Stock
FIZZ
Buy /
Short
BUY
RIO
BUY
Thesis
Current
Price
$ 38.44
Target
Price
$ 41.91
Rio Tinto is a world leader in mining operations, and unlike many
$ 30.32
pure-play firms, Rio has an impressive diversification of assets. The
company has its hands on virtually everything that can be extracted
via mining. While Iron ore makes up the majority of the companys
business, the cost to extract and sell the ore is the lowest in the
industry for Rio. Changes in the market for iron are occurring
rapidly as the Chinese boom appears to be peaking. Iron ore is
forecasted to drop in price by up to 35% through 2020. Pure-play
operators and miners with less diversified portfolios will likely suffer
significant losses in the coming 5 years because of this. Rios asset
base and low-cost production of iron should allow them to maintain
healthy profits even as the price of iron decreases. As competitors
begin to fail Rio will continue to benefit from greater market share.
Another significant challenge for pure-play miners is the cyclical
nature of the commodity market. Rio avoids the downfalls
associated with this because of its greatly diversified portfolio. Along
with combatting cyclical trends Rio Tintos portfolio will also allow
it to take full advantage of the changes occurring the Chinese market
in terms of both supply and demand, and shifts in the performance
of competitors such as Vale. Chinese state-backed steel production
has been cut significantly in the fourth quarter of 2015 and the trend
is continuing in fiscal 2016. This, along with increased demand for
other materials as the Chinese continue to develop industrially will
help to increase the return on invested capital and improve
shareholder value at Rio.
$ 35.76
The National Beverage Corp. is a leader in the development,
manufacturing, marketing, and sale of a diverse portfolio of flavored
beverage products. As the beverage industry continues to become
increasingly more competitive, a companys competitive advantage
within the industry plays a key role in the future growth of the
company. As consumer preferences in the beverage industry
continue to shift towards healthier products, the National Beverage
Corp. will continue to capture market share from bigger competitors
as they continue to build upon their Power+ nutritional brands. The
National Beverage Corp produces soft drinks for certain allied brand
retailers, a strategic alliance which results in improved marketing
efforts for the National Beverage Corp. without the use of much
additional capital. The National Beverage Corp. has also continued
to expand and market their line of energy drinks, which is one of the
highest growing sectors within the beverage industry.
HII
BUY
The company is a monopoly within the U.S. aircraft carriers market, $ 131.47
and a duopoly within the U.S. Navy shipbuilding companies with
General Dynamics (NYSE:GD). Such a position is bringing huge
and constant revenues and will be granted several contracts by
default. Its formidable position gives the company advantageous
contract terms with the U.S. government.
The recent acquisitions is bringing some diversification to the
nuclear energy, and oil & gas industry and might be able to add
some crucial growth to a current lower-than-average revenue growth
due to recent defense budget cuts. Even if currently the acquisition
is not bringing enough revenues as the oil market is in crisis, it may
become a very strong source of revenue and earnings in the longrun.
$ 157.00
GSB
BUY
GlobalSCAPE manages file transfers for businesses with crucial
$
information. Demand has been increasing with no signs of slowing
down as technology evolves and more and more people rely on the
internet to transfer their critical information. The industry as a
whole will see increased demand, as more and more businesses have
to protect their data from hackers. As the business grows they will
be able to decrease their operating costs which will lead to increased
cash that they can reinvest in the business or pay dividends out to
their current shareholders. They have also been showing positive
revenue growth that they should be able to continue with a very high
floor due to the nature of the industry, and the growing demand
within the industry. They also will rely on more third party
marketing which will let the GlobalSCAPE team focus more on
product development and enhancing their current products.
KATE
BUY
KATE has positioned itself in a competitive industry to gain market $ 23.07
share by giving the consumers what they want. They have paid close
attention to consumer taste and have been rewarded for it based on
their fourth quarter increase in their share price. The company has
made key partnerships over the year which have taken away some of
the R&D burden that comes with trying to innovate their handbags.
This innovation will keep customers coming back and build up their
same store sales. Their main competitor, Michael Kors, has seen
continuous decline in same store sales and in sales per square
footage. Whereas Kate Spade has continuously been improving
these numbers, an area vital for retail. KATE is a recommended a
buy with a target price of $29.82. This is a one-year return of around
29%.
