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Today's Random Thoughts



March 24, 2013 – Comments (8) | RELATED TICKERS: VOD , MDLZ , NESC

How's that for a title that will generate clicks and recs.  On a Sunday during March Madness too.  You can tell that I'm not doing this for the glory ;).

Here's a few random thoughts that I had while doing my regular reading on investing today:

Vodafone (VOD)

Vodafone Eyeing $135 Billion Sale Of Verizon Wireless Stake -Report

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If this was to happen I think that I would officially say goodbye to VOD.  The company has for the most part been mismanaged for quite some time and the VZ catalyst will be gone.  The last thing that I want to do is give its management time to waste the massive amount of cash that it will receive in such a deal.  Hopefully the move would cause the stock to pop, offering a nice exist point.


Picks and Shovels 

Here's an interesting excerpt from Kopin Tan's article in this week's Barron's on how to play the boom in natural gas here in the U.S. Mentioned of course is Special Ops' very own Heckmann (HEK).

THE BOOM IN U.S. NATURAL-GAS production gives local manufacturers access to cheaper energy and helps energy-intensive businesses like chemical producers and steel makers (see "The Next Boom," Jan. 28). Less apparent is how it's also fueling demand for a host of support services, like those from water-treatment companies, environmental consultants, and testing-equipment makers.

Fracking, or hydraulic fracturing, pumps chemically treated water through rocks to extract oil and gas. Roughly 70 billion to 140 billion gallons of water are used in the 50,000 U.S. wells each year, enough to fill 150,000 Olympic-size swimming pools, and all that water must be transported, treated, recycled, or disposed of. "Some of the best investment opportunities are in the suppliers helping the industry to operate more efficiently, reducing pollution, and meeting increasingly strict environmental controls," notes Simon Gottelier of Impax Asset Management. "We could be about to witness a modern-day equivalent of selling shovels during the gold rush."

Among Impax's investments are companies that supply and remove water for shale exploration, including Aqua America (WTR), American Water Works (AWK), Heckmann (HEK), and Veolia Environment (VE); and those that help inject and remove fracking water, like Xylem (XYL) and Gorman-Rupp (GRC).

Xylem, for instance, was spun off from ITT (ITT) in 2011 and is known as a pump supplier, but it also monitors pollution and treats water. Xylem reported no increase in 2012 revenue over 2011's, as customers put off spending amid global fiscal worries. At $28, the shares fetch 15 times projected profits—in line with the machinery sector and a discount to water-treatment stocks. Yet Xylem has a solid cash flow, a 1.6% dividend yield, and one of the broadest arrays of water services in a fragmented, growing industry.

I am personally long both XYL and HEK. I have to say though I believe the author is exaggerating the impact upon XYL's results. Also, I don't why they're buying American Water Works (AWK) as a play on the sector. If its impact on XYL is small, the impact upon AWK is microscopic. I should know, I recently sold the company after it nearly doubled. It's time to shine has passed, it should be a fairly boring play going forward.


Mondelez (MDLZ) 

Mondelez, PepsiCo shares up after report of Peltz stake,0,4520852.story

I mentioned recently that I decided to keep Mondelez and sell Kraft in my real money portfolio.  The decision is looking good so far.   I definitely would welcome Peltz's involvement as an activist.


Starboard Steps Up the Pace of War

An interesting article on one of my favorite activist investors.  


I have my monthly wrap-up article coming some time in the next week or two.  This is going to be a good one.  After taking a slight breather a couple of weeks ago, my CAPS portfolio is on fire again.  The charity challenge, new picks, sales, performance, etc...  Lots of stuff to talk about.

Anyone come across any interesting new ideas lately?  I'd love to hear them.

Thanks for reading. 


8 Comments – Post Your Own

#1) On March 24, 2013 at 7:26 PM, HarryCaraysGhost (84.23) wrote:


Reposted on the Randomness board-

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#2) On March 24, 2013 at 8:15 PM, TMFDeej (97.71) wrote:

Thanks Harry. I could be even been even more random if I didn't have to eat dinner when it was ready or help get the kids to bed :). 

Heres some more random thoughts:

Don't expect to win if you're letting your kids fill out your NCAA bracket based upon teams' mascots. My son has a favorite stuffed animal bulldog.  Last night's elimination of Gonzaga and Butler ruined the chances for the all Bulldog championship that we were pulling for :).


