Legal Disclaimer:

Legal Disclaimer: The Author is not a registered investment advisor. Investing involves risk. Financial information provided is believed to be accurate but we are not responsible for inaccuracies. I may own these securities for myself or in accounts that I manage. Past performance is no guarantee of future returns.

2022 was a bad year. I’m not gonna sugar coat it. It was tedious and frustrating

S&P 500 was down 18%.

The Nasdaq was down 32%.

Rally attempts were met at resistance and we never got any momentum going in a positive direction.

Nothing has changed. So, we must be patient for a confirmed uptrend to emerge.

Here are some of my recommendations that did well. I only recommended stocks during uptrends, so most of these ideas came in June.

Celsius Holdings-

$ CELH @ $78.71 +32% This is a name I am still focused on – great growth and potential to be a big winner when this Bear Market ends. See above

June 11:

$ IMXI at $22.51 +10% A name I ‘m still watching and has the potential to be a big winner in the next Bull Market.

$ CELH @ $78.71 +32% This is a name I am still focused on – great growth and potential to be a big winner when this Bear Market ends. See above

Academy Sports: $ ASO

June 9th:

Academy Sports $ ASO at $37.06 – was a great growth and value name. +41%

Solid winner. New Issue with room to run. Could be a Big Winner in a New Bull Market.

 

Focus Group Cash Saved Me.

 Learn more Here

Dicks sporting Goods $ DKS $97.34 now $120.29 +19%

Merck:

Recommended in June at $91.07

All time high and the perfect safe, stable name institutions wanted in a year like 2022.

Not exciting but a solid winner. +21%

Losers / Disappointments:

In a year where the S&P was down 18% and the Nasdaq was down 33%, there were bound to be stocks that didnt perform well.

Phillip Morris: Looked Good Until the Biden Administration banned their JUUL a product. Lost 17% overnight – with a 6% yield – it still outperformed the market but was a disappointment.

Vaalco Energy: $ EGY Announced a merger and lost 30%. This company and its merger partner Transglobe $ TGA are still very undervalued and will look to buy if it resumes an uptrend.

Big Five: $ BGFV Still watching and incredibly undervalued but rolled over and is now in a serious downtrend. Solid Cashflow, buybacks, and yield. Yet down 30%. This is why I use stop losses at 7-10%. Because undervalued stocks can get much more undervalued.

Where do we go from here?

All of the indexes are in a downtrend. I’m working on two new watch lists (growth and value). But until we see a new uptrend with volume, we have to be patient.

My goal is to keep publishing free content but create so much value for you that you will think a Paid Subscription is a Great Value.

As you can see, many of my stock picks were outstannding performers and could have made you money last year. I expect more of the same this year, especially if we enter a Bull Market.

Happy New Year

Four Ridiculously Undervalued Stocks

For June 2021

Subscribe to my Investment Letter called Value Gems  Here

About Value Gems:

I’ve been a professional money manager for 30 years. I wrote a very popular column for an investing platform called Seeking Alpha.

As you may know, I had more than 2,500 followers and had some extremely profitable recommendations.

Now, it’s time for a new venture.

My goal is to deliver value added content that will make you a lot of money.

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Thank you for your support.

Previous Recommendations:

Recommendations from 4/2 Edition of Value Gems:   Full Details Here

$WW Weight Watchers: +14.95%

$MDP Meredith: +26.2%

$DGX: Quest Diagnostic: -.009%

$DLX: Deluxe Corp +9.02%

$VGR: Vector Group +1.62%

 

 

 

Brief Overview of Value Investing:

Value investing is about minimizing risk.

Ben Graham created value investing because of his painful experiences losing money in the Great Depression.

Graham’s losses in the 1929 crash led him to hone his investment techniques. These techniques sought to profit in stocks while minimizing downside risk.

Graham also stressed the importance of always having a margin of safety in one’s investments. This meant only buying into a stock at a price that is well below a conservative valuation of the business.

More on Value Investing here

 

 

Recommendations for 6/4:

 

Biodelivery Systems: $BDSI: $3.62

 

BioDelivery Sciences International, Inc. is a specialty pharmaceutical company. The Company develops and commercializes, either on its own or in partnerships with third parties, applications of approved therapeutics to address unmet medical needs using drug delivery technologies. The Company develops pharmaceutical products aimed principally in the areas of pain management and addiction.

 

Earnings:

2021: .24

2022: .52

 

Why it’s attractive:

Incredibly high ROE (Return on Equity) above 27%. It’s also an asset rich company with a current ratio above 3. Benjamin Graham looked for companies with a current ratio above 2. And earnings are expected to jump 50% next year.

 

 

Diebold: $DBD $14.16

Diebold Nixdorf, Incorporated provides connected commerce services. The Company offers connected commerce solutions to financial and retail industries. The Company enables to automate, digitize and transform the banking and shopping. The Company’s segments include Banking and Retail. The Banking portfolio of products consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation and kiosk technologies.

 

Earnings:

2021: $ 1.97

2022: $2.30

 

Why its attractive: The stock is around $14, which is the same level it was at three years ago. The p/e is at the low end of it’s 5 year range (10). Cash rich company trading at nearly 4x cash flow. Too cheap to stay down here.

