So I was perusing this week's issue of Barron's while watching my son's karate class yesterday and I was absolutely amazed by the number of special situation investment ideas that were presented in part three of its semi-annual Roundtable. The sheer number of ideas there inspired me to compile them all into one post that I will modestly call "The All-Time Greatest Compilation of Special Situations in a Single Post." ;) [more]
As I mentioned in a post a couple of days ago (link: The Government Really Screwed Up This Time. Here's How You Can Profit From the Mistake), food prices are definitely headed higher in 2011 and this is likely bad news for restaurant stocks. [more]
I just came across a short, yet interesting article on the sector by Bloomberg that lays out the bull case for McKesson (MCK), AmerisourceBergen (ABC), and Cardinal Health (CAH). [more]
I know that I've talked about this stock several times in the past. This week's Barron's contains a bullish article on Vodafone (VOD). [more]
As a result of government mandates and subsidies, the production of ethanol now consumers a staggering 41% of the U.S. corn crop. Ethanol increases the demand for corn, which in turn drives up prices in a world with a finite amount of land. The impact is not just limited to corn prices. As corn prices increase, more land is shifted towards planting it. That leaves less land for other commodities. This means that food prices are headed higher, perhaps significantly higher for consumers. That's the bad news. [more]
After digging out of the snow here in the Northeast this morning, I clicked on my CAPS portfolio to see that ITT's shares exploded to the upside. This is actually one that Barron's got right. Back in September it had an article about how ITT's stock is undervalued on the sum of its parts basis. Here's what I said about the company at the time:
With the wars, or at least the combat operations for the war in Iraq winding down (hopefully), and major budget deficits, defense stocks have been beaten up pretty badly lately.
One that's starting to look really attractive on a sum-of-the-parts basis is ITT Corp (ITT). This week's Barron's contains a positive write-up on the company.
ITT is not just a one-trick defense company. It derives nearly a third of its revenue from Fluid Technologies and another 12% from Motion and Flow Control operations.
Both of these divisions have been reporting solid growth. If one values them at 10 to 11 times EBIT their combined value comes in at $7.5 to $8 billion versus an enterprise value of $9.3 billion for all of ITT.
If one assumes that the above valuations are reasonable, ITT's defense business is only being valued at $1.8 billion. That's pretty cheap for a company that's expected to report $650 to $730 million in EBIT in 2010. If one was to apply a conservative multiple of 6 to 7 times EBIT for the defense business it would be worth $4 billion to $5 billion.
The Barron's article pegs ITT's fair value per share at $55 to $60.
There's a lot of assumptions about future earnings and what multiple people are going to be willing to pay for them going on here, but the bottom line is that ITT is still a quality company that pays a dividend that's trading for a fairly cheap price after its recent drop.
With today's huge pop, ITT is now sitting at the high end of where the author of that article pegged its value several months ago. I'm staying long the company in CAPS however because I think that there's more upside. This will be a really cool situation. Too bad I was only in thias one in CAPS and not real life before today's huge gain.
In purchasing and selling stocks, timing is everything. One can make money on the crappiest of companies and lose money on the best ones if they don't time their trades well, or hold onto them long enough. Here's a stock that I took a short position in a while ago here in CAPS that has finally decided to implode. I shorted Great Northern Iron Ore Properties (GNI) in CAPS back in May of this year I believe at $80.74/share. Here's the post that I wrote about the trade at the time. [more]