Thursday, November 10, 2011

Welcome Back

Hello All,

I'm writing my first post in quite some time.  I'm still following the market and watching for good investments, but haven't had a lot of time to blog about them.  Hopefully, I will be able to find the time to keep this up again.

A quick synopsis of my thoughts on the macro situation:

I'd be lying if I said I was an expert of what is going on in Europe with regard to various countries' debt situations.  I do not buy into the fear of contagion and what effect it may have.  Our market overreacts time and time again to these various threats.  Are the situations serious? Yes.  Is the US debt problem serious? Yes.  Because I can't predict what will happen there, I'm not going to worry about it.  Do I have confidence that the they will get through this? Of course.  And I do know this: when the market responds, it often does so so swiftly that it becomes impossible to try and maneuver around news.

In our country, I'm most concerned not about the issues we face, but more about the political climate.  No politicians or party seem to have the political will to make any necessary/tough decisions.  Until we can return the view of serving in political office as a "service" and not a "job", we will have poor politicians who only care about how to get re-elected.  If a candidate showed real leadership and was ready to make the tough decisions showed up, I would support him or her completely.  But it appears that we have another empty election cycle coming up with more "Reality TV" politics.

Even though we have a tough political climate, a disturbing debt situation, and a tough job market, there are still some segments of our economy that are improving, and things are certainly moving in the right direction.  Many companies have cut capacity, cut employees, and cut costs to adapt to this climate, and are now finding it to be very profitable.  Is it ideal?  Of course not.  I hate seeing 9+% unemployment.  I do see all these things improving over time though.

A quick update on my portfolio:

Like for most people, things were looking good for most of the year until early August.  I hold a lot of small cap, value type stocks.  I look for situations where I can buy these stocks a great prices relative to their current asset position, and hopefully they have a catalyst in play which will unlock growth.  Or at least have something in play to get people to notice to stock and that its undervalued.  What happens to these stocks typically is that over time, the value is eventually noticed and the price catches up.  While waiting for this, these stocks can be subject to wild price swings though.  Because of their small size, these companies can be subject to inconsistent revenues and or profits per quarter as we go along because they may not have enough of a product mix to balance things out.  And because there is little to no news that comes out on these companies, investors often panic if a quarter is not so great or if the market as a whole is not doing well.

I am seeing value out there in a lot of companies, both large and small.  But overall, I still mostly prefer smaller companies.  They fit my investment goals best.  I'm willing to be patient and have developed a tolerance for holding through market swings (its not easy at times, I know).  I do mix in some larger stocks, but still using the same value philosophy.

I don't want this post to get too long here.  I will be doing additional separate posts about stocks I like and what I'm doing with my portfolio.

If you're reading this, I do appreciate it, and as always, I welcome your interaction here.

Thanks!

Michael

Friday, March 4, 2011

Still Adding Shares

I'm not spending a lot of time worrying about the events happening in other parts of the world.  Sure, they are having some effect on the market, but a pullback was imminent.  This only gave the market an excuse in my opinion.  Now if we see a carry over effect and it causes fuel prices to spike (they already have, but I'm talking gasoline at $5 kind of spike), then I'd be concerned.

We're right in the middle of earnings season, and most of the stocks I own are reporting on the late end (small caps often do, I have no idea why).

I added shares of Jamba (JMBA) last week at $2.24.  This will be it for me prior to earnings.  If we see a sell off post-earnings and shares get closer to $2.00 or below, then I could see myself adding again.

I also added yesterday to Adams Golf (ADGF).  I really like the opportunity with this company.  I think they have some great new products that the market is just finally realizing, and they have some strong players on staff who are promoting the brand well.  The sport has struggled in the past few years, but any improvement will only help their sales.  Tiger Woods has struggled, and that is huge for the sport.  If he can find his game soon (and I know he will) the sport will benefit greatly.  We also have the situation of the Acushnet spinoff from Fortune Brands.  This will mean that Titleist-Footjoy will be a separate entity and could be a publicly traded company.  This would be the best scenario for us here.  Adams is not widely followed, and thus under appreciated.  Bringing a major player like Titleist to the market would have many analysts and investors taking a look at the industry, and they will discover Adams.

I added shares yesterday at $5.92.  I'm pretty happy with my position in this one (started buying in the high $4's).  I would add if it drops of course but own enough to be satisfied if we see a substantial move.

