Schweitzer-Mauduit: Will Gain from Increased LIP Adoption

A Boston presenter likes Schweitzer-Mauduit (NYSE: SWM, $55.76) at this level. The company is the global leader in reconstituted tobacco products and low ignition paper. LIP is much safer than the regular product and as such is being mandated into use by regulatory authorities around the world. The European market, where LIP adoption is slowly gathering pace, is a very important growth opportunity for the company. SWM has a clean balance sheet and is on track to generate $100 million in FCF this year, following its multi-year manufacturing rationalization. Clarity over licensing arrangements for LIP in Europe and long-term demand for RTL will be the near-term catalysts.

Lufkin Industries: Pump Alternatives and Cheaper Competition Threaten Position

A New York presenter recommends a short on Lufkin Industries (NASDAQ: LUFK, $74.12). The company is a high-cost manufacturer with limited capacity to compete on price. There are a number of alternatives to its main product beam pumps, which have traditionally been the product of choice in artificial lift. Competing pumps work at a wider range of depths and are capable of handling higher volumes. There is also a growing threat from Chinese manufacturers that are able to sell the product significantly cheaper. The quality of the imported product has improved substantially as well. The presenter believes the downside can reach 20% from the current level, based on 6x his estimate for LUFK's peak EBITDA.

KVH Industries: Recurring Revenues on Verge of Ramping Up

A New York presenter likes KVH Industries' prospects (NASDAQ: KVHI, $14.26). This provider of mobile communication services for commercial ships worldwide has completed an initial buildout of its marine global network and is now able to deliver internet and mobile services for the vast majority of shipping routes. KVHI has the most compact and the easiest to install system in the space. Recurring airtime revenues are the best part of the story. KVH's system has been installed on 1,000 ships so far, but the total market opportunity is 130,000 ships. At $2,000/month/unit, incremental earnings from airtime charges can add up very quickly. A recent new contract with Coast Guard underscores the advantages of KVH's offering and boosts the company's credibility.

Nordion: Resumption in Isotope Supply and New Sources Boost Prospects

A New York presenter recommends Nordion (NYSE: NDE, $11.64) as a buy. This provider of medical isotopes, targeted therapies, and sterilization technologies has seen its share of the isotope market fall drastically, due to interruptions in supply from the NRU reactor in Canada. In August, the reactor resumed operation after a prolonged shutdown. NDZ has also reached an agreement with a Russian-based producer to diversify its sources. Sales in the company's two other segments have been expanding at a rapid pace. Nordion has just announced a $0.40 dividend and a very sizable stock buyback. Resolution of the arbitration with the Canadian government expected in 2H 2011 can be a significant catalyst.

Roulston Retail Chair Discussing Retail in Media

Craig Johnson, President, Customer Growth Partners and Chair of Roulston Research Retail Group, has recently been quoted in various media outlets, discussing the outlook for some individual companies in the retail space. Please use the links below to hear his thoughts.

http://www.chainstoreage.com/article/reinvented-department-stores-and-malls-see-robust-rebound

http://www.bloomberg.com/news/2011-02-09/johnson-discusses-increase-in-shopping-mall-spending-audio.html

http://www.usatoday.com/money/industries/retail/2011-02-12-walmart-comeback_N.htm

http://retailtrafficmag.com/charts/dept_stores_resilience_02152011/#

Palomar Medical: Entering Direct to Consumer Market

A New York presenter is bullish on Palomar Medical Technologies' prospects (NASDAQ: PMTI, $16.16). The company is seeing encouraging signs in its core business of selling skin treatment products and systems to medical practioners, but the attraction of the story is PMTI's recent entrance into direct to consumer skin rejuvenation space. The company's PaloVia wrinkle-reducing product started selling on QVC two months ago, and the initial results have exceeded internal expectations. Management sees the product going mainstream in the not so distant future, based on its cost, efficacy and relative ease of application. Potential upside in the $16 billion domestic skin beauty market is very significant. Depending on the number of treatments sold, incremental earnings from PaloVia can reach $1-2/share.

