If there's one thing to take away from Mary Meeker's annual "Internet Trends" report, it's that things change quickly in the tech industry. While the competitive advantages for older industries, such as industrials, allow market leaders to continuously outshine smaller competitors, the moats of Internet companies are easily crossed by upstarts with user bases that flock quickly from one service to another.
In this high tech, photo-sharing, mobile-advertising, social-gaming, and disruptive high-tech world, what are the best investment strategies for companies that can lose their appeal overnight?
Swift changes
First, if you haven't yet scanned Meeker's report, take a look. Here are just a few examples of how things have changed in a few short years:
What to look for when investing
A dynamic industry calls for several characteristics if a company is to survive and prosper.
Top 5 Japanese Companies To Own For 2015: Huntington Ingalls Industries Inc. (HII)
Huntington Ingalls Industries, Inc. designs, builds, overhauls, and repairs ships primarily for the U.S. Navy and Coast Guard. It offers nuclear-powered ships, such as aircraft carriers and submarines; and non-nuclear ships, including surface combatants, expeditionary warfare/amphibious assault, coastal defense surface ships, and national security cutters, as well as engages in the refueling and overhaul, and inactivation of nuclear-powered ships. The company also operates as a full-service systems provider for the design, engineering, construction, and life cycle support of major programs for surface ships; and a provider of fleet support and maintenance services for the U.S. Navy. In addition, it provides a range of support services, including fabrication, construction, equipment, and technical services, as well as product sales to commercial nuclear power plants, fossil power plants, and other industrial facilities, as well as government customers. The company is based in Newport News, Virginia.
Advisors' Opinion:- [By CRWE]
Huntington Ingalls Industries (NYSE:HII) reported that its Ingalls Shipbuilding division has been awarded an $83.3 million cost-plus-award-fee contract from the U.S. Navy for continued life-cycle engineering, modernization and support services on the U.S. Navy’s fleet of USS Ticonderoga-class (CG 47) Aegis guided missile cruisers.
Best Defensive Companies To Own For 2014: CHS Inc (CHSCP)
CHS Inc. (CHS) is an integrated agricultural company. As a cooperative, the Company is owned by farmers and ranchers and their member cooperatives (members) across the United States. The Company buys commodities from and provide products and services to patrons (including its members and other non-member customers), both domestic and international. It provides a variety of products and services, from initial agricultural inputs, such as fuels, farm supplies, crop nutrients and crop protection products, to agricultural outputs, which include grains and oilseeds, grain and oilseed processing and food products. A portion of its operations are conducted through equity investments and joint ventures. The Company has three segments: Energy, Ag Business, and Corporate and Other. In February 2012, the Company acquired Solbar. In May 2012, the Company acquired a 51% interest in CZL Ltd. In August 2012, it acquired Atman. Effective July 28, 2013, CHS Inc, a unit of Hamilton Farm Bureau Co-Operative Inc, acquired a 50% interest in AgFarm Pty Ltd, from Ruralco Holdings Ltd.
During the fiscal year ended August 31, 2011 (fiscal 2011), the Company dissolved its United Harvest joint venture, which operated two grain export facilities in Washington that were leased from the joint venture participants. During fiscal 2011, the Company sold its 45% ownership interest in Multigrain to one of its joint venture partners, Mitsui & Co., Ltd. During fiscal 2011, the Company, through its wholly owned subsidiary, CHS Europe, S.A. acquired Agri Point Ltd.
The Company�� Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products. Its Ag Business segment derives its revenues through the origination and marketing of grain, including service activities conducted at export terminals, through the wholesale sales of crop nutrients, from the sales of soybean meal and soybean refined oil and through the retail sales of petroleum and agronomy products, processed sunflow! ers, feed and farm supplies, and records equity income from investments in its grain export joint ventures and other investments. It includes other business operations in Corporate and Other. These businesses primarily include its financing, insurance, hedging and other service activities related to crop production. In addition, the Company�� wheat milling and packaged food operations are included in Corporate and Other.
Energy
The Company is the nation�� cooperative energy company based on revenues and identifiable assets. The Company�� operations include petroleum refining and pipelines; the supply, marketing (including ethanol and biodiesel) and distribution of refined fuels (gasoline, diesel fuel and other energy products); the blending, sale and distribution of lubricants; and the wholesale supply of propane. The Energy segment processes crude oil into refined petroleum products at refineries in Laurel, Montana (wholly owned) and McPherson, Kansas (an entity in which the Company has an approximate 74.5% ownership interest) and sells those products under the Cenex brand to member cooperatives and others through a network of approximately 1,400 independent retail sites, of which 57% are convenience stores marketing Cenex branded fuels.
