Diversified Healthcare Trust (DHC) 22Q2 Update

22Q2 GAAP loss was $0.46 per share and normalized FFO -$0.04 per share, below my forecast of -$0.42 and +$0.01, respectively.  The Office Portfolio disappointed again, raising concerns about declining occupancy.  Senior Housing Operating Portfolio (SHOP) results met expectations.

Continue reading
Posted in ALR, DHC, Real Estate | Tagged | Leave a comment

AlerisLife 22Q2 Update

AlerisLife reported a 22Q2 net loss of $8.8 million or $0.28 per share, better than the 22Q1 loss of $9.7 million or $0.31 per share and the 21Q2 loss of $12.3 million or $0.39 per share.  I had estimated a $0.28 loss.

Continue reading
Posted in ALR, DHC, Health Care | Tagged | Leave a comment

Bluegreen Vacations Holding (BVH) 22Q2 Update

2022 second quarter net income attributable to shareholders was $17.8 million or $0.87 per diluted share, compared with 21Q2’s $19.5 million or $0.93 per share.  The decline in EPS occurred despite a 21.8% increase in revenues to $235.6 million.

Continue reading
Posted in BVH, Real Estate | Tagged , | Leave a comment

Mistras Group (MG) 22Q2 Update

Mistras Group reported 22Q2 EPS of $0.15, below 21Q2’s $0.20 and my estimate of $0.18.  Revenues of $179.0 million were 0.8% above the year earlier period and also below my expectations.  While revenues were essentially flat, gross margin was lower and SG&A expense higher than the prior year.  Income from operations declined 5.4%.

Continue reading
Posted in Industrials, MG | Tagged | Leave a comment

Organon & Co 22Q2 Update

22Q2 revenues of $1.585 billion were flat year-over-year, but up 5% at constant currency.  GAAP EPS of $0.92, was below 21Q2’s $1.68 and also below my $1.11 estimate.  Non-GAAP EPS of $1.25 was below last year’s $1.72 and also below my $1.34 estimate.  In 21Q2, Organon was still part of Merck, so the year-over-year performance figures are not directly comparable.

Continue reading
Posted in Health Care, OGN | Tagged , | Leave a comment

Public Service Enterprise Group (PEG) 22Q2 Update

Public Service Enterprise Group (PEG) reported 22Q2 operating revenues of $2.08 billion, up 10.8% from 21Q2.  GAAP EPS was $0.26 vs. a loss of $0.35 a year ago.  Most of last year’s loss was related to a net $457 million loss on write-down of its ISO fossil assets, which have been sold, offset partially by a gain on the sale of PEG’s solar assets.  Excluding that loss, and other gains or losses on derivatives and investments, the company posted non-GAAP operating earnings of $0.64, down from $0.70 in 21Q2.

Continue reading
Posted in PEG, Utilities | Tagged | Leave a comment

Merck & Co (MRK) 22Q2 Update

22Q2 sales increased 28% to $14.6 billion, with LAGEVRIO sales of $1.2 billion, a 26% increase in KEYTRUDA sales to $5.3 billion and a 36% increase in GARDASIL/GARDASIL 9 sales to $1.7 billion.  GAAP diluted EPS from continuing operations increased to $1.55, from $0.48 a year ago.  Non-GAAP diluted EPS increased to $1.87 from $1.31.

Continue reading
Posted in Health Care, MRK | Tagged , | Leave a comment

American Water Works (AWK) 22Q2 Update

American Water Works Company (AWK) reported 22Q2 EPS of $1.20, up 5% from $1.14 in 21Q2.  Operating revenues decreased 6.2% to $937 million, mostly due to the sale of the Homeowner Services (HOS) and New York American Water (NYAM) businesses, offset partially by regulatory rate increases.  These same factors contributed to the 3.1% decline in operating income to $327 million.  However, interest earned on the senior note taken back on the HOS sale and an increase in other income more than offset the decline in operating income.

Continue reading
Posted in AWK, Utilities | Tagged , | Leave a comment

Bristol-Myers Squibb (BMY) 22Q2 Update

22Q2 revenues were higher, GAAP earnings lower and non-GAAP earnings higher than anticipated.  Management reduced its 2022 revenue guidance by $1 million to $46 billion due to foreign currency headwinds.  It also lowered its GAAP EPS guidance, but left its non-GAAP EPS guidance unchanged.  The GAAP earnings change is due to higher expected specified items, either losses on equity investments or acquisition costs, which do not affect non-GAAP results.

Continue reading
Posted in BMY, Health Care | Tagged | Leave a comment

GE 22Q2 Update

General Electric Company (GE) announced 22Q2 revenues of $18.6 billion, up 2.4% year-over-year, a GAAP loss per share of $0.59, two cents worse than 21Q2’s $0.57 loss, and non-GAAP EPS of $0.78, above 21Q2’s $0.22.  I had anticipated a GAAP loss of $0.16 per share and non-GAAP EPS of $0.55.

Continue reading
Posted in GE, Industrials | Tagged , | Leave a comment

Hewlett Packard Enterprise Company (HPE) 22Q2 Update

Hewlett Packard Enterprise Company’s performance during the first half of fiscal 2022 was somewhat disappointing, due primarily to the residual disruptions from the pandemic and more recent developments, including the conflict between Russia and Ukraine.  Although its order book increased by 20% year-over-year in both 22Q1 and 22Q2, supply chain disruptions have delayed the delivery of products and services out of the backlog, which has restrained sales and profit margins.  In addition, HPE’s inventory has ballooned this year from 64 to 106 days outstanding.  The increase is due to the supply chain constraints, positioning to fulfill planned future shipments and strategic stockpiling.

Continue reading
Posted in HPE, Technology | Tagged | Comments Off on Hewlett Packard Enterprise Company (HPE) 22Q2 Update

Bluegreen Vacations Holding Corp. (BVH) 22Q1 Update

2022 first quarter net income from continuing operations attributable to shareholders was $16.0 million or $0.76 per diluted share, compared with 21Q1’s $3.1 million or $0.16 per share.  Revenues improved to $195.1 million from $146.4 million.

Continue reading
Posted in BVH, Real Estate | Tagged | Comments Off on Bluegreen Vacations Holding Corp. (BVH) 22Q1 Update

Citius Announces Its Intention to Spin-Off I/ONTAK

Earlier today, Citius Pharmaceuticals issued a press release announcing its intention to spin-off its late stage oncology candidate, I/ONTAK, to a new, standalone publicly-traded company. In making the announcement, the company said that it believed that the market has not adequately valued the potential of its I/ONTAK licensing agreement.

Continue reading
Posted in CTXR, Health Care | Tagged | Comments Off on Citius Announces Its Intention to Spin-Off I/ONTAK

DHC 22Q1 Update

22Q1 In Line with Expectations.  Maintaining Performance Rating and Price Target.

22Q1 GAAP earnings were $1.01 per share and normalized FFO $0.09 per share, in line with my expectations of $1.04 and $0.06.  Excluding a $327.8 million gain on the sale of JV interests, the performance of the Office Portfolio was moderately below expectations, but Senior Housing Operating Portfolio (SHOP) results were better than anticipated.

Continue reading
Posted in ALR, DHC, Real Estate | Tagged | Comments Off on DHC 22Q1 Update

AlerisLife (ALR) 22Q1 Update

22Q1 Loss of $0.30 in Line with Expectations; Katie Potter Steps Down as CEO; ALR Hires Alvarez & Marsal to Conduct a Comprehensive Operational Review

AlerisLife reported a 22Q1 net loss of $9.7 million or $0.31 per diluted share, slightly better than its 21Q4 loss of $10.6 million or $0.34 per share.  I had estimated a $0.28 loss.

