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Baxter International Inc (BAX) : Financial Advisory Group reduced its stake in Baxter International Inc by 5.01% during the most recent quarter end. The investment management company now holds a total of 5,694 shares of Baxter International Inc which is valued at $259,191 after selling 300 shares in Baxter International Inc , the firm said in a disclosure report filed with the SEC on May 13, 2016.Baxter International Inc makes up approximately 0.12% of Financial Advisory Groups portfolio.
Other Hedge Funds, Including , Beaumont Financial Partners added BAX to its portfolio by purchasing 113,974 company shares during the most recent quarter which is valued at $5.2 Million. Baxter International Inc makes up approx 0.86% of Beaumont Financial Partnerss portfolio.Shinko Asset Management Ltd. reduced its stake in BAX by selling 148 shares or 9.37% in the most recent quarter. The Hedge Fund company now holds 1,431 shares of BAX which is valued at $65,139. Howard Hughes Medical Institute added BAX to its portfolio by purchasing 3,240 company shares during the most recent quarter which is valued at $147,485. Baxter International Inc makes up approx 0.03% of Howard Hughes Medical Institutes portfolio.Connable Office Inc reduced its stake in BAX by selling 196 shares or 0.48% in the most recent quarter. The Hedge Fund company now holds 40,447 shares of BAX which is valued at $1.8 Million. Baxter International Inc makes up approx 0.51% of Connable Office Incs portfolio.
Baxter International Inc closed down -0.16 points or -0.37% at $43.5 with 1,07,47,349 shares getting traded on Wednesday. Post opening the session at $43.93, the shares hit an intraday low of $43.16 and an intraday high of $43.93 and the price fluctuated in this range throughout the day.Shares ended Wednesday session in Red.
On the companys financial health, Baxter International Inc reported $0.36 EPS for the quarter, beating the analyst consensus estimate by $ 0.07 according to the earnings call on Apr 26, 2016. Analyst had a consensus of $0.29. The company had revenue of $2375.00 million for the quarter, compared to analysts expectations of $2351.22 million. The companys revenue was down -1.2 % compared to the same quarter last year.During the same quarter in the previous year, the company posted $1.00 EPS.
Investors should note that on May 3, 2016, Baxter International Inc announced a cash dividend of $0.1300. The companys management has announced Jun 1, 2016 as the ex-dividend date and fixed the record date on Jun 3, 2016. The payable date has been fixed on Jul 1, 2016.
Many Wall Street Analysts have commented on Baxter International Inc. Company shares were Reiterated by RBC Capital Mkts on Apr 27, 2016 to Sector Perform, Firm has raised the Price Target to $ 47 from a previous price target of $40 .Baxter International Inc was Upgraded by Piper Jaffray to Overweight on Apr 14, 2016.
Baxter International Inc. (Baxter) is a diversified healthcare company. The Company operates in two segments: BioScience segment which include three commercial franchises: Hemophilia BioTherapeutics and BioSurgery and Medical Products segment which include four commercial franchises: Fluid Systems Renal Specialty Pharmaceuticals and BioPharma Solutions. Its BioScience processes recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies alpha-1 antitrypsin deficiency burns and shock and other chronic and acute blood-related conditions and biosurgery products. Its Medical Products manufactures intravenous (IV) solutions and administration sets premixed drugs and drug-reconstitution systems pre-filled vials and syringes for injectable drugs IV nutrition products infusion pumps and inhalation anesthetics. Its products are used in hospitals kidney dialysis centers and nursing homes among others.
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With every day bringing greater media focus on investment advisors fees and conflicts of interest, its certainly not a bad thing to be a company on the other side of that trend - and thats where retirement plan advisor Financial Engines (NASDAQ:FNGN) finds itself. Although some believe the recently passed fiduciary rule didnt go far enough, I do believe it will underpin the growth story for Financial Engines over time.
The challenge, unfortunately, is that as much as I like the companys position in the advisory market, I dont particularly like its double leverage (on both investment performance and fund flows) to the performance of domestic and international equity markets. I wouldnt call myself a bear, but I also dont think market valuation multiples have tremendous room to expand. With FNGNs valuation pricing in pretty decent continued growth, I would personally prefer to wait to consider this business until a more significant/prolonged market downturn.
They Wouldnt Recommend A Leveraged ETF... But Are They One?
