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Valens Research

Valens Credit Weekly Insights - 2018 03 14

Valens Credit Research Team highlighted ideas for FCX, RIG, and URI. They have also provided recent analyses for AKS and CCI, while CYH topped the quantitative outlier report for the week.

Underlyings
Advanced Micro Devices Inc.

Advanced Micro Devices is a semiconductor company. The company primarily provides: x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets; discrete and integrated graphics processing units (GPUs), and professional GPUs; and server and embedded processors and semi-custom System-on-Chip (SoC) products and technology for game consoles. The company also licenses portions of its intellectual property portfolio. The company has two segments: Computing and Graphics, which consists of desktop and notebook processors, and chipsets; and Enterprise, Embedded and Semi-Custom, which consists of discrete and professional GPUs.

AK Steel Holding

AK Steel Holding is a producer of flat-rolled carbon, stainless and electrical steels products primarily for the automotive, infrastructure and manufacturing, and distributors and converters markets through its wholly-owned subsidiary, AK Steel Corporation. The company's other subsidiaries also provide customer solutions with carbon and stainless steel tubing products, solutions, tool design, hot- and cold-stamped steel components and assemblies. The company sells its carbon steel products mainly to customers in North America, and it sells its electrical and stainless steel products primarily in North America and Europe. The company also produces metallurgical coal through its AK Coal Resources, Inc. subsidiary.

Avon Products Inc.

Avon Products is a manufacturer and marketer of beauty and related products. The company's product categories are Beauty and Fashion and Home. Beauty consists of skincare, fragrance and color (cosmetics). Fashion and Home consists of fashion jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children's products and nutritional products. The company's business is conducted primarily in one channel, direct selling. The company's reportable segments are based on geographic operations in four regions: Europe, Middle East & Africa; South Latin America; North Latin America; and Asia Pacific.

Beazer Homes USA Inc.

Beazer Homes USA is a homebuilder. The company's homebuilding operations consist of the design, sale, and construction of single-family and multi-family homes in Arizona, California, Nevada, Texas, Indiana, Maryland/Delaware, Tennessee, Virginia, Florida, Georgia, North Carolina, and South Carolina. The company acts as the general contractor for the construction of its new home communities. The company's project development activities are controlled by its operating divisions whose employees supervise the construction of each new home community by coordinating the activities of subcontractors and suppliers, subjecting their work to quality and cost controls and ensuring compliance with zoning and building codes.

Builders FirstSource Inc.

Builders FirstSource, through its subsidiaries is a supplier and manufacturer of building materials, manufactured components and construction services to homebuilders, sub-contractors, remodelers and consumers. The company provides a solution to its customers providing manufacturing, supply and installation of structural and related building products. The company's manufactured products include factory-built roof and floor trusses, and wall panels and stairs. The company also assembles interior and exterior doors into pre-hung units. Additionally, the company supplies its customers with building products not manufactured by the company, such as dimensional lumber and lumber sheet goods and various window, door and millwork lines.

Chesapeake Energy Corp.

Chesapeake Energy is a holding company. Through its subsidiaries, the company is an independent exploration and production company engaged in the acquisition, exploration and development of properties to produce oil, natural gas and natural gas liquid from underground reservoirs. The company owns a portfolio of onshore U.S. liquids and natural gas assets. The company has positions in the resource plays of the Eagle Ford Shale in South Texas, the stacked pay in the Powder River Basin in Wyoming and the Anadarko Basin in northwestern Oklahoma. The company's natural gas resource plays are the Marcellus Shale in the northern Appalachian Basin in Pennsylvania and the Haynesville/Bossier Shales in northwestern Louisiana.

Community Health Systems Inc.

Community Health Systems is a holding company. Through its subsidiaries, the company operates general acute care hospitals and outpatient facilities. The company provides healthcare services through the hospitals that it owns and operates and affiliated businesses in non-urban and selected urban markets. Services provided through the company's hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. The company also provides additional outpatient services at urgent care centers, occupational medicine clinics, imaging centers, cancer centers and ambulatory surgery centers.

Crown Castle International Corp.

