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The Oxen Group is a financial analysis and investment opportunities newsletter-based website run by financial analyst David Ristau and features several other traders. Ristau and team have been working in stocks for several years and has developed a knack for identifying winning short-term and... More
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  • The Oxen Report: Play of the Week - Winnebago Industries

    Over the past few weeks, we have had some pretty good success with our Plays of the Week. I am hoping that this week we will have another successful one. It is a slow week in earnings, which is usually what I use to help propel my weekly picks. Therefore, as a preface, I am going out more on a limb this week with my Play of the Week. I think it is a great play, and it matches the criteria I use. Yet, it is definitely still a riskier play simply because of the problems this industry has had. 

    Let’s get into it…


    Play of the Week: Winnebago Industries Inc. (NYSE:WGO)

    Analysis: One of the industries most hurt by the recession was recreational vehicles and large motorized vehicles, in general. Most consumers have throughout the recession tried to avoid a large amount of big-ticket purchases due to the uncertainty in the economy and job market. One of the industry’s leaders, Winnebago Industries Inc. (WGO), lost nearly half of its market value since the beginning of 2007. The company, from the end of fiscal year 2007 to 2009, lost nearly 75% of its revenue, moving from just over $800 million to just over $200 million. The company had profits of just over $40 million in 2007. While in 2009, the company settled for a loss of $78 million. The last few years have been rough on the industry certainly, but it may be time for the RV industry to start making money again.

    In Q2 of 2010, the company reported its first profit since 2008. The company just got by with a $760,000 profit, but it was definitely a great sign for the company that recovery is on the way. The company is projected for this quarter to hit a profit per share of 0.04. Over the past two quarters, however, the company has produced surprise earnings, and a third one could be on its way for a number of reasons. Last quarter’s turn to profit and 120%+ surprise profits is definitely going to give this company some buzz over the coming week, and I expect it will grab some buyers that will help move this into our weekly 4-6% gain range.

    WGO, for this year, has revenue estimates over $400 million, nearly doubling their revenue from one year ago. The increase in consumer spending and slow recovery is being seen most directly in a company like WGO. Some of the numbers from Q2’s report are outstanding. The company made a 247% increase on revenue from Q2 2009 to 2010. The drive in this increase was from motor home unit deliveries. The company, additionally, is selling most of their motor homes in the Class A category, which are the smaller motor homes that allow the company to have large production and efficiency. Operating income was still at a loss, but it improved $18 million from one year ago. The company increased its revenues through the first six months of fiscal 2010 year 89%.

    The following comment from the Chairman and CEO Bob Olson gives a nice overview of how things are going:

    "We are pleased to see a continued trend of sequential growth in revenues and gross profit. After hitting our lowest shipment levels in decades during the second quarter last year, we have seen improvement in revenues and gross profit each quarter since that time. We also saw a sequential increase in dealer inventory this past quarter for the first time in two years as we increased our production levels to satisfy our sales order backlog. While we are encouraged with these improvements, the economic outlook remains uncertain and we believe retail sales will be the key driver to sustain our recovery and for continued growth going forward."

    Olson mentions the backlog, which is extremely important to any company that takes orders before production or has orders that are being filled. The backlog is a great measure of future success for construction companies, large motorized vehicle makers, and cargo companies. WGO’s backlog at the end of Q2 2010 was 1,159 motor homes, which is an increase of 246% at the same time in 2009. That backlog means that orders are coming in at very strong rates, and it will help the company to produce more and more revenue moving forward. As a whole, companies have all been seeing rising revenue rates, and it is no different in the RV industry. The difference is that this industry has so much to recover…

    The industry, as a whole, has been doing very well. Coachmen, the bankrupt company, saw a 90% increase in their quarter-over-quarter net sales despite being bankrupt. Thor Industries, while having some accounting problems on previous reports, had an surprise EPS increase of 10%. The recreation companies, as a whole, are starting to see a nice pickup throughout the sector, and that should play into WGO throughout the week.

    When we do a weekly play, we want a company that can have reasons for expectations moving into the earnings rather than not having much expectations before earnings and then moving into earnings date we can buy right before and make large gains. The technicals are superb for this. WGO is well below the mid-50-point on RSI. It is oversold on slow stochastics, and it is riding its lower band. On fast stochastics, the stock is starting to see a lift off its oversold floor, which points to a short-term buyer interest starting to prop up.

