A Quick Look at the Price of Gold

These are tough times for investors in gold and even tougher times for investors in gold mining companies.  Since the beginning of 2011 (through Aug. 31, 2018), the price of gold, as measured by the continuous CME futures contract) has declined 15.1%.  Meanwhile, the two gold miner ETFs – GDX and GDXJ (the junior miners) – have lost 68% and 79% of their value, respectively. Continue reading

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Genworth Rate Increases a Potential Positive for GE

In its August 20th issue, Investment News reported that Genworth Financial had received approval from regulators in 22 states to raise costs (i.e. rates) an average of 58% on $160 million of its in-force long-term care policies this year.  The company had previously obtained an average 28% increase on $714 million of premiums in 2017 and a 38% hike on $719 million in 2016.  Genworth’s in-force LTC book had $2.65 billion of annual premiums at the end of the 2018 second quarter. Continue reading

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Notes from the Inbox . . . August 24, 2018

Here are the noteworthy items that crossed my desk during the week ended August 24, 2018: Continue reading

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A Process of Adjustment for the Homebuilders

2018 has been rough for homebuilding stocks.  The Lark Research Homebuilder Stock Index, which is an equal-weighted measure of the price performance of ten publicly-traded homebuilders, was down 19.9% year-to-date through August 3rd, far worse than the gains of 6.2% in the S&P 500 and 9.0% in the Russell 2000.
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GE Part 3: Contemplating GE Capital

Besides the recent weakness at Power and Oil & Gas, GE has been grappling with legacy issues at GE Capital.  Although it has been downsizing for more than a decade now – reducing its assets from $660 billion at the end of 2008 to $136 billion at June 30, 2018 – GE Capital still represents 40% of GE’s consolidated assets and it has not reported a profit since 2014. Continue reading

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GE Part 2: Assessing GE’s Value

On June 26, General Electric (GE) announced the outcome of its strategic review. Besides divestiture actions already announced, the company said that it will spin-off its Healthcare business over the next 12-18 months and distribute its 62.5% stake in Baker Hughes, a GE company (BHGE) over the next two to three years. Those actions would leave GE with three core businesses – Aviation, Power and Renewable Energy. Continue reading

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GE Part 1: 18Q2 Results

General Electric reported disappointing 2018 second quarter GAAP earnings attributable to shareholders of $736 million or $0.07 per share, down 30% from $1.03 billion or $0.10 per share last year.  Adjusted (Non-GAAP) EPS, according to the company’s definition, was $0.19 per share, down 10% from $0.21.  Non-GAAP EPS exceeded consensus estimates by a penny. Continue reading

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StoneMor’s Unit Price Plummets as it Files its Delayed 10-K

Since peaking at $32.01 in July 2015, the MLP units of StoneMor Partners LP (STON) have lost nearly 90% of their value.  The steepest part of the decline began in October 2016, just before STON cut its quarterly distribution in half and its CFO Sean McGrath resigned.  In early 2017, the company delayed the filing of its financial statements with the SEC because of errors that it discovered in the reporting of cemetery revenues and deferred revenues.  Subsequent quarterly filings were also delayed, and the company has not yet completely caught up on its filing requirements. Continue reading

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Bed Bath But Not Beyond Hope

  • BBBY has lost 70% of its value over the past three years. Profits are down sharply mostly because of price competition. Store comparable net sales have been falling mid-single digits, offset by growth in online/mobile sales and other areas.
  • Management is seeking to grow revenues in key product categories, increase store traffic, deleverage gross margin and SG&A expenses, reduce lease costs, upgrade digital offerings and improve working capital management.
  • Management’s guidance and goals suggest that EPS will decline through fiscal 2019 but at a slowing rate.
  • At 9 times 2018 EPS and 10 times 2019 EPS, BBBY trades at a discount to peers. My price target is $30, assuming a return to EPS growth in 2020. Meanwhile, the stock has an attractive and reasonably safe 3.2% dividend yield.
  • From a technical perspective, the stock looks like it will retest the recent May 9 low. If it does successfully, it may then face resistance as it bounces back to the $21-$24 range.

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Arch Coal (ARCH) 18Q1 Update

2018 First Quarter Results. On April 26, Arch Coal reported disappointing 2018 first quarter results. Adjusted EPS for the quarter was $2.95, up from $2.82 last year, but behind the consensus forecast of $4.22.  Revenues declined 4.3% to $575.3 million, $20.4 million below consensus. Total tons sold declined 7.8% to 23.7 million. All three of Arch’s business segments – the Powder River Basin, Metallurgical and Other Thermal suffered volume declines. Continue reading

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