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Why Wall Street Would Love to Bug Our Phones

Companies / Investing 2014 Feb 13, 2014 - 11:50 AM GMT

By: Money_Morning

Companies

William Patalon writes: Every month or so, Keith Fitz-Gerald, Shah Gilani or a few of the other editors here at Money Map Press will wonder aloud if the big Wall Street investment banks have secreted a bunch of listening-device "bugs" in our offices or on our phones.

They haven't, of course. And our comments were made in jest - and meant only as a joke.
But the coincidences that prompt these surveillance-by-Big-Brother quips can be quite remarkable.


Let me share a brand-new story that shows you what I mean....

In a prior Private Briefing, we recommended the "Ultimate MacGyver Stock" - a promising "Miracle Materials" profit play called U.S. Silica Holdings Inc. (NYSE: SLCA).

When the stock market opened a few hours later, U.S. Silica shares skyrocketed as much as 4.9% after Wells Fargo & Co. (NYSE: WFC) analyst Matthew D. Conlan upgraded the stock from "Market Perform" to "Outperform."

I'm sharing this story not to gloat - but to illustrate that the strategies our experts use to identify investments really put you ahead of the big-money players on Wall Street. It also underscores that Private Briefing gives you access to the top recommendations from our band of gurus - the same recommendations they provide in the high-dollar advisory services they run for their exclusive subscribers.

And it gives us a chance to "advance" the U.S. Silica investment story by sharing some of the insights that Wells Fargo's Conlan used to make the case for U.S. Silica to the clients of his investment bank.

Remember: One of our main mantras here at Private Briefing is that, while we never follow Wall Street's lead, once we've made our recommendation (and you've had the chance to buy in), we're always glad to have the professional heavyweights spotlight the same opportunities - since we know that can help attract the big flows of liquidity needed to drive your holdings higher in price.

So let's take a look...

A Strong Work Ethic

We actually beat Wall Street to the draw on this stock by much more than just a few hours. To underscore just how far ahead of Wall Street we were on this call - and to set the scene for this story - I need to tell you a bit about the timeline involved in publishing an investment column like this one...
I work ahead on most columns, talking with each of our experts, reviewing their newsletters and investment "alerts" (the formal recommendations they publish for their paid subscribers), and tracking their portfolios. My goal: to bring you some of their very best ideas.

The U.S. Silica recommendation came from a series of conversations that I had over the past several weeks with Michael Robinson, our resident tech guru and the editor of the Nova-X Report and Radical Technology Profit advisory services. I finally wrote my version of Michael's recommendation late last week, and on Friday had it looked over by one of the in-house editors I trust a great deal.

The Monday Private Briefing is put together on late Friday.

This kind of thing happens all the time - which is why our experts like to joke that the big investment banks are "wired" into our best thinking.

In this case, Wells Fargo's Conlan has zeroed in on some of the same attributes that had earlier attracted us to U.S. Silica.

Making the Grade

As we mentioned in our original recommendation, shares of U.S. Silica had plunged after the company reduced its "guidance." Conlan believes the company is being overly conservative. With a price target in the range of $33 a share to $35 a share on U.S. Silica, Conlan sees this as an attractive buy point for investors.

"SLCA's recent earnings preannouncement and below-consensus 2014 guidance set expectations for SLCA's per-ton profits to remain fairly flat in 2014 and lowered the stock's valuation to a level we feel is an attractive (re)entry point," Conlan wrote in a note to clients. "In line with SLCA's most recent (seemingly conservative) guidance, we are lowering our 2013/2014 EPS estimates to $1.43/$1.97 from $1.56/$2.42, with a 2015 EPS estimate of $2.79."

Because of the Wells Fargo upgrade, well-known financial Website TheStreet.com decided to weigh in on U.S. Silica, too, yesterday - giving the "Miracle Materials" play a "Buy" rating.

The "Buy" rating, they said, "is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover.

"The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, increase in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Several other factors add to this stock's allure, including the fact that:

  • Revenue grew at 24.6% on a year-over-year basis - far above the industry average of 1.9%. And that revenue is coming down to the bottom line.
  • Net-income growth exceeded the average of the Metals & Mining Industry average. The increase from $18.8 million to $21.33 million increased 13.5% from the year-ago quarter.
  • And earnings per share (EPS) rose by 11.1% on a year-over-year basis in its more recent quarter.

The bottom line: TheStreet.com says U.S. Silica's shares should continue to outperform the market.

Veteran market players like our own experts will tell you that an upgrade like this one tends to raise a company's profile and can kick off an "upgrade cycle," where a number of other analysts suddenly notice the stock and come through with upgrades of their own.

We saw this last year with such Private Briefing recommendations as The Boeing Co. (NYSE: BA) and Pharmacyclics Inc. (Nasdaq: PCYC), which rose more than 100% and 400%, respectively, following our recommendation.

We were early on those profit plays, too, and then watched each stock as one Wall Street upgrade (and the stocks' gains) begat still other upgrades.

Don't be surprised to see the same scenario play out with U.S. Silica.

The stock ended up rising 3.59% the next day to close at $27.67. That's in the middle of its 52-week range of $17.05 to $37.14. Analysts have a consensus target price of $33 a share, though the estimates go as high as $38.

We'll certainly keep our eye on that one...

Source : http://moneymorning.com/2014/02/13/wall-street-love-bug-phones/

Money Morning/The Money Map Report

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Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a finan

cial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

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