Monday, March 29, 2010

Sold Two Positions

Last Friday RHI Entertainment (RHIEfiled their 8-K, and things are not looking particularly well.  It appears they are still struggling with their debt load and revenues are not coming in quickly enough to meet those obligations.  I've decided to jump ship on this one, with a good sized percentage loss.  I didn't lose much as it was a very small position, and I knew going in that it was speculative.  I was able to cash my shares out after hours on Friday for around 0.26.  I'm not sure what will happen from here, but I'm going to focus on other things.

A couple of lessons to learn here:

1) Excessive amounts of leverage can be troublesome, especially for a small company.  The small cap names I've been buying lately are in much better financial shape, which gives them a nice margin of safety in case their revenue stream slows up.
2) Don't buy a stock strictly because someone else owns it.  What drew me to this stock was the fact that Seth Klarman owned it.  He is an outstanding fund manager, but everybody makes mistakes from time to time, and I should have seen it as a clear warning sign when the bailed late last year.

I also sold out of Carefusion (CFN).  Its still a solid company trading cheaper than its peers, but I have better things to put my money in.  I don't like the uncertainty occurring for them with new health care legislation, and rather than find out, I decided to split.  This is probably still a good stock, but it goes against my rules for holding stocks.  Its time to sell when either: A) The company becomes fully valued or overvalued; B) The situation changes and more uncertainty arises.  This is in the B category.  And there are cheaper stocks out there that I can buy with that money.

So, we'll move on from these.  There are lots of exciting things happening both with stocks I currently own, and ones I'm looking to buy.

Disclosure: None

Thursday, March 25, 2010

Update on Positions

Sorry its been a few days since I've posted, but plenty has been happening.  The market continues to move to the upside, with little resistance.  Some deal applies for me, I think the market is extended, but would not be surprised if it continues to run.  Consumer confidence is coming back and there is too much cash out there getting terrible yields.

Jamba (JMBA) has really performed well since I've purchased it at 1.66.  I added it last week at 2.12 as well.  Today its trading over 2.50 as rumors are flying that Starbucks (SBX) may be interested in Jamba.  The stock still has a small market cap, without a huge float and is subject to some price swings.  The pattern I've noticed since volume spiked is this:  someone has been acquiring the stock.  Probably a few different mutual and/or hedge funds.  When their big purchases come through, they are pushing the price up pretty quickly.  The stock usually pulls back once that volume slows a bit, and that is the time to add if you'd like.  For example, this morning when the volume kicked up, it traded as high as 2.82, and has pulled back to 2.52 as a write.  I've noticed this 2 or 3 different times within the past couple of weeks.  I'll probably add to my position again on any further weakness.

I'd also add iGo (IGOI) and maybe Etrade (ETFC) on weakness.  

Thursday, March 18, 2010

Added to Jamba

I added to my Jamba (JMBA) holding late in the day today at $2.12.  It has pulled back the past couple of days on a little lower volume.  I'll be buying heavier if we see shares back below $2.00.  They are just starting to roll out many new items, and coming into the busy season for their core products.

Wednesday, March 17, 2010

Just Go With It

As many have said, and most of us have felt, the market feels like its at a short-term top.  But I've learned to know better and markets can continue to run (or fall) much longer than we all think possible.  Many businesses are continuing to show improvement, and still more are being priced for it.

I still think there are more and more individual investors coming out of the woodwork as they regain confidence in the market, and that will continue, especially in a low-volatility, but upward moving market.  The yields on cash are just too low.  People are going to go after a better return, and the stock market is the best spot for that right now.  So while I know we're due for a correction, I wouldn't be surprised if we don't see a large one.

My small cap stocks continue to run, and I'll continue to add to my positions if opportunities present themselves. Specifically Jamba (JMBA) and iGo (IGOI).

TII Network Technologies (TIII) reported earnings this morning, and after a quick glance, they look pretty solid.  Gradual improvement, and better results due to cost cutting.  By the way, its awfully late to report Q4 earnings.  Q1 is almost over!  These small cap names with a lot of cash on hand have been doing well lately.  Even if operations don't improve dramatically, you're likely to see some gains as valuations return to more normal levels as the economy picks up.

Dr. Pepper Snapple (DPS) got an upgrade last week, and an analyst noted that they're likely to enter into a bottling deal with Coke, much like the Pepsi deal.  I missed my entry on that stock, and I'll buy it if it pulls back. I'm still a little surprised it hasn't taken any kind of a hit due to the threat of a soda tax.  I'll continue to keep an eye on that.

Disclosure: Long JMBA, IGOI, TIII

Thursday, March 11, 2010

Update on Positions

Jamba-  Really like where they are headed.  The next few quarters will be key as they roll out new products.  Can these products translate into earnings?  

iGo(IGOI)-  Reported last night.  Earnings pretty solid.  The big news was that Wal-Mart decided to bring them into all stores.  Yeah, that's big news for a company of this size.

Dr. Pepper Snapple- Upgraded this morning at UBS.  They believe a potential deal will be struck with Coke regarding distribution like the Pepsi deal.  I haven't bought this yet, but will.

Disclosure: Long JMBA, IGOI

Wednesday, March 10, 2010

Jamba Reports; Stock Drops

Well, those who were buying heavily last week in anticipation of strong results were mistaken.  By the numbers, it wasn't too strong.  They missed on EPS, revenue, and same store sales weren't great.

