Workday

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WDAY : NYSE : US$65.75
BUY 
Target: US$75.00

COMPANY DESCRIPTION:
Workday provides enterprise-scale, cloud applications that deliver the core functions for global customers to manage the human capital and financial resources of an organization. Solutions include: HCM, Financial Management, Payroll, Time Tracking, Procurement, Employee Expense Management, etc. Workday was founded by the former founders of PeopleSoft in 2005 and is headquartered in Pleasanton, CA.

Investment recommendation


Workday delivered another of what we expect to be several more years of quarterly beat and raises. In a world of near-zero interest rates, a fast scaling firm like WDAY is likely to see its revenue growth exceed gradual multiple compression so that investors can logically expect 15%+ annual rates of return on the stock. Reiterate BUY and increasing price target to $75 (up $5).
Investment highlights
 Strong start to FY: another upside quarter. WDAY reported Q1/14 revenues of $91.6M, which was $4.1M ahead of our estimate and represented
normalized y-o-y growth of 75% (99% on the subscription line). Calculated billings of $107.3M were up 31% y-o-y and beat our estimate by $1.5M.
WDAY generated free cash flow of $15.3M (inclusive of several one-time gains), which was well ahead of our expectation for a material loss.
 Business highlights: large enterprises continue to select WDAY. During the quarter Bristol Myers and Levi Strauss chose WDAY for HR as well as
University of Miami for the full WDAY applications suite. Notable go-lives in the quarter included Johnson & Johnson, London Stock Exchange, and Cornell University. WDAY ended the quarter with more than 450 customers, of which 290 are live (up from 265 at the end of last quarter).
 Outlook: go-forward estimates inch nicely higher again. WDAY increased F2014 guidance by $5M and called for an operating loss that at mid-point was 250 bps better than last expected. We have increased our F2014 and F2015 revenue estimates by $8M and $10M, respectively, which are now 60% and 50% y-o-y revenue growth (and likely still a bit conservative

J.C. Penny – The Weak Sister In Retail Family

JCPenney in Frisco, TX

JCPenney in Frisco, TX (Photo credit: Wikipedia)

JCP

 NYSE : $17.57
J.C. Penney was taking it on the chin Thursday after reporting weak Q4 results, with CEO Ron Johnson admitting the company had made big mistakes in its turnaround effort.

The retailer posted a loss of $2.51 per share, much wider than the $0.24 loss that analysts had expected while same store sales sunk by 31.7%. Internet sales, which have been rapidly increasing across the industry, fell by 34.4% at JCP. Revenue fell 28.4% to $3.8 billion. Johnson said that in his quest to “be the favorite store for everyone:, the retailer had made some errors, including marketing issues and an assessment that customers want simple pricing without constant sales.

He commented, “I had a personal conviction to deliver everyday value beginning with truth on the price tag. We worked really hard and tried many things to make the customer understand that she could shop anytime on her terms. But we learned she prefers a sale, at times she loves a coupon and always, she needs a reference price.”

Going forward, the company will be running sales, as opposed to “everyday low pricing” and will begin to offer some coupons.

Health Care : Fortune’s Top Picks

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Three of Fortune’s top 10 stock picks for 2013 are health care related companies. But they are not in big names in the sector, such as Johnson & Johnson (NYSEJNJ [ or Pfizer (NYSE: PFE). They were Align Technology (NASDAQ: ALGN), Fresenius Medical Care (NYSE: FMS) and Gilead Sciences (NASDAQ: GILD).

Here is a quick look at how these three picks have performed recently and what analysts expect from them.

Align Technology

This San Jose, California-based maker of dental and orthodontic devices has a market capitalization of near $2.1 billion. The long-term earnings per share (EPS) growth forecast is more than 17 percent and the operating margin is much than the industry average. But the price-to-earnings (P/E) ratio is higher than the industry average as well. And short interest is about 10 percent of the float, though that is the lowest it has been since May.

Eight of the 12 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, six of them rating it at Strong Buy. The mean price target, or where analysts expect the stock to go, is almost 22 percent higher than the current share price, though still less than the multiyear high reached in September.

Shares dropped more than 25 percent in mid October following disappointing guidance, and have yet to recover. Because of that drop, the stock has underperformed DENTSPLY International (NASDAQ: XRAY) and the broader markets over the past six months.

