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Quotes delayed at least 20 minutes. To track performance in Jubak's Picks fairly, the "Price Then" displayed is the closing price on the date each add/drop was made. Until we have a closing price on the first day of the pick, we display the previous day's close as a placeholder.
| Company |
Symbol |
Date
Picked |
Price
Then |
Price
Now |
Today's
Change |
Jubak's
Gain/Loss |
| Pepsico Inc |
PEP |
04/21/09 |
$49.35000 |
$56.35 |
-$0.17 |
14.18% |
You have to go back to 2004 to find shares of PepsiCo (PEP) trading as low as the $50 range. Even though 2008 earnings were below those for 2006 and 2007, earnings have grown 20% since then, so with an economic turnaround looming in 2010, these shares look very, very reasonably priced now. (It doesn't hurt that the shares pay a 3.3% dividend while investors wait for the economy.) PepsiCo's management isn't waiting passively for the turnaround, however. On April 20, the company launched a bid for the part of its two biggest North American bottlers, Pepsi Bottling Group and PepsiAmericas, that it doesn't already own. The offer values the companies at a 17% premium to their recent depressed bear market stock price. The deal would partly reverse the move in the 1980s by PepsiCo and Coca Cola to spin off bottling assets. That bit of financial engineering had the effect of increasing return on capital at the parent companies as they moved asset-heavy, lower-margin businesses off their balance sheets. This new deal is prompted by PepsiCo's desire to gain more control of its distribution system so that it can, on the soft-drink side, achieve the efficiencies it enjoys in its Frito-Lay snack business. Gaining control of distribution would also give PepsiCo an ability to experiment with new and niche products that the bottlers have sometimes been reluctant to support due to their low initial volumes. I'm adding these shares to Jubak's Picks with a target price of $57 a share by December 2009.
|
| WR Berkley Capital 6.750% Trust Originated Pref Shs 26/07/20 |
WRB-A |
02/13/09 |
$20.04000 |
$22.50 |
unch |
12.28% |
I'm buying Berkley Preferred A (WRB-A) for the yield -- 8.85% as of Feb. 11 -- but I wouldn't be adding them to Jubak's Picks if I didn't like the way the company is navigating the financial crisis. On Feb. 9, Berkley reported what were, on the surface, stinky numbers for the company's fourth quarter. Net operating earnings, excluding one-time items, came in at 62 cents a share, 16 cents a share worse than Wall Street had expected. Revenue dropped 23% from the fourth quarter of 2007. Those nonrecurring items weren't pretty either: The company wrote down $108 million in investment losses. But those results aren't nearly as smelly as they look; in fact, they're downright super. A realized loss of $108 million on invested assets of $12.5 billion in this market is evidence of very solid risk management. (The company had estimated that unrealized investment losses stood at $152 million at the end of 2008.) The fall in revenue is actually great news, too, because it shows that at a time when premiums are low, the insurer is cutting back its underwriting. From Berkley's past history, investors can be reasonably sure that's because the company is focused on writing only profitable policies. The company's combined ratio, a measure of profits for insurance companies, was 92% in the quarter. That's not as good as the 88% the company was showing not so long ago, but it's still good in this economy. (The combined ratio adds up expenses and losses, then divides that sum by the revenues from premiums. If the combined ratio is above 100% it means the company is paying out more than it's taking in. If it's below 100%, the company is making money, so a ratio of 92% is profitable but less so than a ratio of 88%.) The best news on profitability, however, came in the company's conference call when it told Wall Street that it anticipates 'substantial' underwriting profitability in 2009 and that prices will improve by the end of year. At a closing price of $18.68 on Feb. 11, investors were buying the preferred shares about 25% below their 52-week high of $24.87. With a current yield of 8.85%, that kind of gain would push the potential total return from these shares to about 25%. Please note that many brokerage companies don't use the MSN Money ticker for this stock. For example, Fidelity's online brokerage uses WRB/PA. After this buy and the sell below, Jubak's Picks will be 49% in cash as of Feb. 12. I'm adding these shares to Jubak's Picks with a target price of $22 a share by December 2009. (Full disclosure: I own shares of W.R. Berkley Preferred A in my personal portfolio. I will be buying more shares three days after this column is posted. As per the rules of Jubak's Picks, I will not sell this position until three days after I've posted a 'sell' in this column.)
|
| McDonald's Corp |
MCD |
01/13/09 |
$59.32000 |
$57.45 |
-$0.77 |
-3.15% |
On Jan. 26 McDonald's (MCD) reported fourth-quarter 2008 earnings of 87 cents a share, 4 cents a share above the Wall Street consensus but down from the 97 cents a share it had reported in the third quarter. Revenue fell 3.3% from the fourth quarter of 2008. Most importantly for investors looking for growth in a slowing economy, the company reported that same-store sales had climbed a solid 4% in the United States, a very impressive 7.6% in Europe and 10% in the Asia, Pacific, Middle East and Africa division. A stronger dollar hurt earnings by about 7 cents a share, the company said in a conference call. Looking ahead, the company said it felt confident enough in its business to say it would invest $2.1 billion to continue to update existing restaurants and to open 1,000 more. At the Jan. 26 closing price of $57.93 a share, the stock showed a yield of 3.5%. As of Jan. 27, I'm tweaking my target price to $72 a share, up from a prior $70 a share, by December 2009.
|
| Exxon Mobil Corp |
XOM |
12/23/08 |
$75.10000 |
$68.49 |
-$2.07 |
-8.80% |
What terrible results! On Jan. 30, Exxon Mobil (XOM) reported fourth-quarter 2008 earnings of just $7.8 billion, a drop of 33% from the fourth quarter of 2007. Revenue dropped 27.4%, and production fell 3% from the fourth quarter of 2007. As a result, Exxon Mobil merely recorded record profits -- excluding one-time gains -- of $44 billion for 2008. Most importantly, cash flow from operations totaled $10.4 billion in the first quarter and $60 billion for 2008 as a whole. Why do I call cash flow 'most important'? Because at a time when many midsize and smaller oil companies are struggling to find the capital to explore their leaseholds and to develop production, Exxon Mobil is loaded with cash to expand everything from its U.S. refinery operations to its international network to ship liquefied natural gas. That cash flow makes Exxon Mobil a hungry buyer in a buyer's market. According to calculations from Tudor Pickering, Holt & Co., a Texas investment bank with a specialization in energy industries, North American oil and gas stocks are now selling at prices that assume oil prices of $52 a barrel forever. During the energy boom, Exxon Mobil declined to commit its cash to chasing opportunities, arguing that prices were at a peak and would come down in the future. Well, it looks like the future is here. As of Feb. 3, I'm keeping my target price for Exxon Mobil at $91 a share by December 2009. (Full disclosure: I own shares of Exxon Mobil in my personal portfolio.)