    The market looks very healthy right now, and it is all pointing in the right direction towards a great week for Winnebago. 

    My final comment is that if you do not believe me…here is Robert W. Baird’s take:

    "Winnebago reported a smaller operating loss – suggesting lower breakeven levels than previously thought – a good sign. The backlog is robust (+246%), but better shipments reflect strong orders and inventory replenishment – not a recovery in retail (-2%). We raised our estimates to reflect lower breakeven levels and a good mix of diesel units, driving our price target to $15."

    Entry: We are looking to get involved at 11.20 - 11.30

    Exit: We are looking to gain 4-6%.

    Good Investing,

    David Ristau 

    Disclosure: none
    Jun 14 11:56 AM | Link | Comment!
  • The World Cup Series: Emerging Markets of the Cup - Honduras
     This week I am going to be investigating four nations that I think have intriguing investment opportunities that are part of the World Cup 2010 in South Africa. Today we move to Honduras in Central America.

    Yesterday, we looked at the Eastern European nation of Slovenia. Tomorrow, we will look at Nigeria and finish up with Chile. These reports will talk about the nation, its history, its economy, and why it is an interesting investment moving forward. This will help us get into the spirit for the World Cup and connect it to investing! The stadium on the right is the first stadium that Honduras will be playing in called Nelspruit - Mbombela Stadium.

    Did you know that in the past ten years, Honduras has seen over 70% growth in its GDP, increasing its GDP per capita from $1100 to $4175? This has helped Honduras move from a rank of 122 to 109th.

    Historically, Honduras is one of the most prominent banana republics. The actual terminology of calling a nation a banana republic began in Honduras in the late 19th Century. In William Sydney Porter’s bookCabbage and Kings, Porter refers to Honduras as a banana repbulic while staying there. The nation was a major exporter to the European empire for banana and received very little in return for their abundant natural resource. Honduras has a long history of colonization

    The nation was first colonized by Spain in the early 16th Century by the great, almighty Christopher Columbus. Spain ruled the nation till 1821, when they received independence.The nation has been independent ever since but always been at the brunt of first world nations’ power. Honduras has since the post-WWII era had severe political strife. The nation became democratic in 1982 for the first time, but just last year, the nation performed a coup d’etat that removed power from the president and transferred to the head of Honduras’ Congress. The nation’s political struggles have continually dampered the nation’s significant economic capacities, which are abundant. Natural disasters, as well, have continually caused issues for Honduras.

    The political strife of 2009 has caused the nation to extremely damper its economic chances. The 2009 Presidential Crisis took power away from then President Manuel Zelaya, and he was deported. The new leader of the party Porfirio Lobo Sosa was elected in the 2009 elections, and slowly, nations have begun to give support to him and his party. Sosa is a conservative politician that is very economically adept. He has a BA from the University of Miami in Business Administration and has vowed to increase private investments. As of this week, the USA has pushed for Honduras to be readmitted into the Organization of American States. A private delegation will be sent there to look into the nation.

    The political struggle has taken a toll on the nation along with the economic downturn. The nation was growing at above 6% from 2004 - 2007. In 2008, the nation dropped to 4% growth, but in 2009, the nation declined at more than 3% in its growth. While some of this is due to a downturn, most markets that have seen growth at those rates that saw declines did not go negative. Reuters, however, has published that they think the economy could grow by more than 3% in 2010 as stability has been reached.  The economy of Honduras has severe disparity between rich and poor with 50% of the nation below the poverty line. The nation was a Heavily Indebted Poor Country in 2000, and it was eligible for debt relief in 2005.The nation has $3.43 billion of external debt, which is relatively low to GDP, and it has declined by about 50% in the past five years since receiving debt relief.

    The debt relief is very good to see for a nation that is attempting to rebuild itself. The nation is an agricultural and natural resource-based economy. Their main exports are coffee, bananas, and shrimp. The nation has gotten its inflation rate down significantly from 10% at 2000 to below 6% in 2009. The nation has begun to privatize many of its governmental-run organiztions, such as the telecommunications and energy distribution. 

