1. SEB - More at $2,230
2. ASHG - More at $236
3. WNC - More at $14.10
4. SCMR - Buy at $3.68
5. GNCI - Buy at $9.05
6. TGIS - Buy at $11.00
For anyone that actively and soundly invests (or even speculates) to build wealth has heard in passing: "The stock market is just like gambling." Initially, it is easy to defensively respond to statements with some resentment, but the reality is, there are many similarities. Anything can happen, as we can see. Unexpected buyouts, miracle turnarounds, indictments of fraud coming out of nowhere – and those all play into the gambling game of the stock market. Conversely, some sports gamblers or casino gamblers will actually claim that they can research the field and find hidden value the same way that investors claim they can do the same.
I have found, however, that what separates an investor from a gambler – whether it be the stock market or a sports game – is that the investor not only makes educated decisions with sound rationale, but also has an above average success rate in coming out on top (whether it be finding a winner, cutting losers before they become total wipe outs, etc.). More importantly, the investor will take the proceeds from a win and then promptly re-invest in another position, rather than spending the money. Sports and financial 'gamblers' alike will brag about their wins, take all of the money from the wins and spend it. Short and simple, no wealth is built as all gains are disbursed out and losses, which do happen, way hard on the total performance.
My point is that I consider myself an investor and on the heels of the $4.25 buy out offer on Inforte (NASDAQ: INFT), I am taking my gains and re-investing. With the markets at all time highs, everything seems expensive, and it is hard to find value. I hate to sound fearful or bearish, but the comments from Alan Greenspan about a strong chance of us hitting recession, the recent housing data announcement making an interest rate cut unlikely, and seeing margin debt rise to levels higher than just before the 2001 market down-turn have me a little concerned about lofty valuations. Regardless, rather than sacrificing my gains to consumerism, here is the hand I will be playing next.
First, oldies but goodies.
Seaboard Corporation (AMEX: SEB)
Seaboard has had an amazing run the past several months, doubling from its Fall, 2006 lows. Back then, this one was a no-brainer, but now take a little more resolve. Seaboard has seen strong growth in its containerized cargo shipping division the past couple of years and there is no doubt that this sector has been hot. Seaboard continues to make strong capital investments in this unit and continues to maintain the efficacy of its other business lines. Off nearly 18% from its all-time high, I felt this was a good entry point to add to my position. At the close of trading on May 24, 2007, Seaboard was trading at less than 11x trailing earnings, 2.1x book value, and at less than 1.9x forward 12 months book value. An owner-friendly investment that retains much of their cash flow to fund their 20% return on equity business. I added to my position at $2,235 and I have a price target of $2,700-$2,900 per share.
Ash Grove Cement (Pink Sheets: ASHG)
Yes, this company trades on the Pink Sheets, which I know nobody really likes, but they are the 5th largest cement company in the USA and the largest American owned cement company in the country. Ash Grove Cement has committed $190M to increase capacity in its Arkansas cement plant by 70% and $250M to build only the 2nd cement plant in the state of Nevada. Ash Grove will also commit another $60M or so in 2007 to expand their cement capacity. I feel strongly that being the largest American owned cement plant will be critical in the future as cement demand increases not only domestically, but worldwide. With the growth of cement internationally expected to outpace growth in the USA over the coming years, I believe many of the international players will invest in foreign production and capacity. Of course, I would, too, but this puts the largest American player in a good position, and with the capacity, to become a more important supplier to meet the USA's substantial domestic need. Granted, I am not the cement company expert, but I do believe that the domestic vs. foreign demand issue has been somewhat overlooked. I first started my position in the Summer, 2005 at $160 per share and since then, have seen the stock rise $47% and seen the annual dividend increase by 10%. Going back further, the stock has done even better in terms of raising the dividend and providing appreciation to its owners. With the spread at $235 x $269, I have an order in to buy at $236. However, with the stock so thinly traded, I am not expecting a quick fill. Historically, I have watched the spread widen around dividend time – next ex-date is June 6, 2007 – and do expect offer price to come down post-dividend. Unfortunately, I have found on this one that if you want in, sometimes you just have to buy at the ask. It's no fun, but historically, I am glad I have done so. I do believe that upside exists to the $300-$320 range, but especially since the company does not announce financial results and is so thinly traded, patience is certainly a virtue.
Wabash National (NYSE: WNC)
One of my losers thus far, but there is value here. It will likely take several months for Wabash to see results show up in the stock price, but I believe it will happen. The stock is likely trading towards the lower end of its range and should be buoyed by the company's buy back program and some big purchases by 14% holder and heralded value/contrarian/cyclical investor, Tontine Capital Partners. The limited downside from here inclines me to add more to my position - but I will wait a little longer as the stock is up 2.8% today to $14.58 in relatively light volume. I have a target of $19-$23 and I expect Wabash to hit that in the next 12-18 months as the market for their products turns around in late 2007/early 2008, they show stronger margins in the face of growth due to their new ERP system, and see the nearly 4M shares short be forced to cover. In the meantime, this might be a long ride as the general sentiment about the industry is overwhelming negative.
