Maverick Capital is buying Citrix Systems: shares could rally to $95

Posted on March 7, 2013 Written by

Maverick increased its existing position in Citrix Systems (CTXS), a leading application software company at an average price of $64.5. Citrix has great profitability metrics, an interesting investment thesis and an attractive valuation.

Citrix Systems, Inc. designs, develops, and markets technology solutions to deliver IT services on-demand. Citrix offers successful cloud services such as NetScaler, GoTo services and ShareFile which continue to lead the market and gain share. This company has a strong profitability profile:

  • EBITDA growth of 17.8%
  • EPS growth of 18%
  • Net margin of 16%
  • Strong FCF

The investment thesis for CTXS is simple: the business has been performing strongly but in the mid part of  2012 CTXS growth rates dipped down pretty dramatically because several non-skilled customers hold off purchases of highly value-added Citrix products due to economic volatility. Those customers that stopped buying Citrix products last year are finally coming back which is starting to be reflected in Citrix’s earnings reports.
In fact, last quarter Citrix reported Q4 earnings of $0.90 per share, $0.06 better than the Capital IQ Consensus Estimate of $0.84 while revenues rose a strong 19.5% year/year to $740 millionn vs the $705.89 million consensus. Almost every category grew at double-digit rates.

 

Citrix management projects FY13 EPS of $3.12-3.15. Considering that CTXS has been trading in a P/E range between 30-40 x since the last 5 years, this EPS projection could translate in a target price of $95.

CTXS

Filed Under: Stock Ideas

Microsoft could go to $30

Posted on March 7, 2013 Written by

I like to watch Greenlight Capital latest moves and check which stocks have potential upside (with limited downside). I think that Microsoft could be one of those. Greenlight has been investing in Microsoft since the last 5 years and every time the stock went into the $25/26 range, the fund increased its position. Last quarter was no exception as Greenlight increased MSFT position by 41%.

Although there could be a secular move by consumers to non-Windows-based mobile devices such as the iPad, Microsoft is still selling its core products (Win and Office) in a predictable way.

In the last earnings call, Microsoft reported earnings of $0.76 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.75 while revenues rose 2.7% year/year to $21.46 billion vs the $21.5 billion consensus. In addition, gross margin was 73.5% vs. estimates of ~73%. MSFT reported a solid quarter, highlighted by continued adoption of Win8 (>60M sold), Server & Tools and Bing Search monetization. Additionally, Microsoft told investors that enterprise demand remains healthy, as customers continue to add products and additional seats to their enterprise agreements.

Shares are very cheap, trading at just 9x Forward P/E and a Price/FCF of 8x which is at the low end of MSFT P/FCF 5 year range of 8-14x. Microsoft could approach to $30 considering that analysts expect a conservative FY13 EPS of $2.85 multiplied by a low P/E of 10x. I think it is now good time to buy the stock.

MSFT

Filed Under: Stock Ideas

Febraury 2013 Credit Suisse Latin America Recommended Bond Picks

Posted on February 25, 2013 Written by

Credit Suisse Fixed Income Research issues a bi-monthly report called: ' Where We See Value Now in Latam Corporates´. In this report CSFB analysts detail Latin America bond picks that are attractive in terms of yield and credit fundamentals. By … [Continue reading]

Filed Under: Bond Ideas Tagged: , ,

Bonds are still attractive in 2013

Posted on January 23, 2013 Written by

In a 0% return environment, notwithstanding all the uncertainties across so many levels — financial, economic and geopolitical, cash is not king. What is king is cash flow. The Fed has also completely altered the relationship between stocks and … [Continue reading]

Filed Under: Fundamental Analysis Tagged: , , , , , , ,

3 Sources for Great Stock Ideas

Posted on January 14, 2013 Written by

Mohnish Pabrai runs a hedge fund and is famous for paying $650,100 for a lunch with Warren Buffett. Pabrai recently had an interview with interview with The Motley Fool and explained the best lessons from his lunches with Charlie Munger and Warren … [Continue reading]

Filed Under: Fundamental Analysis

Learning Hedge Fund Portfolio Allocation

Posted on January 9, 2013 Written by

A very interesting concept when analyzing hedge fund portfolios is learning how top portfolio managers allocate their assets under management into their best stock ideas.  While there is a lot of theory about portfolio allocation, I think one of the … [Continue reading]

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