The growth story at Financial Engines is multi-layered - the company attracts new assets from plan participants ongoing, automatic 401(k) contributions, in addition to market growth. On top of that, Financial Engines can grow its penetration within existing sponsors (it currently only provides services to about a tenth of participants in plans with which it partners), and it can add new sponsors (such as the Wells Fargo deal its working on).
This all adds up to pretty robust long-term growth prospects, but its not entirely automatic. During the first quarter, the companys AUM declined about 1% on an organic basis, driven partially by negative returns, but also by a small net outflow of client assets.
In and of itself, I actually dont view this decline as particularly concerning. Higher-than-normal cancellations drove some of the decline - the company states that it encountered a timing issue with two sponsors who left for Nationwide and Merrill Lynch, but believes its still on track for its usual 98% retention rate. While this is obviously a factor that bears monitoring, I dont think one outlier quarter is cause for alarm.
What is more concerning is the other half of the story, and what it implies for the companys performance in a significant bear market. FNGN noted that market volatility leads to higher voluntary cancellations by plan participants who wish to pull their money out of the market.
I believe a significant downturn would lead to an even more severe version of this, which is corroborated by financial crisis-era data provided in the companys S-1 from way back when. Financial Engines would likely recover relatively quickly, but the interruption to growth would be a decided negative in light of the robust valuation multiple.
The Mutual Fund Store - Right Strategy, What About Execution?
FNGNs acquisition of The Mutual Fund Store was pricey, but as Ive discussed before, it makes strategic sense in light of where the world is going. Retirees obviously have to roll over their 401(k)s into IRAs, and Millennials seem much less likely than previous generations to stick with employers for decades (and thus generate big 401(k) balances). At either end of the age spectrum, then, the trend seems to be towards IRAs, making it important to have a strong presence in this market.
At least off the bat, though, there are a few questions about performance at the acquired business. While the company initially guided to 2016 Adjusted EBITDA of $125-130 million excluding market gains, that range had fallen a little bit as of the May 6th market performance (which wasnt all that bad). Managements original explanations on the February call didnt particularly convince me, and I do wonder if Warburg Pincus engaged in a little bit of window dressing.
Those questions aside, the moves the company is making - particularly offering seminars and holistic on-site planning beyond the 401(k) - would seem to drive stickier relationships over time. The real revenue synergies will hopefully come from rollovers staying with Financial Engines when employees move on to greener pastures, as well as picking up other accounts that employees may currently have.
Bigger Picture, Still A Strong Story
Everyone (including active managers) loves to hate on active management these days. The fees are too high, returns are too low, and so on and so forth.
Theres another angle, though. The more I look at Financial Engines, the more that I think its actually a beneficiary of these trends rather than threatened by them. Ive discussed before that most investors still value professional advice, and data from Financial Engines (as well as unbiased third parties) makes a case for advisors on a purely behavioral level - if you can simply counteract investors tendency to sell high and buy low, you create more than enough value to offset fees.
With Financial Engines fees quite low in the broader context of the advisory landscape, and investors increasingly knowledgeable (and annoyed) about the fees theyre paying to advisors, I think it has a more favorable long-term outlook than many in the space. Financial Engines professional management revenue represents a modest ~25 bps of its AUM, comparable to popular robo-advisors such as Betterment and Wealthfront, and substantially lower than traditional advisory fees, which can often exceed 1% for small accounts.
Obviously, Financial Engines model is somewhat lower-touch than many advisory relationships, and the number I cited is a blended average. The company is not going to be immune to fee pressure, but its certainly better positioned than retail stockbrokers who charge clients high fees for the privilege of being sold the banks own products. (Looking at you, JPMorgan (NYSE:JPM)!)
The recently passed fiduciary rule should hopefully do two things - first, raise investor awareness about the pervasive and rampant conflicts of interest in the financial advisory industry. Second, make it less profitable for banks to be in the business, leading to them putting their capital and marketing dollars elsewhere (similar to whats going on in fund administration and numerous other markets). These regulatory pressures, combined with ever-increasing investor attention on the fees they pay should continue to benefit low-fee, no-conflict advisors like Financial Engines.
Valuation: As Always, Heres Where I Get Hung Up
While I like the story on many levels, the big challenge for me is valuation. Even assuming some help from the market, I have trouble getting to a high enough 2016 Adjusted EBITDA target to make the current stock price ($26.50) equate to a multiple much below 12x. Making matters worse, Adjusted EBITDA excludes over $20 million of stock-based compensation, so real EBITDA is likely to be much closer to $100 million than $130 million, and the real EBITDA multiple is probably closer to 14x-15x (depending on exactly where stock-based comp comes in).
