Asif Suria of SINLetter.com is running a stock picking contest where Top Financial Bloggers Face-Off. He invited me to join the contest, so I thought I would post my entry on this blog. The contest length is Q1 of 2008. It requires that you pick three stocks (either long or short) and a prediction for the S&P 500 at the end of Q1 2008 (to be used only as a tiebreaker). I didn’t want to worry about the S&P 500 prediction – so I just entered 1470 as my prediction (last: 1468.36).
Bank of Ireland (IRE) - $60.44
Irish stocks are cheap. Irish banks are even cheaper. IRE has very strong position in attractive banking market. More conservative than most large banks trading at higher price-to-earnings, price-to-book, and price-to-dividend. A competitive dividend yield should help encourage buying even if dividends don't count toward the contest.
NutriSystem (NTRI) - $26.98
Stock shorted like a fad last year – but company isn’t a fad. Beaten down to extremely cheap levels. Should be buying back own stock at these levels. Wonderful business model with plenty of revenue from customers once acquired. Can afford to pay a lot in advertising to acquire a new customer. Program works; people actually lose weight without any unpleasant side effects. Hit hard by new diet drug. Launching a new, improved program (now) in Q1 2008. Management has shown they know how to design, market diet programs better than anyone else. But, most of all, the market has set the bar very, very low on this one.
YRC Worldwide (YRCW) - $17.09
Big, cheap trucking company. Cheap on just about every measure. Not expensive on trailing earnings; even cheaper on any sort of average, normalized earnings. High operating leverage causes extreme sensitivity to small changes in the U.S. economy – so those betting for a recession will bet against YRCW; but, in time, the price of YRCW has to move back to something approaching normalcy over a full cycle. No reason to think YRCW shares won’t improve before the industry does. Good stock at best; untimely at worst.
For the contest, the picks won’t actually be priced until after the first day of trading of 2008. So, the prices shown above are just year-end quotes on the three stocks. Contest rankings will be based on percentage changes in stock price over the course of the first quarter of 2008 – regular dividends don’t count for or against you whether long or short.