The Company�� Laurel, Montana refinery processes medium and high sulfur crude oil into refined petroleum products that primarily include gasoline, diesel fuel, petroleum coke and asphalt. Its Laurel refinery sources approximately 85% of its crude oil supply from Canada, with the balance obtained from domestic sources, and the Company has access to Canadian and northwest Montana crude through its wholly owned Front Range Pipeline, LLC and other common carrier pipelines. Its Laurel refinery also has access to Wyoming crude via common carrier pipelines from the south. The Laurel facility processes approximately 55,000 barrels of crude oil per day to produce refined products that consist of approximately 43% gasoline, 37% die! sel fuel ! and other distillates, 5% petroleum coke, and 15% asphalt and other products. Refined fuels produced at Laurel are available via the Yellowstone Pipeline to western Montana terminals and to Spokane and Moses Lake, Washington, south via common carrier pipelines to Wyoming terminals and Denver, Colorado, and east via its wholly owned Cenex Pipeline, LLC to Glendive, Montana, and Minot and Fargo, North Dakota.
The McPherson, Kansas refinery is owned and operated by National Cooperative Refinery Association (NCRA), of which the Company owns approximately 74.5%. The McPherson refinery processes approximately 85% low and medium sulfur crude oil and 15% heavy sulfur crude oil into gasoline, diesel fuel and other distillates, propane and other products. NCRA sources its crude oil through its own pipelines as well as common carrier pipelines. The low and medium sulfur crude oil is sourced from Kansas, Oklahoma and Texas, and the heavy sulfur crude oil is sourced from Canada. The McPherson refinery processes approximately 85,000 barrels of crude oil per day to produce refined products that consist of approximately 49% gasoline, 45% diesel fuel and other distillates, and 6% propane and other products. Approximately 32% of the refined fuels are loaded into trucks at the McPherson refinery or shipped via NCRA�� products pipeline to its terminal in Council Bluffs, Iowa. The remaining refined fuel products are shipped to other markets via common carrier pipelines.
The Company�� renewable fuels marketing business markets and distributes ethanol and biodiesel products throughout the United States and overseas by contracting with ethanol and biodiesel production plants to market and distribute their finished products. It owns and operates a propane terminal, four asphalt terminals, seven refined product terminals and three lubricants blending and packaging facilities. The Company also owns and leases a fleet of liquid and pressure trailers and tractors, which are used to transport refined fu! els, prop! ane, anhydrous ammonia and other products.
The Company�� Energy segment produces and sells (primarily wholesale) gasoline, diesel fuel, propane, asphalt, lubricants and other related products and provides transportation services. It obtains the petroleum products that it sells from its Laurel and McPherson refineries, and from third parties. In fiscal 2011, the Company obtained approximately 55% of the refined products it sold from its Laurel and McPherson refineries, and approximately 45% from third parties.
Ag Business
The Company�� Ag Business segment includes crop nutrients, country operations, grain marketing and oilseed processing. The revenues in its Ag Business segment primarily include grain sales. Its wholesale crop nutrients business sells approximately 5.6 million tons of fertilizer annually. Primary suppliers for the Company�� wholesale crop nutrients business include CF Industries, Potash Corporation of Saskatchewan, Mosaic Company, Koch Industries, Petrochemical Industries Company (PIC) in Kuwait and Belrusian Potash Company. The Company�� wholesale crop nutrients business sells nitrogen, phosphorus, potassium and sulfate based products. During fiscal 2011, the primary crop nutrients products the Company purchased were urea, potash, UAN, phosphates and ammonia. The wholesale crop nutrients business sells product to approximately 2,000 local retailers from New York to the west coast and from the Canadian border to Texas. Its largest customer is its own country operations business, which is also included in its Ag Business segment.
The Company�� country operations business purchases a variety of grains from its producer members and other third parties, and provides cooperative members and customers with access to a range of products, programs and services for production agriculture. Country operations operates 401 locations through 67 business units, the majority of which have local producer boards dispersed throughout Colorado, ! Idaho, Il! linois, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas and Washington. Most of these locations purchase grain from farmers and sell agronomy, energy, feed and seed products to those same producers and others, although not all locations provide every product and service.