Continue reading
Posted in ALR, DHC, FVE, Health Care | Tagged | Comments Off on AlerisLife (ALR) 22Q1 Update

GE 22Q1 Update

Since reporting disappoint 22Q1 results on April 26, GE’s stock has fallen sharply. Year-to-date, GE’s stock is down 22.6%, worse than the S&P 500 Industrial sector’s 11.7% decline.

Continue reading
Posted in GE, Industrials | Tagged , | Comments Off on GE 22Q1 Update

Citius Pharma 22Q1 Update

Citius Pharmaceuticals (CXTR) is a specialty pharmaceutical company focused on the development of five potential products: (1) Mino-Lok, an antibiotic lock solution to treat and salvage infected central venous catheters (CVCs) in patients with catheter-related bloodstream infections (CRBSIs); (2) I/ONTAK, a late-stage oncology immunotherapy for the treatment for cutaneous T-cell lymphoma (CTCL), that was acquired from Dr. Reddy’s Laboratories SA in September 2021; (3) Halo-Lido, a topical formation of halobetasol propionate and lidocaine for the treatment of hemorrhoids; (4) Mino-Wrap, a liquefying, gel-based wrap for the reduction of infections associated with breast implants following breast reconstructive surgeries; and (5) a next generation iPSC mesenchymal stem cell (iMSC) mRNA therapy, which is in pre-clinical development, under license from Brooklyn Immunotherapeutics (BTX).

Continue reading
Posted in CTXR, Health Care | Tagged | Comments Off on Citius Pharma 22Q1 Update

Mistras Group, Inc. (MG) 21Q4 Update

21Q4 Results Below Expectations, Lowering 2022 Estimates, Reducing Rating and Price Target

Mistras Group reported 21Q4 EPS of $0.00, slightly worse than 20Q4’s $0.01 and below my estimate of $0.06.  Revenues of $171.2 million were 6.5% above the year earlier period and better than I expected.  Despite the higher revenues, income from operations declined by 50% compared with the prior year.  Against my projections, Mistras’s revenues were higher, but operating costs were much higher.

Continue reading
Posted in Industrials, MG | Tagged | Comments Off on Mistras Group, Inc. (MG) 21Q4 Update

Thoughts on the Outlook for Homebuilding Stocks

Homebuilding stocks have had a rough 2022. Year-to-date (through 4/12), my equal-weighted index of 11 publicly-traded U.S. homebuilders has fallen 34.8%. That compares with declines of 7.7% in the S&P 500 and 11.5% in the Russell 2000.

Following a three-fold surge in the index from the March 2020 lows to the May 2021 highs, homebuilding stocks were due for a correction anyway. This year’s 34% fall, though eye-catching, still qualifies as a normal correction from a technical point of view, according to Fibonacci retracement analysis.

Continue reading
Posted in BZH, Consumer Discretionary, Housing, KBH, TOL | Tagged , | Comments Off on Thoughts on the Outlook for Homebuilding Stocks

Going to Neutral on Big Pharma

The stocks of large pharmaceutical companies, including Bristol-Myers Squibb (BMY) and Merck & Co. (MRK), which I follow, have outperformed the market significantly so far this year. The pharmaceuticals sector, as measured by the NYSE Arca Pharmaceuticals Index ($DRG) shows a year-to-date gain of 5.2%, as of this post, much better than the S&P 500’s 6.5% decline.

Continue reading
Posted in Uncategorized | Comments Off on Going to Neutral on Big Pharma

AlerisLife (ALR) 21Q4 Update

Lowering Estimates and Safety Rating, Withdrawing Performance Rating and Price Target

AlerisLife Inc. (ALR), formerly known as Five Star Senior Living, reported a fourth quarter net loss of $10.7 million or $0.34 per share, slightly worse than the third quarter’s loss of $10.2 million or $0.32 per share.  I had estimated a $0.15 loss.

Continue reading
Posted in ALR, DHC, FVE, Health Care | Tagged , | Comments Off on AlerisLife (ALR) 21Q4 Update

Toll Brothers (TOL) 22Q1 Update

Since my last report on December 9, 2021, Toll’s stock has fallen 26.3%, much more than the S&P Mid-Cap 400’s 2.6% decline.  As I noted back then, shares of Toll and other homebuilders were ripe for a correction following their three-fold advance off the early pandemic lows.  Yet, this correction has been more severe than I had anticipated, driven by persistent inflation, rising mortgage rates and most recently the uncertainty of the economic fallout from Ukraine.

Continue reading
Posted in Consumer Discretionary, Housing, TOL | Tagged | Comments Off on Toll Brothers (TOL) 22Q1 Update

Merck & Co. (MRK) Update

Establishing 2022 and 2023 Estimates, Maintaining Outperform Rating, Setting $85 Price Target

Following the spin-off of Organon, Merck is focused on growing its pharmaceuticals business to offset the looming loss of exclusivity on its $5 billion Januvia/Janumet franchise and others that will follow as the decade progresses.  Investors’ concerns about the impact of LOE contributed to the stock’s underperformance in 21H2.  Some investors worry that Merck’s pipeline will not sustain its revenues and profits.  My estimates anticipate that both will decline slightly in 2023.

Continue reading
Posted in Health Care, MRK | Tagged , | Comments Off on Merck & Co. (MRK) Update

DHC 21Q4 Update

Lowering Estimates for 2022 and Adding 2023, Lowering Price Target to $5.00

DHC reported 21Q4 normalized FFO of $0.09 per share, compared with 21Q3’s $0.05 and 20Q4’s +$0.09.  Although the Office portfolio posted another solid quarter and the Senior Housing Operating Portfolio (SHOP) occupancy improved by 120 bp, SHOP operating costs were high, due mostly to the tight labor market.  On a positive note, management says that its operators have been able to begin raising rental rates to help cover higher operating costs.

Continue reading
Posted in DHC | Tagged | Comments Off on DHC 21Q4 Update

Bristol-Myers Squibb Update

Raising 2022 Estimate and Adding 2023, Maintaining Outperform Rating and Price Target of $73

Bristol-Myers Squibb Company (BMS) achieved many operational milestones in 2021, advancing its development pipeline through clinical trials, new drug applications and regulatory approvals.  At its November Investor Event, management said that it would further advance these initiatives in 2022 and beyond, bolstering its early- and mid-stage pipeline through internal development, licensing agreements, partnerships and acquisitions.  Facing the headwinds from loss of exclusivity (LOE) for some of its key products, the company must generate significant revenues from new medicines and grow revenues of its existing brands through new indications and product extensions.

Continue reading
Posted in BMY, Health Care | Tagged | Comments Off on Bristol-Myers Squibb Update

The Drivers of Large Cap Stock Performance in 2021

Estimated Returns by Sectors, Industry Groups and Industries

Large cap stocks, as measured by the Lark Research Large Cap index (the “Index”) which currently mirrors the S&P 500, turned in another impressive performance in 2021.  The Index posted a price return of 26.8%, much better than 2020’s solid 16.9% return.

Continue reading
Posted in Energy, Financials, Market Commentary, Real Estate, Sectors, Technology, Utilities | Tagged , , , | Comments Off on The Drivers of Large Cap Stock Performance in 2021

DHC Announces Sales of Joint Venture Interests in Certain Office Properties

Sales Raise Over $1 Billion, Giving the Trust the Means to Retire the 9.75% Senior Notes due 2025 When They Become Callable in June 2022.