3.97
4.82
$ 29.82
HLF
SELL
HLF has been masking their highly sophisticated Ponzi scheme for $ 55.39
over 30 years with the sale of health products. Recently, HLF has
been receiving complaints and are now under multiple litigations
based on a plethora of allegations. This has been destroying value to
the company as each year more expenses are accrued because of
constant legal trouble. This legal trouble will not disappear and HLF
does very little to notify the public about potential losses as they
believe that their business is entirely ethical. The financial trouble
that they consistently get into has resulted in
$ 33.00
HLF
SELL
Herbalife ltd is a leading company in his segment but has several
$ 55.39
financial weaknesses and flaws. On the 30th September 2015, the
company had a Debt to Total Value of 1.05. In 2014, Herbalife
launched a $1 Billion dollars repurchase program and was planning
on taking $1.5 Billion dollars of debt in order to finance this project.
Due to this repurchase of stock; the company generated a negative
cash flow of $327.6 million dollars in 2014 when they purchased
stocks worth $1,291.9 million dollars. In addition to these alarming
signals the company announced a negative retained earnings of 665.4
million dollars despite a net income of $308.7 million. We have also
observed a massive shortfall in their stock price from $83 (at most)
to $38.5. During the period the company ceased purchasing their
common stock by fear of financial difficulty. This phase of high
instability within the financial structure of the firm creates a
tempting breach to short a stock that is surely overvalued and on the
decline.
$ 27.32
GME
BUY
Gamestop is currently priced at $32.19. In the beginning of
$ 31.23
November 2015, they were priced at roughly $47 per share. The
decrease was due to a crash within the entire market with nothing
specifically applying to Gamestop. After reaching a low of $25 per
share in January, Gamestop is starting to make up for the loss,
making this a perfect time to buy. .Not only is the price historically
low, but the company is also diversifying its revenue streams in
order to become more flexible using their newly acquisitioned
Technology Brands segment. This include the sales of new pre-paid
phone, tablets and other electronics. This helps them diversify their
revenue stream that way they are not completely dependent on their
suppliers to constantly come out with new games and consoles.
Lastly, Gamestop gets an extremely high amount of their value from
purchasing pre-owned games a high discount and then reselling
those games or consoles to a new consumer at a much higher rate.
This segment contributed 41% of their gross profit in 2015 and
2014.
$ 68.67
CHH
SELL
Just like cell phones almost erased the existence of land lines or the $ 52.36
apparition of smart phones with camera made useless the job of
photographer, what happens to the hotel industry with the
development of platform such as AirBnB is more likely to cause a
severe crisis for this industry which will have to rethink how it
brands itself. The rise of the power of Millenials is challenging hotels
companies such as Choice Hotels, which does not bring the
customized experience that this generation is looking for. While the
decline on the long-term is definitely in action, Choice Hotels which
has shown an increase in its revenue is not understanding and facing
this challenge yet, which is more likely to drown it in the mid-term
when it will see how important customization is.
$ 32.28
MED
BUY
Medifast has been a leading provider of weight loss and maintenance $ 30.52
products and programs for many years. The increasing heathawareness trend paired with Americans ever quickening on-the-go
lifestyle provide Medifast with substantial growth potential.
Additionally, throughout the last year, Medifast invested heavily in
the development, growth, and simplification of their largest
business, Take Shape for Life, which accounts for 75.7% of their
business. Quarter three 2015 earnings demonstrated tangible results
from the actions taken throughout the year, signaling a positive
improvement within Take Shape to Life. The program realized both
health coach growth and increasing coach productivity, both of
which bolstered revenues generated by TSL. Lastly, Medifast has
demonstrated consistent value creation and improving margins.
According to their Q3 2015 earnings call, gross margin expanded
110 basis points and Medifast was able to effectively manage their
expenses, resulting in earnings per share exceeding expectations.
Additionally, the implied continuing period ROIC/WACC is 2,
signifying long term value creation. Medifasts years of experience in
this industry along with their commitment to growth and evolving
with the changing market make Medifast an attractive investment,
and its current undervaluation due to deferred realized revenues
pose an opportune time for investors to buy. This report includes an
analysis and forecast of the MED stock price.
$ 39.93