Hopefully earnings are solid for both of these names.

Disclosure: Long JMBA, ADGF

Friday, February 18, 2011

CEO Departs; I'm Adding Shares

News today from Compass Diversified Holdings (CODI).  CEO Joe Massoud is taking a leave of absence.  Press release here:



Compass Diversified Holdings, an owner of leading middle market businesses, announced today that Joe Massoud, its Chief Executive Officer, has requested, and the Board has approved, a leave of absence to focus his attention on an informal regulatory inquiry that Mr. Massoud has received on matters unrelated to CODI.  CODI also announced that its manager, Compass Group Management LLC ("CGM"), has nominated, and that its Board has approved, Alan Offenberg to assume the role of CEO on an interim basis, as well as Mr. Massoud's seat on the Company's Board of Directors.  Commenting on the transition, Mr. Offenberg said, "I am honored to be able to serve CODI's shareholders in this capacity. Joe will continue to be available to us during his leave and we are all very excited about the many opportunities the Company has to build value for our owners."
Mr. Offenberg has been a partner with CGM and its predecessor since 1998. Prior to that, Mr. Offenberg was with Trigen Energy, Creditanstalt Bankverein and GE Capital. Mr. Offenberg is a graduate of Tulane Universityand the Northeastern University Graduate School of Business. Mr. Offenberg is currently a director and chair of American Furniture Manufacturing, Inc. and Liberty Safe and Security Products, Inc.
The stock sold off this morning, and bounced around most of the day.  I took the opportunity to add shares today at $16.52.  Although Massoud is integral to this company, he will still be available to  management.  They have an awesome portfolio of companies, and they are only getting stronger.  I want to hold this company for a long, long time, and when you get opportunities to buy shares at a discount, that's what you hope to do as a value investor.  They report earnings in early March, and I expect strong results.
The market continues to be quite strong, and I'm a bit cautious, but quite optimistic for returns for 2011.  
Disclosure: Long CODI

Monday, February 14, 2011

New Purchase

Dr. Pepper Snapple Group (DPS).  If you've followed the blog in the past, you know that I've had my eye on this one awhile (link to my previous DPS posts).  I've always believed in this industry.  High barriers to entry and this is mostly due to brand recognition and loyalty.  If you look at everyday consumer products, in almost every space, generics are there, and are often seen as viable alternatives.  Why does no one buy the cheap soda?  Whether its just within consumers' perceptions or not, people buy the brand in this industry and almost nothing else.  Now, I'm unlikely to ever buy Coca Cola or Pepsi.  They are huge mature companies.  I like DPS because its still a growing brand.  Through the end of 2010 their plan was to be in every US McDonalds, and the Diet in almost half of their US locations.  We're obviously going to get more info during this Thursday's earnings announcement and conference call.  There are a lot of growth opportunities out there for them, and they appear to be leveraging them well.

Here are some stats on their products: (via last year's CAGNY presentation):


  • 41.3% market share in non-cola soft-drinks.  Think Dr. Pepper, 7Up, Sunkist, Canada Dry, A&W, Crush.
  • Snapple; #1 in premium tea category.
  • #1 in juice. Mott's, Clamato, and Hawaiian Punch. 
  • #1 in alcoholic mixers. Mr and Mrs T, Rose's Cocktail Infusions.
  • #1 in gourmet CSDs. Stewarts and IBC.

By the way, the link to that presentation is a great read if you'd like to get familiar with the company.

They also have the bottling agreements with Coke and Pepsi.  Here's a rundown on their operations .

Potential threats to this investment:

1)Soda Tax- Many states and municipalities are still considering this as a way to generate more revenue.  This has been in play for awhile, and I'm guessing it will come up further in the future, but they can pass prices along to consumers to some extent.  Its just a matter of how significant the taxes are.

2)Overall Inflation- Think input prices.  Plastics mostly.  This is an issue for almost every business, but a bigger issue for a soft drink company.  Again, its a matter of "how much", as a certain amount can be absorbed without disrupting consumer's buying decisions.

I like the stock at these levels, and depending on what we hear Thursday, or if the market corrects, I'd add to this stock.  I'm a pretty patient investor and have made very few sales in the past 18 months.  I do own many small-cap names, and love to own and watch those.  But lately I've also looked to add some mid to large cap names to a just a little stability to my portfolio, and this will fit.

I bought today at $33.74.

Disclosure: Long DPS