Top 5 ideas of the week:
Exelon Corporation’s (EXC) bulls have long touted the company because of its Exelon Generation LLC wholesale power generation subsidiary and because of its large concentration of nuclear power plants as part of its power generating assets. Exelon’s stakeholders need to realize that may have held true in 2008 but isn’t as applicable now. Exelon’s risk profile has changed over the last 5 years thanks to its Constellation Energy Group Inc (CEG) in 2012 as well as the advent of hydraulic fracturing serving as a game-changer in the natural gas and energy marketplace.
Although we have demurred with regards to taking a position in Pitney Bowes Inc. (PBI) until February 2013 at the earliest, we can see why a number of notable institutional investors currently hold a position in the company..
Two reports on Nokia (NOK) this week. First report focuses on Nokia’s new Lumia Windows Phone 8 smartphone line and the other focuses on its recent asset sales
Research in Motion’s (RIMM) stakeholders can celebrate the fact that the company’ Q3 FY2013 adjusted loss of $.22 per share ($114M) was less than the $142M incurred in Q2 2013 and the $192M incurred in Q1 2013. RIMM even had a GAAP profit of $9M ($.017/share), which was better than the $235M loss ($.45/share) in the prior quarter. The company benefited from a $226M recovery of income taxes accrued during the quarter. RIMM’s stakeholders should not read too much in the $958M in operating cash flows and the $640M in free cash flows generated during the quarter because this primarily came from amortization ($523M) and reductions in working capital ($420M). We were surprised that RIMM’s gross margin increased by 3.2% year-over-year and 4.4% on a linked-quarter basis.
Although we don’t have a position Alcatel-Lucent (ALU), we know people who do and because Alcatel-Lucent is so cheap, we have kept a loose tab on it over the last couple of years. Alcatel-Lucent was formed in 2006 by the merger of the French telecom equipment firm Alcatel with the U.S. based telecom equipment maker Lucent Technologies. The company’s share price has gone down by over 90% since its 2006 merger due to consolidation in the telecom sector causing headwinds to demand for its products and this has been combined with economic weakness in the US and European markets. We can see that Alcatel-Lucent is not the only telecom facing a challenging environment as Nokia Siemens Networks (NOK) and Ericsson (ERIC) have been generating soft performance over the last 6 years as well. Alcatel-Lucent’s shares have enjoyed a 38% increase over the last month as it entered into commitments with Credit Suisse and Goldman Sachs for €1.615B (US$2.138B) in new senior secured credit facilities. Now that it has secured additional liquidity and financial resources, it will need to focus on improving core operations and selling off non-core assets.
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