The Noxious Nine + Ball Corp. + OI Glass
It is time for some college football handicapping. My approach to sports gambling is similar to my value investing strategy.
If you are not a fan of college football and/or gambling please scroll down past the line of x’s.
Every year I get the Phil Steele college football preview and I review all 130+ “lined” NCAA teams. I look for one surprise team in each conference (just like one stock per sector).
Here is what I am looking for:
I look for teams that were poor against the spread (ATS) last year. This is the same as looking for stocks with low expectations.
I am looking for team with head coaches in their second or third season. This is the same as looking at companies with new management.
I look for teams with great relative recruiting records. This is the same as looking for companies with under-utilized assets.
My top nine ideas:
SEC - Florida, 4-8 ATS, Napier 3rd year, 15th best class nationwide
B10 - Nebraska, 4-8 ATS, Ruhle 2nd year, 6th of 16 class in B10
ACC - Stanford, 5-7 ATS, Taylor 2nd year, 4th of 17 in ACC
B12 - Central Florida, 5-7 ATS, Malzahn 4th year, best class in B12
AAC - Tulsa, 4-8 ATS, Wilson 2nd year, 2nd best AAC class
MW - Colorado State, 4-8 ATS, Norvell 3rd year, 4th of 12 is MW
SBC - Southern Mississippi, 4-8 ATS, Hall 4th year, 3rd of 14 in SBC
MAC - Central Michigan - 3-9 ATS, McElwain 6th year, but on the hot seat, big class last year, big recruiter at Florida years ago
CUSA - Florida International, 5-7 ATS, MacIntyre 3rd year, 4th of 10
I do not give a damn about Notre Dame, Michigan, or Alabama, just give me nine underdogs that might surprise the betting public.
I will choose my top 3 ideas from these “noxious” 9 teams each week. In week 1 my picks are:
Florida +3 vs Miami
Stanford +9 vs TCU
Nebraska -27.5 vs UTEP
Lines from Les Vegas Insider
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When you go through the 130+ NCAA teams you have to evaluate Ball State University in Muncie, Indiana. They are not very good.
After you finish will Ball State, the logical (but, somewhat crazy) mind, knows it is time to check in on Ball Corp. - BALL - $64, The Ball brothers started making home canning jars in Muncie in the 1880’s.
BALL has become the leading maker of aluminum cans for beer and soft drinks. The company just sold its aerospace business for over $5 billion (they made parts for the original “Star Wars” program promoted by Reagan). BALL is using the proceeds to pay down debt, and buyback a lot of stock. Their plan today is low single digits unit growth plus stock buybacks equals a 10% grower. Wall Street loves it, BALL is so predicable.
One Wall Street analyst actually wrote that BALL should have a target price of $70 because a predictable company like BALL should sell it 14x EBITDA. I might pay 14x EBITDA for a company that cures cancer, but not for a can maker. You have to admire BALL’s dedication to returning money to shareholders, but the current valuation is distorted.
As required by law, when I looked at BALL I had to look at the other packaging companies:
O-I Glass - OI - $13 - over-leveraged, but kind of interesting (see more below)
Trimas - TRS - $25 - a sleepy, but cheap, small cap that needs more work
Greif - GRE - $64 - industrial packaging, not quite cheap enough
Aptar - ATR - $128 - a “GARPy” favorite, but at 28x who cares
Crown Holding - CCK - $90 - not as well run as Ball, pass
Berry Global - BERY - consumer packaging near its high, pass
Silgan Holdings - SLGN - $51 - specialty closures near its high, pass
I was ready to toss OI because glass is losing to aluminum, and the balance sheet is ugly. But once again as required by law, I looked at the OI holders and found Luminus Management as a 2% owner of OI. Luminus is a $1 billion hedge fund that has 25% of its assets invested in OI. Luminus has a one paragraph website that admits they invest only in “old economy” stocks. They are also big owners of the troubled titanium dioxide companies Chemours - CC - $20, and Tronox - TROX - $14. Are these guys stone cold crazy? Or is it possible they are long-term investors, that really have done their work on OI?
I want to spend a quiet morning thinking about OI, Trimas, and the titanium dioxide companies, but right now I am still cranking through the remaining “Getting Organized” sector reviews.
Go Gators, Cardinal, and Huskers.