Mike - nice to see you have noticed St. Joe. I gave it my hardest pitch on this board at 90-92 three or four weeks ago and loaded up myself. Two days ago it split 3 for 1 and today it hit 103 pre-split. This is a classic value investment, but I could not seem to get anybody on a value thread interested - except Mike. Why? There's still a good deal of upside on this one.
Another one I think is going to run big in 98 is U.S. Can (USC). Perhaps the most boring business I have ever encountered. Yes, they make cans. Crappy business? Yes. But it doesn't have to be. Their franchise is in aerosol cans, which is an oligopolistic market with only three competitors. To date, the three competitors have totally squandered the opportunity to exert oligopolistic pricing power. Why? Because U.S. Can's CEO is an idiot. But he is about to be fired. Several large independent shareholders sit on the Board, and they are looking for new management. The moment a new guy comes in, I think prices go up and capital expenditures get cut in half. The company has also hired Salomon to sell the company, which is extra significant because Salomon owns 10% of the shares and has a seat on the Board. That's a conflict of interest I like. This company has the potential to be a huge free cash flow generator once they cut cap-ex. It trades at 16 and change and I think a low-ball acquisition price would be 22-24. It is worth over 30. The valuation is not as simple as St. Joe, but I would be happy to go into more depth on this one.
The multiples are cheap, but there is a ton of debt. Only a value investor could love U.S. Can. But clearly there are value investors in the stock. A couple weeks ago they preannounced that they would miss the fourth quarter estimate. If Intel did that, the stock would drop ten points. U.S. Can didn't budge. That's a classic sign of a bottom, when bad news doesn't hurt the stock price.
This was one of my three picks I posted for the new year. So far, St. Joe is up over 10%, Public Storage is up about 8%, and U.S. Can is down. I'd still buy all three if I didn't already own them, but The Can is the only one that is even more attractive now than two weeks ago. Price targets - St. Joe (SJP) 50, Public Storage (PSA) 38 and U.S. Can (USC) 26.
This thread is great. Keep it up everybody.
Jim |
