Chaparral Steel
Originally published in Charting the Market 7/12/07
Cement stocks have never been considered the beta trade, like say, semiconductors, but can add a little alpha to your life. Sometimes they even have precious metals embedded. Texas Industries (TXI-NYSE), a construction and aggregates company located in the Lone Star state, spun out their Chaparral Steel (CHAP-NASDAQ) subsidiary about two years ago. The buyout of Chaparral by Gerdau Ameristeel put an exclamation point on an extraordinary run in the shares, which saw nary a downtick in their short life as a publicly traded entity. Big winners here include Keeley Asset Management and Royce & Associates. Stocks like this don’t come along too often. Nassef Sawaris’ interest in (TXI) might mean that their days as a public company are numbered as well.
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The content contained represents the opinions of 1440 Wall Street This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in securities mentioned
High Voltage
There are only a few legitimate reasons to visit Arizona. Most of them involve attending one of the many investment conferences held at the Biltmore or the Phoenician. But now you can throw in visiting Taser’s HQ with a straight face. OK, maybe not a straight face.
Don’t be shocked, but Taser (TASR-NASDAQ) is making a comeback. After a few years in Wall Street’s doghouse, the stockis ramping, up about 115% year-to-date.
We all remember Taser’s (TASR) 2003/2004 glory days/crash back to reality. It was an interesting ride for traders in the stock. While the stock had a huge fall, its earnings never went negative, and the stock has begun to show up on the radar screens for traders once again. Bespoke Investment Group
Apparently the R&D labs have been working overtime and a slew of new products have investors, uh, electrified?
Where many of the devices from Taser International are a little like dueling pistols from the 18th century--basically, you get one shot to hit a target standing in front of you--the new Shockwave from Taser is more like a Claymore mine.
Unveiled Monday at the annual Taser Tactical Conference in Chicago, the Shockwave is described as an “area denial system,” spraying its six projectiles all at once over a 22-degree arc. In addition, users can stack the Shockwave units vertically or side by side ("like Legos,” the company says) to cover a larger area or “to allow for multiple salvo engagements.” The units--designed for military use--can also be daisy-chained or mounted on vehicles. Crave
We would never advocate violence. But the next time your bonus comes in light, I think you know what to reach for. And we sure ain’t talkin about a HP 12-C.
Taser’s new six-shooter, of sorts
Crave
Bespoke Investment Group
6/28/07
7/10/07
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position
Apple Inc
Originally published in Charting the Market 7/11/07
The shares of Apple Inc. (AAPL-NASDAQ) printed another new all-time high yesterday, driven by speculation that a cheaper, nano-like version version of the iPhone is in the works. The stock continues to confound pundits who called for investors to sell into the iPhone release. Apple’s stock has tacked over $40+ billion in market capitalization since the iPhone was officially announced at MacWorld in January, roughly equivalent to Research in Motion’s current market cap. But it took RIM’s stock 10 years to hit the $40 billion mark. If Apple’s P/E can approach the highs we saw in 2005...well you do the math. Is a $200 billion market capitalization just a matter of time?
Consolidating this move for a few months seems more reasonable to me, but the cult of Steve might not be satisfied with mere backing and filling. The Pod People seem to want more. Take a peek and see how far the stock is trading above its 200 day moving average. And those overbought stochastics...ah never mind.
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The content contained represents the opinions of 1440 WallStreet. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in securities mentioned
The Heat is On Homebuilders
We have run a series of pieces with Wayne Nef from Nef Value Research. He has been right on the money with his calls on this group. We have been talking about homebuilder valuations extensively in the series, and an article today in the Wall Street Journal discussed the topic as well.
The Heat is on the Builder Bulls. Will their resolve melt faster than the stocks? Or is it time to bottom-fish?
This interview was done on June 28th, and all valuation data is as of that date.
Most stocks are close enough to their closing prices on that date that the calculations below are still accurate. Adjust as necessary.
