The Rest of the Moneyball 2012 Dream Team
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Billy Beane, GM of the Oakland Athletics, built up a team of undervalued players on the cheap into a force of nature and leveraged them into an historic 20 game winning streak changing pro baseball forever. With the help of Paul DePodesta (Peter Brand in the movie ‘Moneyball’), a recent Harvard economics graduate, Beane found players who could consistently get on base and win games. Beane and DePodesta didn't scout out players with the usual stats or starpower. The strategy was no theatrics, no stealing bases, no bunts...just get on base.
Although the movie came out in 2011 and the book by Michael Lewis years before, a Moneyball portfolio can still be amassed for 2012. In my first Moneyball portfolio piece, the criteria was market cap over $5 billion, PEGs as close to 1.0 as possible, not trading at 52 week highs or lows, offering yield and lastly, the confidence of a CEO who holds shares--the bigger the better. My first five picks were BlackRock, United Technologies, Coach, Family Dollar and Las Vegas Sands.
The Rest of The Dream Team
The rest of the roster is as follows: Starbucks, Apple, Union Pacific and Hillenbrand (for which I made an exception to the $5 billion market cap rule). A food service, tech manufacturer/retailer, railroad and an industrial/funeral products company, respectively.
First up is Hillenbrand Inc (NYSE: HI), not a well known name, a global industrial diversified company better known for its Batesville Casket division and Options divisions, which sell funeral products and services to funeral directors. In 2010 the company acquired K-Tron International which made them an industrial services company specializing in pneumatic conveyors, size reduction, handlers, screeners, crushers, and feeders. Note, none of the industrial division has anything to do with the funeral division. No Soylent Green here. Hillenbrand has a 4.10% yield and a .88 PEG. Although the market cap is the smallest of the dream team I made an exception because this one is intriguing. Of course, the death business isn’t going away and, like some of the undervalued players in Moneyball, this is one that isn’t a popular superstar. It just reported on August 2 and beat on both top and bottom lines. CEO Kenneth Camp owns 415,170 shares and institutions hold 73.10% of shares.
Next is Apple, Inc (NASDAQ: AAPL), and I was pleasantly surprised to find that Apple could fit on the dream team. It has a recently instituted yield of 1.70% with plenty of cash to raise it in the future, a PEG of .83 and is still trading below its 52 week high of $644.00. It has no debt and operating cash flow of $52.15 billion. Over 1,900 institutions hold shares and while Tim Cook has not been CEO long, he holds 13,817 shares; but remember Steve Jobs, RIP, held billions of dollars worth of Apple shares. I am almost loath to mention Apple as I love holding it in my portfolio and feel like the portfolio is undressed without it.
Apple is coming up on its best selling quarters of the year, back to school and Christmas, not to mention the much anticipated iPhone 5 launch and the mini iPad and fingers crossed, a new Apple TV.
Then there’s Union Pacific Corporation (NYSE: UNP) which has a yield of 1.90% and a PEG of 1.01. It’s trading below its 52 week high of $126.91. Despite concern over lowered demand for coal, Warren Buffett has been particularly upbeat about the railroads, and why not? As oil prices rise it’s cheaper for products to ‘ride the rails?’ Plus, Union Pacific is the biggest railroad in North America with 32,000 miles of track. CEO John Koraleski holds 104,131 shares. Institutions hold 82.90% of shares and the short float is only 1.10%.
All the railroads have been on fire and almost any one of the railroads would have worked on the dream team. Union Pacific is up 30% over the last year, almost twice as much as the S&P. The company reported on July 19 and beat on EPS and was in line with revenue expectations and gross margin at 45%.
Finally, a surprising name to me after screening was java giant Starbucks Corporation (NASDAQ: SBUX), but founder and CEO Howard Schultz owns 17,620,456 shares. Now, that’s conviction! Starbucks has a 1.60% yield, a PEG of 1.34 and is trading well below its 52 week high of $62.00. The company operates or licenses over 17,000 locations in the US and internationally as well as licensing its products for sale through grocery stores and foodservice accounts. Despite amazing growth since its founding in 1971, the company continues to expand its product line with teas, juices and baked products.
Despite the recent sell-off after earnings (Europe problems again...yawn) it is still an institutional favorite; 78.10% of shares are held by them. 786 institutions hold Starbucks. The stock is still up 18.61% over the last year.
Extra Innings
So with the Moneyball Portfolio, you have nine names (or players), all great names, mostly well known names but not at their highs. All have yields, some more than others and diversified into nine sectors. And most important of all, their CEO’s hold significant portions of shares showing conviction and commitment. I think every single one of these can consistently get on base, giving you time to sit back and enjoy the ball game. Batter Up!!
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Hillenbrand, and Starbucks. Motley Fool newsletter services recommend Apple, Hillenbrand, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
