I am posting this list because not only is David clever – but I grew up with his cousin Earl – and you didn’t.

Aarons Inc (AAN): At the end of June, Dreman disclosed to own $34.5 million worth of AAN stocks. The fund sold out its stake in AAN over the third quarter. AAN returned 5.66% since the end of September, versus 12.41% for SPY during the same period. It has a market cap of $2.0B and a P/E ratio of 19.11. John Overdeck and David Siegel’s Two Sigma Advisors sold out its AAN stake in the third quarter as well.

GlaxoSmithKline Plc (GSK): Over the third quarter, Dreman sold out all $3.8 million worth of GSK shares. The stock returned 11.94% since the end of September, slightly underperforming SPY’s 12.41% return. It has a market cap of $115B and a P/E ratio of 22.49. Besides Dreman, Louis Navellier also sold out all his stake in GSK over the third quarter.

British American Tobacco Plc (BTI): BTI is another mega cap stock that Dreman sold out during the third quarter. At the end of the second quarter, Dreman had $3.5 million invested in BTI. The stock returned 11.04% since the end of September, versus 12.41% for SPY during the same period. The $93 billion market cap stock has a P/E ratio of 18.63. Steven Cohen’s SAC Capital Advisors also sold out its BTI stake in the third quarter.

Dreman also sold out all his stakes in Scotts Miracle Group co (SMG), Chicago Bridge & Iron Co (CBI), Hudson City Bancorp Inc (HCBK) and Companhia De Sandeamento Basico (SBS).

THESIS :

These supermajors all have upward earnings revisions for 2012. Upward earnings revisions typically result in positive earnings surprises. Positive earnings surprises lead to higher stock prices. Investors should benefit from these earnings revisions especially since the stocks are currently undervalued and positioned well for stock appreciation.

The undervaluation of the oil companies gives them low downside risk and positions them for steady stock growth. BP has recovered from the 2010 oil spill, but still has not reached its pre-spill price of $60 per share. It is still undervalued with a forward PE ratio of just 6.62. BP’s stock trades at only 1.25 times book value per share.

Total SA, Chevron, ConocoPhillips, and Royal Dutch Shell all trade under 2 times book value per share making them well undervalued. ExxonMobil trades at under 3 times book value per share which is also well undervalued.

The large oil companies achieve economies of scale. Since they operate on such a large scale, the oil companies are able to keep their average costs low and are able to streamline production. These Supermajors are an oligopoly in the oil market. This is why they are able to consistently generate vast amounts of profit and cash flow.

The big oil companies are diverse within the energy sector in that they not only deal with oil, but also with natural gas and other products. They have an upstream side of the business that performs the exploration, development, and production of oil and gas. They also have the downstream side of the business which involves the refining, transporting, and marketing of the oil and gas. The downstream side of the business also handles the manufacturing of chemicals, plastics, and other petroleum related products.

Consumption will grow for decades :

There will be a big clean-up in aisle ten across America.

Eddie Lambert wanted to prove he could operate a company as well as buy and sell shares. He picked the wrong company to show the world how talented he was . That is was because he has had years of failure to tarnish his investor reputation. This ego play has cost him and investors billions.

Now Sears will close under-performing stores .

Caught between cheaper prices at Walmart, sharper marketing at target and expanded appliance lines at Home Depot and Lowes – Sears has been to slow to show its colors . What distinguishes Sears in your mind?

If you remember Sears / K-Mart today is basically a big REIT after playing the consolidate, go broke, emerge and be happy game a few years ago. Now it appears that strategy didn’t do anything for the general suck level of the company itself, and we’re right back where we began.

Home appliance sales and electronics (both big ticket items) were in the trashcan over the holiday season. You don’t think that might have something to do with the general state of the consumer and their spending power, do you – or is it flat footed management.

If you like Craftsman tools (never mind that most are now made in China) I’d suggest buying them soon — just in case, you know, the company implodes and ceases to exist over the next year or so.

One of the largest commodity producers in the world is VALE based out of Brazil. The stock has had a miserable 2011, underperforming the S&P (SPY) by more than 36% year to date. The stock has gotten way too cheap and should have a much better 2012.

7 reasons why VALE belongs in your portfolio at $22 a share:

1. The stock yields almost 3% and has raised its dividend at 16% on average over the past five years.
2. The stock is selling at the bottom of its five-year valuation range based on P/B, P/E, P/S and P/CF.
3. VALE looks like it is putting in a technical base at current price levels (See Chart).
4. The stock sells for less than 5 ½ forward earnings despite growing earnings at north of 16% on average over the past half decade.
5. Although its earnings are volatile, the long-term secular demand in emerging markets should power Vale’s prospects for at least a generation.
6. The company produces massive cash flow and is selling at just 5 times operating cash flow.
7. Vale is 50% under the mean analysts’ price target of $35. S&P has a “buy” rating and a $34 price target on VALE.
8. thanks to bruce Jensen

for more information see http://www.jackbassteam.com