Weekend Edition
The Best of The S&A Digest
August 11, 2007
Yet another reason not to invest in hedge funds... Bear Stearns' choice to liquidate its two failed hedge funds in the Cayman Islands, instead of New York, may limit investors' ability to recoup capital. Bear has a New York judge blocking all lawsuits against the funds until the end of its hearings.
This case could set precedent for other failed hedge funds to liquidate in the Caymans, where judges have a track record of siding with management. An estimated three out of four hedge funds are incorporated there.
Earlier this week, we opened our e-mail to find the greatest single "buy" signal we know of... Ferris is very, very excited about the most recent Extreme Value pick, which subscribers received yesterday evening...
"For the next issue of EVI, I'm recommending a company that:
- has a widely diversified client base – more than 90% of whom are repeat customers, year after year
- has nothing to do with commodities, housing, or mortgages
- has 33% free cash flow margins
- incurs tiny capital expenditures (about 4% of revenues)
- charges 30 times less than its competitors
- has 11% of its market cap in cash, and no debt
- bought back 7% of its shares over the last 12 months
- has 64% gross margins, 22%-25% operating margins, and 17% net margins
- has an enterprise value of about 13 times cash flow
- pays a 2.5% current yield
"And it's nearly identical to a stock I recommended in Extreme Value last year." (That stock is up 31% in 18 months, and has been hitting new highs while the rest of the market goes haywire.)
We're offering Extreme Value at a huge discount right now. You can judge for yourself if Dan's work is as good as we say it is. To learn more, click here.
"Republican presidential hopeful Mitt Romney on Wednesday defended his five sons' decision not to enlist in the military. [He] said his sons were showing their support for the country by 'helping me get elected.'" – Associated Press.
There may be nothing more humiliating than running for president. It's humiliating just watching.
Our old friend Rick Rule has learned a thing or two about investing, having prospered in the resource markets for nearly 40 years. Bear markets teach you things you can't learn any other way. "My experience has been that people who don't care about fundamentals end up very poor... Some folks prefer a lack of fundamentals, perhaps excusing themselves from the onerous responsibilities associated with thinking, while others have different techniques. I'm delighted that other people regard companies that I regard favorably in a less positive light; that increases the probability that I will be able to buy more at advantageous prices. Similarly, in a bull market, I've often been able to offload my mistakes at a profit to those uninterested in fundamentals... It takes all kinds."
With Rick's comments in mind, I asked our analysts to examine all the stocks they follow and suggest a name or two with excellent fundamentals and a price they consider to be outrageously cheap. The following list contains recommendations from across all of our publications. If you want to know more about any of these companies, please see the individual letters. While these stocks might not all have reached a bottom (no one can accurately predict a market bottom), some of our very best ideas are trading, on average, for 15% below their 52-week highs.
Safe Stocks |
Symb |
Publication |
Cash Flow |
Yield |
% From High |
Verizon |
VZ |
|
6.15x |
3.8% |
-6.2% |
Duke |
DUK |
PSIA |
7.45x |
4.5% |
-0.9% |
Xcel |
XEL |
|
7.58x |
4.4% |
-17.2% |
Westwood |
WON |
|
8.63x |
2.0% |
-55.3% |
J&J |
JNJ |
PSIA |
10.7x |
2.7% |
-12.4% |
Mittal |
MT |
Intl. Strategist |
6.5x |
1.7% |
-14.8% |
Progenics |
PGNX |
|
n/a |
n/a |
-17.6% |
Novartis |
NVS |
|
11.53x |
1.7% |
-11.7% |
Quest Cap |
QCC |
|
10.5x |
3.6% |
-21.4% |
Celera |
CRA |
|
n/a |
n/a |
-17.8% |
Home Dep |
HD |
|
7.29x |
2.4% |
-14.9% |
Park Elec. |
PKE |
|
8.39x |
1.1% |
-1.1% |
Average |
8.25 |
3.0% |
-15.9% |
|
Regards,
Porter Stansberry