Rock-Tenn: Smurfit Acquisition Strengthens Position

Rock Tenn(NYSE: RKT, $70.68) is another name from Roulston Research's recent New York idea forum. The Smurfit-Stone acquisition announced last month vaults the company to the #2 position in the growing containerboard space. RKT's CEO is well-known for making successful transformative acqusitions and this latest deal could be his best. The company has historically inderpromised and overdelivered on projected synergies from acquisitions. The presenter believes this trend will be maintained here as well. Consolidation in the space has been the driver for high utilization rates and increasing pricing power. Another price increase is likely in the early spring. Should one transpire, RKT will be on course to generate $13/share in fully taxed cash flow. Based on a conservative 9 times multiple, the upside from here is close to 70%, or 30% with no price increase.

AB InBev: 30% Upside Based on Cash Flow

A New York presenter likes AB InBev (NYSE: BUD, $56.04) at this level. The largest global brewer is set to add $1 billion+ in cost synergies, following the 2008 merger, to the original target. Leverage reduction targets will be met 2 years ahead of plan, triggering a change in leadership incentive dynamics from debt paydown from the deal to share appreciation. The Street is misreading a recent slowdown in Brazil as indicative of future problems in the country, but the presenter disagrees. The comp growth in this all-important market for the company is set to resume shortly as competitors implement their price hikes to match BUD. Based on the presenter's FCF estimates, the upside from her ecould reach 30%. A substantial dividend increase as well as stock buybacks are strong possibilities.

First Solar: Significant Downside Potential

A NY-base presenter recommends a short on First Solar (NASDAQ: FSLR, $157.69). He argues that the company is no longer the low cost producer in the fiercely competitive solar space. Gains in the efficiency of its modules have been decelerating and FSLR's cost advantage may no longer be there. With supply likely to substantially exceed demand this year, First Solar may be the only manufacturer left unable to price its product competitively. Cuts in government subsidies for solar across Europe, and particularly in the two largest markets Germany and Italy, are another major threat to the company's profitability.

Gap's Change at the Top Confirms RBR Mall Tour Takeaways

One of the key takeaways from our November mall tour at Westchester with Arnold Cohen's the former COO of J. Crew, was lack of focus or defined customer in Gap's strategy. Thus, it came as no surprise to us when it was announced earlier this week the company was replacing the head of its namesake brand.

US Bancorp: 30-50% Upside

A New York presenter likes US Bancorp (NYSE: USB, $27.22) at this level. The 5th largest bank in the US has maintained its conservative credit culture during the recent crisis and used severely discounted valuations in the space to make targeted acquisitions. USB doesn't get enough credit for its robust fee businesses. Recent results point to a pick up in loan growth, but significant room for improvement remains, with only a 26% utilization rate in the wholesale operation. A significant dividend increase is the management's top priority, pending a response from the FED on the bank's comprehensive capital plan.

ARM Holdings: Short Based on Valuation

A New York presenter recommends a short on ARM Holdings (NASDAQ: ARMH, $26.99). He respects the company's dominance in semiconductor IP for the mobile market, but believes that the valuation has gotten ahead of itself. The threat from Intel, while dismissed by many on the Street, is credible from the presenter's perspective. The stock is trading at 27 times most bullish earnings estimates for 2011 and investors may question where more upside can come from.

Vitesse: Settled with SEC and Now Poised for Strong Growth

A Boston presenter likes Vitesse Semiconductor's prospects now that the company finally has settled its option-backdating case going back years with SEC and received a clean audit for its fiscal 2010 report. Vitesse's solutions cover all areas of enterprise and carrier ethernet markets, and the company has strong relationships with most of the leading players in the industry. VTSS has substantially lowered its costs by outsourcing manufacturing operations, while at the same time increasing its R&D spend. The company is adding new products at an accelerated pace and has scored a number of important design wins lately. Fiscal 2011 will be flat, as legacy products go away and new products start kicking in, but growth is poised to resume strongly in FY 2012. The presenter targets $8 or 50% upside from the current level.