Q3 2009 Earnings Call

October 28, 2009 8.30 am ET

As part of a great conversation in the comments over at The Sovereign Speculator, I prepared a list of short-sale candidates meeting the following criteria:

Total assets > 50 * tangible book
EBITDA(ttm) / EV yield less than 5%
Debt > 3 * market cap
Interest coverage ratio MRQ < 1.5

Q2 2009 Earnings Call

July 27, 2009; 8.30 am ET

By request, here is the latest update on the Phoenix list:

ACCO Brands Corp (ABD), American Axle & Manufacturing Holdings I (AXL), ArvinMeritor Inc (ARM), Belo Corp (BLC), Clear Channel Outdoor Holdings Inc (CCO), Crosstex Energy Inc (XTXI), Dana Holding Corp (DAN), Delta Petroleum Corp (DPTR), Developers Diversified Realty Corp (DDR), Eastman Kodak Co (EK), Emcore Corp (EMKR), EW Scripps Co (SSP), FCStone Group Inc (FCSX), Ferro Corp (FOE), First Industrial Realty Trust Inc (FR), Gannett Co Inc (GCI), Great Atlantic & Pacific Tea Co (GAP), Hercules Offshore Inc (HERO), ION Geophysical Corp (IO), iStar Financial Inc (SFI), Phoenix Cos Inc/The (PNX), Sunrise Senior Living Inc (SRZ), Technitrol Inc (TNL), Warren Resources Inc (WRES), YRC Worldwide Inc (YRCW) and Zale Corp (ZLC).

Q1 2009 Earnings Call

May 6, 2009 8:30 am ET

ACCO Brands Corporation (ABD)

Q4 2008 Earnings Call

Q3 2008 Earnings Call

November 5, 2008 8:30 am ET

Bullish Calls:

Emerson Electric (EMR) -- “The market is wrong. Emerson’s a better company than you’d think given the share price. Emerson is a buy.”

Q2 2008 Earnings Call

August 6, 2008 8:30 am ET

Bullish Calls

Disney (DIS) -- “I believe gas is dropping from $4.00 to $3.50. Americans will flock to Disney. Disney is ready to rock at $30. Buy 50% of your position now and 50% more on weakness.” 

Readers have suggested some additional tickers for me.  Here they are:

General Electric (GE), Mircosoft (MSFT), Bristol-Meyers Squibb Co. (BMY), Boeing (BA), American National Insurance Co. (ANAT), Kansas City LIfe Ins. Co. (KCLI), and Deere & Co. (DE).

Q1 2008 Earnings Call

May 7, 2008 8:30 am ET

ACCO Brands Corporation (ABD)

Q4 2007 Earnings Call

As I contemplate the coming year, I still expect very challenging times. I continue to be amazed with the depth and severity of the unraveling financial crisis, but I am even more astonished by how the pundits continue to keep expecting the issues to remain contained. In the beginning, it was just a sub-prime problem, and we saw several originators go belly up in Q1. Then, it was just a mortgage problem, and we saw Countrywide (CFC) get “bailed out”. Then, it was just a banking system problem, and we had capital infusions and money-fund rescues. Well, we are about to see what really happens to companies when credit contracts: Those who need it pay a lot for it or don’t get it. With that in mind, I spent some time searching for companies outside of the Financial sector that may be particularly vulnerable to tighter credit.

Using StockVal, I sorted through the entire universe of stocks for companies with certain characteristics: Lots of debt, little tangible equity, low return on capital, falling earnings estimates and potentially unsustainably high valuations. I spent some time looking at the list I generated and settled on the following 8 names (click all charts to enlarge):

The firm said it intends to continuously review the investment but said at this time they do not have any present plans or proposals that relate to or would result in any of the actions specified in clauses (a) through (j) of the instructions to Item 4 of Schedule 13D.

Breeden Capital, run by former SEC-chief Richard Breeden, recently targeted Applebee's (APPB), winning a board seat and pushing for a strategic review, which the company said has yielded several non-binding, preliminary proposals to acquire the company.

ABD markets its products through its own sales force and distribution networks in over 100 countries. Founded in 1903, the company spun-off from parent Fortune Brands, Inc. (FO) on August 16, 2005. It is now a constituent in our Clear Spin-Off Index [CLRSO] which is licensed for the EFT symbol (CSD).

Managing about 8,000 employees, ABD makes more than half of their sales to leading companies that include Office Depot Inc. (ODP), Staples Inc (SPLS), OfficeMax Inc. (OMX), Wal-Mart Stores Inc. (WMT), United Stationers (USTR) and Tech Data Corp. (TECD), among others.

Their product branches include workspace tools, document communication products, visual communication products, storage and organization products, computer accessories, time management tools, and digital print and document finishing. Some of the branded products in these branches include staplers, shredders, report covers, laminating machines, white boards, overhead projectors, filing systems, accounting supplies, keyboards, planners and calendars.

Right when they were spun-off the co merged with General Binding, a company in the same space. Acco management has a very good track record of cutting costs, and they are targeting a 12% operating margin on their $2 billion in sales.

The company has a fair amount of debt, with net debt at $830 million. However, they are by no means highly leveraged, and should be able to get down to an optimal debt level in the next two years. Management has been consistently cutting debt since the spin.

1. S&P 500 companies tend to be contained within index funds,
2. A spun-off company must be sold by the index fund,
3. Large cap funds will sell off small cap spin-offs
4. Little analyst coverage. Too small a market capitalization, too different from parent company's focus, no underwriting relationship, etc

Because of these biases against such companies, the tendency historically has been for them to trade down due to a lot of selling pressure from the large number of initial sellers and to ultimately find a reasonable valuation level.

Downgrades:

Top 100 Women Advisers by Suzanne McGee