Wall Street Breakfast: Snapchat Ready To Make A Lasting Mark?

 Includes: AMZN, BA, BABA, BCS, CBS, CHAT, CRARY, CRM, DB, F, G

The clock has started ticking for one of the most eagerly awaited market debuts of 2017. Snapchat has reportedly filed for an initial public offering in what could be the biggest U.S. listing since Alibaba (NYSE:BABA) went public two years ago. The ephemeral messaging service's parent, Snap Inc. (Private:CHAT), is eyeing a $20B-$25B valuation range, with Morgan Stanley and Goldman Sachs as lead underwriters of the IPO.

Economy

Oil rose around 6% yesterday, its best one day performance since April, on renewed hopes of an OPEC deal to cut production. But prices are now dipping lower after the IEA left its supply and demand forecasts unchanged despite the 2015 Paris Climate Change Agreement entering into force. "The difficulty of finding alternatives to oil in road freight, aviation and petrochemicals means that, up to 2040, the growth in these three sectors alone is greater than the growth in global oil demand," the IEA said in its annual World Energy Outlook.

Longtime Donald Trump supporter and activist investor Carl Icahn has confirmed the president-elect is considering Wall Street veteran Steven Mnuchin and billionaire Wilbur Ross for Treasury and Commerce Secretary, respectively. Meanwhile, Paul Ryan was unanimously chosen for another term as House speaker by his Republican colleagues as he called for his party to unite behind Trump.

"A single policy-rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting," St. Louis Fed President James Bullard said at a UBS conference in London. "There were a lot of predictions that if the election went the way of Republicans and President-elect Donald Trump, then there would be great deal of volatility, but that has not materialized so far."

Bank of Canada Deputy Governor Timothy Lane will speak about globalization at noon ET and market watchers will look for any hints on the central bank's view of the U.S. election results after it held rates last month citing uncertainties. The U.S. is also Canada's biggest trading partner and the destination for roughly three-quarters of Canadian exports.

Citing persistent terror threats, Francois Hollande wants to extend the state of emergency in France until the presidential elections in April and May. The measures were introduced in November 2015, following a series of terror attacks in Paris that left 130 people dead. They give authorities far-reaching powers, including banning people from leaving their homes and conducting searches without a court order.

Germany's banks are robust but suffer from weak profitability and may be underestimating the risk of falling asset prices or rising interest rates, the Bundesbank said in its latest stability review. Although the eurozone's largest economy has driven the bloc's recovery in recent years, German economic growth has slowed in recent quarters, and concern is mounting about the weak profitability of its vast but inefficient banking sector.

Stocks

Amazon for the first time has filed lawsuits against counterfeit sellers, after a number of businesses voiced concern that knockoffs were killing their sales and endangering consumers. Amazon (NASDAQ:AMZN) has increasingly relied on third-party sellers to fuel its growth, but opening its website brought with it a greater chance for fake goods to enter its warehouses.

Seeking to allay concerns over its largest ever deal, Microsoft (NASDAQ:MSFT) has offered concessions to EU antitrust regulators over its $26B bid for LinkedIn (NYSE:LNKD). The European Commission, which will rule on the deal by Dec. 6, did not provide details. It's expected to seek feedback from rivals and customers before deciding whether to accept the concessions, demand more or open a full investigation.

Time To Buy Value Stocks

Referenced Stocks: FCX;NEM;URBN;KORS

After all the fear and talk of a recession, stocks are now positive for the year, both the Dow Jones and S&P 500 went green late last week (fittingly enough on St. Patrick's Day.)

But not all stocks are positive. There's a big divergence between value stocks and growth stocks this year. Value stocks are positive for the year, while growth stocks are down. History shows us that value stocks should continue to outperform growth stocks for the next five to seven years.

This comes after value stocks have lagged growth stocks for the past nine years – and by almost ten percentage points last year.

Historically, value stocks have outperformed growth stocks for at least five years following periods when growth stocks greatly outperformed value stocks (1966–1973 and 1998–2000).

So if we believe we are entering another cycle where value stocks will outperform growth stocks, how do we find value stocks?

In general, value stocks are stocks with the lowest P/E, price to book, price to sales and price to cash flow. Other twists on value investing are simply looking at the lowest priced stocks (usually under $10) in a major index or stocks with the highest dividend yield in a major index.

All of the above are value–based metrics, and usually combining two or more of the above will give you the best edge in value investing.

For example, in the S&P 500 the four best performing stocks year–to–date are: Freeport–McMoran (FCX) (which we own in our Billionaire's Portfolio), Newmont Mining (NEM), Urban Outfitters (URBN) and Michael Kors (KORS).

All four of these stocks are up at least 40% or more in 2016. And all are value stocks. Michael Kors and Urban Outfitters are classic low P/E stocks, and Newmont Mining and Freeport–McMoran, low price to book stocks.

Another sign that value investing is coming back is that value investors are starting to outperform the market. Billionaire hedge fund manager David Einhorn was up 2% at the end of February of this year, and Warren Buffett's Berkshire Hathaway is up 8% in 2016.