DHC announced on January 31 that it has entered into a joint venture with two institutional investors on 10 of its Office properties.  The joint venture is valued at $703 million and will have $456.3 million of secured debt.  The JV investors will pay $196.5 million for an 80% equity stake.  DHC will receive cash proceeds of $653 million and retain a 20% equity interest.  The 10 properties are valued at $657 per sq. ft.  The $703 million estimated value equates to a capitalization rate of 4.98%, based upon full year 2021 actual cash net operating income (NOI).

Continue reading
Posted in DHC | Tagged | Comments Off on DHC Announces Sales of Joint Venture Interests in Certain Office Properties

Notes and Analysis from Campbell Soup’s Fiscal 2022 Investor Day

Since 2019, Campbell Soup Company has jettisoned several businesses to focus on its core Meals and Beverage (M&B) and Snacks segments.  It has also acquired new growth platforms in Pacific Foods and Snyder’s-Lance.  Its $1 billion enterprise cost savings program is now 83% complete.

Continue reading
Posted in Consumer Staples, CPB | Tagged | Comments Off on Notes and Analysis from Campbell Soup’s Fiscal 2022 Investor Day

Mistras Group: Waiting for the Full Recovery

Mistras Group is a leading provider of non-destructive testing (NDT) and related asset protection services that monitor the condition of critical infrastructure and equipment to ensure safe and efficient operations and maximize uptime.  The company’s business has suffered during the pandemic from the decline in usage that temporarily reduced the frequency of maintenance and repair.  Although its revenue has rebounded well off the lows, its 21Q3 performance and 21Q4 guidance suggest at least a pause in its recovery.  Accordingly, investors may be concerned that its recovery will be incomplete.

Continue reading
Posted in Industrials, MG | Tagged | Comments Off on Mistras Group: Waiting for the Full Recovery

Toll Brothers (TOL) 21Q4 Update

Toll Brothers reported stronger-than anticipated fiscal 21Q4 results that once again exceeded my and the consensus estimates.  Its diluted earnings per share were $3.02, up 95% from $1.55 in 20Q4.  My estimate was $2.51 and the consensus estimate was $2.50.

Continue reading
Posted in Consumer Discretionary, Housing, Real Estate | Tagged | Comments Off on Toll Brothers (TOL) 21Q4 Update

Organon 21Q3 Update

Organon reported 21Q3 GAAP EPS of $1.38 which exceeded my estimate of $1.31.  Revenues were in line with my estimates and operating costs were lower, except for a $25 million increase associated with the acquisition of in-process research & development.

Continue reading
Posted in Health Care, OGN | Tagged , | Comments Off on Organon 21Q3 Update

SJI 21Q3 Update

SJI reported a 21Q3 GAAP net loss of $25.8 million or $0.23 per share, wider than 20Q3’s net loss of $10.3 million or $0.10.  On an economic earnings basis, which adjusts for fluctuations in the fair market value of derivatives and other unusual or one-time costs, the 21Q3 net loss was $18.8 million or $0.17 per share, compared with 20Q3’s net loss of $6.0 million or $0.06 per share.  I had anticipated GAAP and economic earnings net losses of $0.16 per share.

Continue reading
Posted in SJI, Utilities | Tagged | Comments Off on SJI 21Q3 Update

Notes and Analysis from HPE’s 2021 SAM

At its 2021 Securities Analyst Meeting (SAM), the management of Hewlett Packard Enterprise Company (HPE) said that the workplace changes advanced by the pandemic are proving the validity of its edge-to-cloud strategy.  HPE has experienced stronger than anticipated growth in revenues this year, as enterprises have enhanced their edge, cloud and data capabilities.  HPE continues to strengthen its portfolio in these areas, focusing especially on fast-growing niches through internal development and acquisitions.  The company forecasts that its mix of growth businesses will increase from 25% of total revenues today to 35% of revenues in fiscal 2024.

Continue reading
Posted in HPE, Technology | Tagged | Comments Off on Notes and Analysis from HPE’s 2021 SAM

DHC 21Q3 Results

Diversified Healthcare Trust (DHC) reported 21Q3 normalized FFO of $0.04 per share, compared with 21Q2’s $0.05.  The loss came despite a 40 bp improvement in SHOP occupancy.  Operating costs remain high and senior living operators are discounting resident rates more because of the slow improvement in occupancy industry-wide.  DHC’s Office portfolio’s 21Q3 performance met expectations.

Continue reading
Posted in DHC, FVE, Real Estate | Tagged | Comments Off on DHC 21Q3 Results

Five Star Senior Living 21Q3 Update

Again Lowering EPS Estimates; Reducing 6-12 Month PT and Maintaining Outperform Rating

Five Star reported a third quarter net loss of $10.2 million or $0.32 per share, less than the second quarter’s loss of $12.3 million or $0.39 per share.  I had estimated a loss of $0.18.

The $0.14 shortfall from my estimate was due mostly to a $3.3 million or $0.10 per share charge on the termination of three senior living community (SLC) leases.  The remaining $0.04 shortfall was from higher than projected losses on the core business, mostly from lower average revenue per occupied room (RevPOR) and a decline in expenses reimbursed by DHC.

Continue reading
Posted in DHC, FVE, Health Care | Tagged , | Comments Off on Five Star Senior Living 21Q3 Update

21Q3 Housing Market Update

The housing market has been quite strong since shortly after the onset of the pandemic, fueled by low interest rates, pent-up demand and a strong desire among urban apartment dwellers to escape the coronavirus.  New home sales from May 2020 until April 2021 were estimated at an average annual pace of 900,000 units, the highest since 2006.  Pending sales of existing homes have followed a similar pattern.  After the slowing of sales from an unsustainably high pace this past spring, there are tentative signs that sales are on the rise again, but there are also legitimate questions about the likely strength and durability of the rebound.

Continue reading
Posted in Housing, Real Estate | Tagged , , , | Comments Off on 21Q3 Housing Market Update

Toll Brothers 21Q3 Update

Toll Brothers reported stronger-than anticipated fiscal 21Q3 results that once again exceeded my estimates.  Its diluted earnings per share were $1.86, up 71% from $0.59 in 20Q2.  My estimate was $1.48 and the consensus estimate was $1.53.

Continue reading
Posted in Consumer Discretionary, Housing | Tagged | Comments Off on Toll Brothers 21Q3 Update

PSEG’s 2021 Investor Day

Public Service Enterprise Group held its 2021 Investor Day on Sept. 27, 2021.  At the meeting, management offered the following guidance:

Continue reading
Posted in PEG, Utilities | Tagged , | Comments Off on PSEG’s 2021 Investor Day

So. Jersey Industries: High Dividend Yield With Moderate Upside Price Potential

SJI’s utility businesses – South Jersey Gas Company (SJG) and Elizabethtown Gas Company (ETG) – are its core growth engines.  Representing 70%-80% of consolidated profits, they have grown by pursuing regulatory-approved infrastructure investment programs and gaining customers from new construction and alternative heating conversions.  SJI also pursues growth its nonutility businesses; but its performance there has been mixed.

Continue reading
Posted in SJI, Utilities | Tagged | Comments Off on So. Jersey Industries: High Dividend Yield With Moderate Upside Price Potential

Organon (OGN) 21Q2 Update

21Q2 Performance in Line with Expectations; Raising Performance Rating and Lowering Price Target

21Q2 GAAP EPS of $1.68 was lower than 20Q2’s $2.14.  Although sales increased 4.5% to $1.6 billion, costs were higher as a result of new tolling arrangements with Merck and certain costs associated with the spin-off and becoming a separate public company.  Still, the results were in line with my expectations.  Organon has initiated a quarterly dividend of $0.28.