The key here though is everything they've been rolling out likely hasn't had a chance to be reflected in earnings, so anyone selling is jumping the gun here.  Hot beverages are just being rolled out.  Their relationship with Core-Mark will give them access to thousands of convenience stores.  All of that will take time to roll out.

I listened to the call last night, and I continue to be impressed with management, and their plan for growing this company and brand.  Here are a couple of tidbits I picked up:

-They are strengthening the balance sheet with $31.5 million in cash and basically no debt.

-They are selling off corporate owned stores to franchisees.

-They are expanding to one international market this year, with more likely to come.

-They now have a range of products that make them not only a year-round option, but they are capitalizing on healthy options for fast food, which is going to be a huge market.

-They did mention that coffee is something they'll be looking at, but will only add it if they can put their own twist on it.

I plan on adding to my position, maybe even today.

Disclosure: Long JMBA

Tuesday, March 9, 2010

Earnings Update

Compass Diversified (CODI) reported this morning.  I haven't had a chance to listen to the call yet, so I don't want to comment.  The stock is down 3+% as I write, but it had ran up quite a bit prior to earnings.

Jamba Juice (JMBA) reports after the bell today, and I'm interested to see what they come out with.  Although they are likely to come in pretty good, expectations have been rising among investors as the stock has rallied for the past week and a half.  It is down today, which is no surprise as people are taking some profits and getting a little defensive before earnings, which is prudent if you own a big position.  I just made a starting purchase and it ran up before I was able to add (I wanted to wait until after earnings).  So lets see what they say, and I'll make a plan from there.  I really like where this company is headed and would like to hold a larger position.

I was quite close to starting a position in Dr Pepper Snapple (DPS).  I've been hearing some rumblings about a soda tax gaining momentum, and I thought that may shake the stock a bit.  But, investors either haven't noticed, or aren't threatened by it.  I did read that DPS's management isn't particularly worried that it will happen, but I've read a few articles talking about it.  Something to watch at least.

The bears continue to look foolish as the market continues to run.  I'm not selling anything, but not adding at this point either.  I could easily see a pullback, but it will likely won't last long.  As time goes on, investors seem content to buy the dips.  I'd welcome the opportunity to buy some of my favorite stocks as better prices, as all true value investors do.

Lets see what Jamba says after the bell!

Disclosure: Long CODI, JMBA

Thursday, March 4, 2010

Jamba Juice Moving Ahead of Earnings

Wow, it sure didn't take long for Jamba Juice (JMBA) to start moving.  I bought this thing less than two weeks ago at $1.66. It closed today at $2.08.  I really like what they're doing with new products, not to mention selling off the corporate owned stores.  Just a good overall philosophy.  I mainly just wanted to get a starting position before earnings, and see what they said, and go from there.  Well, either its been leaked that a good number is coming when they report next week, or people are, like me, realizing they've got some pretty good things happening here and the stock is undervalued.  I'd like to add more shares, and maybe we'll get the opportunity tomorrow.  We've got the jobs report, and you never know with that.  Most traders appear ready to shrug off any number, good or bad, and move higher.  But if we sell off, I'll be buying a few names.  

Jamba did put out a release today as well showing a new offering of frozen fruit bars.  Keep it coming!

Disclosure: Long JMBA

Tuesday, March 2, 2010

More Detail on DPS

I've been spending some time researching Dr. Pepper Snapple (DPS).  DPS was spun off from Cadbury in 2008.  I  love these types of opportunities where management is motivated to perform now that more eyes are upon them so to speak.  It usually makes for a positive situation for shareholders.

I've been reading the transcript from the CAGNY conference on Feb 17.  Its a good read to get the tone of the management and direction they are headed.  Check it out.  Here are a couple of quotes I wanted to highlight:

"Our win at McDonalds in 2009 marked a key milestone in the Dr. Pepper growth journey. By the end of 2010, Regular Dr. Pepper will be in all 14,000 McDonalds restaurants across the country. And we're targeting Diet Dr. Pepper to be in one half of those."

"One of the benefits we're seeing from being a core brand is greater co-promotions and tie-ins. McDonalds' 6.5 billion visitors translates to more than 22 billion impressions for Dr. Pepper."

"DPS is an amalgamation of strong brand companies and weak bottlers, acquired over a 25-year period. In fact, our company-owned DSD operations were created through acquisitions of more than 40 standalone operations over a 22-year period.  These businesses received little in the way of resources from our former parent. So Priority 1 has been to integrate, invest and optimize. And I'm thrilled to tell you that we're well on our way."

They are also well positioned in the alcoholic mixer market, and are working hard to cut costs through their distribution channels.  The big news in the industry is Coke and Pepsi buying their bottlers and what effect that may have on the industry.

The valuation is good, as the stock is trading at 12.5x forward earnings, while KO and PEP usually carry higher multiples.  The management is committed to returning free cash flow to shareholders, and we'll likely see some share buybacks this year.  I like the stock here in the 31's, and will be a buyer on any weakness.

Disclosure: None

Positive News From Jamba

I purchased Jamba not too long ago.  One of the reasons I liked it is the new products they are rolling out, including hot beverages, food, and packaged items in convenience stores.  Today, they put out a release with some detail of the hot beverages, and where they'll be starting at.  Good stuff happening here.  I bought some shares at  $1.66, and wanted to wait until earnings to add or hold.  The stock is up 6% today, so hopefully that continues.

I'm also taking a look at Dr. Pepper/Snapple (DPS).  Their stock appears to be undervalued in a growing industry with strong margins. I found some good commentary on DPS from The Lonely Value Investor blog.

Disclosure: Long JMBA