The Dirt Cheap Value Portfolio: What To Hold And What To Fold

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 |  Includes: DF, IPSU, JBLU, LUB, PBY, SCS, SVU, SWY, WINN, YHOO
by: Mark Krieger

The "DCVP" has hit a rough patch the past thirty days. Despite only a .7% drop in the major averages (DJIA), it dipped 3.4 %, from $95.61 to $92.40. All ten components were in the red, with JBLU leading the pact as the worst performer, with a 20% bloodletting, and LUB earning a position at the opposite end of the spectrum, with a 4% drop.The reason for the weakness: most of the components had just gone up too fast in too short of a timeframe, and needed time to “pause to refresh” via some orderly profit taking.

In summation of the individual components, five remain as buy candidates, two should be sold and three should be held.

Luby's Inc. (NYSE:LUB): Accumulation of the shares seems to be in process, as Hodges Capital Management recently acquired another 151,250 shares and now owns a 6.8% stake. Look for more insight on the ownership structure at the beginning of next month, when the restaurant chain releases its proxy statement for its annual meeting, set for the first week of Jan. Opinion: Buy

JetBlue Airways (NASDAQ:JBLU): The shares are close to reaching an all time low of $2.96, set in March of 2009, and with the airline business continuously unable to shed its stigma as a “money loser”, why subject yourself to this kind of misery? Opinion: Sell

Winn-Dixie Stores (NASDAQ:WINN): There are a lot of conflicting views on this supermarket operator. David Livingston, grocery analyst at DJL Research says that Publix and WMT continue to clean WINN’s clock, and that the chain is destined for rougher times ahead. Karen Short of BMO Capital Markets, likes the company’s transformational remodel program, but is frustrated with its slow pace. Scott Mushkin of Jefferies, has a buy rating and a $11 price target in place. He favors the remodel program, but suggests they find ways to drive down remodel costs. Opinion: Hold

Yahoo (NASDAQ:YHOO): It could be argued that sooner rather than later, this media giant will be sold to the highest bidder. The prospects of a 25% premium coming to fruition during the process makes this equity a priority: Opinion: Buy

SuperValu Stores (NYSE:SVU): The grocer recently presented at the Morgan Stanley Global Consumer Conference. I suggest serious investors view the replay. In the meantime, I am not going to lie, its huge debt load is frightening. Opinion: Hold

Dean Foods (NYSE:DF): Got Milk? It just might be time to get some as the largest US milk producer is starting to see stabilization in its sector, as evidenced by its latest earnings report. The fact that “smart money” is in play for the shares (David Tepper’s Appaloosa Group has been a big buyer) just adds icing on the cake. Opinion: Buy

Pep Boys (NYSE:PBY): S&P’s Brian Milligan recently raised his outlook, based on the success of PBY's service and tire expansion plans and cost controls. Milligan theorized the weak economy is causing drivers to keep their cars longer, which in turn, causes increased demand for PBY’s services. Opinion: Buy

Imperial Sugar (NASDAQ:IPSU): Dismal fourth quarter earnings are expected in two to three weeks, with consensus analyst estimates of an 86 cent loss on sales of $211 million. My guess is a slight beat is in the cards. Look for the only US publicly held sugar producer to generate a loss of 79 cents on sales of $214 million. The report could also offer color on the prospects of a Wholesome sale, status of Port Wentworth and a update on both SteviaCane and LSR joint venture. Opinion: Hold

Safeway (NYSE:SWY): I like its high dividend yield (3.0%), low price earnings multiple (11) and its management. I don’t like the fact that there has been no insider buying and no attempt to monetize or spinoff its Blackhawk Network gift cards division. Opinion: Buy

Steelcase (NYSE:SCS): Office furniture manufacturers seem like a dying breed. Sometimes you just have to go with your gut instinct, and I am not sure if this industry will ever come back, as lower cost producers outside the US make it difficult to compete in the space. At the end of the day, SCS has a decent balance sheet, a low multiple and nice dividend yield, but I am uncertain that these attributes are enough to fend off a faltering economy.

Disclosure: I am long LUB, IPSU, WINN, SVU, DF, SWY, PBY, YHOO.