Continue reading
Posted in Health Care, OGN | Tagged , | Comments Off on Organon (OGN) 21Q2 Update

DHC 21Q2 Update

Progress on Strategic Repositioning; Performance in Line with Expectations; Upgrading Performance Rating; Maintaining Price Target of ~$7.50.

DHC reported 21Q2 normalized funds from operations (FFO) of $12.2 million or $0.05 per share, lower than 20Q2’s $0.25, due mostly to a 780 bp decline in senior housing operating portfolio (SHOP) occupancy.  Although SHOP occupancy was down vs. the prior year, it increased 140 bp sequentially, suggesting that a bottom is in.  Still, the pace of the rebound is uncertain due to the Delta variant, among other factors.  DHC’s office portfolio also reported a  drop in profits mostly due to previous asset sales and a 100 bp decline in occupancy.  However, strong lease-ups and the added contribution from redevelopment projects should improve its profitability going forward.

Continue reading
Posted in DHC, FVE, Real Estate, SNH | Tagged | Comments Off on DHC 21Q2 Update

Five Star Senior Living 21Q2 Update

Five Star reported a second quarter net loss of $12.3 million, reversing last year’s $3.0 million net profit.  On a per share basis, the loss was $0.39, compared to net income of $0.10 and below my estimate of a loss of $0.11.

Continue reading
Posted in DHC, FVE, Health Care, SNH | Tagged , | Comments Off on Five Star Senior Living 21Q2 Update

American Water Works 21Q2 Update

2021 Second Quarter Results in Line with Expectations. Maintaining Neutral Rating.

AWK reported 21Q2 EPS of $1.14, up 17.5% from 20Q2.  Operating revenues increased  7.3% to $999 million.  Operating income rose 5.4% to $330 million.  Operating margin eased 60 bp from 33.6% to 33.0%, due to a refund of excess accumulated deferred income tax.  That refund was offset by a comparable drop in income tax expense, as evidenced by the drop in the effective tax rate from 24.1% to 17.5%.  Thus, net income increased 17.6% to $207 million.

Continue reading
Posted in AWK, Utilities | Tagged , | Comments Off on American Water Works 21Q2 Update

Bristol-Myers Squibb: Initiating Coverage

Initiating Coverage with an Outperform Rating. Prospects Beyond 2022 are Favorable.

With the acquisitions of Celgene in 2019 and MyoKardia in 2020, BMS has substantially transformed its business and repositioned for growth.  Drugs added to the portfolio from the two acquisitions produced 40% of its total revenues in 2020.  The company has launched six new products since 2020, including two CAR-T immunotherapies, a class of treatments that has produced miraculous responses in fighting blood cancers.  It plans to launch two potential first-in-class treatments in 2022 that have good commercial potential.  BMS also has a broad early-to-mid stage pipeline with more than 50 new compounds in clinical development.

Continue reading
Posted in BMY, Health Care | Tagged | Comments Off on Bristol-Myers Squibb: Initiating Coverage

PSEG: A Possible Rocky Transition to T&D

It has been a year since PSEG announced a strategic review to explore divesting its fossil fuel generating assets.  Since then, management has said that it is pleased with the interest shown by potential buyers in its 6,750+ MW portfolio of mostly natural gas-fired generating plants.  The move would complete PSEG’s transition to a regulated utility (with a fleet of carbon-free nuclear generating plants).

Continue reading
Posted in PEG, Utilities | Tagged , , | Comments Off on PSEG: A Possible Rocky Transition to T&D

Bluegreen Vacations Holding Corp. Stands to Gain as Domestic Travel Improves

On May 5, 2021, Bluegreen Vacations Holding Corporation (BVH), formerly known as BBX Capital Corporation, completed the acquisition of the 7% publicly-traded ownership stake of Bluegreen Vacations Corporation (BXG) that it did not already own through a statutory short-form merger under Florida law.  BXG shareholders received 0.51 shares of BVH’s Class A common shares in the merger.  On April 5, the day of the merger announcement, BXG shares rallied 18.8%.  BXG is now a wholly-owned subsidiary of BVH.

Continue reading
Posted in BVH, Real Estate | Tagged | Comments Off on Bluegreen Vacations Holding Corp. Stands to Gain as Domestic Travel Improves

HPE 21Q2 Results

The Company Reported Stronger Than Expected 21Q2 Results, But Its Upwardly Revised Guidance Was Somewhat Disappointing.

HPE reported fiscal 2021 second quarter GAAP earnings of $0.19 per share, well above its most recent guidance of $0.02-$0.08 per share and ahead of my estimate of $0.12.  Its Non-GAAP earnings of $0.46 also exceeded its guidance of $0.38-$0.44 and my estimate of $0.42.  Revenues of $6.7 billion were exactly in line with my projections.

Continue reading
Posted in HPE, Technology | Tagged | Comments Off on HPE 21Q2 Results

Update on Hewlett Packard Enterprise (HPE)

HPE has posted two consecutive quarters of stronger-than-expected results.  Although the quarterly figures still lag behind the prior year, the recent strength suggests that its business is rebounding strongly off the bottom.  As noted by management, HPE’s business portfolio, which sports beefed-up offerings in cloud services, edge networking and high performance computing (HPC), is well positioned coming out of the pandemic as organizations pursue greater flexibility in their IT operations to improve their ROI and seek a more permanent role for work from home.  HPE also appears to be benefiting from a catch up in customer IT spending after pandemic-related delays.

Continue reading
Posted in HPE, Technology | Tagged | Comments Off on Update on Hewlett Packard Enterprise (HPE)

Five Star Alters Strategy, Its Stock Gets Slammed

In early April, Five Star announced a change in its strategy whereby it will transition out of the management of 108 smaller senior living communities (SLCs) with 7,500 living units (with an average of 69.4 units per community), close and reposition 27 skilled nursing facilities (SNFs) with 1,500 units located within its continuum of care retirement communities (CCRCs) and close 37 Ageility inpatient rehabilitation clinics that are located within the exited SLCs. The transition is expected to be completed by the end of 2021.

Continue reading
Posted in DHC, FVE, Health Care | Tagged , | Comments Off on Five Star Alters Strategy, Its Stock Gets Slammed

Assessing the Impact of the Organon Spin-Off on Merck

Merck is progressing toward the spin-off of its subsidiary, Organon & Co., which is expected to be completed by the end of the June.  Organon will include Merck’s women’s health products, biosimilars and certain established brands, most of which have lost patent protection.  (For a more complete analysis of Organon, see my primary report dated April 14, 2021.)

Continue reading
Posted in Health Care, MRK, OGN | Tagged , , , | Comments Off on Assessing the Impact of the Organon Spin-Off on Merck

Five Star and DHC Restructure Their Agreement

On April 9, Five Star and DHC announced a restructuring of their management agreement whereby DHC will transition the management of 108 smaller senior living communities (SLCs) with a total of 7,500 units to other operators by the end of 2021.  Five Star will reposition its senior living management business to focus on larger independent living (IL), assisted living (AL) and memory care communities, as well as stand-alone active adult and IL communities. It will also exit the skilled nursing facility (SNF) business.

Continue reading
Posted in DHC, FVE, Health Care, Real Estate | Tagged , | Comments Off on Five Star and DHC Restructure Their Agreement

Merck Spin-Off of Organon Targeted for 21Q2

In recent weeks, Merck has been following through on its plan to spin-off its subsidiary, Organon & Co., to shareholders.  On March 17, it filed its Form 10 registration statement related to the transaction.  On March 24, it posted on its investor relations website a lender presentation related to planned debt to be issued by Organon.  On March 30, it announced that it had agreed to acquire Alydia Health on Organon’s behalf.  On April 8, it issued a press release announcing the pricing of three debt tranches in a private placement.  The debt offering is expected to close on April 22.