Fresenius Medical Care

This German kidney dialysis company operates about 2,900 clinics in approximately 40 countries. It has a market cap of more than $21 billion and a dividend yield of less than one percent. The long-term EPS growth forecast is more than 10 percent, though EPS fell short of consensus estimates in two of the past four quarters. The return on equity is more than 15 percent.

Only three of the five analysts surveyed recommend buying shares, but none recommend selling. But their mean price target represents almost seven percent potential upside, though that is less than the 52-week high reached in October.

Shares are trading in the same neighborhood as at the the beginning of the year, despite starting to recover from a steep pullback in October as Hurricane Sandy bore down on the East Coast. The stock has underperformed competitors Baxter (NYSE: BAX) and DaVita (NYSE: DVA) over the past six months, but has been in line with the S&P 500.

Gilead Sciences

This biopharmaceutical company is headquartered in Foster City, California and sports a market cap of about $56 billion. The P/E ratio is lower than the industry average and the long-term EPS growth forecast is more than 17 percent. The operating margin is better than the industry average and the return on average is more than 33 percent.

All but four or the 29 analysts surveyed recommend buying shares; 11 of them rate it at Strong Buy. They believe the stock has some room to run as their mean price target is more than 10 percent higher than the current share price. That would be a multiyear high.

Shares have pulled back about three percent from the current multiyear high but are still about 90 percent higher than a year ago. Over the past six months, the stock has outperformed larger competitors GlaxoSmithKline (NYSE: GSK) and Pfizer, as well as the broader markets.

Has Warren Buffett A New Target ? ( Forbes )

August 15
or is he getting ready to Pass The Torch ?
WASHINGTON, DC - JUNE 05:  Warren Buffett, cha...Buffett cut long-held holdings of J&J, P&G and Kraft Foods. Why? (Image credit: Getty Images via @daylife)

Berkshire Hathaway took the ax to some of the longest-held names in its stock portfolio last quarter, sparking questions over just how much sway Warren Buffett is sharing with his recently-installed investing colleagues.

to help manage a chunk of the firm’s approximately $75 billion equity portfolio. Both managers were expected to start small and gradually manage more and more of the company’s holdings until ultimately taking over whenever Buffett steps down.

An SEC filing Tuesday detailing Berkshire’s portfolio at the close of the second quarter revealed significant cuts to holdings in Johnson & JohnsonProcter & Gamble and Kraft Foods, all stalwarts of Buffett’s portfolio.

Deal Journal’s Erik Holm says the cuts may represent a changing of the guard to some small degree, with Buffett sharing more investing responsibility with his younger colleagues:

The moves, disclosed in a regulatory filing Tuesday, reveal an uncommonly active quarter for Berkshire leader Warren Buffett and Berkshire’s new portfolio managersTodd Combs and Ted Weschler.…

Tom Russo, a longtime Berkshire shareholder who manages more than $5 billion as a partner at Gardner Russo & Gardner, theorized that Buffett was selling off the positions to allocate more capital to Combs and Weschler, who are expected to take on ever-larger slices of Berkshire’s investment portfolio in coming years.

The cuts were substantial, and did come from some of the biggest positions in the Berkshire portfolio: J&J, P&G and Kraft were three of 14 equity positions worth more than a billion dollars at the end of 2011. Positions of that size are assumed to be Buffett’s bailiwick, considering the Oracle of Omaha told  shareholders earlier this year that his two deputies each had their mandates raised by a billion dollars and manage about $2.75 billion.

At recent prices, and with the caveat that it is quite possible Berkshire’s positions have changed since June 30, Buffett holds $706 million worth of J&J, just under $4 billion in P&G and $2.4 billion in Kraft. Those positions were cut by two-thirds, a fifth and a quarter from March 31. But it is not a guarantee that the cash raised from paring those stakes found its way into the baskets of Combs and Weschler

While the logic makes sense, another longtime Berkshire shareholder, money manager and Forbes contributor Martin Sosnoff, thinks the portfolio reduction – the overall equity portfolio was trimmed to $74.3 billion from $75.3 billion — might mean Buffett is readying another big acquisition along the lines of his 2010 takeover of Burlington Northern Santa Fe.

Sosnoff, who manages $6 billion at Atalanta Sosnoff Capital writes that while Buffett may be conserving capital in the face of ”investment waters filled with riptides ,” he thinks there is just as good a chance the world’s third-richest man is readying for one last mega-play, another opportunity to step up to the plate when few others can or will. Remember, Buffett also stepped up with sorely-needed capital in 2008 for Goldman Sachs Group and General Electric — bets that paid off handsomely — and again in 2011 for Bank of America.