New finds include:
Sycamore Networks (NASDAQ: SCMR)
This has been a storied stock its entire life on the NASDAQ. Unfortunately, it has not been a good story for most investors. The company makes networking hardware and equipment, which certainly is not very exciting and has much negativity surrounding it. Sycamore is currently delinquent in its SEC filings due to the notorious options back-dating situation. Such scandal is never a good thing from the appearance of things, but will have no cash impacts on their books. Sycamore currently has about $915M in cash, or about $3.28 per share. That is about 90% of their current market cap of just over $1B. More importantly, Sycamore has shown signs of life and reported a nearly 100% increase in sales, primarily due to an acquisition. I like the cash protecting from downside risk, signs of sales growth, and one of their core products serving the MSO/Cable companies, especially as it pertains to the new digital voice/digital phone service that runs over your cable infrastructure. Comcast, Charter, Cablevision, and Time Warner have all reported strong growth in the digital telephony arena and will need hardware to handle the traffic. Granted, Sycamore competes in a competitive landscape with companies like Cisco in the mix, but I am in at $3.68 with a price target of $4.75-$5.75 in the next 9-12 months – perhaps on an acquisition.
Gencor Industries, Inc. (OTC BB: GNCI)
A small manufacturer of construction equipment and machinery, particularly that serves the highway-construction industry. Gencor also makes equipment that has exposure to the environmental control and synthetic fuel arenas. Gencor is a partner in a joint-venture and receives royalty payments, albeit not material, but growing, for production of synthetic fuels. Gencor is trading near its 52-week low as it enters the historically slower 3rd and 4th quarters. The company is small with only $73M in sales. Gencor has no debt, $52M of cash and cash equivalents, which is about 60% of its market cap, and EV/EBITDA is 1.7. Compare the latter ratio to competitors, such as Astec Industries and its 10.8 EV/EBITDA, and there appears to be some value. Individual investor Lloyd Miller III has bought 72,500 shares since March 22, 2007 and now owns nearly 907,000 shares, which is roughly 10% of the company. A strange ownership structure with Class B shares, small float, and thinly traded status makes it hard to determine where this one could go. $9.05 is a good entry point and I think that Gencor should be trading closer to $16-$18, but its market dynamics may not allow that.
Thomas Group, Inc. (NASDAQ: TGIS)
Thomas Group is a very reputable consulting firm that has no debt, pays a dividend yield of nearly 4%, and is cash flow positive. Ratios, for the most part, show that Thomas Group is not cheap: 2x sales, 6x book value, 11x levered free cash flow. However, this company has a strong track record of success and its P/E is far lower than its peer companies. Only 3M of its 10.8M shares are in the public float, so the stock has the tendency to be volatile – in either direction, of course. The stock is trading a little under $11.00 which I feel is a good entry point. It recently traded as low as $9 in early May, 2007 and traded there in June, 2006 and August, 2006 – and bounced quickly up each time. We have seen a double-top at around $16 twice in 2006, but could we have the triple bottom at $9? Stock stands to get back to $16 and perhaps higher if they continue to show good numbers, but first will need to break through the $12 resistance. This one is more of a technical play than a fundamentals play, but it is likely not going any lower than $9-$10 and has a very strong chance, with a lot of rationale behind it, to move up to $15-$16. Enter under $11 and price target is $15.
Simplistically, I am looking for value to hedge against the lofty valuations we are currently seeing and I am strengthening my positions in those that the fundamental reasons why I bought in the first place have not changed.
Showing posts with label wnc. Show all posts
Showing posts with label wnc. Show all posts
Friday, May 25, 2007
Wednesday, May 2, 2007
Wabash National (NYSE: WNC) - Washed Out on Earnings Report
On Monday after the market close, Wabash National (NYSE: WNC) a maker of truck trailers (and unfortnately one of my holdings) reported earnings for 1Q 2007. Analysts estimated WNC to post EPS of $0.08 per share with the range going from $0.05-$0.13. WNC came in at $0.03 per share.
Although the weakness in their numbers was not unexpected per the general market conditions, the stock price was slammed and dropped over 7% on the heaviest volume since August, 2006 to close at $14.22. Needless to say, I was not a happy camper, but my long-term stance and prospects on the stock has not changed. Granted, it would be nice for it to go up and up everyday, but that is just not reality.
When I first bought WNC back in late 2006, I knew it was going to be several months before WNC could get things back in order. Of course, I was hoping for things to start to show signs of life earlier, at least in the stock price, sooner rather than later, but that has not been the case thus far.
The short-term outlook for WNC and the industry does not look great and it has reflected in the stock price, but after listening to the conference call and reading the 10Q report, I still believe that long term, WNC is a winner. It would just be nice for it to be a winner sooner rather than later, but sometimes, it can take up to a couple of years for things to turn around in the marketplace.
Anyway, here is my take on the situation - both arguments for and against owning WNC.
AGAINST
1. Weak Market
2. Price Pressure from China
FOR
1. WNC Backlog Remains Strong
Despite a weak market, WNC continues to book orders and their back log is about 8% higher than 90 days ago. Backlog is defined as signed, committed orders that have not yet been delivered or invoiced, so they cannot be booked as revenue. WNC continues to build on their backlog and generate increased quote activity. The current market activity has delayed the fulfillment and formal delivery of some of these orders, but WNC and myself are both confident the majority of the backlog will be fulfilled within the next 12 months. WNC has already booked 75% of its 2007 target, so that is a positive prospect.
