At the end of December, we launched our Extended Value Portfolio that revolves around our EquityAnalytics platform of research, which prices companies, gives Buy/Sell/Hold ratings and compares companies within their own industry on value, profitability, financial health, management and growth. In today's update on our Extended Value Portfolio, we will be covering our performance so far, our changes in guidance and price targets in February, our current holdings, and some attractive positions that we believe look good in March and 2011.
(See all results here.)
Since our Extended Value Portfolio's inception at the end of December, we have increased the portfolio by 12% with an average holding of 2-4 months and 10-12 holding at a time. In March and April, we started to finally close positions. We closed in April: Baidu (BIDU) for 40%, one-third of GameStop (GME) for 30%, SunPower (SPWRA) for 72%, Jinko Solar (JKS) for 20%, and two-thirds of Changyou (CYOU) for over 20% averaged.
Holdings we recommended in April to our members:
General Motors (GM) - We have a price target (PT) at $52 for the company and believe that GM is a great value right now. The company has a lot of undervaluation currently, but they have a lot of sales potential moving forward and have not priced in their future potential. Ford's (F) recent earnings surprise we believe is industry-wide, not just company specific. With only 3%-4% growth in operating income moving forward each year, the company has significant upside as they continue to lower debt and grow. Rising oil prices hurt margins, but the company has moved into some important new markets. They have received very positive reviews on automobiles, and that appears to be translating into a rise in sales.
Changyou (CYOU) - The company, a Chinese online Internet video game producer, looks to have a lot of upside moving forward after its 2010 IPO, even after its latest move. On any major pullbacks, this stock represents a great buy. The company has the most popular online video game in China, and they are introducing a new line of games in 2011 that should continue to help the company grow market share. Additionally, the company should benefit from the growing Chinese Internet market that should quadruple in the next five years as the Internet comes to more areas in China. We have a price target of $48 for Changyou.
Take-Two Interactive (TTWO) - In 2010, TTWO was the first year that the company was profitable without a Grand Theft Auto release. The company has a very positive lineup of games coming out in 2011, and it has shown that it can take its success in GTA and put it into other games like NBA2K11 and Red Dead Redemption, which were top sellers in 2010. The company has a low P/E ratio at 16, and they are a major takeover candidate. The company would get a major premium on its current price if bought out by an Electronic Arts (ERTS) or Activision Blizzard (ATVI). With the recent success of MLB 2K11 and the future release of LA Noire, this stock looks ready for a move. We have a price target of $24.
Buffalo Wild Wings (BWLD) - We believe that BWLD is a potential short at this point and recommend a short holding in this company. The company is a bit overvalued at current levels, and we are worried about growth potential for the company. The company has gotten a lot of love after its last two quarterly earnings, but we are afraid that the company's growth is going to slow over the next two years. They are face rising input costs and the company has a lot of growth already priced into the stock with a heftier P/E at 26. Further, any NFL lockout issues will definitely hurt this company significantly. Our PT is at 38.
Tata Motors (TTM) - Tata is one of our most touted recommendations. We believe this Indian company has a lot of upside potential with its dual threat of global sales after its reinvention of the Jaguar and Land Rover line as well as its growth in India. The company should benefit from global macro increases in automobile sales as well as growth in India. The company is well positioned in its own country, and they have a lot of upside after a rough several months for the Indian markets. We have a price target of $40.
The Warnaco Group (WRC) - In April, we released our Apparel Manufacturing EquityAnalytics. One of our top rated companies was WRC. The company has a tremendous lineup of underwear and swimwear apparel with CK underwear, Speedo, Olga's and more. The company is not tremendously impacted by cotton price increases, and we believe they have shed a lot of their brands that were not bringing in profits. A small pullback in the stock would warrant a nice Buy, however, earnings are this week. Look for the stock to go to $85.
G-III Apparel (GIII) - Another one of our EquityAnalytics favorites was GIII. The company maintains a luxury designer portfolio of licensed clothing. They are an exceptional company, and we believe they should continue to prosper with retail looking to make a major comeback and luxury to lead the way. The company is less impacted by higher cotton as they can pass on costs to consumers. Look for the stock to go into the $60s.
Big Lots (BIG) - After a "buyout" started to be rumored back in February and March, BIG stock shot up into the mid-40s. The company hired on Goldman Sachs (GS), and things were setting up for a buyout. There has been little talk of it since, and the stock has dropped to the low-40s. We believe the company's fair value is around $52, so a buyout would come at $55 - $60. Even without a buyout, we like this company for fundamentals. They are growing and have opened a lot of new stores in the last two years. CEO Steve Fishman has turned around the company with efficiency and a better supply chain. This seems like a great holding for fundamentals and buyout possibilities.
Ruth's Hospitality Group (RUTH) - Every long-term portfolio needs some small-cap coverage, and we like RUTH. This is a financially responsible and stable restaurant chain that focuses on private dining and fat checks. The company has had beef input prices hurting them, but they have shown some green shoots of growth in the last quarter. The company went to the mid-5s after a strong report prior to earnings, but it has given up all those gains. Look for them to have a strong 2011, and management is A-plus here. This could be a $10 stock in the next 12-24 months.
Trina Solar (TSL) - Still the best solar company out there, and it continues to be lagged by the market. Solar earnings have started to roll out and are mixed. The companies that we believe are well positioned are performing well. Our top pick is Trina, and we see them moving into the 40s in the next 12 months. They have diversified well, have a low-cost, efficient solar panel, and have top notch financials. This is the best solar company now.
Changes in Guidance and Price Targets in April
We initiated coverage on:
Columbia Sportswear (COLM) - PT at $69, Hold Rating
G-III Apparel (GIII) - PT at $54, Buy Rating
Gildan Activewear (GIL) - PT at $40, Hold Rating
Hanesbrands (HBI) - PT at $26.50, Hold Rating
lululemon (LULU) - PT at $80, Sell Rating
Phillips-Van Heusen (PVH) - PT at $62, Sell Rating
Polo Ralph Lauren (RL) - PT at $147, Hold Rating
True Religion (TRLG) - PT at $25.50, Hold Rating
Under Armour (UA) - PT at $59.50, Sell Rating
VF Corporation (VFC) - PT at $156, Buy Rating
Warnaco (WRC) - PT at $82.50, Buy Rating
Quiksilver (ZQK) - PT at $2.50, Sell Rating
Positions Currently in Our Buy Ranges: BIG, Cree (CREE), Dean Foods (DF), GM, RUTH, TTWO, Canadian Solar (CSIQ), GT Solar (SOLR), JA Solar (JASO), JKS, LDK Solar (LDK), ReneSola (SOL), TSL, WRC, GIII and VFC.
Disclosure: I am long GM, CYOU, TTWO, TSL, RUTH, TTM, WRC, GIII.