The Company is one of the country elevator operators in North America based on revenues. Through a majority of the Company�� locations, its country operations business units purchase grain from member and non-member producers and other elevators and grain dealers. Most of the grain purchased is sold through its grain marketing operations, used for livestock feed production or sold to other processing companies. For the year ended August 31, 2011, country operations purchased approximately 582 million bushels of grain, primarily wheat, corn and soybeans. Of these bushels, 558 million were purchased from members and 417 million were sold through its grain marketing operations. Its country operations business units manufacture and sell other products, both directly and through ownership interests in other entities. These include seed, crop nutrients, crop protection products, energy products, animal feed, animal health products and processed sunflower products.
The Company is the cooperative marketer of grain and oilseed based on grain storage capacity and grain sales, handling over 2.1 billion bushels annually. During fiscal 2011, it purchased approximately 60% of its total grain volumes from individual and cooperative association members and its country operations business, with the balance purchased from third parties. The Company arranges for the transportation of the grains either directly to customers or to its owned or leased grain terminals and elevators awaiting delivery to domestic and foreign purchasers. It primarily conducts its grain marketing operations directly, but do conduct some of its business through joint ventures.
The Company��! grain ma! rketing operations purchases grain directly and indirectly from agricultural producers primarily in the midwestern and western United States. The purchased grain is contracted for sale for future delivery at a specified location, and it is responsible for handling the grain and arranging for its transportation to that location. The Company owns and operates export terminals, river terminals and elevators involved in the handling and transport of grain. Its river terminals are used to load grain onto barges for shipment to both domestic and export customers via the Mississippi River system. These river terminals are located at Savage and Winona, Minnesota and Davenport, Iowa, as well as terminals in which it has put-through agreements located at St. Louis, Missouri and Beardstown and Havana, Illinois.
The Company�� export terminal at Superior, Wisconsin provides access to the Great Lakes and St. Lawrence Seaway, and its export terminal at Myrtle Grove, Louisiana serves the Gulf of Mexico market. In the Pacific Northwest, it conducts its grain marketing operations through TEMCO, LLC (a 50% joint venture with Cargill) which operates an export terminal in Tacoma, Washington, and primarily exports corn and soybeans. The Company owns two 110-car shuttle-receiving elevator facilities in Friona, Texas and Collins, Mississippi that serve large-scale feeder cattle, dairy and poultry producers in those regions.
For sourcing and marketing grains and oilseeds through the Black Sea and Mediterranean Basin regions to customers worldwide it has offices in Geneva, Switzerland; Barcelona, Spain; Kiev, Ukraine; and Vostok, Russia. In addition, it opened grain merchandising offices in fiscal 2011 in Budapest, Hungary; Novi Sad, Serbia; Bucharest, Romania; Sofia, Bulgaria; and a marketing office in Amman, Jordan. The Company has a deep water port in Constanta, Romania, a barge loading facility on the Danube River in Giurgiu, Romania, and an inland grain terminal at Oroshaza, Hungary. In addition! , it has ! an investment in a port facility in Odessa, Ukraine. In the Pacific Rim area, it has offices in Hong Kong and Shanghai, China that serve customers receiving grains and oilseeds from its origination points in North and South America. In South America, the Company has a grain merchandising offices to source grains in Sao Paulo, Brazil and Buenos Aires, Argentina. It sells and markets crop nutrients from its Geneva, Switzerland; Sao Paulo, Brazil; and Buenos Aires, Argentina offices.
The Company�� grain marketing operations purchased approximately 2.1 billion bushels of grain during fiscal 2011, which primarily included corn, soybeans, wheat and distillers dried grains with solubles (DDGS). Of the total grains purchased by its grain marketing operations, 866 million bushels were from its individual and cooperative association members, 417 million bushels were from its country operations business and the remainder was from third parties. The Company�� oilseed processing operations convert soybeans into soybean meal, soyflour, crude soybean oil, refined soybean oil and associated by-products. These operations are conducted at a facility in Mankato, Minnesota that can crush approximately 40 million bushels of soybeans on an annual basis, producing approximately 960 thousand short tons of soybean meal and 460 million pounds of crude soybean oil. The same facility is able to process approximately 1.1 billion pounds of refined soybean oil annually. Another crushing facility in Fairmont, Minnesota has a crushing capacity of over 50 million bushels of soybeans on an annual basis, producing approximately 1.2 million short tons of soybean meal and 575 million pounds of crude soybean oil.
