Price The Market Part 21
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Welcome to my journey of pricing the entire S&P500. Well, let's get on with it why don't we.
111. Supervalu Inc (NYSE: SVU) is marginally profitable on falling revenues. Tough business is tough business. That's why they've fallen from almost $50 to around $8. Ladies and gentlemen, welcome to the bargain bin. This is a solid buy below $7. Target: $8-$10. I don't see a lot of downside risk at present. This comes with a solid dividend yield to boot. I'm marking outperform in my CAPS portfolio simply based on price alone. I think that this is a turnaround story at these prices. Companies like this compared to the companies that produce goods that get stocked on their shelves only confirm my suspicions. If you deal with the actual end customer, expect lower margins. Travel and grocery stores are not as good as general shipping and food production. The further you can work your way up the supply chain, the better.
112. Smucker (NYSE: SJM) is one such example of being a little further up the supply chain. Pricey? I think so. I am thinking that they are topping near $80 and normally would actively downthumb them in my CAPS account. No, this does not mean that I don't like the company, it just means that I think that the stock has gotten ahead of its fundamentals. Target: $70-$80. Unfortunately, they already topped at $80 previously and as such, I think that was the opportune time to downthumb. I'll have to wait on this one to travel outside of my target range before taking any action.
113. Reynolds American (NYSE: RAI) is cresting new highs and I don't see much more upside from here. Usually at this point you'll see analysts step in and throw up price targets of over $50 but that's not happening. I'm not particularly sure why insiders are out there buying this company. Target: $36-$40. I expect this to be topping at present. I'm not comfortable betting either way at present. I'd like to see it leg higher to open up a short position, but the dividend is too strong for me to start shorting now.
114. Safeway (NYSE: SWY) looks to be somewhere between fairly valued and cheap. Target: $20-$25. Once you get past the razor thin margins of grocery stores, Safeway isn't that bad at present. Their price to book value and present earnings multiple leave me wondering why there are no insider buys. If they aren't buying, it always makes me wonder why I should. After all, they know more about the company than I do but they don't necessarily know how to value their own company. I hope that this gets over $25 so I can open a short position.
115. Sara Lee Corp (NYSE: SLE) is worth no more than $19.50. Seeing as how this is hovering just under $19, I'm delighted to downthumb this one. It's peaked about this high a few times earlier this year. Before that, it hasn't been this high since 2005 for a reason. I don't think that now is the time to buy, but the time to sell. Sara Lee is not a growth company but it is priced as if it is one. Thus, their present price suggests that this stalwart is transitioning into becoming a growth company. That's something I like to bet against.
Extra: FirstCity Financial Corporation (NASDAQ: FCFC) is worth $8-$12. A few investors of mine brought this to my attention due to their recognition of a rather substantial one time gain and I simply have very little experience valuing their assets. They are presently trading at around book value. I like to buy at a discount to book personally. Who knows what they own? One time gains aren't that appealing to me. I tend to price companies as a function of their present financial position and their future discounted cash flows. Considering how hard they got rocked back in 2009, I'm going to guess that there is a lot of systemic risk here. I'm trying to actively avoid as much of that as possible and as such I don't own it.
If you have any companies that you'd like me to price, email them to me at globalspeculation at gmail.com
Glen Bradford and his investors hold no positions in any of the companies mentioned.