Continue reading
Posted in Health Care, MRK, OGN | Tagged , , | Comments Off on Merck Spin-Off of Organon Targeted for 21Q2

Vaccinations Raise Visibility of a Bottom in Occupancy for DHC

Diversified Healthcare Trust reported 2020 fourth quarter normalized funds from operations (FFO) (my definition) of $15.1 million or $0.06 per share, slightly better than 20Q3, but well below 19Q4.  The results were modestly better than I anticipated with lower operating expenses, greater unrealized gains on its investment in Five Star Senior Living (FVE) and realized gains on property sales.  Even so, occupancy in its senior housing operating portfolio continued to fall at about the same pace as in 20Q2 and 20Q3.

Continue reading
Posted in DHC, Real Estate | Tagged , | Comments Off on Vaccinations Raise Visibility of a Bottom in Occupancy for DHC

Citius Pharma Raises $71 million in Equity Unit Offering

Citius Pharmaceuticals (CXTR) is a specialty pharmaceutical company focused on the development of four potential products: (1) Mino-Lok, an antibiotic lock solution to treat and salvage infected central venous catheters (“CVCs”) in patients with catheter-related bloodstream infections (“CRBSIs”); Halo-Lido, a topical formation of halobetasol propionate and lidocaine for the treatment of hemorrhoids; Mino-Wrap, a liquefying, gel-based wrap for the reduction of infections associated with breast implants following breast reconstructive surgeries; and a next generation mesenchymal stem cell (MSC) mRNA therapy under license from Novellus Therapeutics Limited that is early in pre-clinical development.

Continue reading
Posted in CTXR, Health Care | Tagged , | Comments Off on Citius Pharma Raises $71 million in Equity Unit Offering

Five Star Senior Living (FVE) Update

Vaccination of 90% of Residents Raises Visibility on a Rebound in Occupancy

Five Star reported slightly stronger 20Q4 results than anticipated, due primarily to gains on investments held by its captive insurer.  Average occupancy across its owned and leased senior living communities (SLCs) declined by 320 basis points (bp) to 71.5% in the quarter, comparable to the decline reported for 20Q3.  Average occupancy at SLCs managed for Diversified Health Care Trust (DHC) declined 293 bp to 72.3% in 20Q4.  The decline in managed community average occupancy was 54 bp slower than that reported for 20Q3.  At year-end, the company said that “spot” occupancy was 70.7%.

Continue reading
Posted in DHC, FVE, Health Care, Real Estate | Tagged , | Comments Off on Five Star Senior Living (FVE) Update

2021 Market Outlook – Part 2: S&P 500 Sector Analysis

2020 was of course dominated by the impact of the pandemic on the economy and specifically on the revenues and profits of each of the S&P 500 constituents.  There was a sharp stock market sell-off in March-April, followed by a quick recovery.  By mid-July, the S&P 500 had recovered all of its March-April losses.  By the end of the September, it was up 4.1% YTD.  With a quick resolution to the presidential election and the announcements of the vaccine rollouts, the Index rallied 11.7% in the fourth quarter, posting a 16.3% official return for the full year.

Continue reading
Posted in Communication Services, Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Housing, Industrials, Market Commentary, Materials, Real Estate, Sectors, Technology, Telecommunications, Utilities | Tagged | Comments Off on 2021 Market Outlook – Part 2: S&P 500 Sector Analysis

2021 Market Outlook – Part 1

Despite Ongoing Uncertainties about the Pandemic, the Economic Recovery and Global Events, the Stock Market is Poised to Move Higher in 2021.

The financial markets turned in a stellar performance in 2020, the year of COVID-19, when real GDP probably fell about 3.7%.  Both stocks and bonds had a great year.  The S&P 500 was up 16.3% on price, 18.5% with dividends.  The Bloomberg Barclays U.S. Aggregate index, the broadest measure of U.S. fixed income securities performance, delivered a 7.5% total return.

Continue reading
Posted in Uncategorized | Comments Off on 2021 Market Outlook – Part 1

The Employment Situation and Outlook – December 2020

Yesterday, the Bureau of Labor Statistics estimated that nonfarm payroll employment declined by 140,000 in December.  The estimate for November was increased by 135,000.  The level of employment for December was therefore virtually unchanged from the November report.

Continue reading
Posted in Federal Reserve, Market Commentary | Tagged , , , , | Comments Off on The Employment Situation and Outlook – December 2020

An Uncertain Outlook for Housing

2020 was a surprisingly solid year for housing in light of the pandemic and the havoc that it wreaked in other parts of the economy.  December data will not be reported until later this month.  I project that single-family housing starts will total 971,700 units in 2020, up 9.5% over 2019 and new residential sales will be 804,000, up 17.9%.  That is pretty remarkable, considering that single-family starts and sales were down double-digits in March and April.

Continue reading
Posted in Consumer Discretionary, Housing | Tagged , , , | Comments Off on An Uncertain Outlook for Housing

Colony Credit Real Estate 20Q3 Update

Shares of Colony Credit Real Estate (CLNC) have surged over the past six weeks, nearly doubling from a low of $4.37 on Oct. 29 to a high of $8.11 on Nov. 25.  Since then, CLNC’s share price has been trading in a range, closing most recently at $7.75 (on Dec. 8).

Continue reading
Posted in CLNY, Real Estate | Tagged , | Comments Off on Colony Credit Real Estate 20Q3 Update

Diversified Healthcare Trust (DHC): Weaker Than Anticipated 20Q3 Results

Diversified Healthcare Trust reported 2020 third quarter normalized funds from operations (FFO) (according to my definition) of $11.0 million or $0.05 per share, well below results for 19Q3 and 20Q2 and also below my projection of $27.8 million or $0.12 per share.  The decline reflects the impact of pandemic-related costs and occupancy declines on its senior housing operating portfolio (SHOP) business.

Continue reading
Posted in DHC, Real Estate | Comments Off on Diversified Healthcare Trust (DHC): Weaker Than Anticipated 20Q3 Results

GE: 2020 Third Quarter Earnings Review

General Electric reported a 2020 third quarter GAAP loss of $1.16 billion or $0.13 per share on revenues on revenues of $19.4 billion, down 17%.  In the 2019 third quarter, the company reported a comparable net loss of $1.3 billion of $0.15 per share.

Continue reading
Posted in GE, Industrials | Tagged | Comments Off on GE: 2020 Third Quarter Earnings Review

Wells Fargo: Still Under a Regulatory Cloud, Wading Through the Pandemic

Shares of Well Fargo have been under a regulatory cloud ever since the Federal Reserve placed a cap on its total assets in April 2018.  To lift the cap, the company must demonstrate that it has implemented an effective remediation plan that guards against a repeat of the abusive sales practices that led to the creation of millions of deposit and credit card accounts without customers’ consent.

Continue reading
Posted in Financials, WFC | Tagged | Comments Off on Wells Fargo: Still Under a Regulatory Cloud, Wading Through the Pandemic

GE 20Q3 Earnings Preview and Outlook

Shares of GE have underperformed both the broader market and GE’s industrial peer group since the onset of the COVID-19 pandemic.  The weak performance reflects primarily the company’s exposure to the aviation business, which prior to the pandemic was GE’s most profitable by far.  With both the suspension of production of Boeing’s 737 Max aircraft and more recently the sharp drop in air travel due to the COVID-19 pandemic, GE Aviation’s profitability has collapsed.  At this point, the consensus view, as articulated by Boeing in its 20Q2 conference call, is that air traffic will not return to pre-pandemic levels for three years.  Some see a permanent reduction in air travel demand.