2. WNC Share Repurchase Program
WNC repurchased an additional 218,600 shares during the 1Q 2007 under their authorized share buy back program. WNC has the ability to repurchase up to $32.8M worth of additional stock in open market or private transactions. I do expect WNC to 100% complete this buy back effort and likely purchase another 2,000,000 (approximately) shares over the course of the plan. WNC has already repurchased over 1.1M shares under the current plan. Short-term, the buying back of the stock likely will not directly have much impact on the stock price, but this is a great way to reward shareholders and I believe in the long-term, this will make to be a good use of corporate funds and should ultimately reward shareholders by reducing the number of shares outstanding.
3. Market Geared to Turnaround in Mid/Late 2007 and 2008
Industry trends show that the market for trailers should start to see double digit growth in 2008 when compared to 2007 in terms of # of units ordered/shipped. I do believe that the transportation, especially when it comes to things like railroads, trucking, etc. should start to turnaround strongly within the next several months. The housing slowdown has been problematic for demand of shipping raw materials and goods, much of it done by truck and rail, so naturally, those industries have seen weakness. However, Warren Buffet has recently become a big believer of infrastructure plays in the USA.
4. WNC Customers Responding Positively to Price Changes
Although pricing is a big concern, especially with cost of commodities and raw materials going up and pressure from China manufacturing, WNC has not faced much push back. In fact, WNC has actually raised prices to customers, and it has not scared many customers off. Of course, at some point, things get too expensive, but it appears WNC is leveraging their strong tradition in the USA and placing more emphasis on higher-margin projects and items.
5. WNC - $1M Delayed Charge Impact to Earnings
There was a note of a $1M charge taken by WNC in 1Q 2007 related to some clean up from late 2006. Adding that figure back into earnings and eliminating the extraordinary blizzard event that shut down production for several days, WNC would have been right inline, or at least very close, with analyst expectations.
Anyway, despite the above, the reality is at this stage, both myself and Gendell are not looking like the brightest investors around, but WNC is going to take some more time to materialize. This one is going to need another 12-18 months, but we will see upside earnings surprise and when that happens, especially with the huge amount of shares short that will need to be covered, $23-$28 is going to happen.
Although the weakness in their numbers was not unexpected per the general market conditions, the stock price was slammed and dropped over 7% on the heaviest volume since August, 2006 to close at $14.22. Needless to say, I was not a happy camper, but my long-term stance and prospects on the stock has not changed. Granted, it would be nice for it to go up and up everyday, but that is just not reality.
When I first bought WNC back in late 2006, I knew it was going to be several months before WNC could get things back in order. Of course, I was hoping for things to start to show signs of life earlier, at least in the stock price, sooner rather than later, but that has not been the case thus far.
The short-term outlook for WNC and the industry does not look great and it has reflected in the stock price, but after listening to the conference call and reading the 10Q report, I still believe that long term, WNC is a winner. It would just be nice for it to be a winner sooner rather than later, but sometimes, it can take up to a couple of years for things to turn around in the marketplace.
Anyway, here is my take on the situation - both arguments for and against owning WNC.
AGAINST
1. Weak Market
2. Price Pressure from China
FOR
1. WNC Backlog Remains Strong
Despite a weak market, WNC continues to book orders and their back log is about 8% higher than 90 days ago. Backlog is defined as signed, committed orders that have not yet been delivered or invoiced, so they cannot be booked as revenue. WNC continues to build on their backlog and generate increased quote activity. The current market activity has delayed the fulfillment and formal delivery of some of these orders, but WNC and myself are both confident the majority of the backlog will be fulfilled within the next 12 months. WNC has already booked 75% of its 2007 target, so that is a positive prospect.
2. WNC Share Repurchase Program
WNC repurchased an additional 218,600 shares during the 1Q 2007 under their authorized share buy back program. WNC has the ability to repurchase up to $32.8M worth of additional stock in open market or private transactions. I do expect WNC to 100% complete this buy back effort and likely purchase another 2,000,000 (approximately) shares over the course of the plan. WNC has already repurchased over 1.1M shares under the current plan. Short-term, the buying back of the stock likely will not directly have much impact on the stock price, but this is a great way to reward shareholders and I believe in the long-term, this will make to be a good use of corporate funds and should ultimately reward shareholders by reducing the number of shares outstanding.
3. Market Geared to Turnaround in Mid/Late 2007 and 2008
Industry trends show that the market for trailers should start to see double digit growth in 2008 when compared to 2007 in terms of # of units ordered/shipped. I do believe that the transportation, especially when it comes to things like railroads, trucking, etc. should start to turnaround strongly within the next several months. The housing slowdown has been problematic for demand of shipping raw materials and goods, much of it done by truck and rail, so naturally, those industries have seen weakness. However, Warren Buffet has recently become a big believer of infrastructure plays in the USA.