A move above $17 would be very bullish technically

 

 

 

 

FootLocker: $FL $62.37

Foot Locker, Inc. is a retailer of shoes and apparel. The Company operates through two segments: Athletic Stores and Direct-to-Customers. The Company is an athletic footwear and apparel retailer, which include businesses, such as include Foot Locker, Kids Foot Locker, Lady Foot Locker, Champs Sports, Footaction, Runners Point, Sidestep and SIX:02.

6/3 PRICE: $62.37

Earnings:

2021: $5.49

2022: $5.66

 

Why Its Attractive: The stock has made very little progress over the last five years, yet earnings are up nearly 50%. Some of their competitors are now bankrupt. Low p/e of 11 near the low end of the 5 year range plus double digit return on equity.
New highs above 80 would be very bullish.

 

 

 

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The Frugal Prof

Business is about trends.  Some are sustainable.  Some are not.  There is a time to buy.  There is a time to sell. 

Understanding when the party has gone on too long and it’s time to cash out your chips is an admirable skill.

After the longest bull market in stock market history, Knicks Owner Charles Dolan decided that the trend of Bottle Service was just beginning.  That people blowing $300 on Bottle Service would keep going.  And money was no object.

And when a trust fund Billionaire comes calling, the people behind Tao knew it was time to sell.

Kudos to them.

Feb 1, 2017

TAO Deal: Madison Square Garden Company says it paid $181 million for a 62.5% stake in a new company called TAO Group. ~$250M total valuation for 19 venues.

It’s difficult to give you a direct comparison of how ridiculous this price is.

However, Red Robin Operates 555 Restaurants and RCI Hospitality operates 46 Bars and restaurants and these market caps reflect the impact of the Corona Virus.

Right now, you could buy an entire chain of restaurants for $145M or nightclubs for what Dolan and the Knicks paid for a partial interest in 19 restaurants. In fact, During the 2008 financial crisis, you could have purchased the entire Ruth’s Chris chain for $50M

May 2020

MSG Entertainment Posts Losses, Lower Revenue as Venues Remain Closed

“The company said the increase in operating loss includes the $102.2 million in non-cash impairment charges related to Tao Group Hospitality, its dining and nightlife unit that has had to temporarily shutter virtually all of its venues worldwide — in addition to one permanent closure.”

$90.2M Impairment Charge

Fiscal 2020 third quarter operating loss increased by $105.9 million to $107.6 million and adjusted operating income decreased by $16.8 million to a loss of $9.6 million, both as compared to the prior year period. 

When this deal was announced, I wrote an entire article of how ridiculous this was for Seeking Alpha here.

This was my conclusion:

One could argue that there are some synergies between MSG and a VIP level customer. My issue is one of judgment and stewardship of investor capital.

Of course, the experts in bottle service and restaurants, The TAO Group, were looking to sell.

Investors should be concerned that they know when things cannot get better for the bottle service niche.

Timing is everything

Relevant Articles:

45 Ways to Increase your Income

9 Best Ways to Save $7K This Year

7 Proven Books on Personal Finance to Take Control of Your Money

Apple and Amazon add nearly $2T in Market Cap in Four Months

Apple and Amazon are great businesses no doubt.

The move in Apple of 30% down and 114% up is beyond ridiculous. A two standard deviation move followed by a five standard deviation move. And since Apple is so heavily concentrated in the S&P 500, the indexes are miraculously back at ALL Time Highs.

However, the scale and magnitude of the moves off the bottom are historic and absurd. A side effect of the massive stimulus program supporting the stock market. (Including novice investors rushing into the market. More here).

Apple has seen its P/E explode while growth is relatively slow.  What a dangerous combination.

The case could be made for “stabilizing” the stock market. For supporting small businesses. For targeted aid. What we’ve seen is flooding of liquid public companies.

In July, the Fed bought up more bonds from blue-chip companies including Microsoft and Coca-Cola, while it added junk debt and made loans to a ski resort and casino in the Pocono Mountains. (CNBC)

Why is the Fed buying Apple bonds?

How do you rationalize that?

What is the purpose of that? Apple is such a blood thirsty company that they’re demanding rent reductions for their stores. From commercial real estate companies that really are hurting.

Relevant Articles:

45 Ways to Increase your Income

9 Best Ways to Save $7K This Year

7 Proven Books on Personal Finance to Take Control of Your Money

Negative Interest Rate Policy:  The Fed is flirting with Negative Interest Rate policy, a radical failed experiment everywhere it has been tried.

Japan’s stock market is flat for the last 30 years.  Their economy is irrelevant.  Their government owns their economy via ETF purchases.  Most international mutual funds and indexes do not even include Japan.  It is irrelevant.

For now, Powell is pushing back on the idea.

But his track record of bowing to the wishes of the President is pretty weak.

Stock Market to GDP:

Stock market capitalization now exceeds GDP which is one of many warning signs for this market. It happens to be one of Warren Buffett’s favorite stock market gauges.

See:  Is Buffett Buying Gold?

The “Buffett indicator” divides the combined market capitalization of publicly traded US companies by quarterly GDP. Right now it’s at 170%, which are levels we havent seen since 1999 and 2008.

The Stock Market is never easy

Its designed to Fool Most of the People Most of the Time

-Jesse Livermore

Well said