Continue reading
Posted in GE, Industrials | Tagged | Comments Off on GE 20Q3 Earnings Preview and Outlook

Housing Market Update

Despite continuing elevated unemployment and dampened consumer confidence, the housing market has been surprisingly strong in the months following the onset of the COVID-19 pandemic.  According to the U.S. Commerce Dept., single-family housing starts for August were estimated at the seasonally-adjusted annual rate (SAAR) of 1.01 million units, up 4.1% from July and 12.1% from August 2019.  This represented the highest level for single-family starts since May 2007.  Similarly, new home sales for July were estimated to be 901,000 units, up 20% from June and 36.3% from July 2019, the highest level for new home sales since April 2007.

Continue reading
Posted in Consumer Discretionary, Housing | Tagged , | Comments Off on Housing Market Update

Debt Refinancing Eliminates Risk of Default; But Diversified Healthcare Trust Will Need to Raise Equity Eventually

Diversified Healthcare Trust (DHC) reported 2020 second quarter normalized funds from operations (FFO) (according to my definition) of $52.8 million or $0.22 per share, down 33% from $81.1 million or $0.33 per share in the prior year quarter.  The decline was driven mostly by the 2019 restructuring of its lease agreements with its affiliate, Five Star Senior Living (FVE), and also by the impact of pandemic-related restrictions on its business.

Continue reading
Posted in DHC, Real Estate | Tagged | Comments Off on Debt Refinancing Eliminates Risk of Default; But Diversified Healthcare Trust Will Need to Raise Equity Eventually

A Weak Second Quarter Should Mark the Bottom for Colony Capital, But Future Dilution is a Key Issue

Colony Capital reported a 2020 second quarter net loss of $2.04 billion or $4.33 per share, compared with a much smaller loss in the prior year quarter.  This year’s loss was driven by $2.0 billion of impairment charges taken across all of the company’s business segments, except digital and included a $515 million goodwill charge taken against its Other Investment Management (OIM) business.  It also recorded a $274.7 million other-than-temporary impairment charge against its 36.4% stake in Colony Credit Real Estate (CLNC).

Continue reading
Posted in CLNY, Real Estate | Tagged , | Comments Off on A Weak Second Quarter Should Mark the Bottom for Colony Capital, But Future Dilution is a Key Issue

Five Star’s Strong Stock Performance Could Signal Quicker Turnaround

Five Star Senior Living continues to cope with the effects of the COVID-19 pandemic on its operations.  During the 2020 second quarter, it experienced a 3.8% decline in occupancy from 82.5% to 78.7% across its owned and managed senior living communities.  In addition, its average monthly revenue per available room (RevPAR) decreased 4.6% to $3,581.  The drop in occupancy equates to an average weekly decline of about 0.3%, which is better than the 0.40%-0.50% average weekly decline anticipated by Diversified Healthcare Trust (DHC), the owner of FVE’s managed properties.

Continue reading
Posted in DHC, FVE, Health Care | Tagged , | Comments Off on Five Star’s Strong Stock Performance Could Signal Quicker Turnaround

Colony Capital: The Big Pivot on Hold

In response to activist pressure precipitated by a deterioration in its financial performance and a steady decline in its stock price, Colony Capital announced in November 2019 a new strategy to focus on growing its Digital Realty and Investment Management business, divest over time its healthcare, hospitality and other equity and debt assets and sell substantially all of its investment management business to Colony Credit Real Estate (CLNC). 

Continue reading
Posted in CLNY, Real Estate | Tagged , , | Comments Off on Colony Capital: The Big Pivot on Hold

After the Quick Rebound, Investors Should Approach Homebuilding Stocks with Caution

Homebuilding stocks have been on a wild ride in 2020.  They boomed from the start of the year, rising 19.1% (according to my index of 11 publicly-traded builders) to February 21, handily beating the 3.0% gain on the S&P 500 and the flattish 0.6% return on the Russell 2000.  Then in just four weeks, with the onset of economy-busting measures taken to combat COVID-19, the sector plunged 60.6%, much worse than 30.9% drop in the S&P and 39.6% drop in the Russell.  Since the March 21 lows, however, the homebuilders have come roaring back, surging 117.4% to June 5, compared with the gains of 38.6% in the S&P and 48.7% in the Russell.

Continue reading
Posted in Consumer Discretionary, Housing, Real Estate | Tagged | Comments Off on After the Quick Rebound, Investors Should Approach Homebuilding Stocks with Caution

After Completing Its Corporate Transition, Change Healthcare Copes With COVID-19

Change Healthcare Inc. (CHNG, Change Inc., Change or Inc.) is a new public company formed in 2016 as a joint venture between McKesson Corporation (MCK) and an investor group led by The Blackstone Group.  Over the past four years, the joint venture partners have combined their healthcare IT businesses and raised capital through an IPO and unit offering.  In March, McKesson completed the distribution of its interests in the joint venture.  With the onset of the COVID-19 pandemic, CHNG’s stock has fallen sharply and now trades at an even wider discount to its peer group.  As activity in the healthcare system returns to normal, the stock should have rebound potential to its pre-COVID levels of $15-$17.  If the company then demonstrates progress toward its revenue growth, operating cost and leverage goals, its stock should have upside beyond $17 per share, as it shrinks its discount to its peer group.

Continue reading
Posted in CHNG, Health Care, Technology | Tagged , , | Comments Off on After Completing Its Corporate Transition, Change Healthcare Copes With COVID-19

DHC Cuts Distribution As It Copes with COVID-19 Fallout

DHC’s share price closed on Thursday (4/9) at $3.51, down 58.4% year-to-date, worse than the peer group average of down 24.7%, but the stock is up from its bottom of $2.00.  Most of the losses for DHC occurred during March. There is still considerable uncertainty about the near- to medium-term operating and financial performance for healthcare REITs, which could delay a full recovery of their shares. Even so, DHC’s share price has fallen to only 0.3 times book value, compared with the peer group average of 1.4 times. That gives the shares considerable upside potential, if DHC can cope successfully with COVID-19.

Continue reading
Posted in DHC, Real Estate | Tagged | Comments Off on DHC Cuts Distribution As It Copes with COVID-19 Fallout

Deep Dive on GE: Sum-of-the-Parts Valuation

As noted in a previous post, it is most appropriate to value GE as a single, stand-alone enterprise.  Several unifying investment themes support this view:

Continue reading
Posted in GE, Industrials | Tagged , | Comments Off on Deep Dive on GE: Sum-of-the-Parts Valuation

Deep Dive on GE: GE Capital

In April 2015, partially in response to the regulatory restrictions that accompanied GE Capital’s designation as a systemically important financial institution by the Financial Stability Oversight Council, GE adopted the GE Capital Exit Plan, under which it planned to reduce the size and scope of its financial services operations through the sale of most of GE Capital’s assets and focus on growing its industrial businesses.  The plan was originally intended to be completed over two years.  GE intended to keep most of its vertical financing businesses, including GE Capital Aviation Services (GECAS), Energy Financial Services (EFS) and its Healthcare Equipment Finance business, which directly support its industrial businesses.