|
| Energy Transfer Partners LP |
ETP |
11/11/08 |
$35.75000 |
$40.46 |
-$0.39 |
13.17% |
This company owns and operates 14,000 miles of intrastate natural-gas pipelines, 2,500 miles of interstate natural-gas pipelines, three gas-processing plants, 14 gas-treatment facilities and three gas-storage facilities. Natural-gas pipeline and storage companies make their money from volume, so a sagging U.S. economy will cut into Energy Transfer Partners (ETP) revenue from existing pipelines. But the company's new pipelines -- the recently acquired Transwestern Pipeline and the new Cleburne and Mid-Continent Express pipelines -- should more than make up for the shortfall. (The company has also recently expanded its propane business by purchasing nine small propane companies. Energy Transfer now has 1 million propane customers.) The master limited partnership units have dropped 35% from their January highs. That's brought the dividend yield up to 9.33% as of Nov. 10. In reporting its third-quarter results, the company said it had sufficient cash flow to raise its dividend but would not do so at this time in order to preserve liquidity in uncertain times. The company last raised its distribution in August. In my opinion, Energy Transfer Partners is a good way to get paid a high yield while you wait for a recovery in the energy sector in particular and the economy in general. As of Nov. 11, I'm adding it to Jubak's Picks with a December 2009 target price of $42 a share. (Full disclosure: I will buy Energy Transfer Partners for my personal portfolio three days after this column is posted.)
|
| ONEOK PARTNERS LP |
OKS |
10/07/08 |
$41.71000 |
$46.00 |
-$0.02 |
10.29% |
When you're analyzing a master limited partnership, it's distributable cash flow rather than earnings that count. In fourth-quarter results announced Feb. 23, Oneok Partners (OKS) reported cash flow that was available to be passed on to unit holders of 96 cents a unit. That was down from $1.25 in the fourth quarter of 2007. In its forecast, the company projected that distributable cash flow would fall 14% to 23% in 2009 from 2008 levels. And there's the problem: Investors buy master limited partnerships for income, and they're likely to jump ship if the partnership has to cut distributions. Fortunately, Oneok has a good degree of wiggle room before it has to cut distributions. In 2008, distributable cash flow came to $6.17 a unit, and the company paid out just $4.26 in dividends. If 2009 isn't much worse than the company now projects, Oneok will see distributable cash flow of about $4.33 a unit, which should be enough to keep dividends about where they are now. That should reassure investors shellshocked by falling dividends across the market, even if it disappoints those who were looking for the partnership to grow dividends at something like its recent rate of 7% a year or better. The dividend also doesn't seem to be severely threatened by the company's capital spending plans. Several of Oneok's big projects were commissioned during the year, including the Overland Pass Pipeline connecting the Rockies and the Mid-Continent Pipeline, the Guardian Pipeline extension and the Midwestern Gas Transmission extension. With $130 million available under its revolving credit facility and $180 million in cash, the company believes that it will be able to fund its capital program well into 2009 without raising more capital. As of Feb. 27, I'm lowering my target price to $47 a unit by December 2009 to reflect the slowdown in revenue in 2009. (Full disclosure: I own shares of Oneok in my personal portfolio.)
|
| Transocean Inc |
RIG |
8/1/08 |
$137.61000 |
$70.74 |
-$2.73 |
-48.59% |
In its Feb. 17 earnings report Transocean (RIG) confirmed that 2009 would be as grim as many investors had feared. Though the company missed Wall Street's fourth-quarter-earnings estimate of $3.70 a share by just a penny and actually reported revenue growth of 53% from the fourth quarter of 2007, management told investors that they'd have to wait for 2010 to see earnings growth resume. Earnings will fall in 2009 as more Transocean rigs join the three jack-up rigs and two midwater floaters now idled. Fortunately, that's not much of a surprise to Wall Street analysts who had already lowered their growth estimates for the company to just 2.2% in 2009. In the fourth quarter, one Transocean customer, Oilexco, went bust, and Transocean wound up writing off $17 million in bad debt, so I think it's reasonable to be worried about 2009 -- but not too worried. Transocean's order backlog did drop by $300 million as credit-challenged customers pulled back, but the company notes that only 6% of its now $38.7 billion backlog represents customers with noninvestment-grade credit ratings. The last time I valued the company, on Jan. 13, I wrote: 'Transocean confronts us with the classic value investor's dilemma: Its stock is now selling for far below its fundamental value, but it may be quite a long time before the stock's price recognizes that value. For example, the book value -- that's the value of the stuff like deep-water drilling rigs that Transocean owns at the price the company paid for them -- is $46.91 per share. That's not so far below the stock market price of $50.53 on Jan 12. Book value underestimates the value of assets, such as drilling rigs, that have climbed in value since they were first purchased. The replacement value -- what it would cost to duplicate Transocean's biggest-in-the-industry fleet of deep-water rigs today -- comes to $123.97 a share. So at $50 a share, an investor is getting about $2.50 a share in assets for $1. When will the stock's price recognize that value? I'd guess 2010 and later.' The company clearly believes its stock is a bargain now. On Feb. 17, it announced that it will ask shareholder approval to buy back $3 billion of its own stock. As of Feb. 20, I'm setting a target price of $74 a share by December 2009. That's up from my prior target of $70 a share. (Full disclosure: I own shares of Transocean in my personal portfolio.)
