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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (46757)	2/26/2012 11:32:10 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78507

Fwiw, two stocks mentioned in Barron's that I'm interested in (own) are DAR and VLO: "WHAT'S IN A NAME? With mid-cap Darling International (DAR), not what you might expect. For one thing, only 10% or so of its sales are outside the U.S. Second, Darling takes animal byproducts from slaughtering houses, as well as cooking oil and bakery waste from restaurants and other food establishments, and recycles them into bone and poultry meal, tallow, and other products. Not so darling. Unsurprisingly, the company doesn't attract much Wall Street attention. With the stock price at 16.46 and down about 14% from 52-week highs, investors don't seem to be expecting good things out of Darling, but that could be shortsighted. Irving, Texas-based Darling has a few things going right for it—factors known to the market over the past 12 months—yet the stock price doesn't seem to reflect all the improvements likely over the next 12 months or so. First among them is the $872 million acquisition of Griffin Industries in late 2010, which has clearly raised Darling's earnings profile. In each of the first three quarters of 2011, sales and profits have roughly tripled. But if the stock price is any measure—up only 43% from the announcement Nov. 9, 2010—this has yet to completely seep into investor consciousness. With a $2.2 billion enterprise value (market cap plus net debt) and annual earnings before interest, taxes, depreciation and amortization now running about $400 million, the EV/Ebitda ratio is 5.5 times. That's 10% below the company's average of six times. Darling has been steadily profitable since 2001. It already paid down about half the debt incurred for Griffin, and the balance sheet is strong, with $314 million in long-term debt. It's an underappreciated stock, says Robert Auer, a portfolio manager at SB Auer Funds. He's owned Darling "on and off" but has been buying shares lately. "It's the Wal-Mart of rendering," and it doesn't get credit for that at the current price. Auer likes the 50/50 Diamond Green Diesel joint venture with refiner Valero Energy (VLO), which will take some underutilized Darling products and turn out 9,300 barrels a day of diesel fuel. That plant should be up and running by early 2013 and could add as much as $50 million to Darling's Ebitda next year. That would take the EV/Ebitda ratio down to about five times. The price/earnings ratio of 10 times the 2011 earnings projection of $1.55 a share is undemanding, as well, Auer adds. Investors will find out more Feb. 29, when the company releases fourth-quarter results. One caveat to keep in mind is that Darling will begin to lap post-Griffin results in the second quarter, so growth might slow. Still, there's likely another 10% to 25% more in this stock as investors come to appreciate Darling's post-Griffin charms and Diamond Green Diesel. In case you are wondering, the name comes from the man who founded the company in 1882: Ira Darling." ================================= Article also mentions several banks that have been demutualized and that might be takeover candidates. I don't follow that subsector of investing now; the particular stocks though may be of interest to others here who do. ================================= And JNJ: I've looked again at JNJ and again will pass on it. The article sums up my reasons to avoid the stock: "Last Tuesday's announcement that Johnson & Johnson (JNJ) veteran Alex Gorsky will take over the CEO helm didn't appease investors. The shares fell about 1% after the news. The health-care giant's spate of problems are better explained elsewhere (see Follow Up). JNJ remains a quality company with a diverse stream of revenues and a nice dividend yield, 3.5%, but Gorsky's task is formidable. Changes will take time and JNJ's once-vaunted reputation is eroding. Its stock has basically matched the S&P 500 index in the 10 years ended 2011. At $65, it isn't particularly cheap, with a price/earnings ratio of nearly 13 times. The depth of the market disaffection is summed up by Matt McCormick, a money manager at Bahl & Gaynor Investment Counsel, and a former devotee of JNJ who sold out of JNJ in the first quarter of 2011: "JNJ has to show more top-line growth and…demonstrate results to clean up quality control before I'll buy again." JNJ is a show-me stock. Choosing an outsider might have sent a stronger signal. Changes will have to be seen to be believed, and JNJ is most likely dead money until then." A stock viewed somewhat in the same way by me ("a show-me" stock) is Hospira. For this one I did buy a few tracking shares a week or so ago. If company can get its quality/regulatory issues resolved, the stock price might improve. Mixed view by analysts though: articles.marketwatch.com No claim by me that HSP now is a value stock.