Continue reading
Posted in GE, Industrials | Tagged , | Comments Off on Deep Dive on GE: GE Capital

Deep Dive on GE: Consolidated Enterprise Valuation

In my view, the most appropriate way to look at GE’s stock valuation is to consider the company as a single enterprise.  In this analysis, I compare its current valuation to peers.  My calculations for GE’S enterprise value-to-EBITDA multiple at 31-Dec-19 and 30-Mar-20 are given in the table below:   

Continue reading
Posted in GE, Industrials | Tagged | Comments Off on Deep Dive on GE: Consolidated Enterprise Valuation

Deep Dive on GE: Projected 2020 Consolidated Results

Based upon management’s guidance given at General Electric’s 2020 Outlook meeting on March 4th, I project 2020 Industrial Leverage EBITDA of $11.6 billion, up roughly 3% from 2019.  Industrial Leverage EBITDA was given in the appendix to the company’s 2020 Outlook presentation slides and was meant to be used in the calculation of GE Industrial’s ratio of EBITDA-to-net debt.  The measure excludes non-operating pension benefit costs, which is the part of total pension costs that cover all items that relate primarily to the funding of GE’s pension plans, excluding the service cost.

Continue reading
Posted in GE, Industrials | Tagged | Comments Off on Deep Dive on GE: Projected 2020 Consolidated Results

Deep Dive on GE: The 2020 Outlook for its Businesses

Given the complexity of its business mix and financial structure, valuing GE is not an easy exercise even under benign economic conditions.  The task is made even more difficult when there is considerable uncertainty about prospects for the global economy.

Continue reading
Posted in GE, Industrials | Tagged | Comments Off on Deep Dive on GE: The 2020 Outlook for its Businesses

Though It Might Be Delayed, GE’s BioPharma Sale is Set to Close

GE’s stock has been battered during this sell-off, falling much more than the broader market as a whole.  Since reaching an intra-day peak of $13.26 on February 12 (roughly one month ago), the stock has fallen 40.8% to its March 13 close of $7.85.  By comparison, the S&P 500 has fallen 19.8% over that same time frame.

Continue reading
Posted in GE, Industrials | Tagged , , , | Comments Off on Though It Might Be Delayed, GE’s BioPharma Sale is Set to Close

Recent Observations on Bed Bath & Beyond

The investor optimism that followed the October 2019 appointment of Mark J. Tritton as Bed Bath & Beyond’s CEO and continued after the company gave a preliminary upbeat assessment of its performance early in the Christmas selling season gave way to disappointment initially when it withdrew fiscal 2019 guidance in January and especially following the company’s update on its fiscal fourth quarter performance on Feb. 8.  Since reaching a peak of $17.79 on Dec. 18, the stock has fallen $8.30 or 52% to $9.49 on March 5.  Most of that decline occurred right after the fourth quarter update announcement. Most recently, the stock has been caught in the coronavirus market sell-off.

Continue reading
Posted in BBBY, Consumer Discretionary, Consumer Staples | Tagged , | Comments Off on Recent Observations on Bed Bath & Beyond

Brightcove’s “Disappointing” Quarter

On Thursday (2/21), Brightcove (BCOV) reported somewhat disappointing 2019 fourth quarter performance and guidance which caused its stock to plummet 12.8% on the open and end the day down 7.2% (from the previous close). Yet, buyers emerged quickly after the stock got slammed at the open.  The stock closed up 6.5% on the day from the opening low.

Continue reading
Posted in BCOV | Tagged | Comments Off on Brightcove’s “Disappointing” Quarter

A Strong Start for Housing

2019 was a solid year for U.S. housing.  While still subject to modest revisions, government figures show that new residential sales increased 10.4% from an estimated 617,000 units in 2018 to 681,000 units in 2019.  Single-family housing starts advanced 1.4% to an estimated 888,200 units in 2019 from 875,700 units in 2018.

Continue reading
Posted in Consumer Discretionary, Housing | Tagged , | Comments Off on A Strong Start for Housing

A Brief Update on StoneMor

StoneMor Partners, L.P. has passed a few milestones since my previous update in late September.  These accomplishments have advanced its turnaround, but more is needed including a significant rebound in its profitability before the effort can be declared a success.

Continue reading
Posted in Consumer Staples, STON | Tagged | Comments Off on A Brief Update on StoneMor

NJR Adjusts to Meet Its Challenges and Opportunities

Under new CEO Steve Westhoven, the business portfolio of New Jersey Resources (NJR) has evolved as it typically does in response to changes in its operating environment.  Its regulated utility operations, New Jersey Natural Gas (NJNG) and its Midstream segment, are increasing their contribution to NJR’s total earnings through expanded investment.  NJNG is benefiting from continued infrastructure investment and modest customer growth.  The Midstream segment is growing through acquisitions, including the pending acquisitions of Leaf River Energy Center and the Adelphia Gateway.  Growth in the regulated operations is replacing expected declining profits from New Jersey Clean Energy Ventures, which is anticipating a decline in state and federal tax benefits for renewable energy projects.

Continue reading
Posted in NJR, Utilities | Tagged | Comments Off on NJR Adjusts to Meet Its Challenges and Opportunities

Brightcove’s Prospects Look Brighter

A key change at Brightcove since my last post has been the turnover at the top.  In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with the Board to step down.  Andrew Feinberg, Brightcove’s COO, stepped in as interim CEO.

Continue reading
Posted in BCOV, Technology | Tagged | Comments Off on Brightcove’s Prospects Look Brighter

Homebuilder Stocks Fall as Optimism About Global Economic Growth Rises

Homebuilding stocks have been the best performing of the 150-odd sectors in the Dow Jones U.S. Total Market Index, up 44.4% over the past 12 months as of November 8. Last year, they declined sharply in the face of Federal Reserve rate increases; but they began to show signs of a bottom in late November, just ahead of the Fed’s decision to reverse course on interest rates.

Continue reading
Posted in Consumer Discretionary, Housing, Real Estate | Tagged , , | Comments Off on Homebuilder Stocks Fall as Optimism About Global Economic Growth Rises

Notes and Analysis from HPE’s 2019 Securities Analyst Meeting

At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth.

Continue reading
Posted in HPE, Technology | Tagged | Comments Off on Notes and Analysis from HPE’s 2019 Securities Analyst Meeting

SNH Still Seems Behind Goal on Asset Sales

SNH has set a goal of $900 million in announced or closed asset sales in 2019.  With more than nine months of the year gone, it has completed only $119.1 million in asset sales and has an estimated $125 million of pending sales.  Thus, total announced or closed asset sales to date are roughly $244 million, which means that the Trust must announce another $654 million of asset sales in the remaining ten weeks of the year in order to reach its target.  (If the $99 million in net proceeds that SNH received from the sale of RMR shares in July is counted toward the $900 million objective, it would have to sign up for $555 million of asset sales by the end of the year to reach its target.)

Continue reading
Posted in DHC, Real Estate, SNH | Tagged | Comments Off on SNH Still Seems Behind Goal on Asset Sales

Eliminating the RMR Discount

The five publicly-traded REITs that are managed by the RMR Group, Inc. (RMR), a Newton, Mass.-based property manager, have often traded at significant discounts to their peers. The discount has been attributed to the nature of the relationship between RMR and the REITs. RMR is an external REIT manager, which some claim raises potential conflicts of interest because the external manager can benefit at the expense of the managed REIT. For that reason, many analysts and investors prefer REITs that are internally managed, which they say better aligns the interests of management and shareholders.

Continue reading
Posted in Companies | Comments Off on Eliminating the RMR Discount

NYT Magazine Article on the Boeing 737 Max

The cover story in this week’s Sunday New York Times Magazine is “What Really Caused the Deadly Crashes of the Boeing 737 Max?“. While acknowledging that malfunctions caused the crashes, it also documents in detail the errors made by the crews of Indonesia’s Lion Air Flight 610 and Ethiopian Airlines Flight 302 that might have prevented them. It describes Lion Air’s dismal safety record and culture of corruption. It discusses the weaknesses and failures of the Maneuvering Characteristics Augmentation System (MCAS) that was incorporated in the Max to address certain design problems that can cause the aircraft to stall during takeoff. It also describes the global decline in “airmanship” – the ability of pilots to adjust intuitively to changes in aircraft performance and flight conditions – which was a contributing factor to these crashes.

