August 15th 2014 Tranche - Initial Thoughts

August 15th, 2014 MFI Tranche

Before I think about the new tranche, we should tip our cap to the retiring tranche:

8/15/2013	Start	Current	Dividend	Pct Gain	R3K Gain
CF	$187.26	$252.59	$3.00	36.5%	17.3%
FLR	$66.06	$73.25	$0.53	11.7%	17.3%
AGX	$15.60	$34.80	$0.75	127.9%	17.3%
KLIC	$11.29	$13.85	$0.00	22.7%	17.3%
RPXC	$15.92	$15.50	$0.00	-2.6%	17.3%
Totals				39.2%	17.3%

You have got to be pleased with a 39% gain over a year.  RPXC was the clear mistake, but AGX with a 128% gain makes up for a lot of mistakes.

A lot of my recent studies have been showing that larger cap MFI stocks (say $900m and greater) from the over $100m screen have outperformed.  Not sure why that is, one thought is that is typically a more stable universe of stocks. Another thought might be that they have been an attractive alternative to treasuries during this stretch of unprecedented low fixed income rates.  If it is #2, that could make it more of a function of current environment and subject to change if/when rates normalize.

Here are some quick stock ideas:

AGX - hey, they are up 128%, but they still look cheap. Great balance sheet, in a nice profitable niche (building natural gas power plants), earnings about $2 per share.  They are shareholder friendly, paying a special dividend most years.

CTCM - yes I know they are Russian. But they pay a dividend approaching 7%. They are profitable and reasonably cheap.

TNH - I am really tempted here.  This is a fertilizer MLP that pays a dividend based on earnings.  I love the agriculture business.

COH - this has been on my watch list two or three straight quarters and in hindsight I am glad I have not pulled the trigger.  But some of the biggest gains are made from out of favor stocks. COH  has dropped from $57 to $34.

RGR - gun manufacturers do seem to have uneven earnings.  RGR has dropped from over $80 at the start of this year to $50 currently.  They look REALLY tempting at that price. they have a 3% dividend as well (though that flucuates with earnings). Strong balance sheet.  I am very tempted.

NUS - talk about out of favor.  They were $140 earlier this year and now tip the scale just over $59. It will be extremely interesting to see what their earnings look like next week. If I was a true gambler, I would buy right now pre-earnings.  Of course you do have the HLF drama in the background, if the FTC has negative report on them, could splash over industry. But that seems somewhat priced in. Again, a bit risky but they could become a $80 to $90 stock.

NSR - I bought in May and am awaiting FTC ruling.  While I do think they are still undervalued, I have to think hard about how many eggs I want in this basket as the outcome may be binary.

CSCO _would be a safe pair of hands in my view. Very tempting.

HRB - see CSCO.

CA - quite a few of these decent dividend stocks out there.

AVG - cheap by most metrics. I do already have a largish position.

HSII - this is actually a very interesting stock to bubble onto my watchlist.  I owned them a long time ago, they are a competitor with KFY.  They are a recruiting firm and if employment does pick up in 2015, could be a solid pick. They also pay a 2.9% dividend. Very interesting.