Maintenance - Q3
Most of the third quarters have been reported. Let’s rank the Top 20 Model Portfolio ideas.
First let’s officially add RXO and exit TreeHouse Foods. THS had a significant product recall in the quarter. Just when margins were getting better, there is now another “the dog ate my homework” excuse. It is time to move on. RXO is such a good idea, something has to go.
Nexstar and Halliburton both move up because of the election. I have spent the last few weeks in Las Vegas, and I now understand the Red Rock Resorts story even better, so RRR moves up. Chart should be helped by the LNG business, and Middleby from restaurant construction. The healthcare ideas of Revvity and Royalty Pharma slide down the list. Darling slides some because of the election with their exposure to renewable diesel.
The world changed on Tuesday night. I am certainly thinking more about Oxford, Hasbro, Vail Resorts, and Etsy. Maybe Helmerich & Payne is the obvious answer. The healthcare names are great diversification, but they are difficult to understand. Lets wait for the JACK quarter on 11/20, and think about more changes.
This is the Top 20 Model from best to worst:
Nexstar Media - potential to benefit from deregulation of station ownership rules, still making cryptic comments about spectrum value of local stations, News Nation was the first to call the Presidential election, CW network loses are moderating, buying back lots of stock, advertising is potentially a problem
Halliburton - big beneficiary of Trump’s “Drill Baby Drill”, the company is staying very quiet about potential upside, international business still grows 5-8% in a very poor market, impressive technology gains, cyber attack caused limited damage
RXO Corp. - spinout from XPO, these are smart guys who bought a great asset from UPS, consolidating a fragmented truck brokerage market, margins now 30% below average, clearly in a trough
Red Rock Resorts - I have visited Durango, and it is very well done, maybe smaller than I expected, but you can see the focus on profitability, I also visited proposed Inspirada location and the neighborhood is very high-end, if you get a chance get a room at Red Rock and watch the sun set over the mountains, results hav been solid, less focus on Inspirada and more on a project called Cactus near the airport, started construction on tribal JV near Fresno
HF Sinclair - doing exactly what you should when refining margins are at the bottom, great balance sheet, decent retail opportunities, complete lack of visibility but that is what I like, lubricants doing well, buying back stock
Chart Ind. - stock popped on Trump election because of LNG exposure, quarter was strong across the board, could benefit from SMR’s, lots of green energy projects outside the US
Middleby - permitting reform should help restaurant building, franchisee customers should feel better after the election, consumer business still 70% of pre-pandemic, still thinks margins can get near 30%
Nutrien - cutting cap ex to buyback stock, good to see the Russians cutting potash production, good progress on investor day targets
Corteva - still gaining share in seeds, but crop protection has been a problem, farmers have been very cheap, still impressed with the improvement since the duPont spin, this is a high tech growth stock selling at 1.5x book, investor day in late November
Rayonier - significant property sale of below average timber assets still sold for 40-45x three year average EBITDA to big time buyer, that makes RYN very undervalued, looking to sell New Zealand assets, real estate doing well, carbon capture gaining acceptance
Brunswick - doing pretty well with big boat sales down 30%, trying to find the bottom of the cycle, boat clubs doing well, parts business doing well, BC had estimated trough earnings at $6.00/share, and 2024 looks like it will end at $4.50
Royal Gold - royalties avoid the cost pressures that Newmont is seeing, decent results from newer mines, now debt free with over a billion to spend
Darling - quarter was weak, but that happens in rendering, some issues in California with tax credits, exciting new collagen products for weight loss
Tyson - reporting next week, beef cycle will take a while to change
Titan Int. - ok quarter given the economy, decent enough balance sheet to buyback stock, new products for mid-size tractors
First Cash - pawn shops doing well, POS credit business still an issue
Royalty Pharma - almost TGTBT, difficult to understand, decent quarter with new deals
Revvity - big investor day in late November, decent quarter, China hurt results, lab equipment still lagging
Jack in the Box - reporting later this month, franchisees should be doing better, is there a better restaurant stock?
Kinder Morgan - stock has done too well, but fundamentals are great, tough call, my AI stock