Continue reading
Posted in BA, GE, Industrials | Tagged , | Comments Off on NYT Magazine Article on the Boeing 737 Max

StoneMor’s Rights Offering

This week, StoneMor Partners, L.P. (STON) announced that it has set a record date of September 26, 2019 for its upcoming rights offering. Soon thereafter, once the SEC declares the registration statement to be effective, the partnership will mail a joint proxy/prospectus to unitholders. STON anticipates that the rights offering will be completed early in the 2019 fourth quarter.

Continue reading
Posted in STON | Tagged | 1 Comment

A Review of the Markopolos Report on General Electric

On August 15, 2019, Harry Markopolos, who gained fame as the person who exposed the fraud perpetrated by Bernie Madoff, released a 175-page report entitled “General Electric, A Bigger Fraud Than Enron.” GE’s stock fell 11.3% on the day; but it has since regained all that it lost after GE, security analysts and the media criticized the analysis and conclusions of the report and questioned the motivations of Mr. Markopolos, who had entered into an agreement with an unnamed hedge fund to profit from a decline in GE’s share price. Although this tempest seems to have passed, I will offer some thoughts on the content of the Markopolos report and its potential implications for investors.

Continue reading
Posted in BHGE, GE, Uncategorized | Tagged , , | Comments Off on A Review of the Markopolos Report on General Electric

A Reset for Senior Housing Properties Trust

In response to the financial difficulties of its primary tenant, Five Star Senior Living (FVE), Senior Housing Properties Trust (SNH) has been forced to negotiate a change in the structure of their business relationship.  Specifically, SNH has agreed to cancel its five master leases with FVE and will instead have FVE manage the properties for a 5% annual fee.  This move is a consequence of the nationwide building boom in senior housing communities over the past decade that has put downward pressure on occupancy rates.  After providing some background on this issue, I will focus on the projected impact of this new business arrangement on SNH’s future financial performance.  Complicating the analysis is SNH’s decision to sell $900 million of mostly non-core assets to upgrade its portfolio and reduce debt.  SNH is among the earliest in its industry to address this problem and that should serve it well as others eventually are forced to come to grips with it.

Continue reading
Posted in DHC, Real Estate, SNH | Tagged , | Comments Off on A Reset for Senior Housing Properties Trust

The Old and New Five Star

Five Star Senior Living (FVE) and its landlord Senior Housing Properties Trust (SNH) have previously announced a restructuring of their commercial arrangements whereby SNH will cancel the five master leases that cover 181 senior living and skilled nursing facilities currently operated by FVE.  Under the new arrangement, FVE will manage those properties for SNH for a fee equal to 5% of gross property revenues and reimbursement of direct property operating costs. FVE will also have the opportunity to earn an annual incentive fee equal to 15% of the excess over targeted EBITDA for the properties up to a maximum of 1.5% of gross property revenues.

Continue reading
Posted in FVE, Real Estate | Tagged , | Comments Off on The Old and New Five Star

A Solid First Half for Housing and the Builders

A typical analysis from policy makers, like the Federal Reserve, points out that activity in the housing market has declined so far this year; but that assertion focuses primarily on housing starts.   A more complete picture from the national data shows that the housing market bounced back strongly in the 2019 first quarter from a steep 2018 fourth quarter slide.  The housing market was also able to hold on to those gains in the 2019 second quarter.

Continue reading
Posted in Consumer Discretionary, Housing, Real Estate, Uncategorized | Tagged , | Comments Off on A Solid First Half for Housing and the Builders

An Update on Bed Bath & Beyond

Bed Bath and Beyond, Inc. (BBBY) reported a fiscal 2019 first quarter loss of $2.91 per share, which included approximately $3.03 per share of unusual charges and expenses. Excluding these unusual items, adjusted EPS was $0.12 per share, at the high end of management’s guidance range of $0.07-$0.12, but lower than last year’s adjusted EPS of $0.38.

Continue reading
Posted in BBBY, Consumer Discretionary, Consumer Staples | Tagged | Comments Off on An Update on Bed Bath & Beyond

Bed Bath & Beyond’s Next Generation Lab Store

On Saturday, July 13, I visited the Bed Bath & Beyond (BB&B) store on Route 10 in East Hanover, NJ and also the Cost Plus World Market and buy buy Baby stores about two miles east on Route 10 in Livingston NJ.  Here are my photographs and observations on the East Hanover Bed Bath & Beyond store:

Continue reading
Posted in BBBY, Companies, Consumer Discretionary, Consumer Staples | Tagged | 1 Comment

Notes and Analysis from Merck’s Investor Day

On June 20, Merck held an investor day, its first in five years, to highlight its goals and objectives and provide a broad perspective on its five-year performance outlook.  Although its blockbuster cancer treatment, KEYTRUDA (pembrolizumab), has been a spectacular success, investors have been concerned about whether the company has growth potential from other medicines in its pipeline, especially looking out to 2023 when the Januvia/Janumet franchise faces a steep slide in sales following patent expirations.  During the presentation, management expressed confidence about the company’s growth prospects through 2023 and over the longer term.

Continue reading
Posted in Health Care, MRK | Tagged , | Comments Off on Notes and Analysis from Merck’s Investor Day

Bluegreen’s Share Price Plunges on Bass Pro Contract Cancellation

Shares of Bluegreen Vacations Corporation (BXG) received a double whammy in May from the parent company BBX Capital’s (BBX) decision to back out of its offer to buyback BXG’s public float – equal to 10% of outstanding shares – and by Bass Pro Shop’s decision to cancel its marketing arrangement with BXG.  Since the May 22 close of trading, the day before BBX announced that it would not proceed with its plan to take BXG private, the stock has lost nearly 50% of its value.

Continue reading
Posted in BXG, Real Estate | Tagged , | Comments Off on Bluegreen’s Share Price Plunges on Bass Pro Contract Cancellation

A Solid 2019 First Quarter for New Home Sales

As anticipated, the market for new single-family houses rebounded from a steep 2018 fourth quarter slide to post modest gains in the 2019 first quarter against fairly strong 2018 first quarter levels.  The primary driver of the housing rebound has been the decline in mortgage rates from the recent peak of 4.94% during the first week of November to 4.10% during the week of May 6, according to Freddie Mac.  With unemployment low and consumer confidence high, many potential buyers do not want to lose the opportunity of homeownership (or trading up to a larger home).  If economic conditions remain positive, the new homes market should see at least modest gains in 2019, especially as year-over-year comparisons become more favorable as the year progresses.

Continue reading
Posted in Housing | Comments Off on A Solid 2019 First Quarter for New Home Sales

Impairments Spark a Sell-Off, But Position BZH for an Earnings Rebound

Beazer Homes (BZH) reported a fiscal 2019 second quarter loss of $3.28 per share, compared with earnings of $0.36 per share in the comparable prior year quarter.  The loss included a large impairment charge and a much smaller gain on debt extinguishment totaling roughly $3.08 per share.  Excluding those items, fiscal second quarter earnings would have been about $0.20 per share.

Continue reading
Posted in BZH, Consumer Discretionary, Housing | Tagged | Comments Off on Impairments Spark a Sell-Off, But Position BZH for an Earnings Rebound