Social Media Stocks Are Back on Top

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By George Leong, B.Comm. for Profit Confidential

 

Social media stocks appear to be sizzling on the charts once again in what has largely been an on-again, off-again trading pattern.

Facebook, Inc. (NASDAQ/FB) proved this after surging 30% on July 25, following its reporting a blow-away second quarter in which the social media giant beat on earnings (36%) and revenue growth (53%) year-over-year. The company’s 1.15 billion monthly active users as of June 30 was impressive. Better yet, of this amount, about 819 million of these users were mobile, up 54% year-over-year.

The numbers are excellent. I continue to like Facebook. But more importantly, I see major growth going forward for Facebook in the critical mobile market, from which the company derived 41% of its total advertising revenue. The company remains a buying opportunity, especially if it can monetize its massive subscriber base.

 

A highflyer in the Internet space, Yelp, Inc. (NASDAQ/YELP) operates local business sites across many cities and countries and links consumers to local businesses. Yelp’s valuation is high, but revenues are estimated to grow 59.7% this year and 43.0% next year, according to Thomson Financial. Yelp is also estimated to turn a profit of $0.18 per diluted share in 2014.

On the speculative side is social games developer Zynga Inc. (NASDAQ/ZNGA), which holds some promise in spite of it being down from its $14.00 level in May 2012, when Facebook dropped games from its offering. Zynga is at best extremely speculative and only for traders.

 

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Caterpillar

(CAT : NYSE : US$83.06), Net Change: 1.00, % Change: 1.21%, Volume: 6,583,381


$2 billion? All in US$2 bills?

Caterpillar announced plans to purchase $1 billion of its own common shares under an
accelerated stock repurchase transaction. In April, the company announced a similar $1 billion transaction, which was
completed in June. Repurchasing an additional $1 billion of CAT stock in Q3/13 will bring CAT’s total 2013 stock repurchases
to $2 billion. In February 2007, the Board of Directors authorized the repurchase of $7.5 billion of CAT stock, and in December
2011, the authorization was extended through December 2015. Through the end of Q2/13, $4.8 billion of the $7.5 billion
authorization was spent. Pursuant to the accelerated stock repurchase agreement, CAT has agreed to repurchase $1 billion of its common stock from Societe Generale, with an immediate delivery of approximately 11 million shares based on current market prices.

The final number of shares to be repurchased and the aggregate cost to CAT will be based on CAT’s volume-weighted
average stock price during the term of the transaction, which is expected to be completed in September 2013.

Last week, CAT announced its Q2/13 results and reduced its outlook as dealers draw down inventories. CAT reported Q2/13 revenue of $14.6 billion (-16% y/y) compared with the consensus estimate of $14.9 billion, while EPS was $1.45 (-43% y/y) below the consensus estimate of $1.70. CAT reduced 2013 guidance on a more significant reduction in dealer machine inventory than originally expected, not due to a change in market expectations. For 2013, CAT now expects revenue of between $56 and $58 billion and EPS of $6.50 compared to $57 to $61 billion in revenue previously and EPS of $7.00. CAT’s retail sales of machines in North America declined 10% y/y.

This is the seventh consecutive month that it was in negative territory since April 2010.

Oil and Gas Top Picks

Canyon Services Group (FRC-TSX) Cost base of $10.24/share, last purchase on May 8, 2013 at $9.93/share
o Canyon is the fourth-largest pressure pumper in Canada and plays a central role in the development of unconventional reservoirs in Western Canada. Mason believes that current softness in the industry has stabilized and that its high quality fleet and pristine balance sheet should see the company well positioned to capitalize on accelerating Montney and Duvernay development by super-majors.

Bankers Petroleum (BNK-TSX) Cost base of $4.01/share, last purchase on June 3, 2013 at $2.88/share.
o Bankers is a Calgary based oil & gas company with development and exploration assets in Albania. The company currently produces a little over 18,000 b/d of heavy oil for both the Albanian and export markets. Mason believes that with its large development asset base and growing heavy oil demand globally, Bankers is in an excellent position to continue to grow production and cash flow on a per share basis.
Bellatrix Exploration (BXE-TSX) Cost base of $4.47/share, last purchase on May 15, 2013 at $5.72/share
o Mason likes Bellatrix as an organic growth story with a very reasonable valuation and the returns from its core plays are among the most attractive in the basin. The company has to date provided best-in-class drilling results in its plays. Bellatrix has also been very active in seeking joint-venture partners in order to accelerate the realization of shareholder value from its asset base.

NGas

Name: Encana
Symbol: ECA-tsx
Price: $18.13 (23July13)
Comment: Pays a very nice 4.5% yield at this price.
Name: Peyto Exploration
Symbol: PEY-tsx
Price: $28.60 (23July13)
Comment: “Best in Class” Mason Granger, “Can function if ngas prices go as low as $2.”

