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Some stocks that I like right now

June 23, 2009 – Comments (8)

Well my fine fellow fools I thought I would offer up some thoughts on stocks that I like right now and think have a chance of good long and medium term returns (I haven't any idea what the market will do in the short term so I haven't any idea if they will be up or down tomorrow, next month, etc.).

-HIGH YIELDING BDCs.  As I blogged about a few weeks ago, I love the BDCs with high current yields.  ARCC, FSC, HTGC, and PNNT are the names that I'm accumulating.  Each has a current yield in double digits!!!, each is well positioned in their industry, highly (in my view) unlikely to fail, and potentially in a position to invest right now, which is huge, because asset prices are so depressed. 

I own alot of BDCs, including some of the more tattered ones like MCGC, ACAS, and ALD (not a fun trio to own today, lol).  But I am not buying shares of any of the above at current prices, although I might if they dropped considerably.  In each case above my cost average is several times lower than current share prices, and in each case I have the "houses money" left on the table.

But I am buying the 4 BDC names mentioned above, I love 'em.

-RJET.  Republic Airways bought both Midwest and Frontier recently for fire-sale prices.  I doubled down on RJET last week.  RJET is trading recently with a forward pe of less than 2, current trading with a forward pe of less than 3 after todays big bump.  Buying things in a crisis is good... how many of the companies that wound up with share prices completely in the toilet in the current crisis/bear market got their by building/buying at the top of the market in 2007?  Lets see, MOST OF THEM.  ACAS, ASH, DOW, MTW, OSK, all of Vegas...  I cannot bode badly, in my view, for RJETs future prospects that they made 2 aquisitions at the bitter bottom of the market (hopefully the bitter bottom anyway) at fire sale prices.  RJET has no exposure to the price of oil, the valuation is good, and its my hope that their move to buy cheap will pay off in coming years.

-GE.  In my view GE is eternal, and whatever turmoil or misery the next day or week or month or year brings, from 11 bucks GE is a great long term buy.  If they restored the dividend to where it was before this downturn it'd be 10% plus, and I love Immelts goal of making GE a company taht derives the vast majority of its income from manufacturing and not from finance.  I think the shares are under pressure recently over the potential for it being split up due to new bank regulations.  Fo rall anybody knows, spinning out GE Capital may well unlock value for shareholders.  GE alone, without Capital, is easily worth more than 11 bucks a share.

-BA. Boeing laid an egg, again, on the Dreamliner today and its shares have been fairly well slaughtered over the last couple weeks.  If it drifts much lower, in my view, it becomes a fairly compelling buy.

-MTW.  Manitowoc.  This company made a horribly overpriced aquisition of Enodis last year, and the shares promptly headed for the toilet, successfully found their way to the toilet, and more or less remain in the toilet.  This stock is the single biggest loser I have ever had (grrr!!!) and the short term prospects for MTW aren't great.  They are the worlds biggest make of cranes and of food service equipment (friers and ice machines and so forth for restaurants).  Nice 1-2 punch, both business's will obviously be around forever...  But the Crane business is certainly not an early-cycle one and is likely to be in the toilet for some time, and the same may be true for food service.  Beyond that MTW has an excessive debt load from their heinously overpriced purchase of Enodis, and the interest on that debt will surpress profits for some time.  I am not entirely impressed with management.

But...  MTW has recently re-worked their credit agreements so as to help them avoid violating a covenant and experiencing a default.  That will compress near term profitability due to higher interest rates, but is ultimately a positive.  Since teh announcement of the re-negotiation, the stock has dropped considerably from the mid-$6s to the upper $4s.  I think the recent peaks in stock price in the $40's are bubble valuations and the stock isn't likely to get back there anytime soon, but I hope to find time to scrutinize the new credit agreement and read up on MTW.

Having the #1 biz in two big areas like cranes and food service equipment certainly isn't bad, and if your time horizon is long, I think MTW may well be a good buy from here.  This one I need to do some more digging on...  but its situation is better than it has been over the last 6 months, and its shares are dropping in value, which may be the formula for a good buy.

And remember, just because MTWs businesses aren't likely to come on-cycle soon doesn't mean the shares will stay this cheap forever.

Those are some thoughts I have for stocks I like to buy this week.  The recent downturn has hit higher beta names particularily hard, and thats been great as some buying opoprtunities have arisen that just weren't tehre in early may or early june.

happy hunting.