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Friday, September 4, 2009

Five North American Natural Gas Buys

Five large cap buy recommendations concentrated on North American natural gas, Anadarko Petroleum (APC), Devon Energy (DVN), Encana (ECA), EOG Resources (EOG) and XTO Energy (XTO), have demonstrated volume growth on a basis that takes account of financing (see chart Volume per Share, Adjusted for Debt and Dividends, below). All have low McDep Ratios ranging from 0.72 to 0.91 with the top growers of the latest quarter coincidentally having the higher McDep Ratios.

Stock prices are in an uptrend by the 200-day average measure despite intense short-term pressure on the price of the companies’ main product, clean natural gas. Potentially rebounding economic activity in 2010 may demand the new volumes not needed today for industrial production or power generation. The large cap North American natural gas independents account for 5 of our 28 buy recommendations. We suggest that one or more might account for 18% of enterprise value in a McDep Energy Portfolio, or perhaps 24% if you like the prospects for natural gas as much as we do.

Since the most recent quarterly disclosures, we have modified our volume measurement technique to smooth the debt factor and to include an adjustment for income. As in the past, the share adjustment gives credit for share repurchase or assesses a cost for issuing new shares. The debt adjustment neutralizes the appearance of growth that may be financed with borrowed funds. Our current method takes incremental debt in a quarter and assumes that it is replaced by a corresponding amount of shares issued at Net Present Value (NPV). As a result, the latest change in NPV affects only the latest increment of debt, not the embedded base. The dividend adjustment, also added since the quarterly disclosures, will become meaningful when comparing low dividend paying independent producers with income stocks.

Meanwhile, the 40-week average for six-year oil has turned up this month to $71. An uptrend can appear stronger when the average itself is moving up in addition to latest price being above the average. Latest settlement prices for the average of futures for the next six years are $83 a barrel and $6.71 a million btu. Natural gas is just under the 40-week average of $6.89. Our five large cap independent natural gas buys are positioned to weather the next few months of potential short-term commodity pressure and to participate in the possible upside thereafter.

Disclosure I am long XTO shares.

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DTE Energy (DTE) Declares Dividend of $0.53

The DTE Energy (NYSE: DTE) has declared a $0.53 per share dividend on its common stock payable Oct. 15, 2009, to shareholders of record at the close of business Sept. 21, 2009.

To receive this dividend, you must own the shares before September 17.

Disclosure I am long DTE shares., Inc.

Nucor (NUE) Declares Quarterly Dividend of $0.35

Nucor Corporation (NUE) declared the regular quarterly cash dividend of $0.35 per share on Nucor's common stock. This cash dividend is payable on November 11, 2009 to stockholders of record on September 30, 2009.

To receive the dividend, you must own the shares before September 28th.

Disclosure I am long NUE shares.

Liquidation Channel

Monday, August 31, 2009

Disney to buy Marvel for $4 billion

The Walt Disney Co. announced Monday that it has agreed to purchase comic book and action hero company Marvel Entertainment for about $4 billion.

The deal pairs a comic book publisher that just recently began to produce its own movies with one of the largest international media companies in the world.

"This is perfect from a strategic perspective," Disney Chief Executive Robert Iger told "This treasure trove of over 5,000 characters offers Disney the ability to do what we do best."

On a conference call with investors, Iger said the deal will allow Disney to sell Marvel's vast array of characters and properties across different media platforms and in many more markets. For instance, Iger said that Disney's Pixar animation unit was excited about the opportunities that a Marvel acquisition could yield.

"Spider-Man will appear in 'A Bug's Life' sequel," joked Barclays Capital analyst Anthony DiClemente.

The deal would give Disney some content that appeals more to boys, a market it has been looking to develop, Iger said. Disney XD, a television station and video game unit, already had a deal with Marvel to use some of the comic book company's action heroes in its content.