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Brookfield Office Properties

BPO : NYSE : US$17.13
BPO : TSX : C$17.59
BUY 
Target: US$20.60 

COMPANY DESCRIPTION:
Brookfield Office Properties is a global office property corporation that owns, develops, and operates premier assets in the downtown cores of high-growth cities, including New York, Washington, D.C., Houston, Los Angeles, Toronto, Calgary, Sydney, and Melbourne.
All amounts in US$ unless otherwise noted.

BPO reported Q2/13 funds from operations (FFO) per diluted share of $0.28, or $0.30 excluding non-recurring items. On a comparable basis, recurring FFO per diluted share of $0.30 in Q2/13 was up 5% from recurring FFO per diluted share of $0.28 earned in Q2/12.
The healthy YoY growth in recurring FFO per diluted share was driven primarily by same-property net operating income (NOI) growth of 1.9% (2.5% on a constant currency basis).
Higher rental rates on new and renewed leases drove 2.5% same-property NOI growth. The increase in same-property NOI growth is attributable to new leases and renewals being signed at market rates, which were materially higher than expiring rental rates. During Q2/13, 1.6 million square feet of leasing was completed at an average rental rate 11% above that of expiring leases.
No update on leasing progress at Brookfield Place New York. Although BPO made some progress with respect to the lease-up of Brookfield Place New York subsequent to quarter-end, no update was provided on the much more meaningful ~1.5 million square feet for which the company is in negotiations with potential tenants. We continue to believe that the lack of significant leasing progress at Brookfield Place New York continues to weigh on BPO’s stock price, and any news of a large signed lease would be a positive catalyst.
Maintain BUY rating and US$20.60 target price. Following Q2/13 results, our estimate of NAV per diluted share increases modestly, from $20.58 to $21.25 currently, calculated utilizing a 5.50% cap rate.
We are maintaining our US$20.60 target price, based on a slight discount to our updated estimate of NAV per share. Combined with an annual dividend of $0.56 per share, our target price equates to a 12-month forecast total return of 24%. We continue to rate Brookfield Office Properties a BUY.

 

NIKO Resources, Motley Fool and The AMP Hedge Fund

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Mutual Funds for Dummies … U.S. Funds at War — Too simple? (Monday, June 4, 2012) …item 3.. Music to Help Study and Work – 26:39 minutes … (Photo credit: marsmet545)

The AMP Hedge Fund tracks a good number of stocks for consideration – few as frustrating as NIKO . Great potential – but they used to say that about me.

My advice to myself is that it is better to be a little late into a position than to be early.

Thus we track NIKO ( NKO on Toronto) but haven’t taken a position. Years ago the stock was $ 114 and headed to $ 200 on the basis of massive potential . Natural gas discoveries in India , Indonesia and Trinidad. Swinging for the fences is not an investment strategy it is gambling.

Yet NIKO has the production in India – getting paid a below market rates to satisfy the election bets of the corrupt .

Track and watch and wait.

Similarly – watch the potential natural gas conversion for trucking offered by Clean Energy and Westport Innovations. Westport has been ” touted ” by Motley Fool . Touted to gain paid followers – the bet has not paid off for the followers.

Vascular Solutions

VASC : NASDAQ : US$16.23
BUY 
Target: US$21.00

COMPANY DESCRIPTION: 
Vascular Solutions manufactures and markets high-margin products addressing the needs of the cardiac catheterization lab as well as the IR suite. The company went public in 2000 as a single product, vascular closure company. Over the last three years, Vascular Solutions has broadened its product offering with such devices as the D-Stat Dry hemostatic bandage, the Pronto thrombus extraction catheter, GuideLiner catheter and the Vari- Lase laser.
All amounts in US$ unless otherwise noted.

Investment recommendation
Vascular Solutions continues to validate its clinically-focused niche strategy by reporting another quarter of strong double-digit revenue
growth (+11%). While the company reported solid performance across all three product categories, GuideLiner continued to be a standout
performer during the quarter and is now the highest-selling product in the company’s portfolio. The ClosureFAST reprocessing service is also
zooming along and is now expected to grow 50% in 2013. In addition, VASC achieved a key objective for the year by restoring growth in its
Hemostat business during Q2.
Overall, VASC turned in another strong quarter, highlighted by solid top line performance, strong earnings growth via continued operating
leverage, and solid execution on its corporate strategies. That said, we expect the stock to exhibit some volatility in connection with the
uncertainties surrounding the patent litigation against BSX. However, we expect to BSX to be more of a near-term nuisance than a true long term
competitive threat to VASC’s GuideLiner franchise. In sum, we recommend investors add positions in VASC common. We increase our price target to $21.00 from $20.50.
Investment highlights
 Q2 sales of $27.4M (+11% Y/Y) came in at the top-end of the guidance range and were above our $27.1M estimate.
 EFS of $0.17 grew 12% and met consensus and top end of guidance, while coming close to our Street-high $0.18E.