The Best Ideas of the Week
Get ready for earnings season. Alcoa (NYSE: AA) kicks off the fun on Monday, followed by a big slate of blue chips. By the end of next week, we’ll have a clear tone in place for the remainder of earnings season.
Before then, let’s look back at companies in the news from this past week. Here are some of the most compelling stocks from this week’s Street Authority Winners and Losers.
Taseko Mines (AMEX: TGB)
Shares of Taseko Mines have rebounded a bit from Tuesday’s sell-off, but as we noted then. Investors may have gone too far in their zeal to unload shares. As we noted, the company’s primary active mining site, known as Gibraltar, is probably worth around $4 a share based on projected cash flows — right around the current share price. So even as the company’s promising-yet-troubled second mine, Prosperity, is beset by a daunting local ecological assessment, investors are assigning zero value to it.
That looks to be short-sighted. There’s a decent chance the mining venture will get the green light from federal regulators in Ottawa at the end of the summer. If that happens, investors will quickly push shares up, perhaps past the 52-week high of $6.21 as the new mine has even greater potential than the existing mine.
Action to Take –> In a best case scenario, shares could rise +150% to the $10 mark if both mines produce vigorous amounts of copper and lead. Full production wouldn’t come until around 2013, so it would take time to hit that target.
Kohl’s (NYSE: KSS)
Investors should always maintain a wish list containing great companies that currently appear to be fully-valued. Any time one of these companies gets pulled down on near-term worries, long-term investors should take advantage of that myopia. In recent weeks, we highlighted Best Buy (NYSE: BBY) and Bed, Bath & Beyond (Nasdaq: BBBY) as clear examples. This week, we have another example — Kohl’s. The retailer posted monthly sales that were good — not great — and shares took a hit. They’re now off roughly -20% in the past few months, which spells B-A-R-G-A-I-N.
Citigroup’s Deborah Weinswig sees shares rising from a recent $47 to $68, noting that Kohl’s “has a significant opportunity to emerge as a major player in the moderate retail space,” adding that “a combination of industry consolidation and company-specific initiatives should enhance both top-line and margin performance at Kohl’s.” The retailer’s annual per share profits have been stuck on the $3 to $4 range during the past four years, but should move past the $4 mark in fiscal (January) 2012 and closer to $5 in the subsequent year if the economy hangs in there and starts to modestly rebound.
Big Five Sporting Goods (Nasdaq: BGFV)
It’s tough to buy stocks when the news is bad. But often times, that’s the only way to make money. Big Five Sporting Goods, which operates a chain of retail stores primarily in the Western United States, noted that unfavorable weather in May has led to a quarterly shortfall . That bad news is good news for investors not yet in this stock, as it’s a rare misstep that has temporarily weakened shares. Yet in the long-term, there is much to like about this retailer’s slow-and-steady growth trajectory.
Action to Take –> We recently took a fairly deep look at the company’s operations, and found a winning retail formula. Shares traded for $30 back in 2005, but can now be had for around $10. As consumer spending starts to rebound — which probably won’t happen before 2011 — this could start to be a solid growth story one again. Long-term investors will likely bid shares back up before such an upturn is fully in evidence.