Seeking Alpha
Special situations, contrarian, hedge fund manager
Profile| Send Message| ()  

I know it is a little early in the game, but it's time to get the portfolio ready for 2008. The time to prepare your strategy for the coming year is now. Companies that will likely experience the tax-loss selling in December are good candidates for a bounce in January. It's better to be in a little sooner than later, though it's never a good idea to try to time the market.

This is where I am putting my money the next 12 months. I think 2008 will be a tough year, though not necessarily a bad one. We are likely not to see the number of super high fliers that we had in 2007. Fortunately, the recent market cooling has over-punished a handful of companies and some valuations appear to be very attractive. On top of these stocks, you may also want to consider taking some of your U.S. Dollars and buying Euros or British Pounds. The lagging days of the U.S. Dollar are not over – just wait until they take oil off of this standard. It may not happen in 2008, but it's more likely to happen in the next 5 years than 50.

Seaboard Corp (AMEX: SEB)

The time has come on this one to enhance the position. I have been a long-term holder for a while, and unfortunately, watched most of the wealth I built in this one from Fall 2006-Spring 2007 deteriorate. While I am not calling the bottom (I may have missed this), I think 2008 will be a rewarding year for the food processing and shipping multinational. The new challenges that have come across their plate the last couple of years are now just reality and they will adjust their business accordingly. It is 'pricey' at $1,550 per share (where I added to my position), but you would have said the same thing at $1,400 (it was there just last week). SEB should also complete its $50M buyback program shortly. I just doubled my position in SEB.

ValueClick (NASDAQ: VCLK)

The last of the major Internet advertising agencies standing. Company has been hit by some slower than expected results and some FTC lawsuits. FTC lawsuits will be cleared and VCLK will continue to produce cash from operations. An acquisition is likely in the works or a possible spin off of their Commission Junction [CJ] division. CJ was purchased in 2003 for $58M. A competitor, LinkShare, was bought for $425M. CJ is superior to LinkShare and on its own two feet could likely boast a $500M-$1B+ price tag. In at under $24.

Miscor Group (OTCBB: MCGL)

A small engineering firm that just announced a deal to acquire a company that specializes in the repair and maintenance of wind towers. MCGL is also majority owned by Jeffrey Gendell and he continues to pump financing into this one – and lots of it. This one will take some time (maybe 3-5 years) but it may not be a bad idea to start building a position now. MCGL will undergo a 1 for 25 reverse split in early 2008 and then I look for them to obtain a NASDAQ listing. This will open the gateway for institutional buying and added exposure. MCGL has the makings of a 10 bagger over the next 3-5 years if they execute and wind power takes the stage. However, this one is speculative, to say the least. Solar was hot in 2007 – wind should be in 2008. In at under $0.40 per share.

Trinity Industries (NYSE: TRN)

Long established railcar maker that has taken a beating in 2007 because it appears the short-term boom in railroads is done. However, TRN was smart and saw this and now has a very active railcar leasing business. TRN also is in the business of manufacturing structural wind towers and they are very good at it, however, nobody talks about it. Their energy segment makes up a larger percentage of their revenue than you would think for a company traditionally thought of as a railcar manufacturer. Plus, the rails will be as busy as ever in 2008. We may not need many new railcars, but they will need to be leased. In at under $27 per share.

Magnetek, Inc. (NYSE: MAG)

MAG will be the exclusive marketer and distributor of a line of residential solar and wind power inverters. It is speculative, but MAG is in good financial position with almost no debt and plenty of cash on the books. Power-One, Inc. (NASDAQ: PWER) manufactures the devices and may also stand to benefit from this industry that should see some serious growth in 2009-2010. 2008, however, may be the time to accumulate a position. In at under $4.40. Seacoast

Banking Corp. of Florida (NASDAQ: SBCF)

A well established South Florida bank with over 50 branches and $2B+ in deposits is likely up for sale. Operationally, things are good, but a buyer at the right price would get the attention of SBCF and shareholders. Unfortunately, my track record at picking banks has been, well, awful. I wouldn't count on SBCF going significantly higher in the near-term and it may even fall further, as I doubt they can keep their dividend intact for too long. SBCF has been victimized by the housing market fall-out, of course. I never say don't look, but with this one, if you have a long-term horizon, pick up a few shares at these levels and you should wake up one day with cash or shares of another bank in your account. In at under $12.50.

Ash Grove Cement (Pink Sheets: ASHG.PK)

Wake me up at $400. It's available to buy now at $249/share after hitting $304 recently. Accumulate a position in this one and you should feel pretty good come retirement time. It just takes patience and the stock hardly ever trades. Buy under $275/share.

Georgia Gulf Corp. (NYSE: GGC)

Financially struggling – tons of debt. They make chemicals and products that service the home improvement market. The debt laden company has gotten beat up pretty bad and has seen their credit rankings suffer. This one could have some significant downside, still, but in all likelihood, they would be acquired before they vanished. The premium would not be huge, but likely in the realm of $10. Buy under $8.00 if you have a strong stomach.

Merck & Co., Inc. (NYSE: MRK)

Pharmaceutical giant with a nice dividend, strong pipeline, and lots of momentum. This stock still has $20 of upside over the next 24 months. Buy as long as it is under $62.00

Savvis, Inc. (NASDAQ: SVVS)

With Welsh, Carson, Anderson, & Stowe controlling the fate of this one and likely looking for a buyout, there is upside here. Situation is similar to that of GGC, though SVVS is in far better financial position and producing nice cash flow. The purchase price on SVVS likely will not be astonishingly higher than the $28/share it is fetching now. The stock has been whacked by about 50% from its highs, with no reason, except that it has missed guidance. SVVS will be attractive to a larger suitor. The question is when. Additionally, with Welsh Carson's tiny cost basis, a big payout is likely not on the horizon. The least favorite of my 2008 picks, but should be a winner come the close of 2009-2010. Buy under $30.00.

Source: 10 Stock Picks for 2008