You can invest in value stocks through indices and ETFs, but that will never give you the most bang for the buck. We have found the best returns come from piggybacking the world's best billionaire investors and hedge funds top value stock picks.

This year two of the best performing stocks in the S&P 500—Freeport–McMoRan and Michael Kors—happen to be owned by two of the best billionaire value investors, Carl Icahn and David Einhorn.

On that note:  This is the perfect time to join us in our Billionaire’s Portfolio.  We have a portfolio full of stocks owned and controlled by big influential investors, most of which have an explicit price target from our billionaire investor of a double or more.  You canjoin us here.

By: Billionaire's Portfolio

Source: http://www.nasdaq.com/article/time-to-buy-value-stocks-cm595924

Why Carl Icahn Is Loading Up On This Troubled Energy Stock

There isn't a lot of mystery around what Carl Icahn looks for in an investment opportunity. He wants to own good companies with underperforming management teams. Typically, he can build a large enough position to have a major influence. Then he pushes for share buybacks, board representation, or simply a change in the corner office.

Curiously, a major target for Icahn has none of those options at hand. Cash-strapped Chesapeake Energy Corp. (NYSE: CHK) was once known for a controversial CEO, as I noted in 2010. Yet fresh management has been in place for more than two years, and by all indications, Icahn is a fan of the company's new leaders.

In the second quarter of 2013, Icahn's investment firm acquired 60 million shares (at an average price of $19). He bought another 6.7 million shares in the next quarter (at an average price of $23 a share). Of course oil prices subsequently collapsed, making such a large investment in an oil and gas producer seem foolhardy in hindsight.

You would think that Icahn would decide that he'd made a big mistake and cash out his large stake in Chesapeake. Instead, he bought another 6.6 million shares (at $17.65 a share) in the most recent quarter, according to gurufocus.com. Even that purchase looks premature, as shares have fallen yet further.

To be sure, many investors continue to shun this stock. Under former management, Chesapeake went on a buying spree across the various shale regions, ultimately putting the balance sheet in peril. New management has begun to undo those efforts. Long-term debt approached $13 billion at the end of 2013, while cash remained below $1 billion. A series of subsequent asset sales has reduced debt by roughly $2.5 billion and Chesapeake now has more than $3 billion in cash in the bank.

Still, depressed current oil prices means that Chesapeake will likely outspend its operating cash flow in 2015. These days, most investors are shunning energy exploration firms that cannot live within their cash flow.

Yet Icahn likely spots a subtle turnaround underway now, one that could generate very robust cash flow once energy prices rebound. For example, thanks to investments in new cost-saving technologies, Chesapeake has cut the cost to develop and operate an oil-and-gas well by around 30% in the past few years.

Although Chesapeake has been cutting the number of rigs in service, total output is actually growing, as each remaining well is producing a lot more gas, oil and natural gas liquids. With energy prices at current levels, Chesapeake appears poised to buck the consensus forecast of negative free cash flow this year and at least get to break even.

Yet Carl Icahn is likely focused on this stock for a very different reason: the balance sheet. Chesapeake still holds prime acreage, and the current management team has continually proven its ability to get the best dollar for its assets when they are sold and solid prices for assets that it has been buying. Right now, Chesapeake appears intent on raising cash through joint ventures.Bill Featherston, an analyst at UBS recently said, "Chesapeake had a terrific first quarter operationally, and one of the big themes for the sector during the first quarter was improved capital efficiency and operational efficiency gains."

"We could bring in other people's money and not have to spend Chesapeake dollars on those type of things," said Jason Pigott, a Chesapeake regional vice president, at UBS' May 26, 2015 oil and gas conference.

Here's an even simpler reason to get behind Icahn with this stock: Book value stands above $15 a share, and that figure has been written down to reflect very low land valuation assumptions. Chesapeake's impressive acreage is an asset that will grow in value as energy prices rebound, and M&A activity starts to reflect more robust transaction prices.

Analysts at Goldman Sachs still see more than 50% upside to their price target, noting that "CHK can be a cost-cutting leader, allowing flexibility to make a favorable acquisition that can improve assets." They add that "our (bullish) call has not worked," as most investors continue to shun this stock.

Risks To Consider: A fresh drop in oil or gas prices would put this stock deeper into the penalty box. That may be what short sellers are anticipating, as 21% of the float is held short. (The short interest actually fell by nine million shares in the two weeks ended May 15.)

Action To Take --> This is an unusual stock pick from a very successful hedge fund manager who has a proven knack of seeing value where others don't. Chesapeake Energy is clearly healthier than it was a few years ago and is no longer at risk of a balance sheet blow up. The company's strong base of real estate, coupled with impressive cost controls, could set the stage for a sharp spike in cash flow if energy prices rise from current levels. Carl Icahn is likely focused on such a scenario and is likely relieved that shares have tangible downside support in the form of discount-to-book valuations.

By David Sterman

Source: http://www.streetauthority.com/energy-commodities/why-carl-icahn-loading-troubled-energy-stock-30562855