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  • Punting For Value: The Best Plays In The Field 0 comments
    Oct 30, 2012 10:22 AM | about stocks: TPX, LEG, XOXO, GLW, CXW

    During uncertain times and periods of volatility, macro noise and headlines dominate the news-flow and crowd out stock-specific analysis. Here are some brief but meaningful write-ups of opportunistic value that may be lucrative for those who dig deeper.

    As legendary value investor Seth Klarman reminds us, we should always seek marginal safety.

    Tempurdic (TPX): This stock fell out of bed in the second quarter after announcing sagging sales. Lately price action has been rather dormant, and at these levels I believe there is a lot of support with very little resistance. The specialty market is growing and with the tailwinds provided by the housing recover, this is an excellent sleep-at-night investment. For investors looking for more bounce, consider related bedding supplier Legget & Platt (LEG) which is a real coiled spring, at a more plush multiple.

    XO Group (XOXO): Formerly, The Knot, this company is one of the big beneficiaries of the recent gay marriage legislations- a real secular shift. As discerning value investors, we should not fall in love with our investments, this is certainly a trade-up from the average web business. This kind of investment is best suited for those who have along term view who can withstand the expected ups and downs. The bear thesis is that management is venturing into new high risk propositions but this is divorced from reality, and the CEO is simply keeping things interesting.

    Corning (GLW): Corning is the 800lb gorilla in the specialty glass market and the stock has recently cracked. I am pounding the table on this one. The basic thesis is bullet-proof: Corning has technological know-how and intellectual property, a growing addressable market of tablets and smart-phones, transparent management and a single-digit earnings multiple. The stock is optically cheap and will screen up easily, and this clear-cut opportunity is unlikely to last long. The CEO is no ape, and owns a large number of shares, ensuring excellent alignment.

    Corrections Corp of America (CXW): This is by far the highest conviction position have I have looked at. The company provides services and lodging to a rather captive market, and has pricing power arising from something of a prisoner's dilemma dynamic and locked-in contracts. While management has kept costs from escaping out of control, activist investors have recently proposed structural repositioning and reform, and have filed 13Ds. While these investors are locked up, common shareholders can ride on their backs, knowing that management has served minority interests well. Despite rigid price bars and recent whipsawing, this stock looks poised for a break-out.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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