Co-CEO Nancy Prial of Essex Investment Management Company says that while Illumina, Inc. (ILMN) is no longer an undiscovered stock, it is perhaps still misunderstood. The company develops sequencing and array-based solutions for genetic analysis, and still has a positive growth story according to Prial.
“At the time that we purchased Illumina, the company was not the company it is today. But people did not understand the power of their technology and what was possible for this upstart little company,” Prial said. “What we saw was the power of their product.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Prial says her firm still owns Illumina because the company continues to have a robust growth story, and is changing the way gene sequencing and analysis is done.
“We want to let our successful positions mature as long as those growth prospects are still intact. Also, we believe there is a disconnect as to how fast and how big this company can ultimately be and what’s currently being discounted in the price of the stock,” Prial said.
David Congdon, CEO of Old Dominion Freight Line (ODFL), says the company’s strategy for deployment of investment capital has remained consistent for the last 10 to 15 years. He says LTL transportation is a capital-intensive business, and his team is focused on building the highest service value in the industry.
“Equipment is obviously the largest expenditure because of our consistent replacement cycle plus the equipment that we’ve bought to handle the growth that we’re experiencing,” Congdon says.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Old Dominion’s second-highest expenditure is on real estate. Congdon says the company has spent over $900 million on service centers in the last eight years to stay ahead of growth and have capacity for future growth.
“And the third major area for us has been information technology,” he says. “But we expect this general capital-spending trend for our company to continue as we move forward and as we continue to win market share.”
Robert W. Baird & Co Analyst Benjamin Hartford says Ryder System, Inc. (R) is one of his top stock picks. He says that he believes the company’s market will consolidate, that the barriers to entry are rising, and that the complexities associated with operating fleets are greater than they’ve ever been. He says those factors create a bias toward outsourcing to specialists that can help solve problems.
“What had been done in-house by shippers — the acts of managing fleet and managing broader transportation flows — is noncore,” Hartford says. “They likely require help more than they’ve ever needed it, which creates new growth opportunities for a model like Ryder.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Hartford says Ryder is a leasing company at its core, but that it is increasingly becoming an outsourcing company.
“It’s a company that offers leasing services to these private fleets but also offers customers full outsourced dedicated fleet functions, on-demand maintenances, and other related and complementary services,” he says. “And with that growth, we expect to see both organic revenue growth and improved return on invested capital characteristics for the model.”
Robert W. Baird & Co. Analyst Benjamin Hartford says FedEx Corporation (FDX) is one of the transportation stocks he’s currently recommending. He believes the company is in the midst of a transition.
“FedEx has outperformed the market over the past two years into improving margins within its core Express business,” he says. “It’s also been very shrewd as it relates to managing its capital over the past two years. It bought back stock aggressively while the share price was relatively low.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Hartford says FedEx has tapered share buybacks and instead reinvested in its business by acquiring businesses that have helped expand the product portfolio. He says the company’s model is one that is transitioning from a cyclical recovery in margins to a period in which its opportunity is more structural in nature.
“If successful with this transition, we see both elements — improved capital returns and free cash flow generation — as supporting continued outperformance of the stock,” Hartford says.
BB&T Capital Markets Analyst Kevin Sterling says United Parcel Service, Inc. (UPS) is leading the pack in terms of technology investments. He says the company is looking to tackle the opportunities and challenges of e-commerce with things like its ORION software.
“ORION is a mapping software which essentially helps drivers reduce empty miles, maximizing their effectiveness and utilization throughout the day,” he says. “A reduction of one mile per driver per day at UPS can save the company $50 million a year.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Sterling says UPS believes ORION will be able to reduce by 100 million miles annually the distance driven by its drivers and result in a 100,000 metric ton reduction in CO2 emissions, which is equivalent to taking 21,000 passenger cars off the road for a year.
“In my opinion, the companies that invest in technology will be, as Charlie Sheen would say, ‘Winning,’” Sterling says.