A higher-than-average EBITDA multiple can be supported in context of growth and the fact that this is not a particularly capital-intensive business, although there is some capitalized software and so on. Still, the current multiple requires pretty robust growth - which just didnt happen in Q1 on an organic basis, and may be a challenge if market volatility continues.
The risk factor is what happens if a downturn materializes - not only will Financial Engines take a hit on AUM from market movements, but also from flows, and the recently acquired Mutual Fund Store business appears to be more sensitive here (per management commentary). Falling earnings plus multiple compression could lead to a material decline in the share price. With a pretty good chunk of growth already priced in, Im not eager to take on that risk.
Despite relatively soft results early this year, I still like the long-term story at Financial Engines in light of macro trends in the investment advisory landscape. Everythings a function of price, though - and at an aggressive multiple that leaves little room for error, I think investors should be patient with this story and wait for a better entry point.
Disclaimer: Investing is inherently subjective and this article expresses opinions. Any investment involves substantial risks, including the complete loss of capital. Any forecasts or estimates are for illustrative purpose only. Use of this opinion is at your own risk and proper due diligence should be done prior to making any investment decision. Positions in securities mentioned are disclosed; however, the author may continue to transact in any securities without further disclosure.
This is not an offer to sell or a solicitation of an offer to buy any security. All expressions of opinion are subject to change without notice and the author does not undertake to update or supplement this piece or any of the information contained herein. All the information presented is presented as is, without warranty of any kind. The author makes no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use.
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The financial advice ombud has issued a second determination against a brokerage and two of its brokers, ordering them to compensate a Pretoria pensioner who invested in a hotel property syndication that has since been liquidated.
Noluntu Bam, the Ombud for Financial Services Providers, held Stephanus Johannes van der Walt, together with Barend Petrus Geldenhuys and Huis van Oranje Finansiele Dienste, jointly liable to repay 75-year-old Jeanne Peens R125#x202F;000, which she invested in the Blaauwberg Beach Hotel project between 2009 and 2010.
According to the ombud#x2019;s ruling, Peens is one of thousands of investors who invested in Purple Rain Properties, trading as Realcor.
Realcor was an authorised financial services provider that sold one- and five-year debentures (an investment in a long-term loan), as well as various classes of shares, to build the hotel.
Realcor was liquidated before the hotel was completed.
Bam#x2019;s ruling says Realcor targeted the elderly and those making provision for their income in retirement, offering them monthly interest payments and dividends of more than 10#x202F;percent. This was despite the fact that the hotel had not been built and there was no #x201C;legitimate economic activity to generate the cash flows#x201D;.
Realcor used various subsidiary companies, including Midnight Storm Investments, Grey Haven Richees and Ipobrite, to obtain funding from the public. The investment was publicised as safe and guaranteed, with minimal risk that investors would lose their capital, because it was in property.
In April 2008, in response to allegations that Realcor was raising money unlawfully from the public, the South African Reserve Bank ordered an inspection of Realcor, which was conducted by PricewaterhouseCoopers (PWC).
The Reserve Bank found that Realcor was conducting the business of a bank without being registered as one.
It prohibited Realcor from raising further deposits and took steps to have investors#x2019; money repaid, appointing PWC as the managers to supervise Realcor for the Reserve Bank.
Attempts to put the company under business rescue failed, and its main creditor, First National Bank, filed for liquidation, according to the ruling. The incomplete building was eventually sold for about R50#x202F;million, but investors did not receive a liquidation dividend, the ombud says.
Brokers who sold Realcor Investments took the matter to court, asking that PWC be held liable for investors#x2019; losses and contending that the Reserve Bank#x2019;s intervention had caused Realcor to collapse, the ruling says.
But the court found that the Reserve Bank had not taken over the daily operations of Realcor and it remained under the control of its directors until it was liquidated, the ombud#x2019;s ruling says.
The ruling states that Peens contacted Van der Walt and Geldenhuys in response to a radio advertisement.
They saw her and she signed the investment forms and a record of advice the same day.
Bam says the record of advice Van der Walt and Geldenhuys produced shows that the financial products they considered for Peens were Realcor, the PIC property syndication and the Sharemax property syndication. They suggested Realcor, because it had the highest expected returns.
She says the basis on which Van der Walt and Geldenhuys considered the three property syndications to be suitable for Peens is #x201C;inconceivable#x201D;, given that she had experience only of investing in listed investment companies.
