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A couple from the 'needs more picks' list

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July 04, 2007 – Comments (0)

Happy 4th of July!

Like fellow Fool majakblue, I've done a little poking around in the 'needs more picks' listing and found a couple that seemed worth rating.  

First, a green thumb to Franklin Bankcorp (FBTX). It's a savings and loan holding company in Texas. Fundamentals look good, fwd PE of 9.5, PEG of 0.5, price-to-book of 1 as of Mar '07, although some of that is goodwill. As long as the book value isn't full of subprime stuff, that price-to-book puts FBTX well below the normal buyout price for banking companies. There was also quite a bit of insider buying reported in late June. Company reports on 24 July. Also added this one to my contest picks and may consider buying a little bit before the conference call and see if there's some reason the insiders were buying.

Next, to balance things out, a red thumb to Stonemor Partners, L.P. (STON).  This is an "owner and operator of cemeteries in the United States. The cemetery products and services that the company sells are burial vaults, caskets, grave markers and bases, memorials, and installation of vaults and other cemetery merchandise."

STON has a forward PE of over 35 with very little estimated earnings growth. Market cap of $235 million or so with $6.5 million in cash and $105 million in debt. WIth  interest rates creeping up and that much debt, their thin margins are likely to get even thinner.

STON's current dividend yield is 8.2% and I suspect that high yield is helping keep the stock price up. But, the payout ratio is 1147% (no, I didn't forget a decimal point or add an extra digit) so I don't see how they can sustain the dividend rate very long.  If/when they have to cut the dividend, the stock price will probably tank. They trade at 2 times book value, so there's a ways to fall before the stock finds fundamental support.  I've also added this to my contest picks.

I saw that Rich Duprey used my pitch for Yamana Gold (AUY) in his column "3 More Stocks Getting Taken Out."  Rich, it's nice to be noticed but did it have to be a pick that's in the running for fastest from 'goes active' to '10+ point negative score' in CAPS history ;)

Disclosure:  I own shares of Yamana gold (thankfully not a lot), but have no position in FBTX or STON. 

As always, your comments are welcome. 

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