Is 3M A Three Bagger

I don’t have 3M on my Stocks For The Recovery list but it is in a value play position according to the recent fall in price:

3m is an incredibly diverse manufacturer of countless globally used products. Not only do they have stellar consumer products, such as scotch tape, post it notes, air filters, sandpapers, dust masks and countless others with which you are personally familiar, they synergistically use these technologies in various tapes, adhesives, filters, abrasives, films, coatings and the like to produce lots of items that are used in the manufacture of products. It makes 3M’s products almost indispensable to manufacturing as a whole and broadly diversified among a range of goods that 3M doesn’t even manufacture. Add in that 3M is known worldwide as a great innovator and for its high returns on invested capital and you can see why Morningstar classifies the company as a “wide moat” stock, meaning they have a large competitive advantage over others that make similar products.

Is 3M then currently at value?

3M has underperformed both GE and the S&P 500 over the five-year and especially over the 10-year term, 3M is the clear winner. This would seem to indicate value.

The company recently estimated earnings per share for 2012 at $6.25 to $6.50 (including pension obligations of about .10/share). This would put the company at 12.8 to 12.3 X 2012 earnings, and I generally consider anything below 13X earnings to be of interest. While there are other companies that have cheaper valuations, Morningstar, the king of value investing, has 3M bordering right on its five-star range due to low levels of uncertainty in its business and earnings. You’ll also notice that 3M dividends have approximately doubled since 2001, while the payout ratio has been cut almost in half.

Their trailing earnings, currently right above 13X, is slightly below its long term average, with 9X being the valuation at the depth of the recession and 20X at just before the recession. They also have very safe and comfortable levels of debt. Therefore, I would say there is a noticeable discount, although not overwhelming. However, 3M’s strong and stable business make this discount far more attractive. It’s that low risk factor that is creating a lot of the value for me, as it is always nice to have an investment that requires little thought and few headaches.

for further information please see www.jackbassteam.com

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Restaurant – Fast Food 2012 Profits

My top choice in the sector is Chipolte – highlighted in the AMP book due out next month.

Here is a summary of the sector top picks by fund managers:

. McDonald’s Corporation (MCD): Ranking as the most popular restaurant stock among the hedge funds we follow – MCD is also one of the sky walkers this year. The stock has returned 35% year to date and was owned by 39 hedge funds at the end of the third quarter. Jim Simons’ Renaissance Technologies, which was the largest owner of MCD, increased its position by 25% and had slightly more than 3 million shares in the stock as of the end of September

2. Starbucks Corporation (SBUX): Strongly performed in 2011, SBUX was in the portfolios of 36 hedge funds and has returned 43% year to date. Donald Chiboucis’ Columbus Circle Investors held more shares than any other hedge funds. At the end of September, the firm possessed more than 6 million shares of SBUX. This figure was after the firm decreased its position by 3%.

3. Yum! Brands, Inc. (YUM): Thirty five hedge funds had YUM in their portfolios in the third quarter. The stock gained 22% year to date. Among the hedge funds we track, YUM’s biggest stakeholder was Mason Hawkins’ Southeastern Asset Management. The firm decreased its position by 29%. After that it still had more than 18 million shares in the stock.

4. Wendy’s Co. (WEN): Wendy’s was in 22 hedge funds’ portfolios during the third quarter. The stock managed to beat the S&P and returned 18% so far. Nelson Peltz had the most shares in the stock among the hedge funds we follow. This is after the firm initiated a 76 million shares position.

5. Chipotle Mexican Grill, Inc. (CMG): CMG is the best performed stock here, gaining 56% so far in 2011. Twenty hedge funds held the stock in Q3 and the biggest owner was Jim Simons’ Renaissance Technologies. The firm had about 811 thousand shares, up 33% from Q2.