Van der Walt and Geldenhuys told the ombud that Peens did not want to provide them with the information they required to determine her financial needs.
But Peens told the ombud this was a lie, and she had not known that the advisers should have assessed her capacity to take on the risk and her tolerance for the risk before selling her the investment.
Bam says the brokers appeared to be #x201C;oblivious#x201D; to their responsibilities in terms the code of conduct under the Financial Advisory and Intermediary Services (FAIS) Act. The code states that, before giving you advice, an adviser must:
#x2022; Take reasonable steps to obtain information about your financial situation, your experience with financial products and your investment goals;
#x2022; Analyse the information gathered; and
#x2022; Identify financial products that are appropriate given your risk profile and financial needs.
The ombud says getting you to sign a record of advice does not exempt an adviser from carrying out the investigation he or she is, by law, obliged to do.
She says Van der Walt and Geldenhuys did not demonstrate the lengths they went to get the required information from Peens, despite the fact that she made three separate investments into Realcor.
Bam says Peens#x2019;s complaint #x201C;bears striking similarity#x201D; to a complaint that came before her office in 2012 from a pensioner couple who Van der Walt and Huis van Oranje advised to invest in Realcor. In that case, Bam ordered Van der Walt and Huis van Oranje to repay R695#x202F;000 to the couple, and she says the record of advice was a replica of that given to Peens.
She says Peens believed she was investing in a hotel, but the hotel was incomplete, and it is not clear what steps Van der Walt and Geldenhuys took to explain how the incomplete hotel would generate the promised returns.
Bam says Van der Walt and Geldenhuys contravened the FAIS Act and its code of conduct, because they did not act in Peens#x2019;s interests when they recommended a highly risky investment in an unlisted property syndication, even though her circumstances indicated that the product was not suitable.
She says they failed to act honestly, fairly, with due care, skill and diligence, as required by the FAIS Act, when they recommended an inappropriate financial product.
Bam says Peens would not have invested in Realcor if she had known about the high-risk nature of the investment, its structure, funding model and possible mismanagement, as well as the commission Van der Walt and Geldenhuys earned.
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Equiteq has named David Jorgenson its CEO. He succeeds Paul Collins who will become Chairman of the board. Jorgenson joined Equiteq two years ago as Global Head of Mamp;A. Other changes at Equiteq include: Nicodemo Esposito was promoted to MD, Head of Mamp;A and Strategic Advisory North America, while Alex White has joined Equiteq as MD, Head of Mamp;A and Strategic Advisory Europe.
Strategic advisory and mergers and acquisitions firm to the consulting and IT services sector, Equiteq, has made several key appointments across its US and UK offices to broaden its global leadership team. Equiteq operates from offices in London, New York, Singapore and Sydney.
New York based David Jorgenson, who joined Equiteq two years ago as Global Head of Mamp;A, succeeds Paul Collins as CEO of Equiteq. Jorgenson has advised business owners, shareholders and C-level executives on every aspect of growth and value realization during his 20-year career as a technology consultant and investment banker. He is an expert in every aspect of corporate financial advisory from valuation, strategic financial advisory, public and private equity and debt financing, exit planning, Mamp;A strategy and execution.
Collins, who will take on a new role within Equiteq as Chairman of the Board of Directors, commented:
"Following expansion into North America and Asia-Pacific, Equiteq is closing a record number of deals and will benefit from a new team to take it forward. David is a very experienced advisor in the professional services and IT services space and is uniquely suited to lead Equiteq in its next phase of growth."
Jorgenson, has made two new appointments: Nicodemo Esposito, has been promoted to Managing Director, Head of Mamp;A and Strategic Advisory North America and Alex White, previously Head of Private Equity at BDO Corporate Finance, joins Equiteq as Managing Director, Head of Mamp;A and Strategic Advisory Europe. Jean-Louis Michelet will continue to lead the Asia Pacific region as Managing Director, Head of Mamp;A and Strategic Advisory Asia Pacific.
"Equiteq has developed a unique business model combining deep industry expertise with premier transaction capabilities. I am very excited about the opportunity to develop our global execution model and continue delivering outstanding outcomes for our clients."
About Equiteq (www.equiteq.com)
Equiteq is a consulting sector Mamp;A specialist. The company works with consulting firm shareholders, helping them to achieve their business objectives and exit strategies. Equiteq's services are designed to deliver great returns for its clients, by accelerating revenue, profit and equity value growth, and ultimately realizing that value in a trade sale or other type of liquidity event.