Rockwood to combine two units in possible $2 bln sale -sources

One of my real money holdings, Rockwood Holdings was having a tough ttime selling its stinky Titanium Dioxide  business at a multiple that it was happy with, so it decided to buy out its minority partner and talke possession of the entire thing. It may seem counterintuitive that it would buy more of something that it didn't want, but it looks like Rockwood is going to combine the Titanium Dioxide business with another slightly more attractive business that it is considering selling as a package deal.

I think that its a good move.  Hopefully once the sale is done not only will Mr. Market reward ROC with a higher multiple, but it will have even more money that it can return to shareholders. ROC's recent buybacks announcement was received extremely well by investors. Hopefully hers more of that to come. 


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#3) On March 24, 2013 at 8:43 PM, TMFDeej (97.71) wrote:

I definitely need to read Business Week's cover story on David Einhorn. I've been a big fan of his for a long time:


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#4) On March 24, 2013 at 8:54 PM, TMFDeej (97.71) wrote:

Now that all of the Bulldog teams have been eliminated from the tournament I think that I'm going to have to root for Florida Gulf Coast. Those guys are playing amazing right now. What a great story it would be if they made the Final Four.  

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#5) On March 24, 2013 at 9:18 PM, TMFDeej (97.71) wrote:

I'm definitely not a Carl Ichan fan, but this section of a recent article about him contains some fantastic information on how to profit by following activist investors into stocks:

 Tracking the returns

Ken Squire is founder and principal of 13D Monitor, a research service that tracks activist investing and has data on Icahn-led activist situations since 1994, when the investor targeted Samsonite Corp. The average return of the 85 positions since then was 18.7% (measured until he closed the position, if at all), compared to 12.7% for the Standard & Poor’s 500 over comparable time frames.

Yet this impressive-seeming average outperformance should be viewed in the context of a general tendency of stocks to outperform once they have attracted the intense interest of known activist investors. In other words, this doesn't apply to Icahn alone.

Squire calculates that, following a 13D filing, the shares of companies larger than $1 billion in market value have historically outperformed the S&P 500 by an average of 16 percentage points over the subsequent 15 months. A separate study of nearly 300 activist actions by hedge funds between April 2006 and September 2012 found a similarly strong record of success. Squire runs the relatively new (and so-far small) 13D Activist mutual fund (DDDAX), which chooses stocks from among ongoing activist situations and beat the S&P 500 by 5.27% in 2012, after fees.

Squire takes into account the past record of specific activist investors when considering fund holdings. Hedge fund JANA Partners, for example, has a strong success rate in its arm-twisting maneuvers on corporate executives it deems lacking. One of its prominent targets currently is Canadian fertilizer giant Agrium Inc. (AGU).

Great stuff.


Can Investors Win By Following Icahn Into Battle?


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#6) On March 25, 2013 at 5:42 PM, constructive (99.97) wrote:

Here's a random thought for you:

AVG IPOed last year and could be a takeover target.

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#7) On March 25, 2013 at 6:31 PM, Option1307 (30.63) wrote:

As a shareholder of VOD I'm paying close attention to all the latest ramblings in the news about a possible sale/merger/etc.

I'm not sold that something is actually going to happen in the near future, there were similar rumblings last fall without any real outcome. However this plays out, I too will be selling my shares. I never bought into VOD with a long term mind set, I simply assumed that their minority interest in Verizon wireless was undervalued. So if they sell, no more reason to keep the shares! Hopefully things will continue to run up as these talks and eventually deal progresses!!

Thanks for the great article on Einhorn, I had not seen that. He's a great voice to listen to and a fascinating person in general. Always enjoyable to read more about him. 

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#8) On March 25, 2013 at 6:45 PM, Option1307 (30.63) wrote:

Random thought:

I've started to become interested in Veolia (VE), a water infrastrutuce company that also has a large prescence in the waste management sector as well.

There isn't really a short term catalyst that you typically like but I like their long term theme. Water infrastructure/cleaning and waste disposal seem like no brainers. They also pay a solid dividend while you wait things out. They have had quite a lot of debt, recently began paying that down, which is certainly not something I like to see. 

I haven't looked into this more than a quick glance, hope to spend more time later this week, but seem intriguing on an overall market pullback. 

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