About a month ago I started seeing a lot of chatter online about a small defense contractor called Kratos Defense & Security Solutions (Nasdaq: KTOS). The thinking was that a lot of its contract issues and order delays that resulted from the sequestration would resolve themselves in 2014.
When they do, the stock could run 40% to 50%.
Despite a tough environment for defense contractors, Kratos has not lost or had a single contract cancelled, and just recently its rocket and defense division was awarded a $7.92 billion contract from the Navy. In just the last week it received an additional $44 million in new contracts.
Earnings are expected to move from $0.17 to $0.79 in 2014. It is expected to call its 10% notes this May and reduce its annual interest expense by $15 million. And further debt reduction is planned in 2014 using its $48 million in free cash flow.
The stock is off 21% from its 52-week high but looks like it has everything going in its favor.
This is not the typical stock I pick for this segment, but I like the cash flow, the debt-reduction efforts, the new contracts that are coming in just as predicted – and the big potential in the stock price the estimates are pointing to.
Kratos: Take a look at this one.
A Dowdy Dow Stock
Only 20% of this country’s land area is used for food production and yet we produce more than we could ever consume. This kind of efficiency makes agriculture one of the great growth industries in this country.
Yes, another food-related play. I firmly believe that agriculture will be a huge growth play for at least the next 20 years.
And Dow Chemical (NYSE: DOW) is developing into the No. 2 play in food behind Monsanto. Some may think the chart for Dow Chemical looks tired, but this one’s underlying fundamentals are getting stronger.
It beat fourth quarter earnings by over 50%. Raised its dividend by 15% and tripled its stock buyback from $1.5 billion to $4.5 billion. And it is selling non-core assets to support the buyback program and pay off debt.
The buyback program, debt reduction and its solid dividend are what has been called a total yield strategy that has beaten the market hands down.
And the two drivers of what is happening at Dow Chemical are the agriculture and the feedstock divisions. Sales from these two account for over 30% of total annual revenues, and the agriculture division grew at 12% last year and is expected to grow at an annual rate of 15% a year through 2016.
The feedstock division is also expected to have double-digit growth through 2016 and will produce as much as $11 billion in sales by then.
Double-digit growth from 30% of the company will produce huge results for investors.
Dow Chemical is part of the American renaissance in agriculture and well worth a second look.
The “Slap in the Face” Award: $6,000 a Square Foot
This week it goes to those folks out there who can’t seem to live with fewer than nine bedrooms on the most expensive real estate in the world.
How does $6,000 per square foot for a house strike you?
That’s what a mansion near the Luxembourg Gardens in Paris is selling for.
To put this into perspective, a house two blocks off the beach in Florida in my neighborhood just sold for about $200 a square foot. And this is a very nice neighborhood.
The reason for the sale? Their children have moved on and they just don’t need 7,800 square feet inside and 3,700 square feet of gardens in the middle of Paris.
I have news for them: They didn’t need that much with the kids at home.
Yes, for a cool $47 million you too can live in one of the best neighborhoods in Paris and have enough room for an entire basketball team to stay with you, all in private rooms.
View original at: Investment U
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