Crown Castle International is a holding company. Through its subsidiaries, the company owns, operates and leases shared communications infrastructure that is geographically dispersed throughout the U.S., including towers and other structures, such as rooftops (collectively, towers), and fiber primarily supporting small cell networks (small cells) and fiber solutions. The company's towers, fiber and small cells assets are collectively referred to herein as communications infrastructure. The company's core business is providing access, including space or capacity, to its shared communications infrastructure via long-term contracts in various forms, including lease, license, sublease and service agreements.

CVR Energy

CVR Energy is a holding company primarily engaged in the petroleum refining and nitrogen fertilizer manufacturing industries through its holdings in CVR Refining, LP (CVR Refining) and CVR Partners, LP (CVR Partners). CVR Refining is a petroleum refiner and marketer of transportation fuels. CVR Partners produces and markets nitrogen fertilizers in the form of urea and ammonium nitrate and ammonia. The company's operations include two business segments: petroleum, which includes a complex coking medium-sour crude oil refinery and a complex crude oil refinery; and nitrogen fertilizer, which consists of nitrogen fertilizer manufacturing facilities.

Expedia Group

Expedia Group is an online travel company. The company's portfolio of brands includes: Expedia.com?, an online travel company; Hotels.com?, a global lodging company operating websites with its Hotels.com? Rewards loyalty program; Expedia? Partner Solutions, a global business-to-business brand that provides the hotel business of airlines, travel agencies, loyalty and corporate travel companies plus several consumer brands through its API and template solutions; trivago?, an online hotel metasearch platform; HomeAway?, a global online marketplace for the alternative accommodations industry, which also includes the VRBO brand, among others; and Egencia?, a corporate travel management company.

Freeport-McMoRan

Freeport-McMoRan is a holding company. Through its subsidiaries, the company is a mining company. The company operates assets with proven and probable reserves of copper, gold and molybdenum, and the company is a publicly traded copper producer. The company's portfolio of assets includes the Grasberg minerals district in Indonesia, a copper and gold deposits; and mining operations in the Americas, including the Morenci minerals district in North America and the Cerro Verde operation in South America. The company has organized its mining operations into four primary divisions: North America copper mines, South America mining, Indonesia mining and Molybdenum mines.

J.C. Penney Co. Inc.

J. C. Penney Company is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. The company's business consists of selling merchandise and services to consumers through its department stores and its website at jcpenney.com. The company's department stores and website serve the same type of customers, its website provides the same mix of merchandise as its store assortment along with other extended categories that are not provided in store, and its department stores accept returns from sales made in stores and via its website. The company sells family apparel and footwear, accessories, jewelry, beauty products through Sephora inside JCPenney, and home furnishings.

McClatchy Co. Cl A

The McClatchy is a provider of independent local journalism as well as selected national news coverage through its Washington D.C. based bureau. The company is engaged in providing content, either editorial or through advertising. The company's media companies and its digital media agency, excelerate?, distribute content, including video products, through its owned and operated websites and mobile applications, third-party search and ad exchanges, social media platforms, electronic editions of its daily newspapers (e-editions) as well as its printed daily newspapers. The company also prints selected niche publications and community newspapers, as well as provides other print and digital direct marketing services.

Navistar International

Navistar International is a holding company. Through its subsidiaries, the company is a manufacturer of International? brand commercial and military trucks, proprietary brand diesel engines, and IC Bus? brand school and commercial buses, as well as a provider of service parts for trucks and diesel engines. The company's primary business is conducted in the North American truck and parts markets, where it principally participates in the U.S. and Canada school bus and Class 6 through 8 medium and heavy truck markets. The company also provides retail, wholesale, and lease financing services for its trucks and parts. The company operates in four industry segments: Truck, Parts, Global Operations, and Financial Services.

Newfield Exploration Co.

Newfield Exploration is an independent energy company engaged in the exploration, development and production of crude oil, natural gas and natural gas liquids. The company's principal areas of operation are the Anadarko and Arkoma basins of Oklahoma, the Williston Basin of North Dakota and the Uinta Basin of Utah. In addition, the company has oil producing assets offshore China. As of Dec 31 2017, the company had proved reserves of 680.0 million barrels of oil equivalent, which consisted of 250.0 million barrels of oil and condensate, 1,704.00 billion cubic feet of natural gas, and 146 million barrels of natural gas liquids.

