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TMFDeej (99.47)

Five Really Quick Pitches

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11

August 31, 2010 – Comments (4) | RELATED TICKERS: DCS , ABBC , SONE

While it's always to come home at the end of a vacation, not surprisingly when I return I am always swamped with work and family stuff.  As a result, some of my recent pitches have been a little shorter than normal.  Here's five more recent "quick pitches" for anyone who's interested.  

I would love to read others' thoughts on these trades.  If you're in them yourself or have an opinion on them, let's hear it.

 

Long Claymore Dividend & Income Fund (DCS)

"While its name appear as Dremen/Claymore Dividend and Income Fund here in CAPS, DCS has been renamed just the Claymore Dividend & Income Fund.

The fund's former manager, Dremen Value Management, essentially ran the fund into the ground during the credit crisis, causing its net asset value to drop from nearly $100/share to as low as $7/share. Ouch. No wonder Dremen was given the boot.

Today DCS trades at a 13.5% discount to its Net Asset Value.

http://www.claymore.com/cef/fund/dcs

While most closed-end funds do trade at a discount, I expect that this discount will narrow in the coming years as investors become more comfortable with this now more stable fund.

The fund also currently pays a solid 3% dividend, which should help enhance its outperformance of the S&P 500 in the coming months.

As of 7/31, DCS's top ten holdings included attractive companies such as Johnson & Johnson (JNJ), Pfizer (PFE), Procter & Gamble (PG), Merck (MRK), Glaxo-SmithKlein (GSK), Pepsi (PEP), Coca-Cola (KO), Intel (INTC), and Chevron (CVX).

I think that there's better ways to play energy than Chevron and I personally believe that Intel's acquisition of McAffe (MFE) was beyond idiotic, but for the most part DCS's holdings are extremely attractive."

 

Long Abington Bancorp, Inc. (ABBC) 

"Abington Bancorp (ABBC) is under attack by the activist investor Lawrence Seidman. Mr Seidman recently filed a 13D as an activist shareholder of ABBC. 

Seidman has yielded an average return of 40.7% versus a return of 1.4% for the S&P 500 in his previous 22 13D filings. Given his average purchase price of $8.30/share for ABBC, if this stock performs in line with his batting average we have more than 20% upside left." 

 

Long Winn-Dixie Stores, Inc. (WINN)

"As someone who lived in the South for a number of years during the 1990s I am well aware that "The Beef People" as them used to call themselves aka Winn Dixie stores suck. On the infrequent occasions that I did go there, I half expected to round the corner and see goats and chickens grazing in the isles.  I haven't been to one lately, but given how bad they were back then anything that the Company's relatively new management team does has to be an improvement.

WINN has nearly half of its market cap in cash and little debt. It's trading below its tangible book value and much that is stuff that they could actually get money for in the event of a liquidation, such as land, trucks, etc..." 

 

Long S1 Corp (SONE)

"S1 Corp (SONE) is an interesting situation. The company recently switched from immediate recognition of all of the revenue from new contracts to recognition of revenue on a percentage basis as projects are completed. This switch has made it appear as though the company's revenue is falling, even though there has been no fundamental change in the Company's business. "

 

Short Blue Nile, Inc. (NILE)

"Still over-priced even after recent drop. I'm looking for a few consumer discretionary stocks to short to hedge my mostly long CAPS portfolio. NILE, trading at 36 times its estimated 2011 earnings, versus 14 for a company like TIF, fits the bill nicely."

Deej 

4 Comments – Post Your Own

#1) On August 31, 2010 at 6:02 PM, rd80 (99.10) wrote:

DCS is my all time worst pick in CAPS.  I picked it three years ago thinking an 11% discount and 6% yield would hold up well.  It does seem to have stabilized lately, but I'm so far in the hole with it, I doubt it could ever go green on my scorecard.

I haven't followed it much lately.  New management has to be an improvement - even if it's not as good as a Deej-RD team could do.  But, 2.35% management fee.  When you're holding dividend payers, that fee chews up an awful lot of the income and leaves the fund trying to produce capital gains with income stocks.

I agree the mix of stocks in the top 10 looks pretty good, but they aren't likely to dramatically outperform the S&P.  Back out the management cut and DCS will be hard pressed to beat the market.

In real life, it would be much better to pick a handful of the stocks it holds rather than owning the fund.  You might not put together as good a mix as the fund, but an individual doesn't need to fight the fee headwind.

After writing this, I went ahead and closed my DCS pick.  Even if it outperforms going forward, the math just isn't likely to ever make up a 60 point hole.

Care to share the better ways to play energy? 

 

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#2) On September 01, 2010 at 6:40 AM, TMFDeej (99.47) wrote:

Hey RD.  You're right, we probably could run a pretty solid fund :).

That fee certainly is a decent headwind.

Energy huh?  Oil is very interesting.  I have been talking about a pattern in oil prices that I've noticed for over a year now, but I've never had the stones...not an actual futures account, to play this trend directly.  

It seems as though every time oil approaches $80/barrel it is a screaming short and every time it falls into the $60s it's a buy. This pattern has probably worked nearly a dozen times over the past year or more.

If I was going to add exposure to the energy sector, I already have enough for my taste, I probably would try to add at the bottom of this range.

As for what I own.  I picked up shares of the driller ESV at the height of the Gulf of Mexico panic.  I also own a significant (at least for me) stake in Penn West (PWE) a Canadian oil and gas E&P.  If you're interested, I did a write-up on it in my blog a couple of weeks ago.

Deej 

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#3) On September 01, 2010 at 8:17 AM, rd80 (99.10) wrote:

Thanks Deej,

I've got CVX and plan on putting some more cash to work soon.  Might wait on at least part of it and see if the pattern you found holds.

Russ

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#4) On September 01, 2010 at 3:40 PM, JakilaTheHun (99.93) wrote:

Winn Dixie's decline has been sort of sad to me.  "The Beef People" slogan was no joke --- at one time.  Winn-Dixie had the highest quality meat out there.  It used to be one of the best run grocery chains in the South, too. 

Now ... honestly, I couldn't even say.  The last time I saw one was back in 2004 and it was absolutely dreadful.  It had been run into the ground.  The company tried to cut corners (and it showed!) and they still couldn't match the prices at even some of the more average grocery chains. 

 

As far as "Southern" grocery stores go, I kind of see Harris Teeter (RDK) as taking up the old Winn-Dixie mantle.   Harris Teeter is probably the best in the nation when it comes to the more traditional model supermarket.  Trader Joe's, Wegmans, Whole Foods, and some of the ones with more unique models might have it beat; but HT is a mile ahead of the other traditional chains like Kroger, Publix, Giant, Shoppers/Supervalu, SuperFresh/A&P, etc.  

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