4. WNC Customers Responding Positively to Price Changes
Although pricing is a big concern, especially with cost of commodities and raw materials going up and pressure from China manufacturing, WNC has not faced much push back. In fact, WNC has actually raised prices to customers, and it has not scared many customers off. Of course, at some point, things get too expensive, but it appears WNC is leveraging their strong tradition in the USA and placing more emphasis on higher-margin projects and items.
5. WNC - $1M Delayed Charge Impact to Earnings
There was a note of a $1M charge taken by WNC in 1Q 2007 related to some clean up from late 2006. Adding that figure back into earnings and eliminating the extraordinary blizzard event that shut down production for several days, WNC would have been right inline, or at least very close, with analyst expectations.
Anyway, despite the above, the reality is at this stage, both myself and Gendell are not looking like the brightest investors around, but WNC is going to take some more time to materialize. This one is going to need another 12-18 months, but we will see upside earnings surprise and when that happens, especially with the huge amount of shares short that will need to be covered, $23-$28 is going to happen.
Wednesday, February 21, 2007
NBG - Financial Results; ASHG Acting Up; Other Notes; Lessons Learned
This morning, National Bank of Greece (NYSE: NBG) posted their 2006 financial results. Results were very impressive. Net income rose 36% from 2005 to $1.29B. Results were towards the upper end of the analyst estimate range, but fell short of the high estimate by about 1%. Hence, the stock did not blow up today, but actually did end close up by a modest 0.3% after spending most of the day in the red. This activity is not uncommon. The financial results of NBG were being watched like a hawk by the world marketplace and anticipating a very strong showing. The market then 'prices' this activity in for the most part, so if it ends up where everyone thought it was going to go, it tends to not move much or even decline, sometimes sharply. Tomorrow, on Feb. 22, NBG, will be presenting its 2007-2009 3 year outlook, which is supposed to continue to be very positive as already indicated by NBG, though we will not see full details until tomorrow. Long term, NBG is a great buy and when I say long term, I could be talking several years and I do not believe it will disappoint in 2007. While I do not see a double in 2007, I think NBG getting to $14-$16 sometime before the end of the year is possible. I am considering adding to my position.
It is officially dividend time for Ash Grove Cement (Pink Sheets: ASHG). This stock does not trade very often or at least post trades. I think that this stock trades daily behind the scenes, but the market makets will only post a trade in 100+ share blocks. So, I often think the 100 share blocks is a consolidated trade posting of many small trades. Anyway, activity always picks up around dividend time, which is the first week of March. ASHG is pretty sneaky about this - I am able to see their dividend declaration information at www.pinksheets.com, but it is not anywhere else to be seen. For 2007, dividend is $0.42 per share, a 5% increase over 2006, so that is good stuff.
Anyway, although trades may not occur, the inside market, or bid vs. ask spread, will sometimes change during the day. This is indicative of someone stepping in to buy or perhaps some trades took place behind the scenes and are not yet posted. There are very, very few shares out there, so 5-10 share trades, that seem to be invisible to the market, can effect the spread. I know this because I have personally experienced and seen this first hand. So, yesterday, Feb 20, ASHG opened up the morning at $217 x $220. During a meeting at work, I noticed the spread ticked up as high as $250 x $350!!! I almost lost it and took every ounce of sanity to keep my clothes on and to restrain from humping the desk.
Today, the stock closed as $280 per share, up 24.4% to an all time high. The closing spread was $240 x $272.50 (the bid ticked up from $230 to $240 in some small increments through the day) and the only trade that posted was 125 shares at $295. Now, I have seen the inside market change with some rigor during dividend times, but NEVER like this in the nearly 2 years I have owned and followed this security.
I think this one will pull back some post March dividend, but we will see. I still plan to add to my position, regardless, and somewhat regret not adding more than I did along the way, but again, it's always better to wish you bought more than wish you bought less! I am not sure what is in store for ASHG tomorrow or even for the rest of the year - I thought reaching $240 would take all year - I was wrong. Next year? Who knows....5 years? $700 per share. This is a fantastic retirement investment.
Seaboard Corporatiion (AMEX: SEB) had a very strong day. Up 2.6% to an all-time closing high of $2,154 and touched on an all time high of $2,190 today. Volume today was very strong - double than usual. I am not sure of the activity, but in 7-10 years, do not be surprised to see this one at $6,000-$8,000 per share. There is certainly long term value here and I am considering adding more to my position, but it's tough, because 1 share at this stage chews up $2,154 of capital, which is well, a lot. If I were to buy more, it would be for the real long haul. At some point, the appreciation on this one will have to take a breath and slow down, at least short term. I am trying to figure out what the deal is with this one in terms of the short-term activity and what is means long-term for the stock. Perhaps it is institutions loading up for the long haul as dry bulk shipping, one of SEB's divisions, was very hot today thanks to a mention on CNBC. There is no question SEB is going higher, but under what terms? Timeframe? Retracement? Short and sweet, I like the shareholders equity and cash this beast produces.
On other notes, I added to my positions in INFT at $3.57 and WNC at $16.99. INFT has disappointed me thus far, but it just has to go somewhere. I know, famous last words, but the last time I had that feeling, I was buying up shares of CECE at $3.75-$4.25. It took many years, and I was fortunate to start adding shares just in time, but the metrics said CECE absolutely had to go higher. It did...and ran to $12 last spring and today closed at an all time high of $17. I sold out last spring on the way up to $12.
