Re: Brendan Watt, Grommit, others?
Paul, my recent activity can be summarized as stepping up on retail and energy, trimming real estate.
RETAIL
I added to Shopko (SKO) at around $5 and $4 dropping my average cost to $4.50. Moody's signalled a possible downgrade from BAA3, but no action yet.
I've added to Sears (S) at around $31. A3 rated debt, forward PE around 6, 3% yield. The Great Indoors concept looks attractive, but mainly I think it is underappreciated how tightly woven this company is in the lives of American consumers.
I've added to Penneys (JCP) at $11. Price to sales is approaching .08, but there's some rocks in operations.
I've added to Wild Oats (OATS) at $5. This is a natural foods retailer with a market cap of $111 million, 111 stores, and a forward PE of around 12. The company has been hurt in head to head competition with Whole Foods (WFMI), but there seems to be lots of room for secular growth for both companies, and OATS would make a small snack for a SWY, KR, or a European grocer.
ASBESTOS
I looked at Bemis, but ended up buying Sealed Air (SEE) at around $39. SEE is around 15x cash earnings (adding back amortization). They seem to have been hurt this week by a possible link to the asbestos litigation… they bought some lines of business from Grace. I threw in the towel on Armstrong World at $3. Basically, I lost faith because of management's inaction. No insider buys and no effective communication to the investor community about what is going on. Plus I don't know why they paid last quarter's dividend if the threat of bankruptcy is as real as evidenced by the stock price decline. I haven't taken any other action on any other asbestos plays. I was disappointed to see USG remove its own stock as a retirement investment option for its employees.
ENERGY
I had almost no exposure to energy since I disposed the drillers after a 100% runup 18 months ago. My only position coming into November was XEL bought about one year ago at $20. This month I added Conoco (COC.A) at $26 and American Power Conversion (APCC) at $13. Conoco is around 10x earnings. I'm labeling APCC an energy play… my thesis here is that around 11x earnings that is an attractive speculation on the future energy shortages and unreliability of the American power supply. APCC seems to be the leader in power protection for PCs and low-end servers.
REAL ESTATE
I sold Winston Hotels (WXH) at around $8. My total return was around 4 percent annualized. I sold Associated Estates (AEC). I had a total return loss of over 50 percent and gave up on management. I sold Engle Homes (ENGL) at $19… 6 month holding period, 110 percent absolute gain.
OTHER
I threw in the towel on Worldcom (WCOM) at $15 for a 33 percent loss. Management halved the earnings expectations for 2001. Also, they confirmed plans for tracking stocks which generally make me uncomfortable.
I began a position in Bankamerica (BAC) at $39. Forward PE around 7, yield of 5.9 percent, AA2 rated credit.
I started a position in Newell Rubbermaid (NWL) at $19. The forward PE is around 10 and it yields around 4.4 percent.
I added to International Flavors (IFF) at $18. The forward PE is around 14. It yields 8.2 percent. I'm investing on the expectation that this company has a globally recognized competency in flavors and fragrances but so far I've been wrong.
I began a position in Pitney Bowes (PBI) at $28. Forward PE is around 10 and I think the internet's threat to the mail metering business is comparable to the "dot-coms" threat to the major retailers.
I threw in the towel on Case New Holland (CNH) at $10 for a 0 percent loss. I was just cleaning up a lack of discipline on my part. I don't buy into minority interests.
That's all for now. |