6. Darden Restaurants, Inc. (DRI): DRI slightly underperformed the S&P 500 index so far in 2011 and was owned by eleven hedge funds at the end of September. Alexander Mitchell’s Scopus Asset Management ranked as DRI’s biggest stakeholder among the hedge funds we track. The firm initiated a new position of exactly 500 thousand shares of DRI during the third quarter. Jeffrey Vinik and Cliff Asness were also among DRI’s large stakeholders

7. Panera Bread Company (PNRA): PNRA skyrocketed recently and returned 36% year to date. Thirteen hedge funds held this stock in the third quarter. Jim Simons’ Renaissance Technologies had the most. The firm had 640 thousand shares at the end of September, after a 9% decrease.

8. Tim Hortons Inc. (THI): THI has returned 20% year to date. In the third quarter the stock was owned by 9 hedge funds, with comparatively smaller positions. D. E. Shaw had more shares than any other hedge funds, with 195 thousand shares, down 1% from Q2

Google Breakout ?

I love the name of the analyst group ” Bespoke ” Investment- implying the quiet understatement and heritage of Saville Row . Here’s there opinion on Google :

Google (GOOG) has finally broken out of its 2-plus year sideways trading range this week. Today the stock closed at its highest level since January 14th, 2008. By breaking out of this multi-year sideways trading channel, the stock now opens itself up for a run toward its all-time high of $741.79, reached on November 6th, 2007

At $741.79, it would be the third biggest behind Exxon Mobil (XOM) and Apple (AAPL).

please see more information at www.jackbassteam.com

David Dreman’s Sell list

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).

Insider Buy List – Oil and Gas


GOLD Decline Brings Focus To Golden Dividends

THESIS;

Right now the mining companies are trading more akin to the cyclical heavy industry mining,. The senior companies are trading akin to about five times cash flow at the moment – I don’t see a significant level of downside to the current multiples in the mining industry and  AMP thinks that the gold mining investments in general are  inexpensive today relative to  the past

With gold prices set to finish higher for the 11th consecutive year, producers are swimming in extra cash, wrote Dan Denning for CommodityOnline. While producers are partly paying out more dividends because of their higher cash positions, they are also dishing money out to shareholders because of greater competition, namely low-cost precious metals ETFs.

Market Vectors Gold Miners (GDX) is moving closer to its 52-week low of $50.42 a share, and lost nearly 2% on Tuesday. Market Vectors Junior Gold Miners (GDXJ), which tracks small-cap stocks, also lost ground.

Meanwhile, gold prices dipped below $1,600 an ounce.

According to David Christensen, CEO of ASA Gold and Precious Metals Limited, dividend growth has tapered off “quite substantially” as the industry focused on growth and “started to chase the juniors and the mid-tier companies to a greater extent,” reported Geoff Candy for Mineweb.

However, we are beginning to see gold producers offer dividend yields again. GDX, which tracks larger gold miners, offers a 0.7% yield while GDXJ, which leans toward small- and mid-cap miners, yields an impressive 5%.

More Big Oil Selections for The AMP Portfolio 2012

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 :

Gold Price At The Critical Correction Point

Gold has recently been in a correction (or consolidation) after a very steep rally. On a fundamental basis I am recommending gold producers as a hedge – here is a contrary technical view from Greenfields:

It appears as if Gold is at a critical juncture at present. Gold, at $1594.60/oz, is currently right below both the 200dma  as well as the rising trendline ( recently broken to the downside) since early 2009.

From an overall Technical Analysis standpoint, on both daily and weekly viewpoints, Gold appears vulnerable to a (significant) decline.

Currently

I am very closely monitoring Gold as I believe a steep, abnormal correction could serve to (further) indicate deflationary pressures – which of course would have outsized impacts on financial markets, the economy, and economic policy (particularly QE3 or some other large intervention.)

for further information please see www.jackbassteam.com

SEARS – caught as a Target for Walmart Shoppers

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.

VALE is Walking Through The Vale of Profits

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

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