Watching CECE today - I ALMOST jumped back in at $8-$9 several weeks ago, but I didn't. I wish I did, but honestly, the money I took out of CECE (and others that maybe I sold too soon) I put into other winners:
SVVS: in at $10, out at $17; now at $48.
ASTE: in at $23, out at $34; now at $39.
Thinking about this, did I miss the boat? Well, yes and no, but not really. I took the bulk of my CECE, SVVS, and ASTE proceeds and invested in big winners like ASHG, NBG, SEB and what will hopefully become big winners, like INFT and WNC. My patiences for investments has grown tremendously. I am amazed that I have held and accumulated ASHG for 20 months now, which is a world record for me. It is tough at a young age to have a huge time horizon mentality. Plus, with the in your face of 'gotta have it now' and my need to fend off my other situation, well, as much as I would have loved to have waited the extra year for CECE to turnaround, but honestly, last spring, I didn't have a year.
Going forward, it is important to look at the scope of your investments. Of course, you can never predict the market, but sometimes, bigger gains are out there if you can open your mindset to maybe waiting 3-5 years. I have somehow been able to do that with ASHG. I think part of that has to do with the lack of activity the stock has. Unlike other issues that move up and down, I am better able to keep the fear and greed out of my decision more than the others. Regardless, it is important to set your own price targets and goals - but more importantly, how long you are willing or might have to wait. Are you willing to wait 1 1/2 years for a 75% return? That is what it would have taken for ASHG. A 300% gain requires 18 months? Well, that is SVVS for you.
Opportunities for huge gains are out there, so look for them, and if you have to wait it out, then wait it out. Of course, never underestimate the power of taking profits and successfully re-investing the proceeds in other big winners. Plus, there is only so much capital to go around. If I would have kept my hands on CECE and didn't bother buying more ASHG or SEB, I'd be feeling just as silly, but, I'd really be in the same place I am now from a numbers standpoint.
Simplistically, if you take money out of an investment, make sure you have a solid purpose for it - specifically, another investment that you feel will perform well. If you sell, that's fine, just don't piss it away, because that is when seeing the stock 100% higher than you sold it at will get to you.
It is officially dividend time for Ash Grove Cement (Pink Sheets: ASHG). This stock does not trade very often or at least post trades. I think that this stock trades daily behind the scenes, but the market makets will only post a trade in 100+ share blocks. So, I often think the 100 share blocks is a consolidated trade posting of many small trades. Anyway, activity always picks up around dividend time, which is the first week of March. ASHG is pretty sneaky about this - I am able to see their dividend declaration information at www.pinksheets.com, but it is not anywhere else to be seen. For 2007, dividend is $0.42 per share, a 5% increase over 2006, so that is good stuff.
Anyway, although trades may not occur, the inside market, or bid vs. ask spread, will sometimes change during the day. This is indicative of someone stepping in to buy or perhaps some trades took place behind the scenes and are not yet posted. There are very, very few shares out there, so 5-10 share trades, that seem to be invisible to the market, can effect the spread. I know this because I have personally experienced and seen this first hand. So, yesterday, Feb 20, ASHG opened up the morning at $217 x $220. During a meeting at work, I noticed the spread ticked up as high as $250 x $350!!! I almost lost it and took every ounce of sanity to keep my clothes on and to restrain from humping the desk.
Today, the stock closed as $280 per share, up 24.4% to an all time high. The closing spread was $240 x $272.50 (the bid ticked up from $230 to $240 in some small increments through the day) and the only trade that posted was 125 shares at $295. Now, I have seen the inside market change with some rigor during dividend times, but NEVER like this in the nearly 2 years I have owned and followed this security.
I think this one will pull back some post March dividend, but we will see. I still plan to add to my position, regardless, and somewhat regret not adding more than I did along the way, but again, it's always better to wish you bought more than wish you bought less! I am not sure what is in store for ASHG tomorrow or even for the rest of the year - I thought reaching $240 would take all year - I was wrong. Next year? Who knows....5 years? $700 per share. This is a fantastic retirement investment.
Seaboard Corporatiion (AMEX: SEB) had a very strong day. Up 2.6% to an all-time closing high of $2,154 and touched on an all time high of $2,190 today. Volume today was very strong - double than usual. I am not sure of the activity, but in 7-10 years, do not be surprised to see this one at $6,000-$8,000 per share. There is certainly long term value here and I am considering adding more to my position, but it's tough, because 1 share at this stage chews up $2,154 of capital, which is well, a lot. If I were to buy more, it would be for the real long haul. At some point, the appreciation on this one will have to take a breath and slow down, at least short term. I am trying to figure out what the deal is with this one in terms of the short-term activity and what is means long-term for the stock. Perhaps it is institutions loading up for the long haul as dry bulk shipping, one of SEB's divisions, was very hot today thanks to a mention on CNBC. There is no question SEB is going higher, but under what terms? Timeframe? Retracement? Short and sweet, I like the shareholders equity and cash this beast produces.
