>Apollo Valuation Overdiscount Regulatory Risk
September 22, 2010
>A San Francisco presenter likes Apollo Group (NASDAQ: APOL, $50.45) at this level. The current valuation overdiscounts the regulatory uncertainty in the for-profit education space. Apollo’s student and program mix mitigate any potential hit to enrollment numbers and revenues from the DOE ruling expected in November. The new orientation program will curb dropouts and loan defaults. The company has solid global expansion opportunities through its joint venture with the Carlyle Group. The downside is very limited at this point and the steady case scenario of $5+ eps can translate into a 60-100% upside.
>Roulston smart grid roundtable in San Francisco
September 22, 2010
>Aaron Lehmann has partnered with Roulston Research to review our consultant Roundtables and to add a 40 plus year investor perspective on the experts’ industry comments. The opinions and points below are from his experience. Roulston delivers his thoughts to give our clients a summary of the event and a market insight of possible investment actions that might parallel the conclusions that the experts delivered. Let us know your thoughts, or if you would like to talk to Mr Lehmann directly, we encourage further dialogue.
Aaron Lehmann has since 1968 been engaged in the investment industry as a securities analyst, director of investment research, portfolio manager, and investment banker. His previous employers include Bank of America, Goldman Sachs, Hartford Insurance, Westinghouse Pension Investment Corp., Chase Investors, Steinhardt Partners and several investment boutiques. Mr. Lehmann has performed consulting services for corporations and investment firms. Although retired, he is actively involved in the investment markets and may periodically perform consulting services.
Roulston Conference September 14.2010
Smart Grid: Key Trends, Outlook and Winners/Losers
Sterling Lapinski, President, Genscape, CEO, GLO Ventures, who has impressive credentials, made a very academic type presentation. He focused on wind generation, the storage of the wind gusts and metering issues confronting the alternative energy industry, in particular, as well as the traditional providers of energy. His major concerns are:
1. How do you offload all the different energy sources- wind, solar, LNG, gas, and nuclear and store it for peak levels and what do you do with it in off-peak hours?
2. Can you change users habits to use energy when there is normally lower demand?
3. Can we create better metering to obtain more accurate measures of usage and to adjust the outputs to conform to demand?
4. Can alternative energy systems be made more efficient so that the utilities can get a better ROI?
Mr. Lapinski did not really provide any serious answers to these questions but did say the most likely players will be existing companies that are already in that space, such as: Siemens, IBM, Samsung, GE, as well as all the “chip” manufactures. He also felt that on the industrial metering side Honeywell and Johnson Controls would be dominant. He also raised concerns with the security of the power grid and the risk of cyber attacks.
Aaron Lehmann’s Comments
It was clear that Mr. Lapinski is highly knowledgeable in this field but unfortunately offers no real solutions for some very obvious and serious issues. One would have great difficulty in coming away with an investment thesis from his presentation. Nothing was said about the difficulty of building wind generating systems without some very rare earth materials necessary in building them and the fact that the Chinese now control the rare earth materials. No comment was made about the greater usage of nuclear around the world while the United States lags significantly. After a significant correction, uranium prices have begun to rise sharply based on a very positive long term outlook.
I don’t profess to have the answers to all of his concerns nor those that I pointed out here. What I believe is that while the companies mentioned by Mr. Lapinski may be participants because of their vast resources, I also feel that giants like Emerson Electric, LG, Mitsusbishi, Cisco, Oracle, as well as Badger Metering, and Ituran will be involved. However, I believe that over the next 10 to 20 years new companies will come onto the scene that may have serious solutions. Who would have believed that Intel (founded in the late 1960’s), or Apple (founded in the 1970’s) Microsoft (in the 1970’s), Cisco and Oracle (in the 1960’s), Google (in the 1990’s) and many others would have become the leading companies today. Likewise, there are many creative individuals all around the world looking for the opportunity of emerging as the next Google.
In conclusion, I can not suggest that an investor buys on the basis of a company possibly coming up with a solution to any of the aforementioned issues, since, with the exception of Badger and Ituran, they are very large companies and may only represent a small percentage of their respective business.
Opinions expressed herein are based upon presentations by participants at Roulston Research, LLC. sponsored Roundtables. The associated notes of such presentations summarized herein have not been independently verified for accuracy, truthfulness, or completeness. The report is in no way intended to be a recommendation by Roulston Research, LLC. to purchase or sell any security.
>NWK: Benefitting from Transition to UC
September 17, 2010
>A San Francisco presenter recommends Network Equipment Technologies (NASDAQ: NWK, $3.04) as a play on the global transition of enterprises to the unified communications (UC) platform. The company is at the forefront of this paradigm shift, which is finally accelerating to the next level. Large companies are beginning to move from pilot UC projects and installations limited to just HQ locations to much broader rollouts. With the release of Microsoft’s new UC server this week and the pending introduction of NWK’s new single-box solution, the company is poised to become a major player in the market projected to grow to $15 billion by 2015.
>Roulston’s Technology Community Chair’s thoughts on Intel
September 17, 2010
>Bart Perkins, Founder, Leverage Partners, and Roulston Research’s Community Chair shares his thoughts on Intel.
Intel has a Broader Vision.
Intel’s recent purchase of software security maker McAfee along with the wireless chip unit of Infineon have been the basis for a lot of speculation over the last few weeks. Investors and analysts have not been quite sure where Intel is headed.
That changed at today’s (9/12/10) Intel Developer Forum. Paul Otellini announced that Intel will build a 22-nanometer processor in 2011. Otellini stated. “At Intel, our vision is to create a continuum [with] consistency and interoperability between devices.” Later he said, “we’re trying to deliver a full computing solution stack. … We’ll deliver and develop more complete hardware and software solutions (emphasis added) than ever in the past.”
Later Otellini expanded on the theme, observing computing needs internet connectivity, security, and energy efficiency. All this means that Intel is expanding well beyond its roots as a chip maker. Today Intel is positioned to offer virtually all components of a mobile device. They can provide the processor, security, and operating system.
Intel is not limiting themselves to mobile devices. They are positioned to expand into a much wider set of products. In the Sept. 13 issue of Forbes Magazine, Otellini said “Everything is getting connected; everything is getting smarter; TVs, phones, cars, retail displays. The microprocessor is the driving factor for this. We believe our architecture is best suited for these tasks.”
>Update on Alamo Group
September 7, 2010
>Recommended late last year by Texas presenter the company is tied to farm income with mature products in mature markets. A reminder that they sell specialty mowers and products to farmers and governments for road and field maintenance. Their concept is to tuck in multiple brands so that when giovernment asks for 2-3 bids they are multiple bidders with multiple brands in niche markets. Their other focus is expansion internationally adding brands and products to offer all products to all markets. Their replacement cycle is 5-7 years in the government side and 7-9 years in the Ag side. With farmer income strong and commodity prices rising, business is good. Government municipal purchases have slowed but still holding to past cycle. Presenter still likes the story.
>Listening to Kansas City Southern talk Economy
September 7, 2010
>There is a $200/container savings crossing the border by shippers switching from the 1.9 million trucks to rail. Look for more to happen. Cross border traffic for KSU is up 55% year over year now equal to 25% of their total business. Hurricane Alex really hurt 2010 but other growth has been with train length up 10% year over year. Pricing is increasing and carloads are up 24%. No recession here.
The Collaborator 