Among the phrases that investors hate to hear, “accounting restatements” ranks near the top.  #-ad_banner-#At a minimum, it means that a company maintained sloppy accounting standards. Worst case, it means that a fraud was perpetrated, such as a leading sales executive lying about contracts or a financial officer cooking the books.  Yet, there can be a silver lining. It can push shares well below intrinsic value to the point that upside results simply from new management cleaning up the mess. That’s the setup in place for Hertz Global Holdings (NYSE: HTZ). Read More

Among the phrases that investors hate to hear, “accounting restatements” ranks near the top.  #-ad_banner-#At a minimum, it means that a company maintained sloppy accounting standards. Worst case, it means that a fraud was perpetrated, such as a leading sales executive lying about contracts or a financial officer cooking the books.  Yet, there can be a silver lining. It can push shares well below intrinsic value to the point that upside results simply from new management cleaning up the mess. That’s the setup in place for Hertz Global Holdings (NYSE: HTZ).   Hertz’s accounting woes began many quarters ago, and as recently as June, appeared to be attributable to manageable missteps, which analysts at RGL Forensics explained here.  Hertz didn’t have just one set of math errors to justify; it had a litany of them. At the time, the various accounting issues seemed to fall under the umbrella of improper recognition of various expenses, depreciation and receivables rather than any sort of malfeasance.  Nevertheless, many investors stuck around over the summer, expecting an eventual tidy resolution. Yet when… Read More

Judging by the numbers, buyback plans remain extremely popular. In the S&P 500, 374 companies, or 75% of the index, bought back shares in the third quarter, according to Factset Research. Those companies spent $567 billion as of the end of the third quarter on a rolling 12-month basis. That’s up 27% from the prior 12-month period. Those are stunning numbers. Yet a debate is raging in investment circles. Are share buybacks the best use of corporate funds?  And equally important, are they a boon to investors that are in search of market-beating stocks? #-ad_banner-#The first question goes to the… Read More

Judging by the numbers, buyback plans remain extremely popular. In the S&P 500, 374 companies, or 75% of the index, bought back shares in the third quarter, according to Factset Research. Those companies spent $567 billion as of the end of the third quarter on a rolling 12-month basis. That’s up 27% from the prior 12-month period. Those are stunning numbers. Yet a debate is raging in investment circles. Are share buybacks the best use of corporate funds?  And equally important, are they a boon to investors that are in search of market-beating stocks? #-ad_banner-#The first question goes to the heart of capital allocation. Deploying funds toward buybacks can lead to a hike in debt, stunt the growth of dividends or starve capital spending plans of badly-needed fuel. To be sure, some companies, especially those that bought back shares when they traded at much higher levels, didn’t make the right choice. But for investors, buybacks are usually a clear positive. Since 2008, companies with the largest buyback programs by dollar value have outperformed the broader market by 20%, according to Barclays. The PowerShares Buyback Achievers ETF (NYSE: PKW) has delivered an 18.7% annualized gain over the past… Read More

When the directors at Aspen Insurance Holdings Ltd. (NYSE: AHL) were asked if they would sell the company to Endurance Specialty Holdings Ltd. (NYSE: ENH) for $3.2 billion, their answer was, “no thanks.” Endurance was making such overtures in early 2014. At the time, Aspen sported tangible book value per share of $50, roughly 10% more than the proposed purchase price. Thanks to ongoing profit gains since then, Aspen’s tangible book value per share raised to $54 a share. If Endurance really wants to buy this insurer, then it needs to hike its buyout offer… Read More

When the directors at Aspen Insurance Holdings Ltd. (NYSE: AHL) were asked if they would sell the company to Endurance Specialty Holdings Ltd. (NYSE: ENH) for $3.2 billion, their answer was, “no thanks.” Endurance was making such overtures in early 2014. At the time, Aspen sported tangible book value per share of $50, roughly 10% more than the proposed purchase price. Thanks to ongoing profit gains since then, Aspen’s tangible book value per share raised to $54 a share. If Endurance really wants to buy this insurer, then it needs to hike its buyout offer another $10, to around $54 a share. Aspen’s board is aware of a simple investing fact, which was often discussed by Graham & Dodd, the patriarchs of value investing. If a business carries more net assets on its books than the current share price reflects, then the business could simply be broken up to fully realize the best price. In fact, as recent mergers and acquisitions trends show in the insurance industry, book value can be seen as a floor not a ceiling. Roughly six weeks ago, Renaissance Holding Ltd. (NYSE: RNR) offered to buy Platinum Underwriters Holdings Ltd. Read More

