The Dirt Cheap Value Portfolio: Patient Investors Are Destined To Double Their Money

by: Mark Krieger

With just three weeks left in the trading year, the Dow is now only about 6% from its 52 week high of 12,929 and a mere 15% shy of its all time intraday high of 14,093 set in October of 2007. In comparison, the "DCVP" stands now at $92.41, jettisoning a mind boggling 56% loss of value, since its October 2007 quote of $210.72. The good news is there is ample upside remaining (at least a double) when considering how far it has fallen. The bad news is, you have to be extremely patient.

A closer look at the components:

Safeway (NYSE:SWY): Good management, a solid dividend and a very reasonable valuation makes its holders feel warm and safe at night. Its October 2007 high of $31.50 is still a long way away, but very attainable. In the meantime, a change in the analyst ranks occurred when Standpoint Research didn't stand by its previous opinion and downgraded from a buy to a hold. Action: buy

Jet Blue Airways (NASDAQ:JBLU): Wow, just two weeks after saying that this one should be sold, it literally skyrockets nearly 50% topping the $5 mark- I earn the "fool of the month" award for that call. To say that the AMR chapter 11 filing really energized this sector is a understatement. as a consequence, look for some profit taking to hit and a selloff back down to the $4.25-$4.50 to transpire. Action: Buy on the profit taking dip.

Luby’s (NYSE:LUB): The company’s annual meeting is slated for Jan 20th and if next week’s first quarter earnings announcement doesn’t beat meager expectations (estimates of a 5 cent loss on sales of $76 million) you could just see some shareholder activism brew up with a possible "Gordon Gekko" moment occurring. Possible agitators could include Bandera Partners with a 9.18% stake, Dimensional Fund Advisors with 7.08% and Hodges Capital Management controlling a 6.71% ownership position. CEO Chris Pappas is the firm’s largest shareowner comprising of 4,640,457 shares (16.19%), but don’t expect him to raise a ruckus. Action: buy

Pep Boys (NYSE:PBY): The company beat earnings estimates when it reported it third quarter results, however its shares sagged, as apparently many who had bought the rumor were using the news as a selling opportunity. Action: Hold

Imperial Sugar (NASDAQ:IPSU): Don’t get me started on this one, because in a nutshell, the only word that comes to mind is disappointment. I was stopped out at $4.75 in my trading account, but still own shares in my retirement account. If the shares start to climb up after next week’s earnings results are issued (north of $5.50), I will buy them back. Action: Buy only if the shares pass above the $5.50 mark.

Winn-Dixie (NASDAQ:WINN): Just a few pennies above its all-time low of $5.07, makes this stock one of the most perplexing holdings I have ever encountered. I guess the good news is, the lower the price, the more susceptible it becomes as a takeover target in my convoluted world. One tidbit, value Investor Whitney Tilson, exited his WINN position, which could be construed as a capitulation event. Some could even construe Tilson’s move as a contrarian indicator, especially due to his very poor timing on his vey public NFLX short, because once he covered that short position, the shares promptly imploded 75%. Action: Hold

Steelcase (NYSE:SCS): Unfavorable news regarding last week’s Longbow downgrade (from buy to neutral) was somewhat offset by the fact that legendary value Investor Arnie Van Den Berg (century management) plucked another 2.1 million shares from sellers in the third quarter. Action: Sell

SuperValu Stores (NYSE:SVU): Is the grocer being setup for a super short squeeze? It might just be, as its shares shorted, as a percentage of float increased to 24.18% from 21.92% in the latest reporting period. Action: Hold

Dean Foods (NYSE:DF): The dairy producer's stock has been red hot as of late, and it might not be a bad idea contemplating jumping on the momentum train. After all, the holiday season is the time when dairy consumption reaches its peak levels. Action: Buy.

Yahoo (YHOO): It is pretty obvious the internet portal’s days are numbered in its present form. The only question is how much will the buyout price be at when! Action: Buy

Bottom line: One piece of advice that I don’t adopt nearly enough is, “don’t dwell on the past or future too much”, because that thought process robs you of the present. Enjoy the present, the run, the chase, the game, the journey or whatever you want to call it, because it really is a “present”, and one that you need not wait until December 25th to receive. Finally, I wish to thanks the readers for their interest all year long. Merry Christmas!

Disclosure: I am long DF, WINN, SWY, IPSU, SVU, JBLU, PBY, YHOO, LUB, SCS.

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