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The Chairman’s Circle Weekly Briefing
This is Jeannette Di Louie, your Chairman’s Circle liaison. I want to be the first to officially introduce you to The Oxford Club’s newest service, True Value Alert.
Created and directed by our very own Alexander Green, True Value Alert will teach you how to utilize what he calls “the single greatest investment strategy ever devised.”
Broken down to basics, this technique allows investors to buy into world-class companies at a significant discount. The masses tend to overlook or misunderstand these “True Value” stocks for one reason or another… to their detriment and our gain.
Eventually, though, the kind of stocks that Alex strategically selects get the attention they deserve, driving the share prices higher and your gains right along with them.
As a Chairman’s Circle Member, you’re automatically entitled to this service when it debuts in just a few weeks. So look for issues of True Value Alert in your email inbox next month!
Sincerely,
Jeannette Di Louie
Chairman’s Circle Liaison
The Oxford Bond Advantage
Editor: Steve McDonald
New recommendation: DynCorp is the ultimate rent-a-cop, for-profit company. It supports the U.S. military and the state department worldwide, runs border security and serves as a rapid response service all over the world. This is a business that’s not going anywhere, and its bonds are very attractive. Buy the DynCorp 10.375 bond that matures on 7/1/17 at about 103.5 to 104.5, cusip 26817cab7, rated B-. The MEAR is 9.26%: nine interest payments of $51.87 minus AI of $43.22, minus the premium of $32, divided by our holding time of 49 months, and by our cost of 103.5. There is a call at 103.2 in July 2015 that pays about 11.75%, and one at par in July 2016 that pays 9.15%. This is a good yield, but don’t load up on it. Keep your position small.
The call on First Data was a partial one, so some of you may not have been called and therefore wouldn’t have received a notice. Check with your broker to be certain.
Steve received new information yesterday about Quicksilver, which leads him to believe we should accept the tender offer for the Quicksilver bond with the 8.25% coupon, cusip 74837rae4. Also say yes to the consent request for the Quicksilver bond with a coupon of 9.125%, cusip 74837rag9. Make sure you call your broker right away and tell them to accept on the 74837rae4 bond tender offer, and consent on the 74837rag9 bond.
Today’s video reviewed all of Bond Advantage’s tenants to keep you out of trouble. It is a must watch. Steve can tell by some of your emails that you’re not watching the videos. This is a mistake. Take the four or five minutes each week to watch these. It will pay off.
The Momentum Alert
Editor: Alexander Green
New Recommendation: Thanks to increasing cases of computer hacking, demand is rising for better network security from companies like Palo Alto Networks (NYSE: PANW). Based in Santa Clara, California and founded in 2005, Palo Alto pioneered the next generation firewall technology. Its platform allows users to secure their networks and safely enable applications. Traditional firewalls focus security on the network port and protocols of the data network traffic. But Palo Alto’s proprietary hardware and software focuses on security applications and users. As a result, it’s adding 1,000+ customers a quarter. (It currently has over 11,000 in 100+ countries.) Revenue surged over 70% two quarters ago. And it reported its most recent quarter this week. Palo Alto estimates the total market for network security will grow from $12 billion last year to about $13.4 billion in three years’ time. And industry sources claim the company is replacing a lot of firewalls at the expense of its competitors. PANW beat consensus estimates by 25% in the January quarter and 33% in the October quarter. Alex expects the trend to continue. Action to Take: Buy Palo Alto Networks (Nasdaq: PANW) at $55 or better. Set a sell stop at $45. Speculators can look at the September $65 calls, but don’t pay more than $1.70.
We hit our sell stop on MercadoLibre (Nasdaq: MELI) last week, locking in a 28-point gain in just four weeks. We also took gains of 163.16% and 431.58% in our September $105 calls.
We hit our sell stop on EverBank Financial (NYSE: EVER) last week for a short-term gain.
D.R. Horton (NYSE: DHI) hit its sell stop this Wednesday for a small gain of 5.33%.