Pfizer , Johnson & Johnson, Elan : Alzheimer’s Disease Treatment Results

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Pfizer (PFE : NYSE : US$23.32)
Elan (ELN : NYSE : US$11.67)
Johnson & Johnson (JNJ : NYSE : US$67.28)
Pfizer, Johnson & Johnson, and Elan’s experimental Alzheimer’s disease treatment failed to prove effective in the first of four high-stakes late-stage trials in patients with mild to moderate forms of the memory-robbing disease.

The drug failed to improve cognitive and life function, the primary goals of the trial. Instead, it appeared to have a dangerous side effect of edema (swelling in the brain), compared with patients taking placebos.

The trial involved people who carry a variation of a gene called ApoE4 that makes them much more vulnerable to the disease. Its treatment, Bapineuzumab, is in a race with a similar product from Eli Lilly & Co. (LLY) to become the first therapy to target a cause for Alzheimer’s, rather
than just its symptoms. Pfizer said it and its partner J&J would continue with three other late-stage trials of their medicine, based upon a review by independent safety monitors.

Alzheimer’s is the most common form of dementia and the sixth leading cause of death in the U.S. An estimated 5 million Americans are believed to have the disease, and an estimated 36 million people worldwide are believed to have dementia, including Alzheimer’s disease, Pfizer said. On the news of the drug’s failure, U.S.-listed shares of Irish drugmaker, Elan, which has a longstanding financial interest in the drug plummeted the most
of the three companies involved.

Johnson&Johnson vs Dendreon ( Drug Studies)

A - normal cell division, B - cancer cell divi...

A – normal cell division, B – cancer cell division; 1 – apoptosis; 2 – damaged cell. From the National Cancer Institute. http://press2.nci.nih.gov/sciencebehind/cancer/cancer01.htm (Photo credit: Wikipedia)

Johnson & Johnson (JNJ : NYSE : US$62.34),

Medivation (MDVN : NASDAQ : US$81.64)

Dendreon (DNDN : NASDAQ : US$5.91)

Medivation said enazlutamide, a drug for treatment of advanced prostate cancer in men, met secondary endpoints in a phase 3 study. Men who took the treatment experienced a better health-related quality of life versus those who took the placebo, and the trial’s co-principal investigator said, “The success of this trial could give doctors a new therapy option for men with advanced prostate cancer.”

Separately, Johnson & Johnson said its prostate cancer treatment,Zytiga, slowed the growth of cancer in a clinical trial of men with prostate cancer who had not undergone chemotherapy.

The upbeat news from Johnson & Johnson and Medivation sent shares of Dendreon as each drug presents a threat to Dendreon’s Provenge treatment.

 As a result, one Wall Street brokerage cut its estimates for Dendreon and cautioned against viewing Dendreon as a takeover target. Another analyst said that Zytiga’s results were “beyond anything shown” by Provenge. Zytiga was approved by regulators last year and is expected to generate $1 billion in sales this year, for use at earlier stages of the disease.

 

 

Dogs Of The Dow – Update

 Dogs Of The Dow

A Year in the Life of Dow Jones

At the beginning of every year a lot of fuss is always made over the “Dogs of the Dow” strategy. While some market know–it–alls discount the Dogs strategy as a complete myth, there is no discounting the fact that this strategy is widely followed.

The Dogs is one of the simplest investment strategies around.

At the start of the year, investors purchase an equal-weighted basket of the 10 highest yielding Dow Jones Industrial Average (DJIA) stocks. The basket is rebalanced at the beginning of each year with the new set of high yielders.

In 2011, the Dogs outperformed the DJIA by a wide margin. After adjusting for dividends, the strategy delivered returned 17.2%, compared with a 1.7% loss for the non–Dog stocks and a 4.6% increase for all DJIA components.

According to some market watchers, a successful Dogs strategy requires investors to take advantage of the January effect. How did the Dogs do this past January? So far the 2012 Dogs have underperformed the DJIA, up 1.37% and 3.4% respectively for the month.

Gainers

Dupont  Up 11 %

Intel up 8.9 %

General Electric up 4.5%

Kraft  up  2.5%

Merck up 1.5 %

Johnson and Johnson up .55 %

Trading Lower

Verizon ( VZ) off 6.1%,

 Proctor and Gamble off 5.5%

AT and T off 2.7% and

  Pfizer ( PFE) down 1.4%

  Historically , the Dogs have outperformed the boarder DJIA by more than 1.5% in the month of January alone.

