kevinwinter (95.66)

Possible new additions- 2 stocks and an ETF....

December 26, 2008 – Comments (1) | RELATED TICKERS: BOLT , DAR , PKW

It's the end of the year, and I thought I'd share a couple of the things I'm looking at as possible additions to my Roth.

Bolt Technology (BOLT) makes the toys they use to find oil at the bottom of the ocean. They pioneered the technology in the 1960's, and have carefully expanded in similar areas. No debt and high gross margins give a nice moat for a company this size. Even though I don't usually like technology (R&D costs is money down the drain), these guys seem to be so far ahead of the competition their research costs are small. Cheap oil? New windmills? We'll always be looking for more oil, and Bolt makes money by finding oil not pumping it out.

Darling International (DAR) is a pretty little company in a pretty icky business. They "recycle" the rest of the animal that you don't see for sale at the grocery store, and deal with all that used french fryer oil at your favorite resturant. They branch out into the logical business that go along with that- they tan hides, make dog food, sell protein powder, etc, and is also an interesting play on biodiesel, because they obviously have acess to large amounts of vegetable oil. Is anyone noticing I only like companies with little or no debt? DAR gets paid to haul away someone's waste, then processes the waste into something else it sells for a profit. 

As a rule, I prefer picking stocks over mutual funds (fees too high) and ETF's (like to find the needle in the haystack). But I am intrigued by a ETF called the Powershares Buyback Achievers (PKW). The setup is this- they invest in about 125 companies that have all bought back at least 5% of their shares in the last 12 months. When I looked at their holdings, I was a little shocked at the large household names that have (apparently) bought back >5%. I'm not one to advise buying a stock based on any one factor, figure, or ratio. But if you had to pick just one, a company stock buyback might just be it. A buyback doesn't directly fatten the books. It only does one thing- increases shareholder value. A company that does that shows it's management is truly working in the interest of the shareholders, and has so much cash laying around it can't think of a way to spend it all. I like that in a business.

Of all the stocks I've looked at, these two seem to make my cut. Your thoughts are appreciated....