|
| Middleby Corp |
MIDD |
5/20/08 |
$57.41000 |
$43.87 |
-$1.08 |
-23.58% |
Middleby (MIDD) is closing in on my December target price of $66 a share. Here's what I do when that happens: 1. I check to see whether anything has changed at the company since I last set that target price. 2. If nothing has changed for the positive, I sell at the target. If you do this review and find something has changed for the negative, then sell without waiting for the target. 3. If something has changed for the positive, I incorporate the good news into my calculations and see where that leaves me for a new target price. If the new prices would give me an acceptable potential return for holding the stock, that's what I do. If the target price is up but the gain is piddling, the stock is still a sell. In the case of Middleby, the company has just kept chugging along with its strategy of buying smaller competitors in order to break into additional market segments or increase its clout in its existing businesses. The company should have solid product lines but show inflated costs that it can reduce by applying its buying power or larger sales force. Since the May update, Middleby has acquired TurboChef Technologies, a smaller maker of high-speed cooking equipment used in locations such as convenience stores. This is a market segment where Middleby didn't have a presence. Three customers – Starbucks, Dunkin' Donuts and Subway -- make up about 50% of TurboChef's sales. Middleby plans to get at least $23 million in cost savings. This deal won't add anything to earnings until the third quarter of 2009, but it is an indication that Middleby is sticking to its core strategy even in a tough economy. The company's existing businesses aren't doing badly either. KFC is introducing new low-fat grilled chicken products that depend on Middleby's convection ovens, and the war between Domino's Pizza and Yum Brands' Pizza Hut over guaranteed fast delivery is being fought with Middleby equipment. Only about 10% of Middleby's sales come from the casual-dining restaurant segment that has been hit hard by the U.S. economic slowdown. The rest comes from fast-food or quick-serve food outlets, where growth has held its own. The third piece of positive news for Middleby comes from a slowdown -- and perhaps even a decline -- in steel prices. Depending on which steel market you watch, the price of steel, Middleby's key raw material, is holding flat or declining. Either would be good news for the company, which has been fighting soaring steel prices. These three bits of positive news for Middleby are enough to lead me to increase my target price, as of Sept. 23, for Middleby to $75 a share by October 2009 from my prior target of $66 by December 2008. (Full disclosure: I own shares of Middleby in my personal portfolio.)
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| Kinross Gold Corp |
KGC |
4/4/08 |
$23.36000 |
$18.94 |
-$0.44 |
-18.92% |
On Feb. 18, Kinross Gold (KGC) reported fourth-quarter earnings of 9 cents a share, excluding one-time items. That was 3 cents a share below the Wall Street consensus. Revenue climbed 72% from the fourth quarter of 2007 but at $484 million still came in below expectations of $506 million. The total cash cost of production fell to $375 an ounce, a drop of 11% from the fourth quarter of 2007. The results disappointed investors who had expected better earnings at a time when gold was pushing $1,000 an ounce. I think 2009 looks better on increased production. The company has told investors to expect 2009 production of 2.4 million to 2.5 million ounces of gold, up from 1.8 million last year. Proven and probable reserves fell slightly, to 45.6 million ounces from 46.6 million a year earlier. The drop came from a decrease in estimated reserves at the Cerro Casale project in Chile. I expect that buying from investors looking for a haven in the global financial turmoil will lift gold in 2009 as a whole. In the first half of the year, though, I expect that some profit taking at the $1,000-an-ounce level, and a continued U.S. dollar rally will limit gold's upward movement. I'd look for gold to retreat further in March and April before adding to positions in the metal or in gold mining stocks, even though Kinross Gold has already fallen back substantially on the disappointment surrounding fourth-quarter earnings. Looking at the year as a whole, however, as of March 3, I'm raising my target price on Kinross Gold to $21 a share by December 2009 from the previous target of $19.75 by June 2009. (Full disclosure: I own shares of Kinross in my personal portfolio.)
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| Enbridge Inc |
ENB |
12/18/07 |
$38.41900 |
$34.67 |
-$0.37 |
-9.76% |
Enbridge (ENB) has held up well during the bear market. The total return -- price gains of 4.56% and dividend payments of $1.32 a share since my December 2007 buy -- comes to 8.4%. Some of that is the result of the stock's dividend, about 3.1% as of Sept. 22. But more, I think, is related to on-track progress in the company's new pipeline and wind-power projects. As these projects go into service, they go from being a drain to being a contributor to Enbridge's bottom line. For example, the Waupisoo Pipeline, to bring oil from the Alberta oil sands to Edmonton, went into service in the second quarter, a month ahead of schedule. The company's Ontario Wind Project is on track for completion later this year. The Alberta Clipper project remains on schedule for 2010. It has also helped the stock that the company has been able to raise $1.4 billion from its sale of a 25% interest in Spanish pipeline company Compania Logistica de Hidrocarburos. That's capital that Enbridge doesn't have to raise in today's volatile financial markets. As of Sept. 23, I'm increasing my target price for shares of Enbridge to $48 a share by February 2009 from my prior target of $46 by December 2008. (Full disclosure: I own shares of Enbridge in my personal portfolio.)
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| Fortescue Metals Group Ltd |
FSUMF |
12/19/07 |
$5.25000 |
$2.82 |
-$0.19 |
-46.29% |
Fortescue Metals Group (FSUMF) has canceled a $325 million sale of shares to institutional investors. And that's good news. The company, Australia's third-largest iron ore miner, decided it didn't need the cash after receiving $360 million as part of a deal that would give Chinese steel maker Hunan Valin Iron and Steel Group an additional 16.5% stake in the company. The deal is especially attractive to Fortescue because it gives the company the capital it needs to expand production -- and gives the company a customer for some of that expanded production. The company is aiming at production of 38 million metric tons for 2009 and then plans to expand to an annual production rate of 55 million in the first half of 2010. Fortescue will ship 1 million metric tons of ore to Hunan Valin in 2009 and 4 million in 2010 and later. Hunan Valin will pay benchmark world rates for this ore. Benchmark rates are set during annual negotiations between the big three iron ore producers -- BHP Billiton, Rio Tinto and Vale -- and leading steel producers in China and Japan. This year's negotiations are likely to be completed in March. When I updated this stock in December, I wrote, 'This stock remains what it has been since I added it to Jubak's Picks last November (2007) -- a highly risky bet with a very high potential return.' That's still exactly true. The upside on this stock is still, I calculate, $5 a share by December 2009. The downside is $0. If the company runs out of money, it will still have significant physical assets in its mines and shipping infrastructure, but equity owners are unlikely to see much of anything if the company has to seek bankruptcy protection. You shouldn't have money invested here that will cause real hardship for you if you lose it all. With that caveat, as of Feb. 27, I'm keeping my target price at $5 a share by December 2009. (Full disclosure: I own shares of Fortescue in my personal portfolio.)