Back in my Wall Street research days, we called it “Going to the dark side.” Every year, a few of our fellow research analysts would announce that he is quitting and going to work for a company he was once tasked to follow. The move can make sense. Analysts often know a great deal about the competitive environment in the industries they follow, and they develop strong opinions about which companies in an industry have the right management vision and which ones don’t. #-ad_banner-#Jonathan Litt took a slightly different route. He parlayed a decade’s worth of buy-side and sell-side real… Read More

Back in my Wall Street research days, we called it “Going to the dark side.” Every year, a few of our fellow research analysts would announce that he is quitting and going to work for a company he was once tasked to follow. The move can make sense. Analysts often know a great deal about the competitive environment in the industries they follow, and they develop strong opinions about which companies in an industry have the right management vision and which ones don’t. #-ad_banner-#Jonathan Litt took a slightly different route. He parlayed a decade’s worth of buy-side and sell-side real estate research experience into his own investment firm, which, you guessed it, focuses on real estate. In 2008, Litt launched the hedge fund LandandBuildings, which currently has a respectable, but not massive, $100 million in assets under management. Though there are hedge funds with considerably more capital deployed in real estate, few have cultivated the spotlight as well as Litt. Back in his Wall Street days, he was known for his blunt style of writing and often harsh opinions about the companies he followed. And these days, he’s using that style to rattle the cages at… Read More

When stocks or commodities are tumbling, traders start to prepare for “capitulation.” That’s typically the final phase in a sell-off, characterized by a complete absence of buyers and one last massive exit by sellers.  Investors are hoping we are nearing the capitulation phase in oil prices and related stocks. First, an increasing number of hedge funds are using options contracts to position their portfolios for an imminent rebound in crude prices. Second, oil industry insiders have tacitly declared a bottom by embarking on a large-scale wave of insider buying.  There is good reason to believe that oil prices… Read More

When stocks or commodities are tumbling, traders start to prepare for “capitulation.” That’s typically the final phase in a sell-off, characterized by a complete absence of buyers and one last massive exit by sellers.  Investors are hoping we are nearing the capitulation phase in oil prices and related stocks. First, an increasing number of hedge funds are using options contracts to position their portfolios for an imminent rebound in crude prices. Second, oil industry insiders have tacitly declared a bottom by embarking on a large-scale wave of insider buying.  There is good reason to believe that oil prices have come close to a bottom, and it’s known in economic circles as “supply destruction.” More and more oil exploration projects are being cancelled as $65 oil makes these efforts much less feasible. There’s no way to precisely correlate supply cuts with price support, but the longer-term impact is undeniable: Energy producers will pump less oil out of the ground in 2015 and 2016 than they had planned to just six months ago. #-ad_banner-#Assuming oil prices find a floor near current levels, a number of energy stocks are poised to stage a relief rally. The key is to… Read More

The Bosphorus River, which divides the eastern and western sections of Istanbul, is also thought of as the dividing line between Asia and Europe. Indeed, that location has enabled Turkey to develop strong trading relationships in every direction. As the global economy rebounded from the 2008 crisis, Turkey’s fast-growing role in world trade helped the country lure massive sums of foreign money, which led to 9% GDP growth in 2010 and again in 2011. #-ad_banner-#Then, the Turkish miracle abruptly ended. Inflationary bottlenecks appeared in the economy, eventually leading central bankers to boost interest rates to nearly double-digits. And the frenzy… Read More

The Bosphorus River, which divides the eastern and western sections of Istanbul, is also thought of as the dividing line between Asia and Europe. Indeed, that location has enabled Turkey to develop strong trading relationships in every direction. As the global economy rebounded from the 2008 crisis, Turkey’s fast-growing role in world trade helped the country lure massive sums of foreign money, which led to 9% GDP growth in 2010 and again in 2011. #-ad_banner-#Then, the Turkish miracle abruptly ended. Inflationary bottlenecks appeared in the economy, eventually leading central bankers to boost interest rates to nearly double-digits. And the frenzy of investments led Turkey to run large trade deficits, leading economists in 2013 to categorize the country as one of the “Fragile Five.” Adding insult, local trading partners, such as Egypt and Syria, saw their economies collapse amid political upheaval. And Europe, which had been making overtures about an eventual Turkish entry into NATO, dimmed its ardor for the country, and the prospects of an imminent NATO entry have since vanished. Fast forward to the third quarter of 2014, and the Turkish economy is growing at just a 2% pace, which economists believe will mark the… Read More

The recent plunge in oil prices is just the latest bit of bad news for investors in commodities. Slumping Chinese demand for iron ore, copper and many other items has led to a forgettable year for metals as well. Even the safe havens of gold and silver are losing their luster. Few expect a rapid price rebound for many commodities in 2015 as producers must reckon with too much capacity installed a few years ago. It could be a year or two before the current pullback in mining and exploration leads supply to fall back below demand. Jim Rogers, a… Read More