The Company�� oilseed processing operations produce three primary products: refined oils, soybean meal and soyflour. Refined oils are used in processed foods, such as margarine, shortening, salad dressings and baked goods, as well as methyl ester/biodiesel production, and for certain industrial uses, ! such as p! lastics, inks and paints. Soybean meal has high protein content and is used for feeding livestock. Soyflour is used in the baking industry, as a milk replacement in animal feed and in industrial applications. It produces approximately 60 thousand tons of soyflour annually, and approximately 20% is further processed at its manufacturing facility in Hutchinson, Kansas. This facility manufactures unflavored and flavored textured soy proteins used in human and pet food products, and accounted for approximately 2% of its oilseed processing annual sales in fiscal 2011.
The Company�� soy processing facilities are located in areas with a strong production base of soybeans and end-user market for the meal and soyflour. It purchases virtually all of its soybeans from members. The Company�� oilseed crushing operations produce approximately 95% of the crude soybean oil that it refines, and purchases the balance from outside suppliers. Its customers for refined oil are principally large food product companies located throughout the United States. However, over 50% of its customers are located in the midwest. Its largest customer for refined oil products is Ventura Foods, LLC (Ventura Foods), in which it holds a 50% ownership interest. The Company�� sales to Ventura Foods accounted for 27% of its soybean oil sold during fiscal 2011. The Company also sells soymeal to approximately 325 customers, primarily feed lots and feed mills in southern Minnesota. In fiscal 2011, Interstate Commodities accounted for 12% of its soymeal sold. It sells soyflour to customers in the baking industry both domestically and for export.
Corporate and Other
The Company has provided open account financing to approximately 100 of its members that are cooperatives (cooperative association members). These arrangements involve the discretionary extension of credit in the form of a clearing account for settlement of grain purchases and as a cash management tool. CHS Capital, LLC makes seasonal and term! loans to! member cooperatives and individual producers. The Company�� wholly owned subsidiary, Country Hedging, Inc., is a registered Futures Commission Merchant and a clearing member of both the Minneapolis Grain Exchange and the Kansas City Board of Trade. Country Hedging provides full-service commodity risk management brokerage and consulting services to its customers, primarily in the areas of agriculture and energy.
The Company�� wholly owned subsidiary, Ag States Agency, LLC, is a full-service independent insurance agency. It sells insurance, including all lines of insurance including property and casualty, group benefits and surety bonds. Its approximately 2,000 customers are primarily agribusinesses, including cooperatives and independent elevators, energy, agronomy, feed and seed plants, implement dealers and food processors. Impact Risk Solutions, LLC, a wholly owned subsidiary of Ag States Agency, LLC, conducts the insurance brokerage business of Ag States Group.
The Company�� primary focus in the foods area is Ventura Foods, LLC (Ventura Foods) which produces and distributes vegetable oil-based products, such as margarine, salad dressing and other food products. Ventura Foods is 50% owned by the Company. Ventura Foods manufactures, packages, distributes and markets bulk margarine, salad dressings, mayonnaise, salad oils, syrups, soup bases and sauces, many of which utilize soybean oil as a primary ingredient. Ventura Foods has 11 manufacturing and distribution locations across the United States. Ventura Foods sources its raw materials, which consist primarily of soybean oil, canola oil, cottonseed oil, peanut oil and other ingredients and supplies, from various national suppliers, including its oilseed processing operations. Agriliance LLC (Agriliance) is owned and governed by CHS (50%) and Land O��akes, Inc. (50%).
The Company competes with ConocoPhillips, Valero, BP Amoco, Flint Hills Resources, CVR Energy, Western Petroleum Company, Marathon, ExxonMo! bil, Citg! o, Flint Hills Resources, U.S. Oil, Delek US Holdings, HollyFrontier Corporation, Sinclair Oil Corporation, Tesoro, Chevron, Koch Industries, Agrium, Archer Daniels Midland (ADM), Cargill, Incorporated (Cargill), Simplot, Helena, Wilbur Ellis, Land O��akes Purina Feed, Hubbard Milling, Columbia Grain, Gavilon, Bunge, Louis Dreyfus, Ag Processing Inc., Unilever, ConAgra, ACH Food Companies, Smuckers, Kraft and CF Sauer, Ken��, Marzetti and Nestle.
Advisors' Opinion:- [By Paul Ausick]
ConAgra said on Wednesday that it will close two plants in New York by early 2015, cutting more than 400 employees. The company also expects to close its $4 billion flour mill merger in the second calendar quarter of 2014. Privately held Cargill and CHS Inc. (NASDAQ: CHSCP) will hold 44% and 12%, respectively, of Ardent Mills, while ConAgra will hold the other 44%. Combined sales of what will be the country’s largest milling operation total $4.3 billion.