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| Plum Creek Timber Co Inc |
PCL |
02/06/09 |
$33.30000 |
$28.91 |
-$1.45 |
-13.18% |
I was ridiculously early in buying Plum Creek Timber (PCL) on Nov. 16, 2007, for the prime development land the company owns. After all, the housing market has continued to tank, and any recovery keeps getting pushed back. The 5.3% dividend yield I collect on the shares has limited the loss, but a smaller loss -- 24% instead of 28%, as of Feb. 4 -- is still a loss. The company's Feb. 2 report of fourth-quarter earnings looks like it might have created a bottom near $31 a share. Plum Creek beat by 9 cents a share on earnings and revenue, even though revenue fell 8.5% from the fourth quarter of 2007. Looking ahead, Plum Creek has projected earnings of $1.36 to $1.63 a share for 2009. That would be an improvement on the $1.35 the company earned in 2008 and would be considerably above the $1.04 Wall Street consensus. The company's big costs for severance as it reduces its work force and its gains from the early retirement of debt make comparing company forecasts with Wall Street analyst projections extremely difficult. Standard & Poor's calculates operating earnings of $1.37 a share in 2007 and $1.30 a share in 2008, and it projects $1.50 a share for 2009. I think investors can consider the current dividend rate of $1.68 a share as safe. As of Feb. 6, 2009, I'm cutting my target price on these shares on the extended weakness in the housing market to $44 a share by December 2009 from my prior target of $53 by December 2008. (Full disclosure: I own shares of Plum Creek Timber in my personal account.)
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| Rayonier Inc |
RYN |
11/9/07 |
$46.02000 |
$34.31 |
-$1.94 |
-25.45% |
On Jan. 27, Rayonier (RYN) reported fourth-quarter earnings of 53 cents a share, 5 cents a share above the Wall Street consensus. Revenue climbed 26% from the fourth quarter of 2007 and beat the consensus estimate of $337 million by about $17 million, or 5%. The better-than-expected results didn't come from any big improvement in the company's business but from a one-time sale of 29,000 acres of nonstrategic timberland. Most importantly for investors who are holding these shares for their hefty $2-a-share dividend, cash flow is more than adequate to cover distributions. Cash available for distribution came to $210 million for the year, and dividend distribution came to $157 million. During the year, the company was also able to upgrade its portfolio of timberland by acquiring 110,000 acres in Washington and New York states and selling 50,000 nonstrategic acres at what the company called 'favorable prices.' Looking ahead, though, the company was pessimistic about 2009. Due to a weak economy and an even weaker housing market, revenue and earnings are expected to be below 2008 levels in the company's three major divisions: real estate, timber and performance fibers. Standard & Poor's estimates sales will fall 2% this year. So far in this downturn, Rayonier has been able to avoid panic sales into the very weak real-estate market of its most valuable development land. A strong balance sheet argues that the company will be able to avoid fire sales in 2009 as well. Rayonier has just $122 million in debt coming due in 2009 (on Dec. 31), and the company, besides remaining profitable, still has $144 million on its revolving credit line. Right now it looks like the company will be able to hold on to its most valuable assets through the downturn. As of Feb. 17, in recognition of the depth and ferocity of this recession, I'm cutting my target price on Rayonier to $36 a share by December 2009 from my previous target of $55 by November 2008. As of Feb. 17, the shares paid a yield of 6.8%. (Full disclosure: I own shares of Rayonier in my personal portfolio.)
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| Thompson Creek Metals Co Inc |
TC |
06/26/07 |
$15.47080 |
$10.36 |
-$0.02 |
-33.04% |
Wait 'til next year. On Feb. 18, Thompson Creek Metals (TC) announced lower production goals that amount to the company saying 2009 is a lost cause. The company said it would cut production in 2009 to 20 million to 24 million pounds of molybdenum. That's a huge step down from previous plans for production of 32.5 million to 34 million pounds. But that's what you do when molybdenum prices have fallen to $9 a pound on the spot market from $32 a pound under long-term contracts that are now resetting. And it's what you can do if you're a company like Thompson Creek, which had $271 million in cash Feb. 9 and just $17 million in debt. Because of its financial strength, Thompson Creek can afford to wait for the price of molybdenum to climb whenever global steel demand recovers, rather than rush molybdenum onto the market at any price to cover its debt. The company's cash balance is also enough to cover capital maintenance and expansion plans totaling $60 million in 2009. Thompson Creek isn't the only -- or even the biggest -- molybdenum producer to take the commodity off the market. Freeport McMoRan Copper & Gold, a copper and gold miner that also happens to be the world's biggest producer of molybdenum, has announced production cuts of about 10 million pounds for 2009. Together, the two companies have announced cuts equal to about 5% of global production. That should help stabilize molybdenum prices, although it will take an increase in global steel demand to push prices significantly higher than current levels. I'm not looking for that rise in steel demand until 2010. As of Feb. 20, I'm reducing my target price to $7 a share from the prior $9 a share by December 2009. (Full disclosure: I own shares of Thompson Creek Metals in my personal portfolio.)
