Alan Brochstein

15 Stocks That Are Having a Tough Quarter, But Are Still Worth a Look

I don't think I had a "crash" prediction - more of a retracement prediction and concern about worse. It's been very tough not being superbullish in the best bull market of my life. The account I manage is benched against 60% stocks and 40% bonds, and it is up 27.5% YTD as of tonight. That's a lot better than the benchmark and somewhat better than the S&P 500. I have been too conservative there, running high cash balances and investing in Consumer Staples. Even a monkey can make money in this market!

15 Stocks That Are Having a Tough Quarter, But Are Still Worth a Look

Thanks, Ricard. I haven't really looked that closely at ERTS (hence "seems"). The earnings estimates have clearly dived this year. If they are anywhere near close for 3/2012 (1.46), the stock, net of its $1.5 billion in cash less deferred revenue, trades at less than 10X. It also trades at 3X tangible book value. I need to find out about these fleas!


On Sep 20 03:13 PM Ricard wrote:

> Alan,
>
> Thanks as always for providing a fresh look at the stock market.
>
>
> Not sure if we're seeing the same company in ERTS...everything I've
> been able to find on the company indicates that it's a dog with a
> massive flea problem. I can see how PE may be low if averaged over
> 5-10 years but...not sure what it would take to pull it out of its
> current malaise.

Paired Trade: Buy Akamai, Sell NetApp

TCK, as I mentioned above, the muted average return is a function of all of these trades being built on the idea that we are still in a bear market. Each trade was to improve balance sheet and/or valuation and/or to minimize exposure to growth expectations. That bias has certainly been premature. It's always easy to look at "everything but", but I don't look at the returns excluding the BCR/ISRG fiasco. I expect that the average return will look a lot better soon. My buys are good longs for the long-term. Some of the sells are "less good", while others are "bad' (they could get wiped out in a protracted recession).

As far as being "for the retail investor", I would have to say that you should go back to my original article (link above). I explain there my rationale for doing the series.

As always, I have several different goals in contributing any article to Seeking Alpha. I like to share my thoughts, which is generally the net result of my contributions - period (although I get some great feedback sometimes). With that said, I certainly don't mind the occasional institutional client that I find or that can review my historical contributions when I am prospecting them, and I also offer a product geared towards retail investors.

So, no, I do not recommend that retail investors necessarily take my advice or, more aptly, act on my ideas that I share. I do hope that any of my contributions triggers in the reader something that helps make them a better investor or at least more informed.

Paired Trade: Buy Akamai, Sell NetApp

I forgot to mention on AKAM that it's PE (pro forma) and Cash Flow are somewhat overstated due to deferred tax credits, but I believe that they end beginning in 2011. The stock is still quite cheap (EV/EBITDA stays the same).

The S&P 500's Strongest Balance Sheets

S&P classifies it as an "Industrial"... On your point about their balance sheet, it is quite strong compared to peers and to other business services providers, though I appreciate your comment upon their fundamental outlook.

Make no mistake, this list wasn't a buy recommendation by any stretch, but rather a list of companies that might survive better than others...


On Mar 22 08:54 PM TeresaE wrote:

> Robert Half International is NOT an industrial stock.
>
> Robert Half is an Accounting/Finance/Tech temp firm.
>
> Of course they have a strong balance sheet, you can't show people
> as assets, and their inventory (workers) is bulging while their customers
> are being bankrupted.
>
>
>

The S&P 500's Strongest Balance Sheets

They made the cut. Upon closer examination, they sure have a lot of inventory. Even if one cuts it in half, though, they still have plenty of cash and other short-term assets to cover near-term and most of their longer-term liabilities. Their FCF generation will most likely plunge, but I find it interesting that the company hasn't ever lost money over the past 35 years (which is as far back as my data goes). At 2X tangible book, though, clearly the stock has some downside if their earnings plunge.

On Mar 22 10:46 AM Gunns wrote:

> Not every day you see the argument for Nucor having "financial strength"...
>
>
> Pensions, pensions, pensions...

The S&P 500's Strongest Balance Sheets

I wasn't sure how much to restrict P/TB. It amazes me how many companies now trade at less than tangible book, but most of these have a lot of debt or tend to be very small. My main goal in including that variable was to get rid of the companies with very little (or negative) tangible equity. Clearly AAPL or PCP have a lot less downside protection than ESV or TIE in that regard. You make a very valid point, and hopefully the market will continue to recognize that some companies have intangibles that are worth something.


On Mar 22 06:45 AM Zoltan L. Kovacs wrote:

> Nice to see Apple on your list, they really deserve it. But they
> have only made it because you put hurdle rate for Price/Tangible
> Book <4. It is in fact natural for a company with such innovative
> potential like AAPL to have a price way over the value of the tangibles.