Managing Partner Larry Pitkowsky of GoodHaven Capital Management says his firm has always believed WPX Energy Inc (WPX) had interesting assets, but was very undermanaged. When new CEO Rick Muncrief took the helm a little over a year ago, the firm decided to buy.
“We went out and did an extensive amount of interviews with everybody we could find that we had worked with Rick over the last 20 years. Results came back that he was a sterling operator, a sensible capital allocator, very tight on costs, a real leader of people, and so we made it a large holding,” Pitkowsky said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Pitkowsky says Muncrief has delivered by selling noncore assets and making a transformative acquisition in the Permian Basin that will move WPX Energy further into the oil area.
“As shareholders, we wouldn’t get a transaction like this without a CEO of Rick’s caliber at the helm. He’s doing what very few industry people do in any industry, which is to make an opportunistic acquisition while the industry is going through a difficult period. Most industry people buy at the top and sell at the bottom,” Pitkowsky said.
Bradley Jacobs, CEO of XPO Logistics Inc (XPO), says the company is on track to exceed its 2017 targets much earlier than expected as a result of its recent acquisition of Norbert Dentressangle. He says the acquisition increased XPO’s EBITDA run rate to about $585 million of EBITDA on over $9 billion of revenue.
“So we’re going to exceed our 2017 targets two years early,” he says. “And we’ll set new long-term targets in August at earnings.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Jacobs says the acquisition has given XPO a much bigger engine for value creation going forward. He says Norbert’s service offerings mirror XPO’s, and the two companies have complementary geographies.
“So we can service our large multinational customers in global markets, and we can leverage our scale in our two primary operating regions: North America and Europe,” Jacobs says.
Spencer Schwartz, CFO of Atlas Air Worldwide Holdings, Inc. (AAWW), says the company is expecting positive 2015 financial results after strong earnings in the first quarter. As such, management has enhanced its outlook for 2015 and expects full-year results to increase significantly as compared to 2014.
“We had a really good 2014,” he says. “Airfreight was strong all throughout the year, and we had a very good end to the year. And then, we reported strong earnings in the first quarter of 2015.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Schwartz says management’s outlook reflects the key initiatives they’ve undertaken to diversify the company’s business mix, drive business resilience and generate earnings for shareholders.
“We are also benefiting from improving airfreight demand and from the operating leverage in our business model, which has enabled us to enhance the utilization of our aircraft and capitalize on market opportunities,” he says.
John R. Benda, a Senior Equity Research Analyst at National Securities Corporation, says REIT management teams with “deep experience and the huge Rolodexes” are likely to outperform, He says Lennar Corporation (LEN), which has a distressed investing unit and a multifamily unit, is one such company.
“The CEO who runs that, Rialto, is Jeff Krasnoff. It’s the same thing — he has a lot of connections and contacts within the industry, and that’s allowing his unit to secure deals others aren’t privy to,” Benda says. “Lennar is run by Stuart Miller, who’s the CEO, and Bruce Gross, who’s the CFO; one of the best builders I think in the space.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Benda believes Lennar’s Rialto unit is outperforming because of management’s connections to buy land. He expects the same kind of outperformance for Lennar’s multifamily REIT business.
“You don’t want to go and bid against 10 other people for an apartment building, because then you’re going to pay the maximum price,” he says. “You want to be able to find a building that you know is good and then purchase on a one-off basis a transaction where there aren’t many people involved or there are no bidders at all.”
Paul Adornato, Senior Analyst with BMO Capital Markets covering the real estate investment trust sector, says he particularly likes the storage sector at the moment. One of his top recommended stocks is CubeSmart (CUBE).
“They are one of the premier names in the group; they have about $4 billion in equity cap,” Adornato says. “I think they have the chance to be among the best performers within the storage REIT group because they still have occupancy that is a bit below their peer average.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
CubeSmart has narrowed the occupancy gap significant over the last few yeas. But, Adornato says there still might be another 200 basis points for them to catch up.
“This is the primary reason why we think CUBE’s same-store numbers might be able to outperform peers,” he says. “We also expect CubeSmart to benefit from the very, very strong self-storage fundamentals.”