    The nation, much like Slovenia covered yesterday, is an extreme export-driven economy by its natural resources. As the American economy, which accounts for 70% of Honduras exports, recovers it will help Honduras significantly. The nation, though, needs to diversify its own economy, improve education and poverty lines, and build more internal demand. The keys to any impoverished nation. Guatemala and El Salvador around Honduras have similar resources, but GDPs $27 billion and $9 billion greater. The potential for Honduras is there.

    There is still significant political strife in this nation, but there is great potential for this economy to build itself back up. With the damage the nation did in 2009, it became similar to a bankrupt company that is emerging from bankruptcy. The nation is recovering, and it has plenty of opportunities available for it into the future. 

    Investing in these developing nations is always tough. Honduras has no stock exchange of its own. The best way to invest in Honduras is through corporations that have major stakes in the country that would be heavily influenced by its success and reestablishment. One such nation is Gildan Activewear (NYSE:GIL). They operate more than 50% of their sock operations there and 60% of their activewear. Chiquita (NYSE:CQB) and Del Monte (DLM) have significant amounts of banana stocks in the nation. Technology Research Corp. (NYSE:TRC), a circuit interrupter manufacturer, has its main manufacturing plant in Honduras. Finally, PriceSmart (NASDAQ:PSMT) is the Latin American Costco, and it has stores in Honduras. These companies would all benefit from stability in the country, as would the nation. Unfortunately, no Honduras companies are publicly traded at this time.

    Honduras will be playing in its second World Cup since 1982. The nation tied Spain and Northern Island and lost to Yugoslavia in 1982. The nation plays its first game next Wednesday against Chile. They are in the same group with them, Spain, and Switzerland. The nation is definitely an underdog against three top teams in Spain, Chile, and Switzerland. The nation qualified for the Cup in the same group as the USA and Mexico. They qualified by going 5-1-4. 

    The nation is hoping that the World Cup will help to bring more stability to the nation, and they can connect around a common goal. That hope is still yet to be seen…


    Good Investing, 

    David Ristau

    Jun 09 3:05 PM | Link | Comment!
  • The World Cup Series: Emerging Markets of the Cup - Slovenia

    This week I am going to be investigating four nations that I think have intriguing investment opportunities that are part of the World Cup 2010 in South Africa. We will start with Slovenia, move to Honduras, then to Nigeria, and finish up with Chile. These reports will talk about the nation, its history, its economy, and why it is an interesting investment moving forward. This will help us get into the spirit for the World Cup and connect it to investing!

    When I was in college, I did a study abroad program in Washington, DC at American University, studying the breakup of Yugoslavia and the war in Bosnia, Serbia, and Croatia that followed. Slovenia or, more officially, the Republic of Slovenija, was a former member of the Yugoslav Republic, and it is actually the most successful nation that came out of that bloc. I actually traveled to the nation very briefly as part of the program, and while in Washington, DC, we met with the Slovenian Ambassador to America. It is a truly beautiful and fascinating nation that has a compelling future.

    Slovenia has a rich history as being part of some of the most powerful empires in the world. It was a part of the Byzantine Empire, the Austrian/Ottoman Empire, and even the Roman Empire. The country was under Communist rule in Yugoslavia from the end of WWII until the 1980s. The country experienced four decades of rule under Marshall Tito, who helped link many different ethnic groups and religions under the Yugoslav flag for years. In January of 1990, Slovenia left the Communist Party of Yugoslavia and declared independence. The nation, in the same year, elected a new Christian Democrat Lojze Peterle, who began economic and political reforms that would introduce a market economy and liberal democracy. By 2004, Slovenia was able to join NATO and the European Union. In 2008, the nation was the first post-Communist nation to hold the Presidency of the Council of the EU.

    The nation is quite small with only just over 2,000,000 citizens and only 20,273 square kilometers. The population is similar to the size of Nevada or Utah, while the area is similar to the state of New Jersey. The country is ranked 29th on the Human Developmental Index and is devoutly Roman Catholic. One of the most interesting things that you most likely did not know about Slovenia is that it is ranked 50th in GDP per capita right behind South Korea and above New Zealand.