On other notes, I added to my positions in INFT at $3.57 and WNC at $16.99. INFT has disappointed me thus far, but it just has to go somewhere. I know, famous last words, but the last time I had that feeling, I was buying up shares of CECE at $3.75-$4.25. It took many years, and I was fortunate to start adding shares just in time, but the metrics said CECE absolutely had to go higher. It did...and ran to $12 last spring and today closed at an all time high of $17. I sold out last spring on the way up to $12.
Watching CECE today - I ALMOST jumped back in at $8-$9 several weeks ago, but I didn't. I wish I did, but honestly, the money I took out of CECE (and others that maybe I sold too soon) I put into other winners:
SVVS: in at $10, out at $17; now at $48.
ASTE: in at $23, out at $34; now at $39.
Thinking about this, did I miss the boat? Well, yes and no, but not really. I took the bulk of my CECE, SVVS, and ASTE proceeds and invested in big winners like ASHG, NBG, SEB and what will hopefully become big winners, like INFT and WNC. My patiences for investments has grown tremendously. I am amazed that I have held and accumulated ASHG for 20 months now, which is a world record for me. It is tough at a young age to have a huge time horizon mentality. Plus, with the in your face of 'gotta have it now' and my need to fend off my other situation, well, as much as I would have loved to have waited the extra year for CECE to turnaround, but honestly, last spring, I didn't have a year.
Going forward, it is important to look at the scope of your investments. Of course, you can never predict the market, but sometimes, bigger gains are out there if you can open your mindset to maybe waiting 3-5 years. I have somehow been able to do that with ASHG. I think part of that has to do with the lack of activity the stock has. Unlike other issues that move up and down, I am better able to keep the fear and greed out of my decision more than the others. Regardless, it is important to set your own price targets and goals - but more importantly, how long you are willing or might have to wait. Are you willing to wait 1 1/2 years for a 75% return? That is what it would have taken for ASHG. A 300% gain requires 18 months? Well, that is SVVS for you.
Opportunities for huge gains are out there, so look for them, and if you have to wait it out, then wait it out. Of course, never underestimate the power of taking profits and successfully re-investing the proceeds in other big winners. Plus, there is only so much capital to go around. If I would have kept my hands on CECE and didn't bother buying more ASHG or SEB, I'd be feeling just as silly, but, I'd really be in the same place I am now from a numbers standpoint.
Simplistically, if you take money out of an investment, make sure you have a solid purpose for it - specifically, another investment that you feel will perform well. If you sell, that's fine, just don't piss it away, because that is when seeing the stock 100% higher than you sold it at will get to you.
Sunday, February 18, 2007
The Lost Art of Ownership
"Well, I appreciate the opportunity you're giving me Mr. Cromwell as the single largest shareholder in Teldar Paper, to speak....Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake....You own the company. That's right, you, the stockholder."
For those of you that have seen Wall Street, you will know the above is the scene were Gordon Gekko is addressing the shareholders at the company's annual meeting.
Today, at 2pm, I will be at the annual meeting at the Pelican Yacht Club in Fort Pierce. Granted, this is nothing to compare to say the huge annual meetings of companies like Warren Buffet's Berkshire Hathaway or other large American entities like Disney, Ford, etc. But, nevertheless, it is an annual meeting, and it is the same principle. The board of directors will provide a year in review for 2006 and discuss the goals and challenges for 2007. The board of directors will be addressing the members - members who actually are sharholders and own a share of the corporation that is the Pelican Yacht Club. Granted, this is a little different as there are no dividends, stock splits, etc., but regardless, the people at this meeting are owners. Unfortunately, the vast majority of the owners will not be present. Of the 350 or so owners, I estimate maybe 100, tops, will be represented in person or via proxy.
I think today the art of ownership is lost - or at least misunderstood. I am guilty of this myself, too, on many levels, but when you purchase shares of stock in a company on the stock market - any company big or small - you become an owner. That purchase makes you an owner of the company, just as if you owned your own company. You are legally entitled to all sorts of privileges, such as the right to vote, rights to profits. Also, as an owner, you also have responsibilities, such as to learn as much about the company as you possibly can - remember, your money is at stake.
The other day, I was in the car on I-95 and passed a semi-truck. On the rubber flaps that are behind the tires, I was astonished to see the logo of Wabash National (NYSE: WNC) on the flaps. It told me that the the trailer hitched on the rig was made by Wabash National. Since then, I have seen several trucks with this same characteristic. Why should I be surprised? I shouldn't be. WNC is the #1 manufacturer of truck trailers in the country and an acquisition during 2006 of the #10 manufacturer only strengthens their position. So, from a probability stand point, I should see more Wabash National trailers than any other individual trailer manufacturer.
Seeing the logo, I felt pretty good about my position in WNC. From a performance standpoint, only time will tell if it was a good decision to buy (it appears to be so far), but I recognized the logo and felt good about it. I felt that I took pride in my ownership of WNC and that I understood it. Who knows how many WNC trucks I have seen through the years, but just was not paying attention. Now I am and I felt good about being an owner - being entitled to company dividends, sharing in the success and rewards as the company does well, and being like..."hey, my company made that trailer."
