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One Million Quick Pitches



September 29, 2010 – Comments (3) | RELATED TICKERS: SUNHD.DL , ITT , FUR

I haven't had as much time to blog as I would like lately, but I am still following the stock market and actively making picks for my CAPS portfolio.  I figured that I'd post a few "Quick Hits" on some of the stocks that I have added lately for anyone who's interested.  The quick hits don't contain a lot of meat, but they might spark some interest in these stocks for others that could serve as the starting point for additional research.  I'd love to hear others' thoughts on any of these companies:

Long Carter's, Inc. (CRI)

Carter's is a relatively cheap company that has managed to pay down a slug of debt and has room to grow. It's even a potential buyout candidate.

It does face some headwinds in terms of higher raw material costs and a rising cost of production in China, but I think that the positives outweigh the negatives.

Long Visteon Corp. (VSTNQ.PK)

I came across an interesting write-up on the Visteon, the old Ford parts subsidiary, the other day over on the great AAOI site and requested to have it added to the CAPS system. VSTNQ.PK is up over 18% today...of course only 8.9% of that came after my CAPS pick went live :).

Here's the great write-up on Visteon that I mentioned:

Investment Analysis: The Visteon Corporation (VSTNQ)

As a little background, Visteon was an absolute mess when Ford spun the division off many moons ago. The transaction was actually a great lesson in how all spin-offs are not created equally. It was loaded up with debt and headed down the river in a barrel towards the "Great Recession" waterfall that caused much pain in the auto sector.

Today, as with any company emerging from bankruptcy, Visteon has much less debt today. Its customer list is fairly attractive as well, with 65% of its business going to Ford, Hyundai/Kia, and Nissan/Renault.

For me to purchase this stock in real-life I will have to overcome a number of past ideas that I have about the company. Once I get it in my head that something stinks, it takes a lot to change my mind, but Visteon does look very attractive at this price level with its new structure.

Certainly one would think that Visteon will receive a nice pop once it becomes listed as a normal stock on a major exchange. That in itself might be enough of a catalyst to take a flyer on it right now. That's why I added it in CAPS.

I'm not tremendously bullish on the North American market for light vehicles right now, but Asia should fair somewhat better and the new Visteon derives a ton of business from there. 

Long Gyrodyne Company of America (GYRO)

Hooray I can finally pick Gyrodyne. Every time I have tried in the past the volume was too low. As long as the company doesn't have its recent court victory overturned in an appeal GYRO is probably worth somewhere in the vicinity of at least $100/share.

Long Winthrop Realty Trust (FUR)

Adding shares of this well-run REIT to my CAPS portfolio on recent weakness. The fact that this is not exactly a special opportunity speaks volumes about what I think about Winthrop and its management.

A solid 5% dividend in a market that I still think will trade sideways, with some volatile swings in both directions, for some time is attractive.

Short BioFuel Energy Corp. (BIOF)


Short Pacific Ethanol, Inc. (PEIX)

Ethanol producers are in big trouble if the government does not renew its $0.45/gallon blending subsidy that it currently provides to refiners that blend ethanol with gasoline, which is scheduled to expire at the end of the year. Last year this tax credit cost the government between $5 and $6 billion dollars, something that it cannot afford to spend at a time that we are experiencing such a massive budget deficit.

Making matters worse, the price of corn has skyrocketed, making ethanol more expensive. 

Long ITT Corp (ITT)

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. 

Long Sun Healthcare Group, Inc. (SUNH)

Sun Health has been beaten up along with the rest of healthcare. Not only is its stock now cheap, but the company has a strong demographic tailwind at its back. 

I like Sun's planned spin-off of its real estate assets into a REIT. 

One would think that the demand for nursing homes and assisted living facilities will only grow in the coming years as the Baby Boomers age. 

Also, the spin-off will be small so it might come under selling pressure from funds that don't want to hold onto it. 

As a REIT one would think that it will pay a solid dividend as well.

I'm adding SUNH to my CAPS portfolio as a solid investment idea in its own right as well as a reminder for me to follow-up on the REIT after it has been spun-off. 

Plus a new article on this one that I just found today:

A Value Investment Greenblatt Could Love

I'd love to hear others thoughts on these companies. 


3 Comments – Post Your Own

#1) On September 29, 2010 at 4:05 PM, zzlangerhans (99.70) wrote:

I would have titled the post "A Million Little Pitches". A somewhat obscure pun, but better than nothing.

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#2) On September 29, 2010 at 5:44 PM, tekennedy (91.05) wrote:

I'd looked through CRI's annual the other day and I agree that it'll be a good one to own.  It's current balance sheet is very strong and it appears it is off to a good start turning around Osh Kosh.  The reason I'd looked at them was their integrated business model which includes sales to large retailers, own company retail and licensing.  As the market leader in a fragmented market they should perform relatively well. 

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#3) On November 17, 2010 at 4:38 PM, TangoSukka (< 20) wrote:

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