Parker Drilling Co.

Parker Drilling is a provider of contract drilling and drilling-related services and rental tools and services. The company has two business lines: Drilling Services, which drills oil and natural gas wells for customers in both the U.S. and international markets; and Rental Tools Services, which provides rental equipment and services to exploration and production companies, drilling contractors and service companies on land and offshore in the U.S. and select international markets. Tools provided include drill pipe, tubing, pressure control equipment, and drill collars. The company also provides well construction services such as tubular running services and downhole tools, and well intervention services.

Ryder System Inc.

Ryder System is engaged in transportation and supply chain management solutions. The company's segments include: Fleet Management Solutions, which provides full service leasing and leasing with maintenance options, commercial rental, contract or transactional maintenance services, and fleet support services such as insurance, vehicle administration and fuel services; Dedicated Transportation Solutions, which combines equipment, maintenance, drivers, administrative services and additional services to provide a dedicated transportation solution; and Supply Chain Solutions, which provides logistics management services, including distribution management, transportation management and other services.

Supervalu Inc.

Supervalu is a distributer of grocery and other products and provision of logistics and professional service solutions to retailers across the U.S. The company's business is classified into two reportable segments: Wholesale, which provides wholesale customers a variety of food and non-food products, including national and regional brands, and the company owns lines of private label products, as well as providing an array of professional services that provide wholesale customers with solutions; and Retail, which provides grocery offering and, depending on size, a variety of additional products, including general merchandise, home, health and beauty care, and pharmacy.

Transocean Ltd.

Unisys Corp.

Unisys is an information technology company. The company's Services segment provides cloud and infrastructure services, application services and business process outsourcing services. In cloud and infrastructure services, the company assists clients to apply cloud and as-a-service delivery models. In application services, the company develops and manages applications for select industries and provides data analytics. In business process outsourcing services, the company assumes management of processes and functions for clients in target industries. The company's Technology segment designs and develops software and provides hardware and other related products including Unisys ClearPath Forward? and Unisys Stealth?.

United Rentals Inc.

United Rentals is an equipment rental company that operates throughout the U.S. and Canada. The company's segments are: general rentals, which includes the rental of construction, aerial and industrial equipment, general tools and light equipment, and related services and activities; and trench, power and fluid solutions, which includes the rental of specialty construction products and related services. The types of equipment that the company provides include general construction and industrial equipment; aerial work platforms; trench safety equipment; power and heating, ventilating and air conditioning equipment; fluid solutions equipment; and general tools and light equipment.

United States Steel Corp.

United States Steel is a steel producer of flat-rolled and tubular products with production operations in the U.S. and Europe. The company is also engaged in railroad services and real estate operations. The company's segments are: North American Flat-Rolled, which produces slabs, strip mill plates, sheets and tin mill products; U. S. Steel Europe, which produces and sells slabs, strip mill plate, sheet, tin mill products and spiral welded pipe, as well as heating radiators and refractory ceramic materials; and Tubular Products, which produces and sells seamless and electric resistance welded steel casing and tubing (known as oil country tubular goods), and standard and line pipe and mechanical tubing.

YRC Worldwide

YRC Worldwide is a holding company. Through its operating subsidiaries, the company provides its customers a range of transportation services. The company's reporting segments include: YRC Freight, which provides a range of services for the transportation of industrial, commercial and retail goods in national, regional and international markets, primarily through the operation of owned or leased equipment in its North American ground distribution network; and Regional Transportation, in which its service portfolio includes regional delivery, guaranteed and expedited delivery, interregional delivery, cross-border delivery, and hollandregional.com, newpenn.com, and reddawayregional.com.

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Valens Research
Valens Research

In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:

  • GAAP and IFRS have failed to provide rules for reliable financial statement reporting
  • Stock analyst recommendations are not grounded in disciplined financial analysis
  • Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
  • Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available

We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.

  • Corporate credit ratings remain years behind the fundamental underpinnings of company performance
  • Stock analysts continue to make recommendations with deeply inherent biases
  • Research firms have failed to break down the walls between credit, equity, and macroeconomic research
  • The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming

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