Filed under: International markets, Top Picks 2007, Canada, Bargain stocks, Chasing Value, Oil, Stocks to Buy, Best Stocks for 2008

In seeking value stocks that have seen their share prices greatly diminished this past year based on reduced earnings, I came across Precision Drilling Trust (NYSE: PDS), which has a price earnings ratio (P/E) near 5 and a dividend yield over 10%. According to AOL Money & Finance information the company is Canada’s largest drilling contractor with a fleet of 240 service rigs. Its contract drilling units provide drilling services, equipment supply and repair, and on-site catering and management. PDS has extended their reach into the United States this year and has invested in new technology, replaced older rigs, and is preparing for continued expansion. Favorable metrics include a low P/B of 1.57 and high historic profit margins of 40%.

PDS closed today at a price of $15.47 per share near its 52 week low of $15.35, a low set today during the trading day, and 44% off its high of $27.78. The P/E is a trailing figure and is actually higher but the dividend looks secure. The dividends have been paid monthly. The company earned $0.58 for the third quarter implying an annual return of $2.32 if earnings do not slip further. That would give it a forward P/E of 6.68. This is comprable to other energy sector stocks, unless earnings are further eroded. The winter weather makes working PDS’s drilling rigs harder. I am looking for the spring thaw to also thaw out its earnings.

Disclosure: I own shares of PDS

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

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Filed under: Stocks to Buy

Despite a probable U.S. economic slowdown, global growth is proceeding at a better-than-adequate pace (so far), with infrastructure work playing a significant role, and that’s good news for The Shaw Group.

The Shaw Group Inc. (NYSE: SGR) is a leading supplier of industrial piping systems, including engineering, pipe erection, and construction/maintenance services.

Analysts really like the fact that Shaw Group has also positioned itself as one of the largest engineering and construction contractors for the power generation market and as a top environmental services company. Analysts also like SGR’s large geographic footprint.

Further, in general Wall Street expects 15%-20% revenue growth for fiscal year (FY) 2008, and 12%-15% for 2009, with adequate margins. The Reuters FY 2007/FY 2008 EPS consensus estimates for SGR are $2.44 to $3.41

The risks? Analysts are monitoring potential cyclical declines in markets of SGR’s customers, overall cost containment, and the company’s order backlog.

The First Call mean rating for SGR is: Buy [12 firms]. Mean 2008 target: $74.00 [high: $90, low: $65].

Stock Analysis: The Shaw Group is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from SGR’s shares. Sell/Stop Loss if you were to purchase shares in this company: $44.

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Filed under: Hewlett-Packard (HPQ), Goldman Sachs Group (GS), Oracle Corp (ORCL), Israel

With stock markets continuing to spiral downward and valuations getting cheaper and cheaper, I wouldn’t be surprised to start seeing a big pickup in mergers and acquisitions (M&A). Yesterday came news of the Israeli company NetManage, Inc. (NASDAQ: NETM) being acquired by Rocket Software for approximately $69 million, a 95% premium over the previous days closing price. That is also coming on the heals of Hewlett-Packard Company (NYSE: HPQ)’s purchase of Nur Macroprinters Ltd. (OTC: NURMF.pk) earlier in the week. Israeli M&A is back with a vengeance. A very slow year up until now has suddenly turned hotter than the New England Patriots.

With the focus squarely back on foreign firms picking up Israeli publicly traded firms for cheap, here are 3 M&A picks for to keep an eye on.

Continue reading Three Israeli takeover targets

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Filed under: Earnings reports, Technical Analysis, Stocks to Buy

Korn/Ferry International (NYSE: KFY) runs the largest executive recruitment firm in the world, working through more than eighty offices in thirty-nine countries. Executive Search, the firm’s core business, focuses on board level, CEO, and other senior executive positions for clients in the consumer, financial, industrial, technology, and life sciences industries. Through the company’s Futurestep service, job seekers use the Internet and videotaped job interviews to locate mid-level management positions.

The firm pleased investors last week, when it reported fiscal second quarter (Q2) earnings per share (EPS) of 37 cents and revenues of $206.8 million. Analysts had been looking for 33 cents and $190.1 million. Management also guided Q3 EPS to 34-39 cents, versus a Street consensus of 33 cents. KFY shares popped on the news and then moved into a bullish “flag” consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three “strong buys”, five “holds” and a “sell”. Analysts expect a 15% average annual earnings growth rate, through the next five years. The KFY P/E ratio (15.08), PEG ratio (1.01), Price to Sales ratio (1.25), Price to Book ratio (2.11), Price to Cash Flow ratio (13.94), Price to Free Cash Flow (15.11), Sales Growth rate (25.49%), EPS Growth rate (19.35%) and Return on Assets (8.50%) compare favorably with industry, sector, and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $15.35 and $27.13. A stop-loss of $16.60 looks good here if one were to invest in it.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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Filed under: Earnings reports, Good news

Ferrellgas Partners L.P. (NYSE: FGP) is the nation’s second largest propane distributor with more than 1 million customers all over the country. The company recently released first quarter (Q1) fiscal year (FY) 2008 results, always a difficult quarter in the company’s seasonal heating cycle. Q1 gross profit set a record of $131.4 million, and adjusted EBITDA rose 18% to a record $23.2 million. These numbers are quite impressive given the fact that Ferrellgas faced record wholesale costs for propane and October temperatures that were 24% above normal, reducing the need for propane heating usage by 20 million gallons.