    Economically, the nation has developed quite significantly since the breakup of Yugoslavia. At its inception, in 1992, the nation’s GDP was at $13 billion. As of 2008, the GDP had risen all the way to $54.6 billion. The nation was always the most prosperous part of Yugoslavia, accounting for a fifth of the nation’s entire economy. The nation has developed into a modern economy that benefits from a high level of education and productive work force. The country has low levels of debt below $1 billion and has a high credit rating.

    The nation’s top industry is actually in financial services, where they operate 60% of their entire economy. Industry and construction accounts for 1/3 of the GDP, while agriculture is very low. The nation’s top industries are in metallurgy, aluminum reduction, lead and zinc smelting, electronics, and wood products. The nation has an abundance of lead and zine, as well as, uranium and silver. Additionally, the nation has begun a strong organic farming initiative in the Alpe-Adria bioregion.

    Slovenia has benefitted significantly from being oriented close the European Union, lying just below Austria and to the west of Italy. The nation has significant trade with those nations as well as Germany and France. Nearly two-thirds of all of Slovenia’s trade is with EU members. Therefore, the current state of the EU does threaten the stability of Slovenia as it highly dependent on its EU counterparts.

    The nation, though, continues to grow its GDP and still could increase its overall GDP significantly. It is only twenty years out of its Communist control, and it has only been a part of the EU for six years. While the nation may no longer be the emerging market it has been over the past twenty years, in which it increased its GDP by over 300%, Slovenia has taken a rough spill as of late due to the economic slowdown in the EU and since Slovenia has a strong export economy since internal demand is low due to low population.

    The nation has seen its stock market, the Ljubljana Stock Exchange (LJSE), drop over 20% in the past year. The nation has been battered among the recession, but at its low right now, it presents great opportunity. The nation still has great development to undergo, and it is beginning to be invited and joining some of the top economies in the world. Just this week, for example, Slovenia joined the Organization for Economic and Cooperation Development (OECD), which is an organization of 30+ members of the richest economies in the world. The OECD thinks that the Slovenian economy will grow by nearly 3% this year, and it will be able to recover with lower government spending and wages. The nation, itself, has only a 1.5% increase in GDP this year with a 2.5% in 2011.

    Slovenia also has developed trade with China. The nation, like most other developed nations, uses China for manufacturing a number of goods from telecommunications, real estate products, electronics, and many other manufacturing routes. The trade relations between the nation slowed during the crisis and declined, but recently, Chinese Economic Advisor to the Chinese Embassy in Slovenia commented that Slovenian trade has improved significantly.

    Finally, the nation is continually looking to diversify itself and build its economy. This is a nation that has kept deficits low and developed a very successful free market economy in less than twenty years. They are looking towards tourism, high-tech electronics, and more growth in other nations as the future. This is an economy that while having contracted in its Q1 of 2010 is poised for more growth.

    Investing in Slovenia is not as easy as one would hope. Right now is the perfect time to get involved in this nation that is obviously no longer the emerging market it once was, but it is a reemerging developed market that has long-term growth potential. One of the best ways is to invest in the iShares Austria Investable ETF (NYSEARCA:EWO), which is a broad range ETF with exposure to Austria, Czech Republic, Slovakia, and Slovenia.

    Another way to invest Slovenia is to invest in companies that are doing significant work in Slovenia. One company that is doing a lot of work in Slovenia through a subsidiary Lek is Novartis (NYSE:NVS). Lek is a pharmaceuticals development company and is one of the top companies in Slovenia. Another company doing significant work in Slovenia is Goodyear, who obtained Slovenia’s Sava Tires and operates now in the nation.

    Finally, if you have the ability, there is the Slovenian stock market - the LJSE or LJE. Getting involved at that level is actually the best way to get involved with this market. As the economy continues to grow, I suspect they will start some more ETFs directly for this nation, but for the time being, these are the best ways.

    Finally, since this is a World Cup series, Slovenia is going to be taking place in its second ever World Cup. They qualified in 2002 but lost their first three games and were eliminated. The nation did not qualify in 2006, but they did in 2010 by beating Russia and taking second in their region. They play their first game on June 13th against Algeria. Slovenia is actually in the same group with the USA, and they will play them on the 18th.


    Good Investing,

    David Ristau

    Jun 08 3:34 PM | Link | Comment!
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