Archive: July, 2008

GTLS: Chart Industries Off the Chart Performance

My latest column is up at RealMoney.

Chart Industries (GTLS) is a leading independent global manufacturer of highly engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases. As an infrastructure supplier to the energy industry, Chart lies at the intersection of two major investment themes that I think will continue to work for some time.

The advertising bombardment relating to T. Boone Pickens’ “Pickens Plan” can’t hurt Chart. A central component of the plan is to increase the use of natural gas in transportation.

For the Pickens Plan to work, money will have to be spent building out an infrastructure to transport the gas from remote areas to those where it is needed. Enter Chart, which supplies engineered equipment used throughout the global liquid-gas supply chain.

While the Pickens Plan ads may increase awareness of natural gas, Chart has been doing fine without it. Sales grew 24% in 2007, but backlog grew at twice that rate. The current backlog amounts to more than 60% of projected 2008 sales, offering high visibility.

What’s more, demand continues to rise. In a recent note, Lehman Brothers estimated that the expansion plans of a single customer (Energy World Corporation) could mean more than $250 million in additional orders for Chart.

For a company that looks like it can generate 20% annual growth, I don’t really require the free-cash-flow yield to be higher than the 3.2% return on five-year Treasury bills. The growth alone is sufficient reward for the risks involved.

Seen another way, the average free-cash-flow yield in the S&P 1500 Supercomposite is about 3.1%, and the average growth forecast is 14%. With Chart, you get higher growth at a lower valuation.

If Chart can grow its cash flow 20% over the next year and increase its valuation so that the free-cash-flow yield matches the Treasury yield, the stock could more than double in that time. That would make for a (stock) chart I could appreciate.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

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GD: General Dynamics Set to Regain Altitude

My latest column is up at RealMoney.

General Dynamics operates through four business groups: aerospace, combat systems, marine systems and information systems and technology. The way I see it, the sum of these parts is greater than the whole.

The aerospace division consists of Gulfstream business jets and accounted for 18% of the company’s sales in 2007. I believe investors have some doubts about whether the pace of private jet sales can be sustained in an economic downturn. Although the company’s backlog extends past 2010, investors are likely to react more strongly to new orders than to shipments from backlog. It’s worth noting, though, that more than half of Gulfstream sales are outside the U.S. Another 35% of revenue accrued to the information systems and technology group, which provides electronics and software primarily used for defense purposes.

Combat systems accounted for 29% of sales and produces a variety of products, most notably the Stryker armored combat vehicle that has been so necessary in Iraq and Afghanistan. Stryker shipments under the current contract wind down in 2009, so the group will likely contribute less to future sales for some time, barring an escalation in combat operations. However, the unit continues to develop new systems and is expanding sales internationally.

As combat systems slow, marine systems seem poised to pick up the slack. In particular, production of Virginia-class submarines is now expected to double to two per year by 2011, one year earlier than previously thought. The unit’s 18% share of 2007 revenue should rise in the years ahead.

Sales forecasts through 2009 are more or less in the bag. The company’s backlog at the end of March was $50 billion, and annual sales are in the $30 billion range. What’s more, both orders and prices for aerospace and defense equipment have been increasing rapidly in the last few months. The backlog looks like it could grow still further.

The company has a strong track record of exceeding earnings expectations, and analysts have been raising their 2008 and 2009 estimates over the last three months. Meanwhile, the stock has fallen more than 15% since mid-May. The current valuation could be a strong buying  opportunity.

Disclosure: At time of publication, William Trent has no financial position in the companies mentioned in this article.

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CNBC Bonus Bucks Trivia: In the feature, “Sucker’s Rally? Stock Gains Likely to Be Short-Lived” which analyst used the phrase, “sucker’s rally”?

In the feature, “Sucker’s Rally? Stock Gains Likely to Be Short-Lived” which analyst used the phrase, “sucker’s rally”?

“It’s a sucker’s rally,” Kathy Boyle, president of Chapin Hill Advisors, says of this week’s market move.

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CNBC Bonus Bucks Trivia: In a July 15 CNBC interview, Jim Rogers used which metaphor in discussing a Fannie Mae/Freddie Mac bailout?

In a July 15 CNBC interview, Jim Rogers used which metaphor in discussing a Fannie Mae/Freddie Mac bailout?

Band-aids for cancer.

Topics: Fannie Mae (FNM), Freddie Mac (FRE) | No Comments

CNBC Bonus Bucks Trivia: In the Fast Money post, “No Guts No Glory – Pt. II” what animal metaphor is used to describe value investing?In the Fast Money post, “No Guts No Glory – Pt. II” what animal metaphor is used to describe value investing?In the Fast Money post, “No Guts No Glory – Pt. II” what animal metaphor is used to describe value investing?

In the Fast Money post, “No Guts No Glory – Pt. II” what animal metaphor is used to describe value investing?

For her latest amazing feat Finerman puts her head directly into the lion’s mouth.

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Annual Report Service

As a fundamental investor, I think it is important to read a company’s regulatory filings before investing. This is a big reason why Stock Market Beat has partnered with the Annual Report Service to bring you free access to download and hardcopy investor kit information on thousands of public companies worldwide.  You don’t even pay for shipping!  You can follow the “Annual Reports” links on the site (next to the club symbol), or just click below: http://stockmarketbeat.ar.wilink.com

Also, I’ve added a News Headline section for newly available reports.  You can see it at the top of the right nav bar on the site.  This is updated daily, as new documents, filings, and investor materials become available for all companies in the service.  Just click any headline and it will take you straight to that company’s information.

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CNBC Bonus Bucks Trivia: In Bob Pisani’s “ETFs: An Investor’s Primer” which fund-accessible nations are named?

In Bob Pisani’s “ETFs: An Investor’s Primer” which fund-accessible nations are named?

For stocks, the world is your oyster with ETFs: you can buy sectors like healthcare or energy.  You can also buy into country-specific funds like Taiwan, Singapore, or Brazil, or regional funds like Asia and Europe.

Though Asia and Europe are also mentioned, they do not qualify as “nations.”

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CNBC Bonus Bucks Trivia: Which “eye-catching” word or phrase is NOT found in managing editor Allen Wastler’s Two-Way Street blog post of July 8?

Which “eye-catching” word or phrase is NOT found in managing editor Allen Wastler’s Two-Way Street blog post of July 8?

Perp-walk is not in the post.

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CNBC Bonus Bucks Trivia: In the July 17 Mad Money post, “Oil Down, Banks Up?” which fictional realm does Mad-man stock guru Jim Cramer reference?

In the July 17 Mad Money post, “Oil Down, Banks Up?” which fictional realm does Mad-man stock guru Jim Cramer reference?

The past two days have seemed like Bizarro World in the markets.

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CNBC Bonus Bucks Trivia: CNBC Stock Blog: On Tuesday, Jim Rogers specifically said he has been short:

CNBC Stock Blog: On Tuesday, Jim Rogers specifically said he has been short:

Rogers noted that he’s “been short Fannie Mae since I came here three years ago or four years ago,” adding that “I’m short lots of banks.”

Topics: Fannie Mae (FNM) | No Comments