Mr. Sensitive

December 26, 2012

Toogie Time – 2013 FSX Changes

Filed under: Uncategorized — lbej @ 14:37

With just three full trading days left in 2012, it’s time to announce the changes I’m making to the Family Stock Index for 2013.  I reviewed each of the 25 FSX components, and I’m comfortable with/resigned to leaving in place the stocks representing 21 of the 25.  That means four of us will have new tickers going into the New Year.  I’m breaking it down by group, providing explanations where I feel like it.

COMFORTABLE WITH (16)

Name Ticker Company Business
Brinkley BCO Brink’s Company Security
Dustin DST DST Systems Software
Jenny JNY The Jones Group Fashion
Justin SCI Service Corp International Deathcare
Katie CATY Cathay General Bancorp Banking
Lisa LNCE Snyders-Lance Snacks
Lulu LULU Lululemon Athletica Athletic apparel
Marcus MCS Marcus Corporation Hotels, theaters
Mario T.E. MGEE MGE Energy Gas/electric utility
Nicole E. NICE NICE Systems Software
Nicole M. COLM Columbia Sportswear Athletic apparel
Reagan REGN Regeneron Pharmaceuticals Biotech
Ruby RJET Republic Airways Airlines
Wilson WILC G Willi-Food International Kosher products
Winston ED Consolidated Edison Electric utility
Zondro ZQK Quiksilver Athletic apparel

No explanations on these.  So sorry to disappoint.

RESIGNED TO (5)

I’d considered changing each of these before backing off when the time came.  Would you like some insight into the backing-off thought process?  Of course you would.

Charlotte (ICE).  I like ICE, even though its market cap ($9 billion) is pushing the high end of the mid-cap range I prefer to stay in.  The only reason I was considering a move is that the price action had been too tame for my edgy sister.  Now that ICE has agreed to buy the New York Stock Exchange for $8 billion—triggering shareholder lawsuits and the possibility of a bidding war—I’m expecting a rowdy 2013.  That should keep Charlotte in the headlines where she belongs.

Icarus (FAST).  This was a desperation move that’s grown on me.  Besides, if I’m contending that Zondro is quick (ZQK), it follows necessarily that Icarus is just plain FAST.

Jodi Ann (JOY).  JOY was a move I made because I didn’t know enough about Jodi Ann to make a snarkier pick.  Well, I don’t really know any more than I did last year, and JOY has grown on me in the meantime.  More importantly, the stock is cheap, trading at less than 9 times trailing earnings.  JOY is pricing in the end of the coal mining industry AND making the assumption the company couldn’t retool in the event of a slow death for coal.  At this price, JOY is a takeover target for Caterpillar, Komatsu, or even diversified industrial conglomerates like Berkshire Hathaway and GE.  I like the stock in 2013.

Nami & Lita (NL).  Like FAST and JOY, I went with NL for Charlotte’s cats even though I didn’t feel great about the pick.  With NL down 16% on the year, you’d think I’d be ready to dump a stock I wasn’t in love with to begin with.  Well, I can’t—it’s just too cheap.  To give you some context, the S&P 500 index trades at 17 times trailing earnings.  I argued that JOY was cheap at 8.7 times earnings—and it is—but that’s nothing compared to NL Industries.  NL trades at a ridiculous 6.9 times earnings; what’s more, the company pays an annual dividend of $0.50 per share, giving it an enormous yield near five percent.  Compare that to the S&P 500 yielding 2.2% and 10-year Treasuries at 1.75%.  NL is a terrific acquisition candidate as well.  I lauded JOY for the same reason, but a potential acquirer would likely have to offer something at or above the stock’s 52 week high of $96 to get a deal done.  That translates to a deal value above $10 billion, not including assumption of debt, and limits the field of potential acquirers to companies with deep pockets and strong balance sheets.  The bite-size NL can be gobbled up for less than $1 billion even with the acquirer paying $20 a share, well above the 52-week high of $16 and nearly double the current price.  NL could well be the WOLF of 2013, and that’s why I’m leaving it in the index.

Lucas (LEI).  I’ve come oh-so-close to dumping LEI at several points this year, most recently when it dipped below $1 for the first time.  If it had remained a penny stock, LEI would be out, but it bounced off its $0.95 low to $1.32 as of this writing, a gain of nearly 40%.  Even so, Lucas is the worst performer in the FSX for 2012, down more than 40% for the year.  Management has been canned, including the founder; the company is being sued for failure to pay a promissory note related to an acquisition; and the net loss reported for the last 12 months ($10 million) is a third of the company’s total market value.  But I still believe in Lucas.  I bailed too early on LEE (up 100% in 2012) and I won’t repeat my mistake.  Besides, I don’t have a better alternative.

