Twelve Posts of Christmas, Part 4

Today we are finishing up the Twelve Posts of Christmas, sung to the classic English holiday song introduced back in 1780. We used the holiday season as inspiration to try out new ideas and reassess old ones. We covered the first six days last Wednesday and Friday, and moved on into days seven to nine on Monday. On this eve of Christmas, let's now sing a hallelujah chorus as we wrap up our Twelve Posts of Christmas! In this Tenth Post of Christmas, my true love sent to me: Ten Lords-a-Leaping At Christmas, toy sales are an area of focus for investors, and one company that is not making the leap to better results is LeapFrog Enterprises (LF). The stock has been lousy this year, down over 40%, as sales growth has stagnated and earnings have turned into losses. Revenue is expected to be down substantially for the year, with a loss of ($0.20) per share this fiscal year (ending in March), versus earnings of $1.19 last year. A sure fire indicator of poor management: look at the level of pay being spread around a not-that-large company. This alone tells me they are not disciplined in spending. The company also faces a longer-term problem: the disruptive nature of the proliferation of tablets and smartphones, which are now the platform of choice for games of learning as well as fun. My only reticence in making an outright short call on LF is valuation. At a $330 million market cap, but with over $100 million in cash and the likelihood of high cash flow as it converts working capital post holidays, the stock is pretty depressed and would need substantial fundamental deterioration to fall further. At a minimum, avoid this one for now. In this Eleventh Post of Christmas, my true love sent to me: Eleven Pipers Piping Sometimes, research almost feels like a commodity on Wall Street, since there is so much of it and brokers find it so hard to get paid for their work. Everyone does have their favorites, however -- incredibly solid firms and analysts that get the job done year in and year out, with insightful, value-added research. I am a huge fan of Piper Jaffray (PJC), and highly recommend to our institutional readers to utilize their expertise. Piper covers a number of industries, but is an ace in consumer, health care, agriculture and industrials, among others. For instance, Michael Cox has carved out an innovative universe of growth ags that extends from classic machinery names like Deere (DE) to precision farming equipment like Trimble, from ag biotech leaders like Evogene (EVGN) to renewable fuel names such as Green Plains. Similarly, Alex Potter is one of the most innovative industrials analysts on the street; he speaks Chinese and regularly does multi-week due diligence trips to China, doing on-the-ground fact-finding to assess prospects for his names in this most important of markets. His universe covers large traditionals like Cummins (CMI) to trucking technology leaders like Fleetmatics (FLTX), as well as key natural gas beneficiaries like Chart Industries (GTLS). And of course I need to mention Gene Munster, Piper's star internet and tech analyst. Gene is ubiquitous on CNBC, and does excellent research on leading names in his space, including Apple (AAPL), Amazon (AMZN), Google (GOOGL) and LinkedIn (LNKD). Piper puts together an annual best pick list, which will be coming in early January. Here is a sneak peek of a few names that are already on the record as top picks from some of their analysts: Charles Duncan, PhD: Mirati Therapeutics (MRTX) We see multiple near-term mid-stage data points for lead candidate Met/Axl-inhibitor '265 that should clinically validate the agent and Mirati's targeted development strategy... Michael Cox: Bunge (BG) ...record soybean crop in the U.S. and expectations of another strong soybean crop in Brazil sets a positive tailwind for the core Agribusiness segment...management is focused on growing the higher margin food & ingredients business, while the strategic review of the Sugar business progresses... Alex Potter: Wabco Holdings (WBC) WBC is immune from peakish order concerns in the US, and will be a major beneficiary when a European truck cycle materializes...unless the EU implodes completely, we think investors will remain focused on how Europe's aging truck fleet needs updating... Sean Naughton: Boulder Brands (BDBD) We see the current valuation at less than 12x CY15E EBITDA as an attractive entry point given depressed margins, double-digit topline growth and a strong portfolio of brands that we believe would be attractive to strategic buyers... Ed Tenthoff: Novavax (NVAX) We look for several important clinical trial read-outs in 2015 to drive Novavax shares toward our price target ($10.50), and position the company to begin registration trials of its two potential blockbuster vaccines (RSV and flu)... In this Twelfth Post of Christmas, my true love sent to me: Twelve Drummers Drumming Before you get on d' plane, boss, d' plane to head to your holiday destination -- or more likely, after you land -- you may want to enjoy d'rum. The holidays are a great time to assess the product line-up of the liquor companies -- in moderation of course. This sin industry is blessed with a robust and recession-resistant demand profile. Margins are quite high, although a good chunk of the gross is eaten up in marketing costs, since the only real way to differentiate in the major categories is the bottle and the advertisements. Diageo (DEO) is the industry giant, but I prefer to tipple with Brown-Forman (BF-B), a smaller company at $18 billion market cap and $4 billion in annual sales. The stock is not cheap at 27x, but the results are extremely steady and you get a pleasant 1.4% dividend yield. BF's key brands include Jack Daniels, Southern Comfort, and Finlandia vodka, among a couple dozen. The long-term record at BF is strong, and given the ongoing consolidation in the industry, its smaller size could make it an acquisition candidate at some point. For all those celebrating Christmas tomorrow, we wish you a happy, healthy and loving holiday!

Twelve Posts of Christmas, Part 4

Piper's best stock picks, and some festive drinks.

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