Gencorp Inc (GY), Petroleo Brasileiro Petrobras SA (ADR) (PBR): High-Quality Companies You Should Consider

Page 1 of 2

I always liked to look for investments that might have huge up-side potential. Of course, this up-side comes at a cost such as political risks or lack of liquidity. Here, I present two very un-covered companies that I have been looking at for very specific reasons, and I which I believe offer limited downside and huge up-side potential. These companies will not be a huge part of my portfolio, but I think they might deserve a bet.

Betting on M&A

Petrobras Argentina SA ADR (NYSE:PZE) most commonly know as PESA, has strong fundamentals, huge potential shale reserves in the Vaca Muerta basin, and trades cheaply. But, most importantly, it’s a perfect M&A candidate. As a matter of fact, the company has recently received a bid (the sum was not disclosed) that was considered too low by its controlling shareholder, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). I think it will not be long until bidders come back with a higher offer.

Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR)

Moreover, the company’s fundamentals are strong. PESA continued to report strong results in the fourth quarter of 2012, on the back of increased revenue in local currency and improved operating margins in the exploration and production (E&P) segment. EBITDA benefited from higher gross profits, mainly driven by the E&P segment, along with sizable reductions in operating expenses resulting from controlled SG&A management and lower exploration expenses. Results comparisons versus the previous year were impacted by substantial non-recurrent expenses undertaken by PESA throughout 2011. As a result, EBITDA in 4Q12 and FY2012 increased substantially by 218% year-over-year (yoy) and 95% yoy, respectively, with marked margin expansions.

As previously mentioned, during April of this year, several newspapers reported that Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) was studying the possibility of selling 51% of its current stake in PESA (Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) currently owns 67% of PESA) to Oil Combustibles. The deal did not go through, but I am sure we shall see much more activity going forward. After all, PESA trades at 1 time EV/EBITDA and pays a growing 3.7% cash dividend yield. This is just a fraction of the price you need to pay if you want to buy Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR). The Brazilian oil giant trades at 6 times EV/EBITDAX and, since it’s controlled by the Brazilian government, it has zero chances of becoming an M&A target.

A market leader with huge growth ahead

Gencorp Inc (NYSE:GY) provides missile defense and satellite propulsion systems to clients such as the U.S. Department of Defense and NASA.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!