The Insider Alert
Editor: Alexander Green
Cheesecake Factory (Nasdaq: CAKE) hit a recent 52-week high, and our shares are up 15%. Raise your sell stop to $38. Our July $38 calls have tripled. Sell half your remaining position.
Chesapeake Energy (NYSE: CHK) is up a total of 15%. Raise your sell stop to $19.50 and move it back to a “Buy.” Along with its recent surge, there has been renewed insider buying. In the last two weeks, Director Louis Raspino invested another half-million dollars. And Director Archie Dunham picked up 450,000, an investment of over $9.4 million.
We have a 15% gain in DaVita HealthCare (NYSE: DVA). Revenue surged 53% last quarter, and earnings estimates going forward have been rising. Raise your sell stop to $121.
Raise your sell stop on AGCO Corp. (NYSE: AGCO) to $48.
VMware (NYSE: VMW) is technically up. But move the stock to a “Hold” due to uninspired price action and no further insider buying. Alex still likes the company, which reports quarterly results on July 21.
Earlier this week, we had another double-digit gain in Esterline Technologies (NYSE: ESL), so Alex raised the sell stop to $73. Yesterday, we hit that stop, exiting ESL with a 3.27% gain.
The Pacific Advantage Alert
Editor: Alexander Green
We hit our sell stop on Huaneng Power (NYSE: HNP) last week, locking in a 57% gain, excluding dividends.
Sony (NYSE: SNE) has soared 22% since our entry point. Raise your sell stop to $19.50. Our July $18 calls have quadrupled. Sell half your remaining balance.
HSBC Holdings (NYSE: HBC) went “ex” a $0.50 dividend on Wednesday, which will be paid into your account on July 11.
China Construction Bank (OTC: CICHY) has been quiet lately though its business prospects are improving. The Chinese market has been under pressure, and it’s tough for individual stocks to swim against the tide. Alex still expects it to report better-than-expected profits.
SouFun Holdings (NYSE: SFUN) recently reported that net income almost doubled on a 56% sales increase. Operating margins are 48%, and management is earning 99% ROE. It has smashed estimates in the last year, and earnings estimates for 2013 and 2014 are up. So Alex doesn’t know why the stock is treading water. Move the stock to a “Hold” and raise your sell stop to $24.
Healthcare Profits Alert
Editor: Marc Lichtenfeld
Shares of PharmAthene (NYSE: PIP) are higher this morning after the Supreme Court of Delaware maintained that SIGA Technologies breached their contract. But the court reversed an earlier ruling regarding an equitable payment stream to PharmAthene. The company may still be entitled to damages when a final resolution is decided by the Chancery Court of Delaware. PIP will also receive compensation to cover part of its legal fees. This was what we were waiting for; Marc isn’t interested in holding it any longer. We have about a 20% gain in a month. Action to Take: Sell PharmAthene (NYSE: PIP) at market.
Our shares of NPS Pharmaceuticals (Nasdaq: NPSP) are up 50%, and our August $9 calls are 275% higher. Action to Take: Sell half of your NPS Pharmaceuticals (Nasdaq: NPSP) August $9 calls for $6 or higher. Raise your stop to $12.33.
ImmunoGen (Nasdaq: IMGN) is climbing already. Action to Take: Raise your stop on ImmunoGen (Nasdaq: IMGN) to $13.86.
The Oxford Systems Trader
Editor: Marc Lichtenfeld
Costco (Nasdaq: COST) rose Thursday morning after reporting another solid quarter. It earned $1.04 per share in its fiscal Q3, a penny better than the consensus estimate and up 18% over last year. Year to date, EPS is 29% higher. Revenue of $24.08 billion was a bit short of Wall Street’s expected $24.23 billion, but still represented a 7.8% increase. And same-store sales have been strong, up 5% in the quarter and 6% year to date. Operating margin improved by 18 basis points over last year to 2.88%. Continue to hold. Action to Take: Raise your stop on Costco (Nasdaq: COST) to $92.16.
