Category Archives: Stocks

M&A continues

All sectors was in a red territory yesterday, but only one of them was up. The biggest loser was energy and the winner was the heath care sector. So far in 2014, the biggest loser is the energy sector, while the health care sector is the winner. This is just what I expected it to be in 2014. Read my article titled; health-care bull, dated January 8, 2014.

The takeover boom is not over yet, and 2014 will be the best in many years. Lawyers working with advice on takeovers say they`ve got a robust pipeline of deals in the works. Some of their works is delayed, so December will be busier than usual.

Health care stocks soared in 2014 and next year is shaping up to be another great year for these stocks.

The shares of Cubist Pharmaceuticals Inc rose 35% yesterday, and the reason is that pharmaceutical giant Merck (MRK) want to acquire its smaller peer for $102 per share. Included the debt, the deal is valued at $8,4 billion. This deal will strengthen Merck`s leadership position in the hospital acute care market.

Two of Cubist Pharmaceutical`s three commercial products focus on treating difficult-to-fight infections, and the firm`s reputation has become a «superbug» specialist in a business that has overlooked such infections until fairly recently.

The deal will be financed primarily by the issuance of about $9,5 billion in new debt, and Merck expect the deal to add about $1 billion in annual revenue. Cubist Pharmaceutical`s drugs should become significantly accretive to Merck`s EPS from 2016.

I wrote about M&A activity last year. Read my article titled M&A (merger and acquisition), December 13, 2013. First of all; it is very lucrative for companies to buy now when the interest rates are historically low, and I think this will continue until the Fed makes a jump on the interest rate.

If you look at 2013, the S&P 500 was up about 30%, and that was a good sign of a healthy stock market. Credit markets was also good with higher leverage levels. About 18,000 Private Equity Firms were also looking for liquidity given strong prevailing market conditions, in addition to increased corporate cash and finite-lived private equity capital reserves. All this factors have led to high degree of M&A activity in 2014, but what about 2015?

Predicting the future is risky business, but what are you gonna do if you don`t belive in something?

By tracking global sell-side mandates and deals reaching the due-dilligence phase of a transaction, it is possible to forecast future deal levels. If you look at the deal volume reported by Thomson Reuters, you can indicate future changes in the numbers of announced M&A transactions.

The latest Q3 data this year will forecast Q1 2015, and that suggests sustained momentum in M&A activity through 2015. Deal volume is expected to go up, and hot sectors will be entertainment, media, consumer, manufacturing and telecommunication. The most active sectors are expected to be energy and technology.

A forecast is based on facts today, but as you may know everything can change tomorrow. A change in macroeconomic or political conditions or even a change in the financial markets will change the whole picture and that can happen overnight.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Azul and Virgin America IPO

Azul SA is Brazil`s third-biggest airline after TAM and GOL, founded by David Neelman, who also founded JetBlue Airways Corp (JBLU.O). They may become No. 1 as Azul could offer about 3,000 more seats than their biggest competitors. Azul has a 15,9% market share and is the fastest growing airline in Brazil based on passenger kilometers flown, according to the National Civil Aviation Agency. Azul had $1,64 billion (4,2 billion reais) in revenue for the fist nine months in 2014.

Azul

Neelman left JetBlue Airways Corp in 2008 to launch the Brazilian carrier, which is his fourth airline startup.

David Neelman`s family is American, but he was born in Brazil and has Brazilian citizenship. That`s important, because Brazilian law forbids majority foreign ownership of airlines.

Azul SA revived plans for an IPO in Sao Paulo and New York. According to the U.S SEC filing, Azul plans to list referred shares on the Level 2 chapter of the Sao Paulo Stock Exchange, and American depositary shares on the New York Stock Exchange. It doesn`t say when the IPO will take place.

So far, they expect the IPO will be worth around $1 billion. Neelman owns 67% of voting shares and 4,58% of outstanding preferred shares. The private equity firms TPG Growth, Weston Presidio, Grupo Bozano, and Gàveo Investimentos, which is owned by J.P. Morgan, also own stakes in Azul Airline. The shareholders in Azul may sell an unspecified portion of their shares as part of the offering.

