The 2018 Article I'm Most Proud Of Writing

Dec. 03, 2018 1:15 PM ETHWKN, OMI7 Comments

Summary

  • The article I'm most proud of from 2018 is the article I wrote about Owens & Minor vs. Hawkins on February 5th.
  • In that article, I warned investors about the dangers of investing in Owens & Minor, and instead suggested that Hawkins was a better value.
  • Investors who heeded my warning would have been spared a dramatic loss of capital, and investors who purchased Hawkins would have done very well the past 9 months.
  • I've decided to sell my Hawkins position (mostly because of portfolio considerations), and this article will review what went right with these ideas.
  • The article also discusses acquisition cycles, demonstrates why I think debt-to-equity is a useful evaluation tool, and shares a couple of quick ways to assess management.

celebration winning stockSource: Pixabay

Introduction

Earlier this month I wrote an article that reviewed some of my biggest Seeking Alpha mistakes and what I had learned from them. This article will come from the opposite direction and review the article from 2018 of which I'm most proud. The article that holds this distinction is "Owens & Minor Inc. Is Cheap, But This Alternative Is A Better Value" and it was published back on February 5th, 2018. (That link should be un-paywalled, so everyone can read it.) The genesis of the article came after I read a bullish article from another SA author (one whom I admire) about Owens & Minor (OMI). OMI had sold off over -50% from its highs and it looked like a very good investment candidate for my style of investing, which focuses on beaten-down stocks that trade more than -30% off their highs. After taking a closer look and running OMI through my impairment tests, however, I found some warning signs that kept me from buying the stock. I decided to share those warning signs with other investors in that February article.

My general policy when writing bearish articles is to suggest some sort of alternative that is likely to perform better than the stock in question. Usually, that alternative investment takes the form of an ETF, but in the case of Owens and Minor, I thought that Hawkins (HWKN) had a better risk/reward profile. While Hawkins has a smaller market cap than OMI and is in a different sector, it was going through a similar acquisition cycle that OMI was going through at the time and Hawkins offered a respectable, and safe, dividend. Here is how the two investments have performed since the article was published compared to the S&P 500 index:

ChartHWKN Total Return Price data

ChartOMI data by YCharts

ChartHWKN data by YCharts

ChartOMI Debt to Equity Ratio (Quarterly) data by YCharts

ChartOMI Debt to Equity Ratio (Quarterly) data by YCharts

ChartHWKN Debt to Equity Ratio (Quarterly) data by YCharts

This article was written by

Cory Cramer profile picture
20.21K Followers
One-of-kind research using historical cycles to identify tops and bottoms

My analysis focuses on the cyclical nature of individual companies and of markets in general. I've developed a unique approach to estimating the fair value of cyclical stocks, and that approach allows me to more accurately buy near the bottom of the cycle.

My academic background is in political science and I hold a Bachelor's Degree and a Master's Degree in political theory from Iowa State University. I was awarded a Graduate Research Excellence Award in 2015 for my research on conservatism.

Disclosure: I am/we are long AAPL, MDR, BTI, TAP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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