By Jack Kenta
Whitney Tilson, founder and Managing Partner of T2 Partners LLC and Tilson Mutual Funds, added a few new cards to his deck in February. Seventeen new stock picks bring his total portfolio to 101 stocks valued at $321.41 million. Those stocks break down into 15.5% technology, 18.9% financials, 3.5% telecommunications, 22.7% consumer services, 3.1% health care, 6.9% consumer goods, 4.1% industrials, .2% basic materials, 6.9% oil & gas, and 18.4% in various industries and sector classes. Like Chase Coleman and Bill Ackman, consumer services stocks make up a substantial portion of Tilson’s portfolio. So without further ado, let’s take a look at his newest picks:
Calamos Asset Management Inc. (CLMS): The company provides money management and investment advice to institutional and individual investors. Calamos has approximately $33 billion of assets in about 15 mutual funds and five closed-end funds. In its fourth quarter results, Calamos’s revenue rose 6% to $86 million, and while compensation costs increased 26% to $18 million, this was mostly due to performance-based incentive compensation. Dividends were increased by 27% (2 cents a share) to 9.5 cents per share, resulting in a dividend yield of 2.4%. The stock trades at $16.47 with a PE Ratio of 16.83 and EPS of .99, and while not cheap, is a good value.
Berkshire Hathaway (BRK.A) (BRK.B): We’re bullish on Warren Buffett’s Berkshire Hathaway, which owns over 70 firms and has stakes in more than a dozen others. The company’s fourth quarter earnings were up year over year, helped significantly by the recent acquisition of railroad company Burlington Northern Santa Fe. As the economy stabilizes and consumer spending increases, expect higher revenues in its Utilities & Energy and Manufacturing, and Service & Retail businesses. The stock trades at $127,010 with a PE Ratio of 18.75 and EPS of 7,928. Also, Berkshire short put index positions should look increasingly attractive as markets move higher.
Best Buy Company Inc. (BBY): The stock trades at $29.08 at the time of this writing, close to its 52-week low ($28.65). With mounting pressure from online retailers like Amazon.com (AMZN) and bargain retail shops like Wal-Mart Stores (WMT) and Costco Wholesale (COST), Best Buy is finding it increasingly difficult to compete. With an even greater percentage of consumers expected to purchase online for electronics, it looks like Best Buy won’t make the 20% recovery this year that analysts expect. Best Buy’s PE Ratio is 8.36 with an EPS of 3.07. Citigroup analyst Kate McShane downgraded Best Buy to Sell from Hold and cut her price target from $36 to $27.
IDT Corp. (IDT): IDT Corporation has seen its fair share of ups and downs over the past few years. The stock traded as high as $41.84 per share on September 18, 2006, and as low as $.71 per share on December 19, 2008. The stock currently trades at $25.80 with an EPS of 1.93. The consumer services-focused company operates in the telecommunications and energy industries. The company was on its way to bankruptcy in 2008, but made a huge turnaround with the introduction of Howard Jonas as CEO and has become profitable once again. Despite some claims that IDT has peaked, it still has room for growth in its Telecom and Energy sectors.
Artio Global Investors Inc. (ART): Artio Global Investors is the holding company for Artio Global Management, which provides investment management services to intermediary clients. The company trading in the unloved international asset management sector has come under heavy scrutiny and pressure from analysts such as Ticonderoga who recently reiterated a Sell on ART. However, the company has a strong business model and comes cheap. The stock trades at $15.75 per share with a PE Ratio of 9.10 and an EPS of 1.58.
Telular Corp. (WRLS): Telular Corporation’s main product is the Telguard system, which wirelessly transmits security alarm signals from resident or commercial locations to a monitoring company. Telguard’s total subscriber base is approximately 572,000, and recurring service revenues account for about 60% of total revenue with margins exceeding 60%. Management has concentrated on keeping costs down, and has done a good job of it even as revenues and cash flow have continued to rise. Telular Corporation’s dividend in January means management has high confidence in the company, and is a good sign for long-term investors. The stock trades at $7.38 with an EPS of 2.44.
Alleghany Corp. (Y): Alleghany has found its comfort zone in property/casualty insurance with real estate mixed into the formula, and its goal is to create stockholder value through ownership and management of a small group of operating businesses and investments. Alleghany’s subsidiaries include Capitol Transamerica and RSUI Group and in it’s last quarter beat EPS estimates by 1.19 (4.85 actual vs. 3.66 estimated). Alleghany Corporation has had an average earning growth of 1.9% over the past 10 years. As of the end of February, Alleghany holds $825 million in cash for use in future investments and have no debt to note. Shares closed at $332.32 with a PE Ratio of 18.91.