A Couple Positions Placed on Emerging Turnarounds

Bought ~2% position in Computer Associates, ticker CA, at $22.94.

Bought CA primarily for the changes made in the business over the past year, which includes new management and acquisitions in the cloud computing sector. Generally, this is how I like to invest by identifying companies making good investments in their business that should lead to improving returns. Stock trades around 11x 2011 non-GAAP EPS consensus estimate, slightly lower than IBM and Oracle. While the company is by no means a pure play cloud computing company (legacy mainframe business provides stable and substantial amount of cash flow), and it has significant hurdles to migrate its business in this direction, more cloud-oriented software companies like Salesforce.com (Ticker: CRM), Amazon.com (Ticker: AMZN), and Concur (Ticker: CNQR) trade north of 40x 2011 EPs estimates. So I realize it has been "dead money" for years, but I expect the business to gradually look better over the next few years, offering accelerating EPS growth and possible multiple expansion.


Bought ~2% position in A shares of LyondellBasell, ticker LYB, at $28.00.

Complex business analyze due to its breadth, recent emergence from bankruptcy court and recent listing on the NYSE. However, it boils down to this: the company has pricing power, should benefit from a weakening dollar (although difficult to pin-down due to hedging activity), and it fits in my macro strategy of investing deep in the supply chain where inflation is most likely to emerge first. As time rolls forward the business trends should become clearer and analysts should pick up coverage, providing greater clarity for investors.

The stock trades at an EV /TTM Sales of about 0.7x, comparable to other chemical companies like DOW, GRA, and ASH.

LyondellBasell plans to release the results for the September quarter before the market open on Friday October 29.

LyondellBasell participates in the entire petrochemical value chain, from refining to specialized petrochemical product end uses. They are the largest producer of polypropylene and polypropylene compounds; a leading producer of propylene oxide, polyethylene, ethylene and propylene; a global leader in polyolefins technology; and a producer of refined products, including biofuels. Additionally, LyondellBasell is a leading provider of technology licenses and a supplier of catalysts for polyolefin production. To learn more about their business please look through recent presentations.