Value Investing Ideas for June and 2011

by: David Ristau

At the end of December, The Oxen Group launched our Extended Value Portfolio that revolves around our EquityAnalytics platform of research, which prices companies, gives Buy/Sell/Hold ratings and compares companies within their own industry on value, profitability, financial health, management and growth. In today's update on our Extended Value Portfolio, we will be covering our performance so far, our changes in guidance and price targets in May, our current holdings, and some attractive positions that we believe look good in June and through the next twelve months.

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Since our Extended Value Portfolio's inception at the end of December, we have increased the portfolio by 12% with an average holding of 2-4 months and 10-12 holdings at a time. In March - May, we started to finally close positions. We closed in April and May: Baidu (NASDAQ:BIDU) for 40%, one-third of GameStop (NYSE:GME) for 30%, SunPower (SPWRA) for 72%, Jinko Solar (NYSE:JKS) for 20%, two-thirds of Changyou (NASDAQ:CYOU) for over 20% averaged, and one-third of Dean Foods (NYSE:DF) for a 44% gain.

Holdings we recommended in May to our members:

Dean Foods - Despite our significantly lower entry point below $9 back in December, we believe Dean Foods is still a very good value. We upped out PT in May from $13 to $17, and we think that the stock still has a lot of room to run despite is nearly 50% move in the past five months. The company has gotten back on track with their pricing and raised guidance in their last report that was above our expectations that priced the stock at $13. Dean Foods is a great comeback story in 2011 and continues to perform well in any market condition.

Changyou - The company, a Chinese online Internet video game producer, looks to have a lot of upside moving forward after its 2010 IPO, even after its latest move. On any major pullbacks, this stock represents a great buy. The company has one of the most popular online video game in China, and they are introducing a new line of games in 2011 that should continue to help the company grow market share. Additionally, the company should benefit from the growing Chinese Internet market that should quadruple in the next five years as the Internet comes to more areas in China. There are a lot of Chinese Internet gaming companies out right now, but Changyou represents the best combination of growth prospects with financial health and strong management along with value. We have a price target of $53.50 for Changyou.

Take-Two Interactive (NASDAQ:TTWO) - In 2010, TTWO was the first year that the company was profitable without a Grand Theft Auto release. The company has a very positive lineup of games coming out in 2011 (Duke Nukem and LA Noire), and it has shown that it can take its success in GTA and put it into other games like NBA2K11 and Red Dead Redemption, which were top sellers in 2010. The company has a low P/E ratio at 16, and they are a major takeover candidate. The company would get a major premium on its current price if bought out by an Electronic Arts (ERTS) or Activision Blizzard (NASDAQ:ATVI). With the recent successes and a bright future, this stock looks ready to continue higher. We have a price target of $24.

Tata Motors (NYSE:TTM) - Tata is one of our most touted recommendations. We believe this Indian company has a lot of upside potential with its dual threat of global sales after its reinvention of the Jaguar and Land Rover line as well as its growth in India. The company should benefit from global macro increases in automobile sales as well as growth in India. The company is well positioned in its own country, and they have a lot of upside after a rough several months for the Indian markets. We have a price target of $40.

The Warnaco Group (WRC) - In April, we released our Apparel Manufacturing EquityAnalytics. One of our top rated companies was WRC. The company has a tremendous lineup of underwear and swimwear apparel with CK underwear, Speedo, Olga's and more. The company is not tremendously impacted by cotton price increases, and we believe they have shed a lot of their brands that were not bringing in profits. A small pullback in the stock would warrant a nice Buy, however, earnings are this week. Look for the stock to go to $85.

G-III Apparel (NASDAQ:GIII) - Another one of our EquityAnalytics favorites was GIII. The company maintains a luxury designer portfolio of licensed clothing. They are an exceptional company, and we believe they should continue to prosper with retail looking to make a major comeback and luxury to lead the way. The company is less impacted by higher cotton as they can pass on costs to consumers. Look for the stock to go into the $60s.

Big Lots (NYSE:BIG) - After a "buyout" started to be rumored back in February and March, BIG stock shot up into the mid-40s. The company hired on Goldman Sachs (NYSE:GS), and things were setting up for a buyout. There has been little talk of it since, and the stock has dropped after the bids did not occur. We believe the company's fair value is around $52 before any buyout speculation. Even without a buyout, we like this company for fundamentals, growth, and their ability to develop in new markets. They are growing and have opened a lot of new stores in the last two years. CEO Steve Fishman has turned around the company with efficiency and a better supply chain.

Ruth's Hospitality Group (NASDAQ:RUTH) - Every long-term portfolio needs some small-cap coverage, and we like RUTH. This is a financially responsible and stable restaurant chain that focuses on private dining and fat checks. The company has had beef input prices hurting them, but they have shown some green shoots of growth in the last quarter. The company went to the mid-5s after a strong report prior to earnings, but it has given up all those gains. Look for them to have a strong 2011, and management is A-plus here. This could be a $10 stock in the next 12-24 months.

GT Solar (SOLR) - GT Solar is the only company to have moved to the upside in the last two months from the solar sector after some great earnings and a raise in guidance. We raised our original PT from $18 to $21 in May after the company's latest earnings. We believe GT may be moving into a very small of solar companies that we would want to hold or even trade in the short-term along with Trina Solar (NYSE:TSL), JA Solar (NASDAQ:JASO), and Renesola (NYSE:SOL). (NASDAQ:SOHU) - We believe that SOHU is currently the best investment in Chinese Internet web portal companies. It is a better option that Baidu and Sina (NASDAQ:SINA) given the companies better options with video and gaming connection with Changyou. Further, the stock represents the best value in the industry with a below 20 P/E, which is deeply undervalued compared to other internet stocks in China. The company has great financial health, balance sheet, and should continue to develop as the market continues to increase in China. We have a PT of $118.50.

Changes in Guidance and Price Targets in April

We initiated coverage on:

  • China DangDang (NYSE:DANG) - $25 PT, Hold Rating
  • Giant Interactive (NYSE:GA) - $10.50 PT, Hold Rating
  • Kongzhong (KONG) - $6.50 PT, Hold Rating
  • (NASDAQ:NTES) - $56 PT, Hold Rating
  • Perfect World (NASDAQ:PWRD) - $36.50 PT, Buy Rating
  • Shanda Games (NASDAQ:GAME) - $9.50 PT, Hold Rating
  • Shanda Interactive (NASDAQ:SNDA) - $55.50 PT, Hold Rating
  • Sina - $85 PT, Sell Rating
  • Sohu - $118.50 PT, Buy Rating
  • Youku (NYSE:YOKU) - $30.50 PT, Sell Rating We updated PTs and Ratings on:
  • GT Solar - Upped PT from $18 to $21, Maintained Buy
  • Gamestop - Upped PT from $29 to $31, Dropped Rating from Buy to Hold
  • Yingli Green (NYSE:YGE) - Reiterated PT at $4, Maintain Sell
  • Trina Solar - Dropped PT from $41 to $39, Maintain Buy
  • Canadian Solar (NASDAQ:CSIQ) - Maintain PT at $20, Upped Rating from Hold to Buy
  • Nordstrom (NYSE:JWN) - Upped PT from $45 to $50.50, Maintain Hold
  • Rosetta Stone (NYSE:RST) - Upped PT from $12 to $14, Maintain Hold
  • Dean Foods - Upped PT from $13 to $17.40, Maintain Buy
  • JA Solar - Maintain PT at $35, Maintain Buy
  • Warnaco (WRC) - Dropped PT from $82.50 to $80, Maintain Buy