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Recent Winners: Using Warren Buffett's Strategy to
Profit |
Published:
June 11,
2007
As
editor of StreetAuthority's premium Half-Priced Stocks
newsletter, my mission is rather simple: identify stocks trading
at just pennies to the dollar. In other words, we scour the
market for stocks that are trading at hefty discounts (in some
cases up to 50%) to their true fair value.
Of course, finding those stocks isn't always easy. In many
cases, the search for value takes us down some of Wall Street's
more neglected paths. However, value hunters like Warren Buffett
and Peter Lynch have spent decades looking for "boring" stocks
in out of favor industries -- and they've made out okay.
Similarly, we aren't afraid to clear away the cobwebs and
explore dusty corners of the market that most investors have
overlooked. For example, in the June 2006 newsletter, we
profiled the grocery business -- not exactly a glamorous
industry with an exciting story to tell. However, we aren't
interested in finding stocks that would win a popularity
contest, just those with compelling price tags.
At the time, the grocery industry was still recovering from a
crippling labor dispute in California that kept workers (and
customers) out of stores for more than four months -- erasing
millions in revenues. However, we looked past the threat of
future strikes, as well as the tepid growth rates and thin
profit margins that are commonplace in the industry.
Instead, we saw companies churning out consistent cash flows,
initiating new dividend payments, sprucing up their stores, and
using loyalty programs and private-label merchandise to attract
customers and win back market share from the likes of Wal-Mart
(NYSE: WMT) and Target (NYSE: TGT). And over the past year, Wall
Street has responded enthusiastically.
Since we first recommended the group last June, shares of
Safeway (NYSE: SWY, $34.75), Kroger (NYSE: KR, $29.55), and
Supervalu (NYSE: SVU, $46.28) have climbed +42%, +45%, and +57%,
respectively -- in each case, hitting and surpassing our fair
value estimate.
In this month's "Industry Spotlight" feature, we tour another
overlooked industry that could take investors on an exciting
ride. In fact, our favorite stock in the group has turned a
modest $10,000 investment into more than $275,000 over the past
two decades, thanks in part to 20 consecutive years of rising
dividend payments. Better still, this cash machine just closed a
landmark acquisition that will double the size of the company
and provide ample opportunity for growth. Yet, the shares are
still trading at a hefty 15% discount to our conservative fair
value estimate.
To learn more about our Half-Priced Stocks newsletter,
and to gain access to this month's "Industry Spotlight," please
visit this link.
Good investing!
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Nathan Slaughter
Editor
Half-Priced Stocks, The ETF Authority
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in-depth guidance on today's leading value opportunities every other weekend, plus educational guidance, please subscribe to
Nathan Slaughter & Paul Tracy's premium value investing newsletter --
Half-Priced
Stocks |
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Income Security
of the Month
Our "Income Security of the Month" for August 2008 invests in a
fast-growing overseas market that doesn't get much exposure in the
mainstream financial press. And although it typically makes enormous
annual dividend payments -- it has paid an average dividend of
25.5% per year over the past five years -- this fund is perhaps
most appealing for its total return potential. Specifically, the
fund has delivered total returns of +178.9% since 2003,
and it ranks in the top 10% of its category over the past decade.
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Ten Stocks for 2008. |
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