"Disney is the perfect home for Marvel's fantastic library of characters given its proven ability to expand content creation and licensing businesses," said Marvel Chief Executive Ike Perlmutter. "This is an unparalleled opportunity for Marvel to build upon its vibrant brand and character properties by accessing Disney's tremendous global organization and infrastructure around the world."
0:00 /5:30Disney bets $4 billion on Marvel

Disney Chief Financial Officer Tom Staggs noted that Marvel owns the rights to many action-hero characters that are not widely known, which Disney anticipates bringing to the forefront for future movies or TV shows should the deal go through.

If Marvel shareholders approve the deal, they would receive $30 per share in cash and 0.745 shares of Disney for each share of Marvel that they hold. The deal is valued at $50 per Marvel share, more than a 29% premium, based on Friday's closing price.

Disney said it will issue about 59 million shares as a result of a deal, but it will repurchase as many shares over the course of the 12 months following the deal's closing.

Marvel has launched a large number of action-hero movies over the past decade, including "Spider-Man," "X-Men," "The Fantastic Four" and "The Incredible Hulk."

Last summer's "Iron Man" blockbuster earned just under $100 million over three days, the second-best non-sequel opening ever, according to Entertainment Weekly. "Iron Man" was the first Marvel movie to be fully financed and produced by the comic book company.

But Marvel still holds deals with Paramount, Sony and Fox for future movies, including several more Spider-Man films. Marvel chairman Morton Handel estimated that the company has about five more films with Paramount and intends to honor the current contracts it has with other movie studios, even if the Disney deal is inked before the contracts expire.

Marvel pays Paramount, the comic book company's primary movie distributor, between $20 million and $60 million per movie in distribution fees, according to Barton Crockett, analyst at Lazard Capital Markets.

Crockett said Disney would likely become the sole distributor of Marvel's movies in the future, giving it a "full plate" of movie releases, including Pixar, Marvel and its own films.

Shares of Marvel (MVL) soared 26% in morning trading. Shares of Disney (DIS, Fortune 500) were down 3%.

Disclosure NONE

Smoking Everywhere

Deere & Company (DE) Announces Quarterly Dividend of $0.28

The Deere & Company Board of Directors declared a regular quarterly dividend of $.28 a
share on common stock, payable May 1, 2009, to stockholders of record on March 31, 2009.

Deere & Company manufactures and distributes products and services for agriculture and forestry worldwide. The company operates through four segments: Agricultural Equipment, Commercial and Consumer Equipment, Construction and Forestry, and Credit. The Agricultural Equipment segment offers a line of farm equipment and related service parts, including tractors; combine, cotton, and sugarcane harvesters; tillage, seeding, and soil preparation machinery; sprayers; hay and forage equipment; integrated agricultural management systems technology; and precision agricultural irrigation equipment.

The Commercial and Consumer Equipment segment provides equipment, products, and service parts for commercial and residential uses, such as tractors for lawn, garden, commercial, and utility purposes; mowing equipment, including walk-behind mowers; golf course equipment; utility vehicles; landscape and nursery products; irrigation equipment; and other outdoor power products. The Construction and Forestry segment offers a range of machines and service parts used in construction, earthmoving, material handling, and timber harvesting, including backhoe loaders; crawler dozers and loaders; four-wheel-drive loaders; excavators; motor graders; articulated dump trucks; landscape loaders; skid-steer loaders; and log skidders, feller bunchers, log loaders, log forwarders, log harvesters, and related attachments. Its products and services are marketed primarily through independent retail dealer networks and retail outlets.

The Credit segment primarily finances sales and leases by dealers of new and used agricultural, commercial and consumer, and construction and forestry equipment. It also provides wholesale financing to dealers of the foregoing equipment, provides operating loans, finances retail revolving charge accounts, offers certain crop risk mitigation products, and invests in wind energy generation. Deere & Company was founded in 1837 and is based in Moline, Illinois.

Disclosure I am long DE shares

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