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| Yara International Each Repr 1 ADR |
YARIY |
05/22/07 |
$29.50000 |
$27.50 |
-$1.35 |
-6.78% |
Yara International and fertilizer stocks in general have been hit with a one-two punch of lower farm-commodity prices and tight credit. But I think the imagined damage far outweighs the real, at least if you look past the next six months or so. The logic behind the panic that has taken down the sector runs like this: The drop in farm prices reduces the ability of farmers to buy fertilizer at current high prices. With prices for things such as corn and wheat so far off the highs, farmers don't have much reason to invest in expensive fertilizer in order to produce bigger crops. I think this logic falsely inflates what is indeed a short-term drop in demand into a long-term slump. First, the drop in demand that fertilizer makers are seeing is largely a result in farmers holding back on their usual pre-buying for the next growing season. With credit tight, farmers are more than willing to hold off and take a chance that prices will be down if they wait a few weeks or months to order. Second, I think this logic doesn't take into account the gradual thawing that we're seeing in the credit markets. The evidence is slight, I admit, but it looks like the credit markets will, if not return to normal, at least turn the tap on lending a bit. It will be easier for farmers to get credit three months from now than it is today. (That will be especially true in Brazil, one of Yara's key growth markets.) And third, this logic forgets the time-honored response of farmers the world over to lower prices: They don't cut back but instead plant more because it's the only way to make up for falling prices. I've cut my 2009 earnings-per-share estimates for Yara by 20%, and that still puts this stock in the cheap enough to keep with a price-to-earnings ratio of 3.5 on projected 2009 earnings per share. As of Oct. 17, I'm setting a target price of $38 a share by December 2009. (Full disclosure: I own shares of Yara in my personal portfolio.)
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| Maxwell Technologies Inc |
MXWL |
01/23/07 |
$12.55000 |
$13.69 |
-$0.21 |
9.08% |
On Feb. 19, Maxwell Technologies (MXWL) reported a fourth-quarter 2008 loss of 8 cents a share, 12 cents a share better than the Wall Street consensus call. Revenue climbed 38% from the fourth quarter of 2007. Gross margins, after excluding one-time items, climbed to 37%, as the company continued to reduce manufacturing costs. I'd expect margins to continue to rise in 2009 as the company winds up several unprofitable contracts for its ultracapacitors. Right now it doesn't look like that segment will reach profitability in 2009 despite recent wins in the wind segment, still the biggest part of ultracapacitor sales. Wind segment revenue is likely to double in 2009. In 2010, Maxwell's wins in the European auto industry should start to move from sampling to production. In addition, the heavy transportation segment, trucks and buses, will ramp three customers to full production in 2009. All in all, ultracapacitor revenue is on track to grow 30% in 2009 and 50% in 2010. The company should reach full-year profitability in 2010 and might actually see a quarter of profitability in 2009. As of Feb. 24, I'm setting a target price of $11 a share by December 2009. (Full disclosure: I own shares of Maxwell Technologies in my personal portfolio.)
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| Deere & Co |
DE |
01/12/07 |
$49.66500 |
$38.53 |
-$1.84 |
-22.42% |
When I picked Deere (DE) for Jubak's Picks on Dec. 11, 2007, it was in a column titled 'How to profit from rising food prices.' A better headline for today might be 'How to survive until food prices start climbing again.' (I'd say we'll see food inflation again in 2010.) Well, Deere is hanging in there, but 2009 isn't going to be a year for the company to crow about. On Feb. 18, it announced fiscal-first-quarter earnings of 48 cents a share, 15 cents below the Wall Street consensus estimate and a 42% drop from the year-ago November-January quarter. Revenue fell just 1.1% to $5.2 billion, however, which was considerably above Wall Street estimates of $4.6 billion. Don't expect much from the rest of 2009, the company told investors. Sales likely will be down about 8% for the fiscal year, including a 6% hit from a stronger dollar in the first and second quarters. The biggest problems are – surprise -- outside the United States. Farm-machinery sales are forecast to be somewhere between flat and up 5% for the year in the U.S. and Canada but down 2% worldwide. Order cancellations were somewhat above normal in South America in the first quarter, but the real problem is in Russia and Central Europe, where economies are rapidly deteriorating. The company is not seeing any problems in North America from the credit crunch because high crop prices have led to strong cash flows for farmers. I don't see Deere facing a collapse in its sales in 2009 or significant balance sheet problems, and the company is well-positioned for a turnaround in 2010. As of Feb. 24, I'm lowering my target price for Deere to $35 a share by December 2009, down from a prior target of $62 a share. (Full disclosure: I own shares of Deere in my personal portfolio.)
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|
| Company |
Symbol |
Date
Dropped |
Price
Then |
Price
Now |
% Change
Since Dropped |
| USB Capital VIII |
USB-G |
04/17/09 |
$18.85000 |
$21.30 |
13.00% |
Shares of USB Capital VIII (USB-G) -- what I've called US Bancorp preferred for the sake of simplicity -- have crossed above my $18 target price (for February 2010). I'm going to take my profits here with this strategy in mind. I think we're in the midst of a bottoming process for the stock market. I expect we'll get a reversal of the current rally sometime relatively soon as part of that process. Too many sectors are pressing up against resistance levels (like the 200-day moving average) right now for me to feel that the short-term risk/reward ratio favors risk-taking. Once we get that correction (if we get that correction) and take some of the risk back out, I'll look to put this money to work in the financial sector, quite probably in a common stock with more upside than a preferred issue has. I'm selling this position with a 17% return (including dividend) since I added it to Jubak's Picks on Feb. 10. This will bring my cash position in Jubak's Picks to about 54% of the portfolio. (Full disclosure: I will sell my personal position in USB Capital VIII three days after this column is posted.)