According to Azul`s prospectus, the money raised will be used to finance expansion plans and to pay down debt. They plan to buy 38 Airbus A320neo jets and lease 25 more. They have also begun international service with the first flight connecting Brazil and the U.S. In April, they announced plans to start flights to southern Florida early next year, followed by flights to New York, using a dozen leased wide-body jets, first A330-200 and then A350-900 aircraft.

Azul`s president Antonoaldo Neves said they are going to grow the cake, not steel from their competitors. He also said there`s no reason the market can`t double. Brazil`s airline association has said domestic demand is expected to rise to about 200 million passengers by 2020. That`s up 100%.

The IPO comes during a periode with few Brazilian offerings, as the equity issuance market stagnated this year as the economy slipped into a technical recession in the first half of 2014. The falling petroleum prices is helping airline stocks around the world, so the timing could be good. (Read my article “Airlines hammered”, October 14, 2014).

Sir Richard Branson know that. Delta (DAL) and JetBlue (JBLU) are both up over 50% this year. He`s low-cost airline Virgin America (VA) made an impressive debut on Nasdaq. The stock jumped 30,43% to close at $30 on November 2014. Virgin America raised $307 million through the offering.

Virgin America is the U.S offshoot of Branson`s London-based Virgin Group. Branson, through VX Holdings LP, own 24,8% stake after the IPO. The biggest shareholder with 32,8% is the Hedge fund Cyrus Capital Partners LP.

Virgin America has had a troubled time ever since its launch in 2007, and witnessed profits for the first time in 2013. Third quarter profits climbed about 24% buoyed by an increase in passenger traffic and higher fare rates. Revenue was up 4,7%, totaling $405,5 million.

Take note that Virgin America is the only U.S airline company to have gone public since another low-cost carrier, Spirit Airlines went public in 2011. Can Virgin America win this battle with their Wi-Fi service and comfortable leather seats? Will a hip airline work on Wall Street?

Anyway, it`s gonna be hard for Virgin America to fight with big players like American Airlines, Delta Airlines and United Airlines. It`s not going to be easy for Azul either, but investors will not ignore their growth in the future. Nor Azul and Virgin`s competitors.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Cyber Monday Sales – Biggest E-Commerce day ever!

Cyber Monday is a marketing term for the Monday after the Thanksgiving holiday in the U.S. The term «Cyber Monday» was created by marketing companies to persuade people to shop online. It all started on November 28, 2005.

Cyber Monday online sales grew to a record $2,68 billion, compared to last year`s $2,29 billion. However, the average order value was $124, down slightly from last year`s $128.

Online sales on Monday climbed to a new record high, and the sales came in at $2,68 billion, and that is the best online spending day ever. It is also the first to surpass $2 billion in sales.

The weekend after Thanksgiving was popular for online shopping too. The sale was up 26% compared to the same time last year. It seems like this online shopping will continue to post new historical highs, and that reflects the ongoing strength of online shopping.

IBM says that the online sales jumped only 8,5% this year compared to last on Cyber Monday. This is less than last year when online sales jumped more than 20% by its measure.

Some belive it`s a change in shopping behavior and not a lack of consumer demand. It is a larger shift toward online buying as mobile phones spur the practice known as «showrooming». People tend to go to the store to see the products and buy them, or a similar product online. Price is a very important trigger here. Why spend some time to go to the shop if the price is lower online?

Cyber Monday is the busiest U.S online shopping day of the year, and that title is held since 2010. Walmart said it received the most online orders in its history on Cyber Monday. Mobile made up about 70% of the traffic to its website between Thanksgiving and Cyber Monday.

This is called Cyber Monday, so how is the online marketing? Is it working?

Social Media did very little to boost sales this year driving only 1,5% of sales. According to IBM, Facebook referrals drove an average of $109,94 per order compared to $100,24 for Pinterest. Facebook referrals converted online sales at more than twice the rate of Pinterest.

What really works better is e-mail marketing which was the primary driver of sales on both Black Friday and Cyber Monday beating the usual winner; search. Companies sent out 11% fewer e-mails this time, but the e-mails were more targeted.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Digital Ally up +45,2% yesterday!