Best Defensive Companies To Own For 2014: AutoNation Inc (AN)
AutoNation, Inc. (AutoNation), incorporated on May 30, 1991, is an automotive retailer in the United States. As of December 31, 2011, the Company had three operating segments: Domestic, Import, and Premium Luxury. As of December 31, 2011, it owned and operated 258 new vehicle franchises from 215 stores located in the United States, predominantly in metropolitan markets in the Sunbelt region. Its stores sell 32 different brands of new vehicles. The core brands of vehicles that it sells, representing approximately 90% of the new vehicles that it sold during the year ended December 31, 2011, was manufactured by Ford, Toyota, Nissan, General Motors, Honda, Mercedes-Benz, BMW, and Chrysler. The Company offers a diversified range of automotive products and services, including new vehicles, used vehicles, parts and automotive repair and maintenance services , and automotive finance and insurance products, which includes the arranging of financing for vehicle purchases through third-party finance sources. The Company retailed approximately 400,000 new and used vehicles through its stores in 2011. It acquired one automotive retail franchise and related assets during 2011.
Domestic segment consists of retail automotive franchises that sell new vehicles manufactured by General Motors, Ford, and Chrysler. Its Import segment is comprised of retail automotive franchises that sell new vehicles manufactured primarily by Toyota, Honda, and Nissan. Its Premium Luxury segment is consists of retail automotive franchises that sell new vehicles manufactured primarily by Mercedes-Benz, BMW, and Lexus. The franchises in each segment also sells used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products. For the year ended December 31, 2011, Domestic revenue represented 34% of total revenue, Import revenue represented 37% of total revenue, and Premium Luxury revenue represented 28% of total revenue. Corporate and other is consist of its other businesses, incl! uding collision centers, e-commerce activities, and an auction operation, each of which generates revenues, as well as unallocated corporate overhead expenses and retrospective commissions for certain financing and insurance transactions that it arranges under agreements with third parties.
The Company�� stores acquires vehicles for retail sale either directly from the applicable automotive manufacturer or distributor or through dealer trades with other stores of the same franchise. it acquires used vehicles from customer trade-ins, auctions, lease terminations, and other sources. It recondition used vehicles acquired for retail sale at its stores��service facilities and capitalize costs related thereto as used vehicle inventory. Through its VVOs, which are located on existing store facilities, it sells vehicles that it would have traditionally wholesaled with an average retail price lower than that of used vehicles it typically retail. Used vehicles that the Company do not sell at its stores or VVOs generally are sold at wholesale prices through auctions.
The Company offers a variety of automotive finance and insurance products to its customers. The Company arranges for its customers to finance vehicles through installment loans or leases with third-party lenders, including the vehicle manufacturers��and distributors��captive finance subsidiaries, in exchange for a commission payable to the Company. It also offers its customers various vehicle protection products, including extended service contracts, maintenance programs, guaranteed auto protection (GAP, this protection covers the shortfall between a customer�� loan balance and insurance payoff in the event of a casualty), tire and wheel protection, and theft protection products. The vehicle protection products that its stores offers to customers are underwritten and administered by independent third parties, including the vehicle manufacturers��and distributors��captive finance subsidiaries. The Company sells t! he produc! ts on a straight commission basis; however, it also participate in future underwriting profit for certain products pursuant to retrospective commission arrangements. Commissions that it receives from these third-party providers may be subject to chargeback, in full or in part, if products that it sells, such as extended service contracts, are cancelled. Its stores also provide a range of vehicle maintenance, repair, paint, and collision repair services, including warranty work that can be performed only at franchised dealerships and customer-pay service work. The Company has entered into framework agreements with vehicle manufacturers and distributors. It operates each of its new vehicle stores under a franchise agreement with a vehicle manufacturer or distributor.
Advisors' Opinion:- [By Monica Gerson]
AutoNation (NYSE: AN) is projected to report its Q3 earnings at $0.77 per share on revenue of $4.44 billion.
Microsoft (NASDAQ: MSFT) is expected to post its Q1 earnings at $0.54 per share on revenue of $17.79 billion.