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| Petroleo Brasileiro ADR Reptg 2 Ord Shs |
PBR |
04/10/09 |
$35.99000 |
$39.00 |
8.36% |
I think the stock market has run way, way ahead of the economy. Too far ahead. Whereas a month ago every bit of news was seen through the darkest glass possible, today everybody is going gaga over the slightest sign that things aren't getting bad as quickly as they were in January. One result has been a strong rally in the price of oil -- the spot price of Brent crude has climbed 25% in a month, for example -- that just isn't justified by the economic data. With everybody from the Federal Reserve to the Organisation for Economic Cooperation and Development getting more pessimistic about when the recovery will arrive (2010 now) and how strong it will be (not very), I think oil prices are due to retrace a good part of that gain. That means oil stocks, especially those that have moved up most strongly, are facing a correction, too. Share of Petrobras (PBR) have climbed 137% since the Nov. 20 market low and 33% since the March 9 low. As much as I like the long-term prospects for Petrobras, I think the process of turning those prospects into oil is going to take so much capital and so much time that right now it's priced into the stock. My target price on these shares is $41 by December, and at a current price near $36 a share, I just don't see the upside in holding right now. So I'm going to sell these shares with an eye on re-establishing a position in the mid-$20s when this rally falters. I'm selling these shares with a 32% loss since I added them to Jubak's Picks in my own excess of enthusiasm on Aug. 26, 2008. (Full disclosure: I will sell my personal position in Petrobras three days after this column is posted.)
|
| Gorman-Rupp Co |
GRC |
03/20/09 |
$18.26000 |
$19.90 |
8.98% |
I still like shares of Gorman-Rupp (USB) for its long-term exposure to the world's growing shortage of water and the need to move more and more of it longer and longer distances. But in the short term -- say, the next quarter or two -- I think Gorman-Rupp is looking at increasing pressure on its hefty order backlog as hard-pressed municipalities cancel contracts. This sell is most definitely a call on the economy -- I think the bottom is at least two quarters away, and visibility is very poor -- and on the stock market. I'm going to take advantage of what I believe is a bear market rally to sell these shares and raise some cash. That way, I'll have more to put into the market when I can see the eventual turn in place. Gorman-Rupp's shares climbed 36% from their March 9 low through the close on March 19. That's a more-than-decent short-term bounce. I'm selling these shares with a 54% loss since I added them to Jubak's Picks on June 24. (Full disclosure: I will sell my personal position in Gorman-Rupp three days after this column is posted.)
|
| US Bancorp |
USB |
02/20/09 |
$10.58000 |
$17.04 |
61.06% |
I think US Bancorp (USB) is a survivor that will come through the financial crisis with more market share than it went in with. That said, I think the bank is going to have to cut the dividend on its common shares in the not-too-distant future. The market believes that, too, which is why the stock has been in free fall over the past two weeks. So, for safety, I'm selling my common shares in this bank and buying some of the bank's preferred shares. The yield on the preferred is 9.07%, less than the yield on the common, but I think that dividend is a lot safer. I'm selling the common shares out of Jubak's Picks with a loss of 38%, including dividends received, or 62% excluding dividends, since I added the stock to this portfolio April 11, 2008. (Full disclosure: I own shares of US Bancorp common stock in my personal portfolio. I will sell those shares three days after this column is posted.)
|
| JP Morgan Chase ADR Rep 1/4 Share of 5.49% Cumulative Pref S |
JPM-G |
02/13/09 |
$36.85000 |
$40.73 |
10.53% |
The risk in owning shares of JPMorgan Chase (JPM-G) -- even the preferred shares -- has climbed substantially in the last week. In a normal market, I wouldn't sell, but this isn't a normal market. In this bear market, investors punish financial stocks without mercy on even the rumor that a balance sheet is headed for a downgrade, and the capital gains upside for anything in the financial sector just isn't enough to compensate. The yield on the these shares -- 6.54% as of Feb. 12 -- is great but still not enough to compensate for my assessment that risk is climbing for this bank. What are the sources for that climb? First, JPMorgan Chase's exposure to the increasingly likely bankruptcies of General Motors and Chrysler. Banks, including JPMorgan Chase and Citigroup, have extended loans totaling $6 billion to GM and $7 to Chrysler. Second, I think the much-reviled financial-sector bailout plan from Treasury Secretary Tim Geithner could have real teeth -- at least as far as bank balance sheets are concerned. Regulators have already sent teams to the 20 biggest banks to stress-test their portfolios. Right now it looks like regulators will apply the stress test to off-balance-sheet portfolios at the banks. No one knows how stringent the test will be or what it will find. I don't find exposure to that kind of potential surprise especially attractive in this market. As of Feb. 13, I'm selling JPMorgan Chase Preferred G out of Jubak's Picks with a 4.8% return, including dividends, since I added it to the portfolio Dec. 19. (Full disclosure: I will sell my personal position in JPMorgan Chase Preferred G three days after this column is posted.)
|
| Goldcorp Inc |
GG |
01/09/09 |
$27.14000 |
$35.62 |
31.25% |
Shares of Goldcorp (CHK) climbed 109% from Oct. 27 to Dec. 31 as the U.S. dollar rally stalled. In 2009, the stock has given back some of those gains, falling from $31.53 a share on Dec. 31 to $27.50 on Jan. 7 as the dollar has started to rally again. I'm anticipating the first half of 2009 will be good to the dollar, as a global flight to safety and the perception that the United States' economy is closer to a turnaround than Europe's will combine to send the dollar higher against currencies such as the euro. So I'm going to take some profits here by selling Goldcorp out of Jubak's Picks for the first half of the year. I anticipate that gold -- as a hedge against a falling dollar and rising inflation -- will do well in the second half of the year but that the dollar's strength in the first six months of 2009 won't be positive for gold. I'm selling these shares with an 84% gain from Oct. 27 to Jan. 7 and a 10% loss from May 30, 2006, when I added the stock to Jubak's Picks, through Jan. 7, 2009. (Full disclosure: I will sell my personal position in Goldcorp three days after this column is posted.)
|
| Chesapeake Energy Corp |
CHK |
01/06/09 |
$19.09000 |
$18.68 |
-2.15% |
We're still in a bear market until stocks -- and the economy -- show me otherwise. And in a bear market, when you get handed a rally, you sell. So as much as I like the long-term prospects for Chesapeake Energy (CHK), I'm going to sell the shares out of Jubak's Picks with this column. From Dec. 5 through Jan. 6, the shares gained 38%. I don't think that gain will hold: We're headed into the weak shoulder period for natural gas between the winter heating season and the summer cooling season. The U.S. economy continues to stumble along with manufacturers reporting low levels of capacity utilization. That's not good for natural-gas prices. And I think we're still at least nine months away from a bottom in global energy demand. I'd love to buy Chesapeake back later in 2009, but I'm going to take what the bear market has given me in a belief that a true energy rally is quarters away. I'm selling these shares with a 66% loss as of Jan. 6 from my April 22, 2008, purchase price of $53.68. This sell will leave Jubak's Picks 48% in cash as of Jan. 6. (Full disclosure: I will sell shares of Chesapeake Energy out of my personal portfolio three days after this column is posted.)