In the previous sentence, the latter may be a little zealous, but I think we have to think that way. I think we have to get beyond thinking that a share of stock is a piece of paper that has an arbitrary value that goes up or down. Sure, we all want our stocks to go up because we want to own something that increases in value over time. But, owning a stock should not be looked at as only having the right to sell it when you feel like it or when it reaches a certain price. Yes, we are all stewards of our own little nest eggs, regardless of how big or small, and we have the responsibility to make good financial decisions, but owning stock is far more than "buy low, sell high."
I think of companies in my portfolio like Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheet: ASHG). The founding families of these companies own huge blocks of the company. I estimate that the Bresky family controls 70%-80% of SEB stock and that the Sunderlands control anywhere from 80%-90% of ASHG. The latter is difficult to figure out because they not required to report ownership, but SEB is more clear. Additionally, in both cases, I suspect that both companies and families purchase additional shares of the company's stock on the open market or in private transactions and are further willing to buy what you are selling.
SEB, for instance, since they have to file with the SEC and information is more readily available. The founding family's stake is worth about $1.8B. However, they don't sell it. The CEO, Steven Bresky and member of the founding family makes a $1.5M/year salary and the Bresky family takes home about $2.6M in dividends. So, yes, that is a ton of money, but $4.1M per year is only about 0.2% of their entire SEB worth. The situation at ASHG is likely very similar, though I do not have exact #'s. The point is, nearly of the families sell their stock to buy big houses, big lifestyle, etc. They maintain their ownership where it is at, even acquire more - despite them not having access to that full amount of cash and fronting their own cash to buy more.
The above stories are a little extreme, but compare to the other extreme, say at our company in Vero Beach. Most everyone who works there owns shares of stock and/or stock options. I am towards the upper end of the spectrum in terms of # of shares I own, which is nice, though the shares are worthless. However, not a day goes by where a discussion of "I can't wait for the company to sell so I can dump my shares" comes up. Understood - you have to diversify and god knows I'd be likely to do the same under the same circumstances, but what happened to valuing the ownership? Why would anyone want to buy the shares from you if they know all you care about is getting rich off them and selling them to build a big house, buy a fancy car, etc. My question is, where is the honor and pride of ownership anymore?
Yes, in any given time frame, whether it be 1 month, 1 year, 10 years, or 100 years, there will always be one stock or company that does the best in terms of providing returns to shareholders. Someone has to be #1 and I think often, especially with the greed that circles around the stock market, we feel we have to be #1 all of the time. So, people move their money around from stock to stock - forgetting the art of ownership. But, even saying being the #100 performing stock of 2006 is pretty good about still puts you in the top 1% Even if your stock you owned was the #1000 performer, you would still be doing very well in terms of building wealth.
So, yes, we are here in the stock market to make money, but the #1 thing to remember is that you are an owner, so act like one. Understand where your money is because your money is at stake. Participate in annual meetings - submit your ideas and proposals to the board of directors, though do so with tact and informed expression.
There is nothing worse than the guy with 10 shares at the Ford annual meeting that just crassly screams out "RAISE THE DIVIDEND". Trust me - this happens - I have been to the Harbor Federal (now National City, NYSE: NCC) annual meetings. Dividends are great, yes, as they are returns of actual cash to the investors and owners - but, if the board feels that money can be better used by re-purchasing stock or retaining for acquisitions or other corporate purposes, then so be it. If you want more dividends, write a business case as to why you feel the cash can do better if in the hands of the owners (shareholders) rather than the company and acquire support for it, whether it be by lobbying the board members, other stockholders, or just buying all of the stock yourself.
Make the most of your ownership rights. You don't have to go crazy, but at the very least, participate in elections of directors, proxy statements (if you cannot physically attend the meeting), and act like an owner. It's hard to do all the time, especially as a stock goes down or up, but it's a good thing to keep in the back of your mind.
For those of you that have seen Wall Street, you will know the above is the scene were Gordon Gekko is addressing the shareholders at the company's annual meeting.
Today, at 2pm, I will be at the annual meeting at the Pelican Yacht Club in Fort Pierce. Granted, this is nothing to compare to say the huge annual meetings of companies like Warren Buffet's Berkshire Hathaway or other large American entities like Disney, Ford, etc. But, nevertheless, it is an annual meeting, and it is the same principle. The board of directors will provide a year in review for 2006 and discuss the goals and challenges for 2007. The board of directors will be addressing the members - members who actually are sharholders and own a share of the corporation that is the Pelican Yacht Club. Granted, this is a little different as there are no dividends, stock splits, etc., but regardless, the people at this meeting are owners. Unfortunately, the vast majority of the owners will not be present. Of the 350 or so owners, I estimate maybe 100, tops, will be represented in person or via proxy.
I think today the art of ownership is lost - or at least misunderstood. I am guilty of this myself, too, on many levels, but when you purchase shares of stock in a company on the stock market - any company big or small - you become an owner. That purchase makes you an owner of the company, just as if you owned your own company. You are legally entitled to all sorts of privileges, such as the right to vote, rights to profits. Also, as an owner, you also have responsibilities, such as to learn as much about the company as you possibly can - remember, your money is at stake.