Please view our new You Tube video , here is the link

http://www.youtube.com/watch?v=db_c5GwnWFA

“Defense , Defense Rah Rah Rah ” by Ben Graham

I lifted this summary from Insider Monkey reporting on stocks Ben Graham and Warren Buffett would conclude held ” a margin of safety” . With reports that investor sentiment is high a contrarian would be mapping out the exit strategies.

“…large-cap defensive U.S. stocks that may provide a margin of safety to investors. The market data are sourced from Finviz. All companies in this list have high annualized dividend yields of at least 3%. These stocks also have market capitalizations above $10 billion, current P/E Ratios lower than 20 and maximum total debt/equity ratios of 50%.

The best performing stock is Bristol-Myers Squibb Company (BMY), which gained 38% over the past 52 weeks. It has a market cap of $59.3B and a P/E ratio of 18.05. It also pays decent dividends and has a low debt-to-equity ratio. Its dividend yield is 3.88% and its debt-to-equity ratio is 0.34. Jim Simons’ Renaissance Technologies had $177 million invested in BMY at the end of September.

ConocoPhillips (COP) has the lowest P/E ratio among the stocks listed above. Stocks with low P/E ratios are generally trading at discounts compared with stocks with higher P/E ratios. COP has a P/E ratio of 9.5 and a market cap of $98.5B. Like other stocks on the list above, COP has a relatively high dividend yield of 3.56% and a low debt-to-equity ratio of 0.35. During the past 52 weeks, COP returned 12.74%, outperforming the market by more than 10 percentage points. Buffett’s Berkshire Hathaway invested $1.8 billion in COP. Jean-Marie Eveillard and Bill Miller are also bullish about COP. At the end of September, Eveillard’s First Eagle Investment Management reported to own $462 million of COP and Miller’s Legg Mason Capital Management disclosed owning $121 million worth of the stock.

Other large-cap defensive stocks include Johnson & Johnson (JNJ), Pfizer Inc (PFE), Intel Corporation (INTC), Eli Lilly & Co (LLY), BlackRock (BLK), Carnival Corporation (CCL), Thomson Reuters Co (TRI), Raytheon Co (RTN), and Northrop Grumman Corporation (NOC). We think that the economy is more resilient than most people expected. Nevertheless it is always wise to follow Graham’s recommendation and invest with a margin of safety. We encourage investors to do some deep research on the stocks listed above for their own portfolios.

 

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Barclays Bank Picks for 2012

AMP builds Watchlists in various sectors – then tracks outstanding candidates for possible AM portfolio slots . Here are six worthy of your due dilligence – yhe first three are covered in the new AMP  book due out in the new year.

 

1. General Electric Company (GE): Operates as a technology, service, and finance company worldwide. Market cap of $189.08B. On 10/14/2011, Barclays Capital had an Overweight rating on the stock. The stock has had a good month, gaining 13.64%.

2. Johnson & Johnson (JNJ): Engages in the research and development, manufacture, and sale of various products in the health care field worldwide. Market cap of $179.09B. On 12/09/2011, Barclays Capital had an Overweight rating on the stock. Offers a good dividend, and appears to have good liquidity to back it up–dividend yield at 3.48%, current ratio at 2.46, and quick ratio at 2.17. The stock has gained 9.89% over the last year.

3. Oracle Corporation (ORCL): Develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide. Market cap of $128.91B. On 12/06/2011, Barclays Capital had an Overweight rating on the stock. The stock has performed poorly over the last month, losing 18.18%.

4. SAP AG (SAP): Provides business software primarily in Europe, the Middle East, Africa, the Americas, and the Asia Pacific Japan region. Market cap of $65.01B. On 12/06/2011, Barclays Capital had an Overweight rating on the stock. The stock has performed poorly over the last month, losing 11.69%.

5. Time Warner Inc. (TWX): Operates as a media and entertainment company in the United States and internationally. Market cap of $36.17B. On 09/07/2011, Barclays Capital had an Overweight rating on the stock. The stock has gained 15.54% over the last year.

6. VMware, Inc. (VMW): Provides virtualization and virtualization-based cloud infrastructure solutions primarily in the United States. Market cap of $35.12B. On 12/06/2011, Barclays Capital had an Overweight rating on the stock. The stock has performed poorly over the last month, losing 13.95%.

 

http://www.jackbassteam.com

Twitter @jack25bc

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