Chesapeake Energy (CHK - $43.29)
1) Largest natural gas producer in the U.S.
2) Trades for 10x forward earnings, 6x cash flow
3) Savvy CEO/Co-founder who may be the most active share acquiring executive in Corporate America
4) Largest acreage in U.S, largest amount of 3-D seismic data. Massive acreage in high-potential deposits.
5) Haynesville Shale could be the most important natural gas find in the U.S. ever. CHK is the largest lease holder and initial wells producing at rates even higher than expected
6) Recent transaction to monetize 20% of the Haynesville play with PXP put an implied value of $16 billion on CHK’s operations in the area
7) 77% Q3/Q4-08 production hedged @ $9.16
8) 54% 2009 hedged @ $9.79, 7% collared $8-$10
9) 24% 2010 hedged @ $10.02, 2% collared $8-$11
10) Selling low growth, steady production long-lived assets will help the company raise a ton of money to fund aggressive drilling programs
11) Production increases still topping 20% which is difficult for companies 1/10th their size.
12) CEO is campaigning to Congress that we switch over to natural gas to fuel America. It is 2/3 more efficient than gasoline, made in America and clean. He vows to bring back $2/gallon gas equivalent.
Palomar Medical Tech (PMTI - $13.69)
1) Laser and pulsed light systems for aesthetic applications such as permanent hair reduction, skin resurfacing, photofacials, skin tightening, leg vein and acne treatment, and tattoo removal
2) Peak earnings (2006) over $2.60 per share, almost $7 per share in cash on the balance sheet
3) “Effects of a weakened economy in the United States” hurting sales. U.S. accounts for 76% of sales
4) 10% of revenue comes from licensing as PMTI controls many of the major patents in the aesthetic laser industry
5) Non-exclusive License Agreement with Procter & Gamble to exploit home-use light-based hair removal devices for women. P&G will manufacture and market and PMTI gets the royalty revenues. Since it is non-exclusive, PMTI can license IP to other consumer companies
6) Positive demographic trends: aging population with a desire to look young
Terex (TEX - $47.22)
1) Third largest manufacturer of construction equipment in the world
2) Five business segments (followed by the percentage of total sales for the past 12 months thru 03.31.08): Aerial Work Platforms (25%), Construction (20%), Cranes (25%), Materials Processing & Mining (23%), and Roadbuilding, Utility Products and Other (7%). These five segments produce equipment for use in various industries, including construction, infrastructure, quarrying, surface mining, shipping, transportation, refining and utility
3) Terex seeks to differentiate itself by dominating smaller equipment markets to reduce the appeal of large scale competition
4) A true global player with approximately 70% of 2007 sales from outside the U.S.
5) Down on worries of slowing global economic growth and increased raw material costs but we believe global growth will continue
6) Management continues to fund product development and efforts to move production closer to its international end customers
7)) Backlog expected to be realized over the next 12 months is up more than 40% year-over-year
8) Company is about halfway through a $700 million stock buyback program
9) Management has stated a goal to deliver $12 billion in annual sales by 2010, with a 12% operating profit margin and working capital levels equivalent to 15% of sales.
10) Shares trade for less than 7 times the midpoint of management's 2008 revised earnings guidance of $7 per share. TEX also boasts a current price-to-sales ratio of 0.4.