Ferrellgas did post a seasonal net loss for Q1, but it was $6 million smaller than last year’s seasonal net loss, indicating that Ferrellgas has made serious efforts to control other types of fixed costs to compensate for reduced off-season cash flow. While operating expenses edged up slightly, this increase was offset by a decrease in equipment leasing expenses. Ferrellgas is well positioned to return to its typical profit pattern in the winter heating season in Q2 FY 2008.

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Filed under: Earnings reports

Fleetwood Enterprises Inc. (NYSE: FLE) manufactures motor and mobile homes, as well as other types of manufactured housing. The market has not been kind to the company for the past several years, as gas prices and other costs continue to escalate.

Nevertheless, Fleetwood has been actively rearranging itself, cutting excess manufacturing capacity, selling off unwanted assets, producing more fuel-efficient motor homes and RV trailers. These steps have made a difference in the 2Q FY 2008 results that company recently posted.

For starters, the company actually posted operating income this quarter, $4.4 million — quite a change from last year’s 2Q operating loss of $15.2 million. This quarter’s operating income was offset by $3 million in write-downs, leading to a $1.2 million net loss, or $0.02 per share for the quarter, a big improvement over a net loss of $20.4 million or $0.32 per share in 2Q FY 2007.

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Filed under: Stocks to Buy, Technology

For long-term plays, the preferred investment is a company with a demonstrated business model (10 years), in an established market, with an average total annual return on equity of 20% during that span.

To be sure, First Solar (NYSE: FSLR) does not fit that profile, but it’s worth a review, given both macro fundamentals and the company’s outlook. Note: Underscoring, this is a high-risk stock.

First Solar uses an advanced, thin-film technology which uses cadmium telluride semiconductor material to convert sunlight into electricity. With a global polycrystalline silicon shortage holding back some producers of solar cells, First Solar’s glass as substrate, coated with cadmium telluride can march ahead, while others await their raw materials.

Continue reading First Solar: Potential, but not for the squeamish

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Filed under: Deals, Products and services, Consumer experience, Dell (DELL), Technology

One of the main concerns with EqualLogic customers when Dell (NASDAQ: DELL) announced it was acquiring the company was a question of customer and reseller support continuing at the level where it had been. As many of us know, an acquisition can disrupt normal operations as smaller companies are folded into the large bureaucracies of newer parent companies. The delicate balance of not ticking off existing customers in the process is a huge concern.

Nothing reassures customers of a small but important company like a celebrity CEO directly addressing issues before issues even come up. Dell CEO Michael Dell is making his case directly to existing EqualLogic customers and retail channel partners by stating that the acquisition will be a smooth process and EqualLogic customer support will remain at the high levels where it has always been.

Continue reading Dell assures EqualLogic customers of painless acquisition

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Filed under: Press releases, Rants and raves, Merck and Co (MRK), Top Picks 2007, Bargain stocks, Chasing Value, Stocks to Buy, Newcastle Investment (NCT), Best Stocks for 2008

When I posted Chasing Value: Newcastle’s 21.9% yield too good to be true?, I said that the metrics don’t really matter as long as Newcastle Investment Corp (NYSE: NCT) stays open for business and keeps paying that dividend!

Today came the announcement that NCT will be distributing $0.72 per share for the fourth quarter, on January 30, 2008, to shareholders of record on December 31. This represents a 20% dividend yield — not too shabby, but a little lower based on today’s price, hovering around $14.00. When I first posted, the stock was 10% lower and yield was 10% higher.

Continue reading Chasing Value: Newcastle makes good on dividends — 20% yield is still great

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Filed under: After the bell, Good news, PepsiCo (PEP)

Rigel Pharmaceuticals, Inc. (NASDAQ: RIGL): Sees good news on its rheumatoid arthritis drug. Jumps to $26.45 up from 52-week low of $6.64.

Savient Pharmaceuticals, Inc. (NASDAQ: SVNT): Gets strong results from late stage trials for drug which effectively treated patients with gout. Shares move up to $18.58 from 52-week low of $10.58.

BioMarin Pharmaceuticals, Inc. (NASDAQ: BMRN): FDA approves company’s new drug. Stock up to $30.49 and more after hours from 52-week low of $15.53.

Coca-Cola Enterprises Inc. (NYSE: CCE): Has a strong earnings outlook for next year. Moves up to $26.83 from 52-week low of $19.78.

PepsiCo, Inc. (NYSE: PEP): No news. Just a safe, successful place to put money. Up to $78.78 from 52-week low of $61.89.

Douglas A. McIntyre is an editor at 247wallst.com.

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