Dollar General (NYSE: DG) reports its fiscal first quarter results early on June 4. Analysts project EPS of $0.71 on $4.24 billion in sales. The full-year consensus is EPS of $3.28 and $17.63 billion in revenue. Last week, rivalDollar Tree reported an 8% increase in sales and EPS growth of 18%, which is right in line with expectations for DG. So Marc expects the company to perform at least that well. It also hit a new high this week. Action to Take: Raise your stop on Dollar General (NYSE: DG) to $44.13.
Action to Take: Raise your stop on Kulicke and Soffa Industries (Nasdaq: KLIC) to $9.30.
Action to Take: Raise your stop on Genesis Energy LP (NYSE: GEL) to $41.11.
Action to Take: Raise your stop on Lithia Motors (NYSE: LAD) to $43.36.
Action to Take: Raise your stop on Westlake Chemical Corp. (NYSE: WLK) to $78.61.
The Peak Energy Strategist
Editor: David Fessler
Analysts are just now starting to notice Alliance Resource Partners LP (Nasdaq: ARLP), which Dave added to our income-producing stocks in December. It’s now up 37.8% and yielding about 6%. Alliance’s distribution per unit has grown at a compound annual growth rate of 11.5% while many coal stocks are suffering. Now U.S. coal demand should remain relatively flat to slightly lower for the next several years. Coal and natural gas will continue to dominate U.S. power generation and compete for market share. But as natural gas prices rise, coal looks more attractive to utilities that have dual-burning power plants. Right now, all the coal Alliance produces from its Illinois Basin and Northern Appalachian mines is cheaper than natural gas, which could stay well above $4.00 per MMBtu through 2013. Another reason Alliance does so well is its robust liquidity and conservative balance sheet. Its debt to long-term earnings ratio is 1.3 compared to an average of 2.7 for other MLPs and 3.9 for all energy MLPs. Lastly, the company’s customers are major utilities and industrial users. Electric utilities that have executed long-term contracts with Alliance purchase more than 90% of the company’s sales tonnage. It expects to grow its production from 35 million tons a year to 50 million by 2016.
We’ve enjoyed a fabulous run-up in SolarCity Corp. (Nasdaq: SCTY). But the market is starting to act a little toppy here, so let’s tighten our trailing stop to 20%, or $41.28.
The Emerging Trends Trader
Editor: Matthew Carr
New Recommendation: NeuStar Inc. (NYSE: NSR) provides real-time analytics to the telecom, retail, financial and advertising sectors. And whenever you make a call through any carrier, you have to use NeuStar’s clearinghouse to route it properly. It operates the North American Numbering Plan, which is basically a directory of all area codes and phone numbers in the U.S. and Canada. NeuStar also operates the Number Portability Administration Center (NPAC), the nationwide registry of telephone numbers that enables you to keep your same telephone number from carrier to carrier. The company resubmitted its contract in April to remain the country’s NPAC operator after receiving a near-perfect customer service score for this role in 2012. NPAC represents a little over half of NeuStar’s revenue, and its growth sent the Carrier Services’ segment revenue 6% higher in Q1. NSR’s also involved in managing traffic on the Internet, the directories for .us and .biz domain names, and Common Short Codes in the U.S., which is typically used to text votes for reality contest shows. In Q1, revenue increased 8% to $216.4 million, and adjusted net income per share rose 25%. The strongest segments of the company in the first quarter were Enterprise Service (revenue increased 13%) and Information Services (revenue increased 10%). So it’s not just growing revenue from NPAC. For the full year, NeuStar expects revenue of $895-$915 million, and it announced a $250 million repurchase program for Class A shares after buying back $24.4 million worth in Q1. Since 2005, when it went public, shares have had solid runs from June to December, with average gains of 14.59% and one loss in 2008. Since 2009, the gains have been higher than that long-term average. Meanwhile, the run for shares from December to June averages -3.40%. Shares usually hit a high in late September, mid-October and November. And they may retract a little in July or August, where we can add to our position. Action to Take: Buy NeuStar (NYSE: NSR) at market. Use a 20% stop from your entry price. Our projected exit date is December 1.