Digital Ally skyrocketed yesterday, up +45,2%. What a jump! The market cap was just $28M before the big jump, but now it`s up $40M. This big jump comes after the White House announced it`s providing $75M in funding for the purchase of 50K body cameras by U.S police departments. There are currently 750K police officers in the U.S.

dgly

The White House`s program provides matching funds for local and state agencies buying body cameras, and that`s a similar program for vests which has led to over 1,1M vest purchases. Police Foundation president Jim Bueermann said; “In five years, this will be ubiquitous. It will be more unusual to see officers not wearing a body cam than wearing one”.

The main reason for all this is the death of Michal Brown in Ferguson, Missouri. It is a tragedy. A young teenager died. Shot by a police officer, and whatever your opinion, the riots and destruction that followed the grand jury`s descision not to indict the police officer who shot him have ravaged businesses and upended lives.

The result is that tensions between law enforcement officials and the communities they serve are higher than they`ve been in decades. Whatever you belive happened to Michael Brown when he was killed, it would be without a doubt that the evidence would be strengthened if there were a video camera on the officer.

President Obama has proposed a $263 million solution over the next three years, and it`s just a matter of time before we see police officers and other law enforcement personnel in the U.S fitting cameras.

What a great idea!

There will be a radical reduction in the use of police force and citizen complaints against the police when you have video from the event to prove the evidence. Police officers and other professionals will be more polite when they know that the video-camera is recording.

What kind of fool can be against surveillance like that? No one I guess, and that`s why investors have reacted quickly to the news right now.

Another company that can profit from this is Taser (TASR), which is known for their taser guns. The non-lethal weapons that police use to incapacitate suspects. It accounts for over 90% of the firm`s revenue.

But they has another business, and that`s police cameras. The good part of this story is that their business includes independent cloud storage of footage and data collected on cameras. A third-party will store the data, and that will reduce the cost, and it will reduce suspicions that when police misbehave, the evidence will «mysteriously» get lost.

It seems like an expensive stock as it trades at over 60 times earnings, but this it is an exception and could be worth it. There`s plenty of room for the stock to rise.

Taser is one of the few number of companies who will benefit from this trend. That company looks better than Digital Ally with better market position and a better management.

Another large players among Digital Ally is L-3 Communications (LLL). They are too big for their stocks to fully benefit, so Taser is the only company out there that`s already worked through difficult issues like privacy and data security concerns. What about GoPro? They know what action camera is…..

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Home Depot earnings report tomorrow morning

Home Depot (HD) is a do-it-yourself home improvement retailer. The firm operates The Home Depot stores, which are a full-service, warehouse-style stores. HD stores serve three primary customer groups; do-it-yourself (D-I-Y) customers, do-it-for-me (D-I-F-M) customers and professional customers.

homedepot

In February 2013, HD acquired Measurecomp LLC and HD components LLC. About one year later, in January 2014, HD acquired Blinds.com.

It`s only a few companies left to reveal their earnings this time, and tomorrow morning Home Depot (HD) will report their latest earnings. Last time HD reported earnings they had an earnings growth of 23%, but this time it is estimated an earnings growth of «only» 21%.

That will be down two ticks, but that`snot bad, because a 21% boost to the bottom line will be the second best quarter last year. The growth seems to continue, as the retailer has seen some solid growth on the bottom line over the past two years.

HD reported a sales growth of 3% and 6% in the first two quarters, and this growth is expected to decline to 5%. Analysts consensus is expecting $1,13 in earnings per share. Revenue is $20,500 billion YoY.

When HD reports positive earnings report Q3 like the one we will see tomorrow, it usually boost the stock price. It is expected to see similar things to happen and HD will continue to lead the industry.

Some analysts belive that the industrial retail sales companies like HD will lose market shares against the online sales. It will simply kill the market sector, but despite that, it is expected to see solid earnings report from HD tomorrow morning. Positive news for HD tomorrow is good news for long perspective investors. The stock is up 19% YTD, and 17% last three months.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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