Big Quarter for JBSS

JBSS reported second quarter earnings after today's close.   See excerpt below and look for updates on Seeking Alpha

• Net sales increased by 4.4%
• Sales volume increased by 12.0%
• Net income increased by 11.1%

ELGIN, Ill.--(BUSINESS WIRE)-- John B. Sanfilippo & Son, Inc. (JBSS) (the Company) today announced operating results for its fiscal 2014 second quarter. Net income for the second quarter of fiscal 2014 was $9.2 million, or $0.83 per share diluted, compared to net income of $8.3 million, or $0.76 per share diluted, for the second quarter of fiscal 2013. Net income for the first two quarters of fiscal 2014 was $16.0 million, or $1.44 per share diluted, compared to net income of $15.8 million, or $1.45 per share diluted, for the first two quarters of fiscal 2013.

Muncipal Bond CEFs: Understanding the Risks on Seeking Alpha

Municipal Bond CEFs: Understanding the Risks

We just posted an article on Municipal Bond CEFs on Seeking Alpha.  Next we'll discuss strategies to reduce interest rate risk in your portfolio while being able to maintain much of the positive after tax features these funds can provide.  Keep checking the blog for our next post.

Mortgage Reits Specializing in Servicing Rights

With the ten year note quickly retracing some of its recent back-up yield it strikes me as the opportune time to add positions benefiting from the next upward movement in rates.  While the employment report was soft the economy is undeniably on the mend.  At some point the artificial fed bid has to end driving rates up -- in the meantime there is little likelihood we make  a substantial mark down.   One type of mortgage Reits are especially levered to an upward move in rates -- those specializing in Mortgage Servicing Rights.  Servicing rights are essentially an annuity stream for the life of the mortgage.   They decline in value as rates drop since the mortgage they are tied to is more likely to prepay and the annuity stream will end shortly.  As rates rise the opposite holds true and the projected annuity stream grows longer -- increasing the value of the MSRs.  Two mreits that specialize in MSRs are CHMI and NRZ.  I recommend NRZ over CHMI as the latter often purchases MSRs from an affiliated company posing potential conflict of interest. 

As always do your own research.

NRZ

Link to Seeking Alpha Article on JBSS

Seeking Alpha Article

Summary Valuation is below

Valuation Model Summary
Valuation Figure 1: DCF - Free Cash Flow WACC Model				Valuation Figure 2: Enterprise Value to Cash Flow Model							Valuation Figure 3:  Net Asst Value
10 Year Treasury	3.00%	EBITDA	55,073	Entity	EV	EBITDA	Multiple	Weight	Equity Mkt Cap	267,215	Total Assets	373,261
Beta	1.25	Capex	(11,000)	JBSS	352,840	55,073	6.4	0	Total Debt	86,820	Adj Intangibles	(7,218)
Equity Risk Premium	4.96%	Working Capital	(2,300)						Less Cash:	(1,195)	Adjust DTA	(1,002)
Cost of Equity	9.20%	FCF	41,773	DMND	1,160,000	99,811	11.6	0.50	Enterprise Value	352,840	Re Mkt Val Adj.	17,683
Cost of Debt	5.50%	Growth Rate	2.0%	LNCE	2,540,000	178,650	14.2	0.08	EBiTDA TTM	55,073	Gross Asset Value	382,724
Tax Rate	0.3512	Mutliple	12.8	HSH	4,680,000	495,000	9.5	0.08	EV/EBITDA (Implied)	11.1	Liabilities	150,747
After Tax Cost of Debt	3.57%	Enterprise Value	534,254	THS	3,300,000	302,840	10.9	0.08	Proj EV	610,452	FV Debt Adj & Def Tax	($3,852)
Total Debt	86,820	Equity Value	447,434	SENECA	6,444,900	673,400	9.6	0.25	Equity Value	524,827	Net Asset Value	228,125
Market Cap	267,215.13	FCF Value	$40.32						EV Share Price	$47.29	NAV p/Share	20.56
Debt %	24.52%	Current Price	24.08						Current Price	$24.08	Current Price	$24.08
WACC	7.82%	Target Gain	67.44%					11.1	Target Gain	96.41%	Target Gain	-14.63%

Recommend JBSS as Top Pick: Target Price $44

Glyndon Park recommends shares of JBSS trading at $23.20 with a target price of $44.  For our investment summary see our article posted on Seeking Alpha.