Man, that went on longer than I planned.  On to the four changes.

Our spectral cat, Marisa, was able to retain her place in the FSX by appearing to Brinky on Halloween, less than a week after her death.  And in a spooky coincidence(?), Molex has two classes of stock that trade publicly: the regular common shares traded under the ticker MOLX, and the class A shares traded under the ticker MOLXA.  I am not making this up.  What’s the A stand for?  Afterlife, of course.  So Marisa will continue her hunt for ghost vermin in 2013 in the afterlife class of the same stock she inhabited in life.  What’s the real difference between MOLX and MOLXA?  The A shares trade at a large discount to the regular common, probably something to do with disproportionate shareholder voting rights—and who really cares about that?  Cats can’t vote anyway.

I’m moving Zero from ZIP to ZAGG.  I said I was going to do that several weeks ago, and maybe you thought I was joking, or maybe you just skim these things to see if I say anything obnoxious about you and didn’t notice at all.  Either way, Zero is the sort of fellow who zags when the universe says zig, and I try and side with Zero and against the universe whenever possible.  I also have my doubts about Zipcar, and at 95 times trailing earnings, those doubts are hardly reflected in the price.  By comparison, Zagg Inc., maker and marketer of covers for smartphones and other gadgets, trades at just 10 times trailing earnings and 7.5 times next year’s estimate.  The recent price of $7.43 gives ZAGG a market cap of $227 million, with plenty of upside room below its 52-week high of $13.29.

How many times have I switched stocks for Mario the Younger?  I’ve honestly lost count.  Stock after stock after stock, and for one reason or another I’ve eschewed the obvious.  No longer.  Why stretch for WMAR when MAR is available?  That is what Katie calls her little brother, after all, and if Katie’s not calling the shots, she certainly ought to be.  MAR is the ticker symbol for Marriott, the international hotelier, and that company’s $11.7 billion market cap may be what prevented me from considering it before.  Since the FSX was created in April 2010, I’ve added FAST ($13.7 billion cap) and ED ($16.4 billion); furthermore, during that time LULU’s market cap has increased from $3.2 billion to nearly $11 billion, and REGN’s has absolutely exploded, rising from a modest $2.4 billion to today’s $16.7 billion.  From that standpoint, $11.7 billion isn’t nearly so problematic.  At a recent $37, MAR trades closer to its September high near $42 than its year-ago low of $29, but the range is attractively narrow overall.

The Katie-knows-best theme doesn’t stop with MAR, though.  She calls her younger brother Mar; so what does Katie call me?  A number of things, of course, depending on audience and circumstance; for example, if she calls me something other than Daddy in front of Reagan, a stern rebuke (from Reagan) will likely follow.  But what is the true name of a thing if not what is most reliably used to summon it?  And if Katie wants to summon me, what name does she call me?  She calls me Toogie, and she has for a long, long time.  Why?  I truly have no idea, and I don’t think Katie knows, either.  But I answer to Toogie; therefore, Toogie I must be.  There is no Toogie Corporation—get on the ball, corporate America—but there is a company with the ticker TGI, and that’s close enough.  TGI is the ticker for Triumph Group, which, according to Bloomberg, “designs, engineers, manufactures, repairs, overhauls, and distributes aircraft components.”  Okay.  That’s better than MicroStrategy, which “enables departments and enterprises to deploy Web-based reporting and analysis solutions” (again, per Bloomberg).  What does that even mean?  Apparently, not much; MSTR is down 30% in this quarter alone.  At a recent $65, TGI is close to its 52-week high near $67, something that by itself would give me pause.  In this case, though, the 52-week low is only $53, and that narrow range (plus a below-market P/E of 10x) suggests stability and limited downside.  Stability and limited downside?  I believe I could get into that.  I haven’t been a complete waste of flesh and food this year, but neither have I performed MSTR-fully; after all, I meant to have a book to shop at the beginning of 2013, and good or bad reasons notwithstanding, the fact remains that I don’t.  I am Toogie, win or lose (was that in my marriage vows?); and if I have a more triumphant year on account of this stock switch, well, that’d be fine, too.

MOLXA, ZAGG, MAR and TGI will be added to the FSX after the close on 12/31, replacing MOLX, ZIP, WMAR and MSTR.  So there.

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2 Comments »

  1. I like the changes, especially Toogie! And I always love hearing your logic behind why to change/not change. I hope it’s going to be a great year.

    Comment by euregirlsandboys — December 26, 2012 @ 14:46 | Reply

  2. I really like all the changes. I’m excited to see if Zero destroys his new ticker, and I’m happy to still be ICE. I can’t believe Marisa’s new ticker. It’s perfect.

    Comment by Sis — December 28, 2012 @ 17:10 | Reply


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