is up the most at 50%, followed by silver at +33.73%, and then gold at +22.16%. Even natural gas is up since the March 9th, 2009 low with a gain of 16%. Wheat and corn are the only commodities shown that are down over the last year. Corn is down 11%, while wheat is down 18.27%.

click to enlarge

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The Inflection Point submits:

Powerful inflection points are characterized by companies that have recently experienced a dramatic improvement in their fundamentals. Important inflection points often coincide with a breakthrough earnings report that is soon followed by a surge in both the stock and the volume accompanying the breakout. UFP Technologies (UFPT) experienced such an inflection point last week.

UFP Technologies is a company which designs and manufactures engineered packaging solutions for the automotive, computer, medical, aerospace, military and consumer markets. After three accretive acquisitions last year and an underlying improvement in overall demand, UFPT posted a breakthrough earnings report on Wednesday morning. Earnings grew 150% year-over-year to $.45 a share as revenues grew 11.4% higher to $26.1 million. Along with these record profits, the company also achieved record gross margins of 31%.

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Trader Mark submits:

I only have two commodity plays and I am disappointed in the relative performance of Potash (POT) of late. I had mulled moving into an iron ore (CLF) stock or coal stock over the past month, and in retrospect that would of been a very smart thing to do, but I missed the boat. Considering the price increases announced lately in those spaces, the potential for a very nice upside in earnings is strong, while the fertilizer market is more or less ho hum right now. With that said, the stock of CLF is up 50% in a month, so it’s not like the market has not re-adjusted the price of the stock accordingly.

I appear to be the last person on Earth not to chase into these stocks, but for now I will sell the small amount of Potash we have left and buy either a coal- or iron-based stock in the future to replace it. (Click to enlarge)

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Paul Price submits:

Avery Dennison Corporation (AVY) manufactures pressure-sensitive materials, office products and a range of tickets, tags, labels and other converted products. AVY also makes and sells a range of office products and other converted products such as binders, organizing systems, markers, fasteners, business forms, tickets, tags, radio-frequency identification (RFID) inlays and imprinting equipment for retail and apparel manufacturers. They operate three segments: Pressure-sensitive Materials, Retail Information Services and Office and Consumer Products.

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Renaissance Capital IPO Research submits:

With roots dating back to 1916, this former division of Texas Instruments (TXN) was LBO’d by Bain Capital in 2006 for $3 billion. Sensata Technologies (ST) is a leading global manufacturer of customized sensors (60% of sales) and controls (40%) that are used to improve safety and energy efficiency in mission critical applications, from braking systems in cars to heating, ventilation and air conditioning in commercial and residential markets.

The company plans to offer 31.6 million shares, including 5.3 million from insiders, at a price range of $18-$20. Morgan Stanley (MS), Barclays (BCS), Goldman Sachs (GS), BofA Merrill Lynch (BAC) and J.P. Morgan (JPM) are acting as joint bookrunners on the deal. If successful, Sensata will be the largest IPO of 2010, easily eclipsing the $315 million IPO from insurer Symetra (SYA) in late January.

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