|
| Devon Energy Corp |
DVN |
12/23/08 |
$63.02000 |
$52.22 |
-17.14% |
I hate to do this. In my opinion, for the long term, Devon (Devon) has one of the best production and development pipelines in the oil industry. I would want to hold this stock for five years or more -- once we get past 2009. But 2009, especially the first half of 2009, will be a train wreck for most exploration and production companies. Without the big refining and marketing businesses of the integrated majors such as Chevron and Exxon Mobil to act as a buffer, these companies are exposed to the full force of falling oil prices. And though oil prices, which are down by more than $100 a barrel as of mid-December from their July high at $148, can't tumble another $100 a barrel, the effect of lower oil prices on company earnings is still working its way into earnings reports as hedges that had protected oil and gas producers from the worst of the decline expire with 2008. I haven't been able to find a single oil or natural-gas producer that has a higher percentage of production hedged against price declines in 2009 than it had in 2007. In the short term, the industry is also headed into February and March, when oil demand drops even without a global slowdown. And oil is building up to record levels in storage tanks; oil in storage at the Cushing, Okla., hub, for example, has climbed in 11 of the past 12 weeks, to the highest level since May 2007. That means there's plenty of oil around to keep oil prices stuck at current low levels for a while despite any uptick in demand or any reduction in supply from the Organization of Petroleum Exporting Countries. So I'm selling exploration and production company Devon Energy out of Jubak's Picks with this column. I have every intention of buying the shares back in six months at what I hope will be a lower price. The shares have gained 10% since I added them to the portfolio on July 18, 2006. (Full disclosure: I will sell the shares of Devon I hold in my personal portfolio three days after this column is posted.)
|
| Ultra Petroleum Corp |
UPL |
12/23/08 |
$32.23000 |
$37.12 |
15.17% |
What goes for oil exploration and production companies applies in spades to domestic natural-gas exploration and production companies such as Ultra Petroleum (UPL). I think gas prices in the United States aren't likely to recover markedly in the next six to nine months and could fall even further as slowing U.S. economic growth cuts into industrial demand. And, like oil producers, most natural-gas producers will feel more pain from low prices in 2009 than they did in 2008, thanks to reduced hedging in 2009 compared with 2008. Longer term, I continue to like Ultra. The company is one of the lowest-cost producers of natural gas in the United States, and its leases in promising natural-gas shale formations in the Rocky Mountain region put years of earnings growth ahead of the company. Once we get past the earnings pain of 2009. I'm selling Ultra out of Jubak's Picks with a 43% loss since I added it to the portfolio on Sept. 21, 2007. (Full disclosure: I will sell the shares of Ultra I hold in my personal portfolio three days after this column is posted.)
|
| Itron Inc |
ITRI |
12/22/08 |
$58.48000 |
$53.46 |
-8.58% |
When a bear market gives you a rally, you sell into the rally. Since it hit a bottom (not the final bottom, I'm afraid) Nov. 20, the Standard & Poor's 500 Index had climbed 20% as of the Dec. 17 close. Shares of Itron have roared past that, scoring a 74% gain for the same period. I still like -- no, make that I still love -- Itron's (ITRI) long-term fundamental story. The market for high-tech utility meters that make it possible for utilities to operate more efficiently and profitably is just taking off. This stock is one of the 50 I picked in my new book, 'The Jubak Picks,' due for publication Dec. 30, as a way to profit from one of the 10 big trends remaking the global economy. But as I've said before, fundamentals don't count for much in a bear market. I believe I can sell now, reaping a loss for tax purposes, and then pick up the shares again at a lower price six to nine months from now, when the stock market is closer to a real bottom that will end the bear. As of Dec. 18, I'm selling Itron out of my 12- to 18-month Jubak's Picks portfolio with a loss of 38% since I added the shares Dec. 21, 2007. (Full disclosure: I will sell my personal position in Itron three days after this column is posted.)
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| Freeport McMoRan Copper & Gold Inc |
FCX |
12/09/08 |
$19.74000 |
$49.72 |
151.87% |
I had decided that I would hold Freeport McMoRan Copper & Gold (FCX) for the late 2009 recovery in the global economy and in copper consumption. But the company's decision to suspend its dividend has changed my thinking. When the shares were paying a dividend yield of better than 5%, I was getting paid fairly well to wait. But now I'm getting paid bupkis, so I'm going to sell into the current rally with the idea that that move increases my flexibility and decreases my risk. (I can buy Freeport McMoRan shares back later or go with some other mining or industrial stock.) I think we're a good three to six months away from the bottom in copper prices. As of Dec. 9, I'm selling these shares with an 80% loss since I added the shares to my portfolio on Feb. 26, 2008. (Full disclosure: I will sell my personal position in Freeport McMoRan Copper & Gold three days after this column is posted.)
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| Gilead Sciences Inc |
GILD |
12/09/08 |
$44.83000 |
$45.90 |
2.39% |
Shares of Gilead (GILD) had launched a small rally while the market tanked in the week after Thanksgiving. But on days when the stock market has itself rallied, such as Dec. 8, the shares have retreated. I see this as a sign that investors are using Gilead's shares as a haven from the current market turmoil. That means the stock will hold up well when the bear shows its claws again but is likely to lag in any end-of-the-bear rally. I'm going to use the recent move up in Gilead's shares as a selling opportunity. As of Dec. 9, I'm selling Gilead out of Jubak's Picks with a 17% gain since I added it to the portfolio Sept. 25, 2007. (Full disclosure: I will sell my personal position in Gilead Sciences three days after this column is posted.)
