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Some stocks that I like right now

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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.

8 Comments – Post Your Own

#1) On June 23, 2009 at 8:44 PM, checklist34 (99.72) wrote:

And add to that MGM.  MGM is one of the high risk stocks I try not to publicly recommend, but...

per a form 8k filed today their auditors have lifted the "going concern" clause that MGM was saddled with after Q4 2008. 

Stifel has a "buy" rating on MGM shares, and there's no denying that they have made some moves recently that have profoundly improved their situation.

The City Center project is scheduled to be completed later this year and that may provide some catalyst for the shares, and in the fullness of time if MGM avoid BK the stock probably has considerable upside from todays prices. 

MGM isn't a sure bet, neither is MTW, neither is RJET...  but sure bets aren't what make money.  What makes big $$$ is being ahead of Wall Streets curve.  Buying ASH or XL before it has a great Q1 and all the analysts upgrade it, etc.

Good luck, and never take anybody elses recommendations to heart w/o making up your own mind first, especially mine. :)

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#2) On June 23, 2009 at 9:05 PM, anticitrade (99.65) wrote:

I ALMOST bought RJET the other day when I was listing my buys.  I am kicking myself now.  The buys I should have made seem more painful than the buys I shouldnt have made.

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#3) On June 23, 2009 at 9:29 PM, BadCopNoDonuts (< 20) wrote:

I certainly agree about HTGC.  I was very tempted to sell after it doubled from early March, but I'm making 27% on that money (!), so I'm going to hang with that one for a while and pick up more when it comes down again.

I just bought ARCC (before the last ex-div), and have a feeling that will be a nice long term dividend maker, as well.

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#4) On June 23, 2009 at 9:38 PM, NOTvuffett (< 20) wrote:

bad cops don't get donuts, especially the ones with the festive sprinkles, lol.

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#5) On June 24, 2009 at 12:00 AM, checklist34 (99.72) wrote:

I'd add PSEC and AINV to my list of high yielding BDCs that I am buying.  I have enough AINV, but I'd love to add some PSEC.  PSEC has insider buying and a 17% yield. 

Antici...  I know that feeling - passing on a stock only to watch it rocket.  I deal with it by always writing down why I do or don't like a given stock.  If I fail, I can at least look back and say "well not for nothing, but I lost over a well thought out bet, can't win them all" and same with not buying.  

One doesn't need to bat 1000 or even 500 to win big in the investment game...  you can win quite well less than 1/2 of your bets and come out ahead.  If you get 2/3 of them right you're probably looking at epic returns.  

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#6) On June 24, 2009 at 12:04 AM, rofgile (99.33) wrote:

Checklist: I'd second the MTW pick, right now it is at my buy-in point again.  My buy-in for this year is $4-5/share, next year it would be higher, probably in the 6-8 range.

I already have probably 50-60% of my holdings in MTW, so I'm probably going to look into other companies at this point.  OTTR, and ZOLT are good possibilities.  I like GLW also, but not at its current price.

A lot of my dilemma right now is being patient for just the right opportunity.  I've been waiting to buy in more for over a month now, which is a short time - but has felt very long.  Patience is my biggest difficulty. 

 

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#7) On June 24, 2009 at 12:27 AM, checklist34 (99.72) wrote:

hey rofgile, thats alot of eggs in the MTW basket, I sure hope it works out for you.  While I have reservations about management and I do think they grossly overpaid for Enodis...

#1 in cranes and #1 in food service are too very nice, eternal, things to be #1 in and I am going to do some reading and listening (reading 10Qs and listening to conference calls) on MTW once again and quite possibly take a nice stake.  The assets that they have are pheonomenal.  GOOD LUCK!

I'll check out OTTR and ZOLT and GLW, i've not heard of any of those.  

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#8) On June 24, 2009 at 2:07 AM, awallejr (81.44) wrote:

I've been building a position in PSEC.  I like the fact they they are involved in the energy sector.  I would never touch any airline though.

GE is starting to concern me.  There is talk that the new financial regulations may actually hurt the company if it is viewed more as a "bank."

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