Trefis Top 5 – May 26 Insights (BLK, LDK, SLW, GM, LNKD)

by Trefis Team
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In today’s action we look at the volatile solar sector after recently updating our estimates for LDK Solar (NYSE:LDK), which fell 10% on Wednesday and bounced 7% today. Our estimates are still well above the market price based on the our sanguine long-term view of the solar industry, despite Chanos and other naysayers. BlackRock (NYSE:BLK) agreed to buy back its shares from Bank of America (NYSE:BAC), and we look at how this could impact its balance sheet. We inspect Silver Wheaton’s (NYSE:SLW) deal with Capstone Mining Corp. and the upside could add on silver demand. Finally, we discuss GM’s (NYSE:GM) growing reliance on the China market to drive its growth and what value drivers move the needle for LinkedIn (NYSE:LNKD).

Bank of America Offloads BlackRock Stake

BlackRock (NYSE:BLK), the world’s largest publicly traded asset management firm, recently agreed to buy back Bank of America’s remaining 7% stake in the company for about $2.5 billion. The transaction involves an exchange of 13.6 million Series B convertible preferred shares at $187.65 per share, which is at a 3.6% discount to the average closing price for the 15-day period prior to the announcement. BlackRock plans to fund the purchase with the available cash and $2 billion of commercial paper, medium-term and long-term debt. [1]

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Taking Another Look at LDK Solar’s Upside

LDK Solar (NYSE:LDK) and other solar plays like First Solar (NASDAQ:FSLR), Suntech Power (NYSE:STP) and Sunpower (NASDAQ:SPWRA) have traditionally been dependent on demand driven by government subsidies. This has made these companies vulnerable to government policies, especially as countries like Germany, Spain and Italy have made budget cuts to their solar subsidies. LDK in particular has seen large swings in its stock over the past year and a half, which rose from $5.20 in July 2010 to a high of $14.55 in February 2011 before declining to around $6.18 Wednesday.

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Elevated Silver Prices Give Wheaton’s Silver Large Upside

The average silver price (per ounce) realized by Silver Wheaton (NYSE:SLW) from its streaming contract with Capstone Mining Corp. rose from $16.20 in 2009 to $32.30 currently. We expect the average price to keep rising given the growing industrial demand for silver as well as on fears of inflation. Silver Wheaton mainly competes with silver manufacturers like Silver Standard Resources (NASDAQ:SSRI), Pan American Silver (NASDAQ:PAAS), Bear Creek Mining Corporation (CVE:BCM) and Endeavor Silver (NYSE:EXK).

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GM’s Growing Dependence On China

The Chinese auto market is growing at blistering speeds despite concerns around a withdrawal of government incentive programs and the potential supply chain disruption from the tragic Japanese tsunami. We think GM (NYSE:GM) will be one of the main beneficiaries of the growth, as it beat Toyota (NYSE:TM) this year to become the second largest passenger car manufacturer in China after Volkswagen (ETR:VOW). Other automobile makers like Ford (NYSE:F), Daimler (ETR:DAI), and Honda (NYSE:HMC) also stand to benefit from the growing Chinese vehicle market.

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2 Key Value Drivers for LinkedIn

LinkedIn’s (NYSE:LNKD) recruitment services and job postings business accounts for around 50% of our $30 price estimate for LinkedIn stock, making it the most valuable business for LinkedIn. Here we take a look at two key value components of the recruitment services and job postings segment. LinkedIn competes with Monster (NYSE:MWW) in the recruitment services market, but also competes with social networking portals like Facebook and Twitter, as well as Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO) in the online advertising market.

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  1. BlackRock to buy 13.6M shares from Bank of America, Bloomberg, May 19’ 2011 []
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