Be forewarned, It might be 100 degrees outside, but Wayne cannot even make a case for Beach Houses.
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Thanks for joining us again Wayne.
Events have played out as you expected...and your price targets, which seemed aggressive six months ago have been reached.
Analysts typically raise price targets when stock go up and hit them. Are you lowering yours?
On certain stocks I am lowering my price targets, while on others I am not. Some stocks have gotten hit much harder than others due to worse balance sheets, less geographic diversification or due to other factors.
In general, I remain bearish on the homebuilders, as I believe conditions will get worse before they get better. A large number of ARMs are set to reset between now and November and I expect many more properties to hit the market across the U.S. Prices are dropping and sellers are finding it takes much longer to sell a home now compared to last year. As sellers become impatient, we should see more price discounting in both the new and pre-owned markets.
There are three things that are driving me to lower my 12-month price targets on a number of the homebuilders.
1) Most of the homebuilders are trading nowhere near their deep trough multiples. An article on Bloomberg the other day said that many of the homebuilders are trading near 1x book value and that they may be Buys for patient investors here. I disagree with this premise. In 2000 many of these stocks traded to “true” trough multiples. The table below shows where these stocks traded at the trough in 2000 and 1990 and where they are trading now.
Book Value At Trough in 2000 Versus Today, and in 1990 if applicable
BZH
.54x-----.70x in June 2007
CTX
.61x-----..97x in June 2007-----.60x in 1990
DHI
.70x-----1.01x in June 2007
HOV
.43x-----.64x in June 2007------.33x in 1990
KBH
.65x-----.97x in June 2007-----.64 in 1990
LEN
.78x-----1.12x in June 2007-----.35x in 1990
NVR
1.50x-----3.55x
PHM
.51x-----.94x in June 2007-----.45x in 1990
RYL
.45x-----1.09x in June 2007-----.67x in 1990
TOL
.78x-----1.12x in June 2007-----.72x
2) The second point that is leading me to lower my price targets for many of these stocks is that at this point Book Value is still a moving target. Since March 6 the consensus book value estimate is down 6.3%. The drop in book value was spread across 7 out of the top 10 homebuilders.
3) The third point that leads me to believe that these stocks are headed lower is fear. Fear about interest rates, fear about falling home prices, fear about credit risk and rising inventories. All of this fear will combine to drive stock prices lower. I pointed out to my clients in November that the pain likely won’t be contained to the homebuilders only. Consumers will begin to feel the pain and that will likely impact autos and retail as well. In my opinion, we are already starting to see some of this change. Retail sales have been sluggish over the past couple of months and I expect weakness to persist in June also. Meanwhile the Bear Stearns Mortgage Backed Loan debacle has frightened investors even further. The year 2000 was mild in my opinion, compared to current conditions and risks.
Rear View Mirror: Quarter Ends with a Bang
Never a dull moment.
The second quarter certainly was eventful, particularly in its final week. The tape was looking dreadful until the Politburo at Bear Stearns issued a statement late Tuesday providing clarity on their situation. Given that every trader worth a damn has kept one eye firmly focused on the brokers, a little reassurance went a long way, lighting the fuse for the usual end of quarter fireworks. Overlooked during the week was the other announcement from Bear, the roll-out of their new web portal BearVIEW:
BearVIEW offers smoother integration and sharing of information across a broad range of features. It includes quick access to contact lists, real-time holdings, positions and balance information through simplified, right-click functionality. BearVIEW also streamlines the money transfer process and gives clients the ability to choose from over 70 currencies. Market data, quotes and charts are also available on the customizable BearVIEW homepage.
With this release and planned future releases, our clients will begin to interface with their clearing or custody firm at an entirely new level,” said Rich Cancro, managing director and head of product development for BDIAS. “Feedback from our broker-dealer and investment advisor clients will continue to drive our efforts as we further enhance BearVIEW.”
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