Best Defensive Companies To Own For 2014: Rhoen Klinikum AG (RHK)
Rhoen Klinikum AG is a Germany-based provider of health care services. It is primarily engaged in building, acquiring and operating privately owned hospitals. The Company�� portfolio comprises basic and standard care, intermediate care, maximum care, specialist care, medical care centers (MVZ) at hospitals, portal clinics, university hospitals and academic teaching hospitals. These hospitals offer treatment in several specialist fields, including psychiatry, anesthesiology, dermatology, ophthalmology, various types of surgery, women�� medicine and obstetrics, geriatrics, neurology, rehabilitation, urology and internal medicine, among others. The Company operated a number of hospitals and medical care centers. In addition to the hospitals in Bad Berka, Frankfurt, Hildesheim, Karlsruhe, Munich, Pforzheim and Wiesbaden, among others, it has MVZ companies located in Germany, as well as two research and education companies and service companies. Advisors' Opinion:- [By Corinne Gretler]
Fresenius rose 3.6 percent after its Helios subsidiary agreed to buy 43 hospitals from Rhoen-Klinikum (RHK) AG. BHP Billiton Ltd. and Anglo American Plc both dropped at least 2 percent, contributing the most to a decline by a gauge of commodity producers. TDC A/S fell 3.1 percent as a group of private-equity firms sold its stake in Denmark�� biggest phone company.
Best Defensive Companies To Own For 2014: Fabrinet (FN)
Fabrinet, incorporated on August 12, 1999, provides optical packaging and precision optical, electro-mechanical and electronic manufacturing services to original equipment manufacturers (OEMs) of complex products, such as optical communication components, modules and sub-systems, industrial lasers and sensors. The Company offers a range of optical and electro-mechanical capabilities across the entire manufacturing processes, including process design and engineering, supply chain management, manufacturing, advanced packaging, final assembly and test.
The products that the Company manufactures for its OEM customers includes optical communications devices, such as selective switching products, such as reconfigurable optical add-drop modules (ROADMs), optical amplifiers, modulators and other optical components and modules that collectively enable network managers to route signals through fiber traffic at various wavelengths and over various distances; tunable transponders and transceivers that eliminate the need to stock individual fixed wavelength transponders and transceivers used in voice and data communications networks; and active optical cables providing high-speed interconnect capabilities for data centers and computing clusters, as well as Infiniband, Ethernet, fiber channel and optical backplane connectivity.
Solid state, diode-pumped, gas and fiber lasers (industrial lasers) used across a array of industries, including semiconductor processing (wafer inspection, wafer dicing, wafer scribing), biotechnology (DNA sequencing, flow cytometry, hematology, antibody detection), metrology (instrumentation, calibration, inspection), and material processing (photo processing, textile cutting, annealing, marking, engraving); and sensors, including differential pressure, micro-gyro, fuel and other sensors that are used in automobiles, and non-contact temperature measurement sensors for the medical industry. The Company also designs and fabricates application-specific crystals, pri! sms, mirrors, laser components and substrates (customized optics) and other custom and standard borosilicate, clear fused quartz, and synthetic fused silica glass products (customized glass).
The Company competes with Sanmina-SCI Corporation, Celestica Inc., Venture Corporation Limited, Benchmark Electronics, Inc, Browave Corporation, Fujian Castech Crystals, Inc., Research Electro-Optic, Inc. and Photop Technologies, Inc.
Advisors' Opinion:- [By Seth Jayson]
Fabrinet (NYSE: FN ) reported earnings on April 29. Here are the numbers you need to know.
The 10-second takeaway
For the quarter ended March 29 (Q3), Fabrinet beat expectations on revenues and beat expectations on earnings per share. - [By Monica Gerson]
Fabrinet (NYSE: FN) is estimated to post its Q4 earnings at $0.35 per share on revenue of $172.02 million.
Sky-mobi (NASDAQ: MOBI) is projected to report its Q2 results.
- [By Seth Jayson]
Calling all cash flows
When you are trying to buy the market's best stocks, it's worth checking up on your companies' free cash flow once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That's what we do with this series. Today, we're checking in on Fabrinet (NYSE: FN ) , whose recent revenue and earnings are plotted below.
