Radioactive Avocados
Rather than turn on CNBC for a 5am dose of macro-momentum word salad, I fired up Gurufocus and ran a simple screen.
The result was a fairly good small cap investment idea, Phibro Animal Health Corp - PAHC, but only after a fun and relaxing journey through a variety of new companies. PAHC is down from $50 to $13. It sells for only about 11x, and there is growth potential in new products for companion animals. The float is pretty small because the founder controls 50% of the company.
I prefer to do broad screens that leave me with 200-300 companies to look at, rather than screens that give me a narrow list of 5-10 names. I am looking for new names that I have never looked at before.
My favorite screen is to look for companies within 30% of their 5-year lows (yes, Gurufocus allows you to screen on this variable). This is roughly a replacement for the old habit of looking at the new low list in the Wall Street Journal. Back in the days of the dinosaurs, we did not have screening software. This screen left me with about 400 companies, although about 100 of these were SPAC’s.
One new name of interest was Mission Produce - AVO. AVO is a 2020 IPO that grows and sells mainly avocados. Never underestimate Wall Street’s ability to cash in on the latest fad. At 1x sales I cannot get too excited about a commodity food producer, but low avocado prices have caused negative revisions. The company produces exclusively in Peru, which cannot be an easy place to do business. Busted IPO’s can be an interesting angle. AVO will be a name to watch. This also reminded me to check in on my favorite little fruit company, Limoneria - LMNR, but the stock has bounced from $13 to $16, so I will pass for now. Fresh Del Monte - FDP (bananas), is still selling at book value, but nothing is new. To complete the fruit stocks, I quickly reviewed Sunopta - STKL, which keeps getting cheaper and deserves more work.
Right below AVO was another new name, NuScale Power - SMR. SMR is developing Small Modular Reactors. I heard about this concept 10 years ago, but did not realize their was a public company. Never underestimate Wall Street. SMR was born from a SPAC two years ago. Should we really be allowing SPAC’s to play with nuclear material???? The company just announced they will build a test project in Romania, and have somehow already received $1 billion dollars in financing. Despite this good news the stock still sits near its lows. Is their opportunity in SPAC-land? Maybe? Someday I will review all the SPACs and find a good investment idea. And maybe someday I will become an astronaut.
It was 8am, and I had already read about avocados and new fangled nuclear reactors. This is the life of a generalist.
While looking at SMR I clicked on the Seeking Alpha “peers” tab and came across TPI Composites - TPIC. These guys make the blades for wind turbines. The stock is down from $75 to $11. They are shutting down in China and bringing production back to the US. Wind power is here to stay. Could this be a Joe Biden 2024 stock? As every academic paper always concludes - Further research is necessary.
Here are some other new ideas the screen presented:
Douglas Dynamics - PLOW - commercial snow plows, last year was a warm winter, maybe?
Netgear - NTGR - home internet stuff, my guys at Victory - Sycamore are still hanging on
Monro - MNRO - these are smart guys, is there any future in auto repair?
Mister Car Wash - MCW - I never wash my car, so I need to learn more
Olaplex Holding - OLPX - kind of a modern day Sally Beauty, but 3x sales
Under Armour - UA - I think their competitors have caught up
And some old ideas to reconsider:
International Flavors - IFF - it just keeps getting cheaper
John Wiley and Sons - WLY - there are legal issues here I need to understand
Cable One - CABO - I need to come to a conclusion on this rural cable provider
Newell - NWL - another dividend cut, still 1x sales with a bad balance sheet
VF Corp. - the dividend is cut, but the balance sheet stinks
Advance Auto Parts - AAP - the stock just keeps going down after the dividend cut
Avista - can I live with the balance sheet?
Disney - DIS - I just hate the politics, but at 1.7x book?
Hanesbrands - HBI - still sitting there at $5
Victoria Secret - VSCO - balance sheet???
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Just for fun lets do a narrow screen.
How about :
10 year median - Return on Invested Capital > 15%
price to book < 1.5x
This gives me 20 stocks. It is a pretty good list. Maybe I will try this more often.
Thor - THO - $95 - I hate the mobile home industry, but this is well run company, at only 1.3x book in this crazy market. Airstream is a premium brand
Foot Locker - FL - $26 - Inventory issues have crushed the stock recently, but there is new management. I worry about basketball shoes almost become a trading currency.
Onewater Marine - ONEW - $35 - This is the boat retailing business. I like Brunswick, but maybe this is a better way to play boating
Westlake - WLK - $116 - These are smart guys, but the PVC pipe business is too tied to homebuilding. Maybe this is the time to step up?
MKS Instruments - MKSI - $105 - There is great technology here, but they made an acquisition that messed up the balance sheet.
Netgear - NTGR - $14 - The one stock on both lists.
Each of these are interesting to think about.