The recent plunge in oil prices is just the latest bit of bad news for investors in commodities. Slumping Chinese demand for iron ore, copper and many other items has led to a forgettable year for metals as well. Even the safe havens of gold and silver are losing their luster. Few expect a rapid price rebound for many commodities in 2015 as producers must reckon with too much capacity installed a few years ago. It could be a year or two before the current pullback in mining and exploration leads supply to fall back below demand. Jim Rogers, a perma-bull on commodities, can only muster deep enthusiasm for agricultural commodities these days. #-ad_banner-#But there is one commodity that is bucking the global down-trend: Uranium. And a deeper look at why uranium is rebounding now provides insights as to why it should also perform well in 2015 and 2016. For investors, it’s a chance to profit from an otherwise unloved asset class. After Fukushima We’re coming up on the fourth anniversary of the nuclear disaster in Fukushima, Japan. The events of March 2011 led the Japanese and German governments to announce plans to radically reduce their use of nuclear… Read More

Europeans have a clear case of high-tech envy. American companies like Apple, Inc. (Nasdaq: AAPL), Amazon.com, Inc. (Nasdaq: AMZN), The Priceline Group, Inc. (Nasdaq: PCLN) and Netflix, Inc. (Nasdaq: NFLX) are building major market share across Europe, while homegrown tech stars are few and far between. Paris-based Criteo (Nasdaq: CRTO) would like to change that perception. Not only is the company in the midst of robust growth, but it is outperforming many of its U.S.-based rivals. And its shares, which have fallen by more than one-third from the 52-week high, sport an impressive GARP (growth at… Read More

Europeans have a clear case of high-tech envy. American companies like Apple, Inc. (Nasdaq: AAPL), Amazon.com, Inc. (Nasdaq: AMZN), The Priceline Group, Inc. (Nasdaq: PCLN) and Netflix, Inc. (Nasdaq: NFLX) are building major market share across Europe, while homegrown tech stars are few and far between. Paris-based Criteo (Nasdaq: CRTO) would like to change that perception. Not only is the company in the midst of robust growth, but it is outperforming many of its U.S.-based rivals. And its shares, which have fallen by more than one-third from the 52-week high, sport an impressive GARP (growth at a reasonable price) value proposition. #-ad_banner-#At first blush, Criteo may seem to be just another internet advertising company. Companies like Rocket Fuel, Inc. (Nasdaq: FUEL), The Rubicon Project, Inc. (Nasdaq: RUBI) and even almighty Google, Inc. (Nasdaq: GOOG) are adept at matching web surfers with relevant, targeted ads. But Criteo goes one step further, offering the kind of cloud-based “Big Data” analytics that has helped firms like Splunk, Inc. (Nasdaq: SPLK) and Tableau Software, Inc. (Nasdaq: DATA) garner lush market values in excess of $5 billion. As analysts at Goldman Sachs note, in prose that only a financial professional could… Read More

Belgium, Finland, Germany, Hungary and Denmark deserve a tip of the cap. They are the only major economies that have actually reduced their gross external debt levels over the past two years, according to the World Bank. Said another way, every other major economy in the world has taken on… Read More

You can often find a direct correlation between earnings estimate revisions and share prices. As analysts boost profit forecasts, the stock invariably follows suit. This is why management at MicroStrategy, Inc. (Nasdaq: MSTR) recently embarked on a far-reaching cost-cutting plan. #-ad_banner-#​MicroStrategy operates in a field known as Business Intelligence, providing a range of consulting services and software programs that help companies analyze and manage enterprise data. Investors knew that the company carried far too much overhead relative to its peers. In July, management set a goal to reduce annual expenses by $40 million. By October, they… Read More

You can often find a direct correlation between earnings estimate revisions and share prices. As analysts boost profit forecasts, the stock invariably follows suit. This is why management at MicroStrategy, Inc. (Nasdaq: MSTR) recently embarked on a far-reaching cost-cutting plan. #-ad_banner-#​MicroStrategy operates in a field known as Business Intelligence, providing a range of consulting services and software programs that help companies analyze and manage enterprise data. Investors knew that the company carried far too much overhead relative to its peers. In July, management set a goal to reduce annual expenses by $40 million. By October, they boosted that savings target to around $75 million. “We’re trying to run a much tighter ship and challenge basically every single dollar we’re spending,” said CFO Douglas Thede on the company’s third-quarter conference call. Simply shaving off the fat, which should help profit margins move back in tandem with the peer group, has been predictably well-received on Wall Street. MicroStrategy’s belt-tightening came in the form of eliminating 800 jobs (20% of the workforce), consolidating administrative overlap, reducing resources in China and shuttering satellite offices in Russia and other countries. Read More