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Eight new pitches. Approaching 100% penetration rate, 79 of 91 complete.

Recs

27

July 12, 2010 – Comments (7)

In order to do well in the game of CAPS one has to have a huge portfolio of stocks.  The 14 concentrated positions combined with high-yield bonds that I hold in real-life wouldn't cut it here.  I'm actually fine with that because being forced to pick a ton of stocks makes me look at companies and situations that I might not normally consider investing in.  

The problem that I have had in the past when I had a 200 stock CAPS portfolio is that by the time I'm done collecting all of the companies and giving them the thumbs up or thumbs down I sometimes can't remember why I liked or disliked the stock to begin with.  This is why I am now attempting to add pitches for every single stock in my CAPS portfolio (other than the ones that are official recs of Motley Fool newsletters, which there are a few of).

While I prefer to post long, detailed write-ups for companies time constraints often prevent me from doing that, so I at least want to add one small sentence or phrase that describes the reason for the pick.

Today I added several more pitches for companies in my CAPS portfolio.  Here they are from most to least detailed.  Let me know if you're familiar with any of these companies.  I'd love to hear others thoughts.

New Picks :

 

Alliance Fiber Optic Products (AFOP) Long

AFOP, a maker of fiber optic components, is a relatively cheap company with lots of cash on its balance sheet that has remained profitable even at the height of the credit crunch and Great Recession. 

After backing its $33 million in net cash (aka after backing out debt) its current market cap is only $29 million. In 2009 the company earned $800,000. That's down from the $3 million that it earned in 2008. Let's assume that AFOP earns $2 million over the next year or so as companies begin investing the huge slugs of cash that they have on their balance sheets in their businesses. 

Using those numbers AFOP is trading at 14.5 times earnings after we back out the net cash. That's pretty reasonable for a company that just pre-announced record revenues for its past quarter as a result of "stronger than expected bookings from key customers and continuous business progress achieved in the first half of YR 2010."

Alliance Fiber Optics not only pre-announced record revenue for the quarter it also stated the following "AFOP expects to report that quarterly profits will improve significantly compared with both the previous quarter and the year ago quarter as well.

Other potential catalysts include the possibility of Alliance Fiber Optics eventually paying out a dividend or being bought out by a competitor.

 

Aviat Networks (AVNW) Long

Activist investor Ramius is pounding on Aviat to unlock shareholder value.

Stock is currently trading below tangible book value and it has net current assets of $3.35/share 

 

McDermott International (MDR) Long

Playing the impending spin-off.

New Pitches for Existing Picks:

 

Enterprise Products Partners (EPD) Long

EPD is one of my all-time favorite stocks and one of the few that I continue to hold despite there being no specific catalyst or hidden value. Enterprise is simply one of the best-run pipeline operators in the country. It continues to grow and pay a solid 6%+ dividend at a time when even the trashiest "investment grade" (HAHAHAHAH) corporate bonds don't even yield 6%.

 

The Talbots, Inc. (TLB

I heard retail expert Howard Davidowitz say in an interview a while ago that he believes that Talbots will eventually be worthless and I can't disagree. The company is loaded with debt and it seems to have lost touch with its target demographic of older women. The J. Jill acquisition was terrible. It is shopping the stores now and it can't find a buyer. The only reason TLB hasn't filed for bankruptcy already is that its Japanese lenders / shareholders keep extending and pretending. Add what I expect to continue to be a tough environment for all retailers to the mix and that's one big mess. 

 

AmerisourceBergen Corp. (ABC) Long

Cheap, dividend-paying distributor of drugs and devices to the healthcare industry that's poised to benefit from the government-mandated increase in the number of insured and the coming wave of generic drugs...which are significantly more profitable for distributors. 

 

Cardinal Health (CAH) Long

Cheap, dividend-paying distributor of drugs and devices to the healthcare industry that's poised to benefit from the government-mandated increase in the number of insured and the coming wave of generic drugs...which are significantly more profitable for distributors.

 

McKesson Corp (MCK) Long

Cheap, dividend-paying distributor of drugs and devices to the healthcare industry that's poised to benefit from the government-mandated increase in the number of insured and the coming wave of generic drugs...which are significantly more profitable for distributors. 

Deej 

7 Comments – Post Your Own

#1) On July 12, 2010 at 11:50 AM, TMFDeej (99.46) wrote:

BTW, in case you couldn't tell by my glowing pitch for Talbots (TLB) I am short it in CAPS :).

Deej 

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#2) On July 12, 2010 at 5:29 PM, leohaas (35.73) wrote:

Kudos for writing pitches! That is really helpful to all CAPS players. I wish I had the time to match you...

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#3) On July 12, 2010 at 5:39 PM, TMFDeej (99.46) wrote:

Thanks leo.  It definitely is challenging finding the time to write pitches and blog posts.  That's why a few of the above are only one-liners :).

Deej 

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#4) On July 12, 2010 at 7:39 PM, rd80 (98.66) wrote:

In order to do well in the game of CAPS one has to have a huge portfolio of stocks. 

If your goal is Top Fool, yeah, you'll need a lot of good picks to get there.  However, getting well into the 90's is very possible with a modest portfolio.  I believe a lot of players hurt their rating with too many picks.  I'm impressed by those that can play with 200 open picks, but I don't think I have the time or discipline to play a full scorecard without upping the loser count.  Case in point - one of my kids started a CAPS portfolio a while back to play along with me.  The profile has less than 20 picks total, hasn't been touched in over a year and is rated in the low 90's.

 

I had been doing pretty well with pitches, but have been lazy about entering and updating them lately.  Thanks for the inspiration to get busy again.

Fool on!

Russ

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#5) On July 12, 2010 at 8:07 PM, ozzfan1317 (81.83) wrote:

I have gotten into the 70s before the correction crushed my score lol I need like a nice straight 30% move up so my small and midcaps can earn me big time points..lol A couple of the stocks you mentioned I am gonna take a look at I'm especially gonna see if talbots has options trading and maybe buy some near term puts in real life.

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#6) On July 13, 2010 at 12:20 AM, Tastylunch (29.54) wrote:

nice deej!

I'm with ya on Talbots, that's a trainwreck of weirdness on wheels. That merger with BPW still is head scratcher for me 

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#7) On July 13, 2010 at 10:33 AM, TMFHelical (98.70) wrote:

Deej,

I agree that the pharmaceutical distributers (ABC, MCK, and CAH) should do well long term.  These companies are the EPD of drug distribution (shame they don't get taxed the same - LOL).   I've had them all rated in the past, but only MCK is active now.  

I should revisit, but as I recall there was something about AmerisourceBergen I didn't like (management mayber?). I do like and subscribe to the companies webcasts wherin industry issues are discussed.

http://www.knowledgedriven.com/webisodes.cfm

I would love to find a Chinese equivalent to these companies, as pharmaceutical supply chain is something the country needs to better develop.  Until then I can be content that overseas opportunities exist for the established US firms.

TMFHelical

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