The Dirt Cheap Value Portfolio: 30% Appreciation Slated For 2012

by: Mark Krieger

There is no doubt that the stock market has been on fire lately. The DJIA is just a slight rise from notching a 13,000 closing, and only 9% from eclipsing its all time closing high of 14,165 (set on 10/9/2007). Has the market gotten ahead of itself? It just might have; after all, the housing situation is still in disarray, gasoline prices are "through the roof", a weak unemployment rate of 8.3% still persists, and an ever growing national debt of $15.37 trillion is present.

I guess the stock market is looking past these landmines and focusing on the future (six to twelve months ahead), expecting both housing and the unemployment rate to improve. The fact that this is an election year makes it more plausible that the recovery will stay the course.

In the meantime, don't fall asleep at the wheel; guard your gains with protective stops and expect some corrections to transpire. As far as the DCVP is concerned, it now trades at $102.45 after its most recent rebalancing, and is slated for a 30% appreciation clip in 2012 versus a 10% increase in the overall market.

The members exposed:

Safeway (NYSE:SWY): Credit Suisse upgraded the national grocer from neutral to outperform on improving fundamentals. The stock is quickly reaching overhead resistance in the $24 to $25 area and holders should look to lock in profits if that area is reached.

SuperValu (NYSE:SVU): This one finally showed some recent strength, rising nearly 6% from its lows, on twice average daily volume. The food retailer announced an 800 head count cut on the corporate level, so it is obviously serious about getting lean and mean. The question is, is it too little too late? Action: Set a protective stop at $5.90

Yahoo (NASDAQ:YHOO): Will a buyout ever occur? I am starting to lose my patience, but news that Alibaba (OTC:ALBCF) was seeking a $3 billion loan was comforting. It would be cleaner and quicker if somebody just bought the whole company for $18 per share, rather than initiate a series of esoteric transactions involving the sale of its Asian assets.

Dean Foods (NYSE:DF): The milk producer put up a great fourth quarter report by earning 27 cents on sales of $3.3 billion. Analysts had expected the company to earn 23 cents for the quarter. The company also upped its fiscal 2012 guidance to the range of 87 to 95 cents, putting the shares at a rather meager price of only 13 times forward earnings.

Pep Boys (NYSE:PBY): The auto parts company is being removed from the "DCVP" due to its impending private equity sale to the Gore Group,and is being replaced by Imperial Sugar (NASDAQ:IPSU). IPSU has redeemed itself by seeing its stock price rise substantially over the very important $5 threshold level on improving fundamentals and the prospects of raising cash through the sale of its 50% interest in Wholesome Sweeteners.

Steelcase (NYSE:SCS): This one is up over 10% from our last update and is starting to reach nose bleed levels. Although fundamentals appear sound, there are some red flags - chiefly $500 million of long term debt and pension fund obligations. A 20% to 30% retracement of its recent gains are in order before investors contemplate purchasing.

JetBlue Airways (NASDAQ:JBLU): While high fuel prices, federal regulations, and expensive union labor continue to plague the industry, JBLU's niche is starting to produce dividends. A pullback to the $5.50 area would produce a nice entry point.

Bridgford Foods (NASDAQ:BRID): The company's annual meeting is set for next month and it will be interesting to see if management provides any color on its prospects. The stock's volume has all but dried up, now averaging just 1880 shares a day (it has not traded in three days). Its shares are so thinly traded that either buying or selling is very hard to do without pushing the price 10% in either direction.

Luby's (NYSE:LUB): Bandera Partners increased its lead as the largest outside shareholder when it purchased another 294,000 shares, upping its stake by 11% to 2.92 million shares. The hedge fund now owns a 10.4% stake in the iconic cafeteria chain. The question is, why are they so enthralled with the company? Do they know something the rest of us don't?

Krispy Kreme (KKD):The donut purveyor is up 20% in the last three weeks alone and has already surpassed Stephens Inc.'s $8.50 one year target price making it vulnerable to a downgrade on valuation purposes.The stock is overbought, and at 27 times forward earnings, way overdue for at least 10% correction.

Disclosure: I am long SVU, IPSU, YHOO, SCS, PBY, LUB, BRID, KKD, DF, SWY.

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