Best Defensive Companies To Own For 2014: GATX Corp (GMT)
GATX Corporation (GATX) leases, operates, manages and remarkets assets primarily in the rail and marine markets. GATX has three segments: Rail, American Steamship Company (ASC) and Portfolio Management. Rail and its affiliates lease tank cars, freight cars and locomotives in North America and Europe. ASC operates a fleet of United States flagged vessels on the Great Lakes. Portfolio Management has investments in affiliated companies. As of December, 31, 2011, the Company held 37.5% interest in AAE Cargo AG (AAE), a 12.5% interest in Adler Funding LLC (Adler) and a 50% interest in Southern Capital Corporation (ACC). In January 2012, ASC entered into a five-year lease for a newly constructed articulated tug-barge. The tug is diesel powered and the barge is 740 feet in length with a carrying capacity of 34,000 gross tons. During the year ended December 31, 2011, the Clipper Fourth Limited and Clipper Fourth APS marine joint ventures, in each of which GATX held a 45% interest, were dissolved.
Rail
Rail is exploring leasing opportunities in Asia through both wholly owned subsidiaries, as well as joint venture arrangements. As of December 31, 2011, Rail�� worldwide fleet, consisted of wholly owned and leased-in railcars, totaled approximately 130,000 railcars. Rail offers customers financial, operational, management and maintenance expertise. In addition, Rail actively manages fleets for an affiliate and other third-party owners of approximately 8,000 railcars, in aggregate.
Rail�� customers primarily operate in the chemical, petroleum, food/agriculture and transportation industries. Rail�� fleet consists of a diverse selection of railcar types that are used by its customers to ship approximately 700 different commodities. Rail also had an ownership interest in approximately 32,000 railcars through investments in affiliated companies. Affiliate fleets consist primarily of freight and intermodal railcars. Additionally, Rail manages approximately 2,000 railcars f! or third-party owners. Rail primarily provides railcars pursuant to full-service leases under which it maintains the railcars, pays ad valorem taxes and insurance and provides other ancillary services. Rail also offers net leases for railcars under which the lessee is responsible for maintenance, insurance and taxes.
In North America, Rail leases railcars for terms that generally range from three to 10 years. Rail�� North American operations also include a locomotive leasing business. As of December 31, 2011, Rail�� locomotive fleet totaled 572 locomotives. The majority of Rail�� leases are full-service contracts under which Rail maintains the railcars. Rail operates an extensive network of service facilities across North America that perform repair, maintenance, modification and regulatory compliance work on the fleet. Maintenance services include interior cleaning of railcars, general repairs to the car body and safety appliances, regulatory compliance work, wheelset replacements, exterior blast and painting, and car stenciling.
Rail leases standard gauge railcars to customers throughout Europe. Lease terms generally range from one to seven years and at December 31, 2011, the average remaining lease term of the fleet was approximately two years. Rail acquires new railcars primarily from the IRS Group and VRZ Karlovo. The owned service centers are supplemented by a number of third-party repair facilities.
ASC
ASC operates a fleet of United States flagged vessels on the Great Lakes, providing waterborne transportation of dry bulk commodities primarily for customers in the steel, electric utility and construction industries. The primary commodities carried by ASC�� vessels are iron ore, coal, limestone aggregates and metallurgical limestone. End markets for these commodities include domestic automobile manufacturing, electricity generation and non-residential construction. At December 31, 2011, ASC�� fleet consisted of 17 vessels. Fourteen ! of the ve! ssels are diesel powered. The diesel vessels range in size from 635 to 1,004 feet in length with maximum load capacities between 23,800 and 80,900 gross tons. The three remaining vessels are steam powered. The steamer vessels range in size from 690 to 767 feet in length with maximum load capacities between 22,300 and 26,300 gross tons. In 2011, ASC carried 28.4 million net tons of cargo including both contracted volume and spot business.
Portfolio Management
Portfolio Management leverages its equipment knowledge by managing portfolios of assets for third parties. Portfolio Management generates fee and residual sharing income through portfolio administration and remarketing of these assets. Affiliate activities include aircraft spare engine leasing, shipping operations and gas compression equipment leasing. Rolls-Royce and Partners Finance (RRPF) is a collection of 50%-owned domestic and international joint ventures with Rolls-Royce plc, a manufacturer of commercial aircraft jet engines. RRPF leases spare engines to Rolls-Royce plc and commercial airlines. The RRPF portfolio in aggregate is comprised of approximately 370 Rolls-Royce and International Aero Engine aircraft engines. Cardinal Marine Investments LLC (Cardinal Marine) is a 50%-owned marine joint venture with IMC Holdings, a subsidiary of the IMC Pan Asia Alliance Group (IMC).