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| Apple Inc |
AAPL |
11/11/08 |
$94.77000 |
$140.02 |
47.75% |
The economy is getting worse faster than I anticipated when, on Oct. 24, I lowered my target price for Apple (AAPL) to $125 by December 2009. Though that may still be a reasonable price to anticipate for the stock 13 months from now, the news from consumers and the retail sector is turning so grim so fast that I think Apple's shares could be in for a further decline before the shares begin any recovery to $125. For that reason, and in order to keep the cash position in Jubak's Picks at 40% or slightly more after the buy of Energy Transfer Partners, I'm selling Apple out of Jubak's Picks with a 48% loss since I added the shares June 6. This buy-and-sell pair bring my cash position in Jubak's Picks to 44% as of Nov. 11. (Full disclosure: I will sell my personal position in Apple three days after this column is posted.)
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| Nokia ADR |
NOK |
11/04/08 |
$16.74000 |
$14.56 |
-13.02% |
The market has finally delivered the bear market rally I'd been expecting for weeks, but it's not a particularly robust one. Though stocks have moved up sharply, it's been on light to moderate volume. That's not what you'd like to see from a rally. Rising volumes would indicate that more investors are buying as prices go up in anticipation that the rally will go on for a while. So far, I'm not seeing much of that kind of behavior. We may get the rush of enthusiasm yet, but I'm going to cautiously take some cash off the table here. Nokia has moved up just 7% in the recent rally -- not exactly a strong move. But I think that reflects investors' skeptical attitudes toward a consumer stock as the economy heads into a recession.In its third quarter, Nokia (NOK) saw its market share drop as it declined to get into a price war with competitors in the high-end smart-phone market. That didn't help the company's average selling price, which fell about $2.60 in the quarter as less-expensive phones sold into emerging markets made up a bigger share of company sales. I continue to think that Nokia's new high-end smart-phone hardware and its new music, games and navigation software will be long-term winners in the market. But I think 2009 is going to see sales flat or even down slightly across the wireless phone industry, and that will make it hard for Nokia to gain share in the face of heavy discounting from competitors. I think that makes Nokia dead money or worse for at least the first half of 2009. As of Nov. 4, I'm going to sell Nokia out of Jubak's Picks with a loss of 39% since I added it July 11. (Full disclosure: I will sell the shares of Nokia I own in my personal portfolio three days after this column is posted.)
|
| Exelon Corp |
EXC |
10/28/08 |
$54.60000 |
$49.37 |
-9.58% |
The third-quarter earnings announced by Exelon (EXC) weren't anything to write home about. The company missed Wall Street's earnings estimates of $1.13 a share by 6 cents and reported revenue of $5.27 billion versus the expected $5.46 billion. The biggest ding in earnings was caused by high fuel costs, in part because refueling took longer than expected at some of the company's nuclear power plants, and by a large increase in uncollectible accounts as utility customers fell behind on their bills. But I'd call those problems business as usual in the utility sector during this economy, and they're not the reason I'm selling Exelon out of Jubak's Picks. I bought these shares because of Exelon's big position in nuclear-generated electricity. Its 17 nuclear plants generate 18% of all U.S. nuclear power. Right now, existing nuclear plants beat coal and natural gas on the cost of generating electricity, and I expect to see that cost advantage increase as the country fights global climate change by imposing extra costs on power plants that use carbon-based fuels. From that perspective, I find Exelon's bid to buy NRG Energy extremely disappointing. NRG generates only 5% of its power from nuclear plants and 46% from natural gas, 33% from coal and 10% from oil. This acquisition would seriously dilute the nuclear exposure that I'd hoped to gain by buying Exelon. I'm also concerned that an all-stock deal would saddle Exelon with NRG's $8 billion in debt. At a time when financing debt is both more difficult and more expensive, I think this adds significant risk to what is supposed to be a low-risk investment. Standard & Poor's has already downgraded Exelon's debt to BBB from BBB+ on news of the deal. As much as I hate to sell anything into a bear market, I think these changes in the company remove much of my original reason for buying its stock. As of Oct. 28, I'm selling Exelon out of Jubak's Picks with a 41% loss since I added it Jan. 15 at $84.61 a share.
|
| Tejon Ranch Corp |
TRC |
10/07/08 |
$30.16000 |
$25.88 |
-14.19% |
It doesn't pay me to wait for the recovery in the real-estate market. With the likely duration of the current economic downturn getting longer every day, I'm going to take my loss, sell Tejon Ranch (TRC). The, and put the money to work in something that pays a dividend (in this case, Oneok Partners). I'm selling these shares out of Jubak's Picks with a loss, as of Oct. 7, of 41% since I added the shares to Jubak's Picks on Dec. 12, 2006. (Full disclosure: I will sell my shares of Tejon Ranch three days after this column is posted.)
|
| SiRF Technology Hldgs Inc |
SIRF |
10/07/08 |
$1.18000 |
$4.11 |
248.31% |
There's no reason to fear that these shares are going to fall a whole lot further -- they're down 96% from my buy of Jan. 12, 2007 -- but the chance of the company's being bought out at a significantly higher price continues to recede with the stock market and the economy. And even if the cash that results from this sale is insignificant, taking SiRF Technology Holdings (SIRF) off my regular research list frees up time that I can use more usefully -- and I hope more profitably -- on researching other stocks. As of Oct. 7, I'm selling these shares out of Jubak's Picks. (Full disclosure: I will sell my shares of SiRF Technology Holdings three days after this column is posted.)
|
| Edison International |
EIX |
10/07/08 |
$35.71000 |
$30.62 |
-14.25% |
I think there are good reasons to sell a utility on a capital spending spree right now. Utilities are seeing their cost of capital zoom in this financial crisis. That's a big issue for Edison International (EIX), which has $20 billion in capital spending budgeted by 2012. That capital-spending plan was one thing that attracted me to the stock back in July, and I think over the long term it will be a reason to own these shares. But in the short run, as construction costs and capital costs rise, they will put pressure on Edison International's earnings growth, since regulated utilities have to wait for state utility regulators to act before they can recoup these costs through rate increases. As of Oct. 7, I'm selling these shares out of Jubak's Picks with a 27% loss since I added the shares to Jubak's Picks on July 15, 2008. (Full disclosure: I will sell my personal position in Edison International three days after this column is posted.)
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