Cardinal Marine owns six chemical parcel tankers (each with 45,000 dead weight tons that operate under a pooling arrangement with IMC�� other chemical tankers in support of the movement of liquid bulk chemicals in the Middle East Gulf/Far East and United States Gulf/Far East trades. Somargas II Private Limited (Somargas) and Singco Gas Pte, Limited (Singco), respectively, are 35% and 50%-owned joint ventures with IM Skaugen ASA (Skaugen). Clipper Third Limited (Clipper Third) is a 50%-owned joint venture with Clipper Group Invest Ltd. (the Clipper Group). Clipper Third owns two handysize vessels that support the worldwide movement! of dry b! ulk products, such as grain, cement, coal and steel. Enerven Compression, LLC (Enerven) is a 45.6%-owned joint venture with ING Investment Management and Enerven management. Enerven provides natural gas compression equipment leasing through its subsidiary, Enerven Compression Services (ECS) and third-party maintenance and repair services through its subsidiary, Worldwide Energy Solutions Company (WESCO).
The Company competes with Union Tank Car Company, General Electric Railcar Services Corporation, American Railcar Leasing, CIT Group Inc., Trinity Leasing, First Union Rail, Helm Financial Corporation, National Railway Equipment Corporation, Relco Locomotives, Inc., VTG Aktiengesellschaft, Ermewa, CTL Logistics Group, PCC Rail Group, Interlake Steamship Company, VanEnkevort Tug and Barge, Grand River Navigation, Great Lakes Fleet, Inc. and Central Marine Logistics.
Advisors' Opinion:- [By Dividends4Life]
Fair Value: In calculating fair value, I consider the NPV MMA Differential Fair Value along with these four calculations of fair value, see page 2 of the linked PDF for a detailed description:
1. Avg. High Yield Price
2. 20-Year DCF Price
3. Avg. P/E Price
4. Graham Number
GWW is trading at a premium to all four valuations above. The stock is trading at a 10.0% premium to its calculated fair value of $219.95. GWW did not earn any Stars in this section.
Dividend Analytical Data: In this section there are three possible Stars and three key metrics, see page 2 of the linked PDF for a detailed description:
1. Free Cash Flow Payout
2. Debt To Total Capital
3. Key Metrics
4. Dividend Growth Rate
5. Years of Div. Growth
6. Rolling 4-yr Div. > 15%
GWW earned three Stars in this section for 1.), 2.) and 3.) above. A Star was earned since the Free Cash Flow payout ratio was less than 60% and there were no negative Free Cash Flows over the last 10 years. The stock earned a Star as a result of its most recent Debt to Total Capital being less than 45%. GWW earned a Star for having an acceptable score in at least two of the four Key Metrics measured.
Rolling 4-yr Div. > 15% means that dividends grew on average in excess of 15% for each consecutive 4 year period over the last 10 years (2003-2006, 2004-2007, 2005-2008, etc.) I consider this a key metric since dividends will double every 5 years if they grow by 15%. The company has paid a cash dividend to shareholders every year since 1965 and has increased its dividend payments for 42 consecutive years.
Dividend Income vs. MMA: Why would you assume the equity risk and invest in a dividend stock if you could earn a better return in a much less risky money market account (MMA) or Treasury bond? This section compares the earning ability of this stock with a high yield MMA. Two items are considered in this section, see page 2 of the linked
Best Defensive Companies To Own For 2014: Cyan Inc (CYNI)
Cyan, Inc., incorporated on October 25, 2006, has carrier-grade networking solutions that transform legacy networks into open, high-performance networks. The Company�� solutions include high-capacity, multi-layer switching and transport platforms, as well as a carrier-grade software-defined networking platform and applications. The Company�� solutions enable network operators to virtualize their networks, accelerate service delivery. The Company has designed its solutions to provide a range of applications, including business Ethernet, Wireless and broadband support services and cloud connectivity. The Company also offer high-capacity, multi-layer switching and transport platforms, known as its Cyan Z-Series, that have been designed to support the multiple concurrent technologies used in regional and metro networks, including both Ethernet-based services, as well as optical services.
The Company�� Z-Series platforms have been designed to transport traffic over network layer, utilizing both electrical and optical domains, to enable network operators to maximize network capacity at the lowest cost per bit. The Company�� customers range from service providers to high-performance data center and large, private network operators.
Advisors' Opinion:- [By Lauren Pollock]
Among the companies with shares expected to actively trade in Tuesday’s session are Cyan Inc.(CYNI), Neurocrine Biosciences Inc.(NBIX) and SandRidge Energy Inc.(SD)
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