The other day, I was in the car on I-95 and passed a semi-truck. On the rubber flaps that are behind the tires, I was astonished to see the logo of Wabash National (NYSE: WNC) on the flaps. It told me that the the trailer hitched on the rig was made by Wabash National. Since then, I have seen several trucks with this same characteristic. Why should I be surprised? I shouldn't be. WNC is the #1 manufacturer of truck trailers in the country and an acquisition during 2006 of the #10 manufacturer only strengthens their position. So, from a probability stand point, I should see more Wabash National trailers than any other individual trailer manufacturer.
Seeing the logo, I felt pretty good about my position in WNC. From a performance standpoint, only time will tell if it was a good decision to buy (it appears to be so far), but I recognized the logo and felt good about it. I felt that I took pride in my ownership of WNC and that I understood it. Who knows how many WNC trucks I have seen through the years, but just was not paying attention. Now I am and I felt good about being an owner - being entitled to company dividends, sharing in the success and rewards as the company does well, and being like..."hey, my company made that trailer."
In the previous sentence, the latter may be a little zealous, but I think we have to think that way. I think we have to get beyond thinking that a share of stock is a piece of paper that has an arbitrary value that goes up or down. Sure, we all want our stocks to go up because we want to own something that increases in value over time. But, owning a stock should not be looked at as only having the right to sell it when you feel like it or when it reaches a certain price. Yes, we are all stewards of our own little nest eggs, regardless of how big or small, and we have the responsibility to make good financial decisions, but owning stock is far more than "buy low, sell high."
I think of companies in my portfolio like Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheet: ASHG). The founding families of these companies own huge blocks of the company. I estimate that the Bresky family controls 70%-80% of SEB stock and that the Sunderlands control anywhere from 80%-90% of ASHG. The latter is difficult to figure out because they not required to report ownership, but SEB is more clear. Additionally, in both cases, I suspect that both companies and families purchase additional shares of the company's stock on the open market or in private transactions and are further willing to buy what you are selling.
SEB, for instance, since they have to file with the SEC and information is more readily available. The founding family's stake is worth about $1.8B. However, they don't sell it. The CEO, Steven Bresky and member of the founding family makes a $1.5M/year salary and the Bresky family takes home about $2.6M in dividends. So, yes, that is a ton of money, but $4.1M per year is only about 0.2% of their entire SEB worth. The situation at ASHG is likely very similar, though I do not have exact #'s. The point is, nearly of the families sell their stock to buy big houses, big lifestyle, etc. They maintain their ownership where it is at, even acquire more - despite them not having access to that full amount of cash and fronting their own cash to buy more.
The above stories are a little extreme, but compare to the other extreme, say at our company in Vero Beach. Most everyone who works there owns shares of stock and/or stock options. I am towards the upper end of the spectrum in terms of # of shares I own, which is nice, though the shares are worthless. However, not a day goes by where a discussion of "I can't wait for the company to sell so I can dump my shares" comes up. Understood - you have to diversify and god knows I'd be likely to do the same under the same circumstances, but what happened to valuing the ownership? Why would anyone want to buy the shares from you if they know all you care about is getting rich off them and selling them to build a big house, buy a fancy car, etc. My question is, where is the honor and pride of ownership anymore?
Yes, in any given time frame, whether it be 1 month, 1 year, 10 years, or 100 years, there will always be one stock or company that does the best in terms of providing returns to shareholders. Someone has to be #1 and I think often, especially with the greed that circles around the stock market, we feel we have to be #1 all of the time. So, people move their money around from stock to stock - forgetting the art of ownership. But, even saying being the #100 performing stock of 2006 is pretty good about still puts you in the top 1% Even if your stock you owned was the #1000 performer, you would still be doing very well in terms of building wealth.
So, yes, we are here in the stock market to make money, but the #1 thing to remember is that you are an owner, so act like one. Understand where your money is because your money is at stake. Participate in annual meetings - submit your ideas and proposals to the board of directors, though do so with tact and informed expression.
There is nothing worse than the guy with 10 shares at the Ford annual meeting that just crassly screams out "RAISE THE DIVIDEND". Trust me - this happens - I have been to the Harbor Federal (now National City, NYSE: NCC) annual meetings. Dividends are great, yes, as they are returns of actual cash to the investors and owners - but, if the board feels that money can be better used by re-purchasing stock or retaining for acquisitions or other corporate purposes, then so be it. If you want more dividends, write a business case as to why you feel the cash can do better if in the hands of the owners (shareholders) rather than the company and acquire support for it, whether it be by lobbying the board members, other stockholders, or just buying all of the stock yourself.
Make the most of your ownership rights. You don't have to go crazy, but at the very least, participate in elections of directors, proxy statements (if you cannot physically attend the meeting), and act like an owner. It's hard to do all the time, especially as a stock goes down or up, but it's a good thing to keep in the back of your mind.
Tuesday, February 13, 2007
Wabash National (NYSE: WNC) - Earnings Report
WNC, one of my holdings, announced their financial results for the 4Q 2006 and FY 2006 yesterday. This morning, I listened in on the company's conference call. The actual financial results were a little disappointing, though inline with expectations, but the conference call shed new light and I may add to my position.
WNC announced a net loss of $0.16 per share - excluding extraordinary items, they would have had a net income of $0.16 per share, which is right in line with analyst expectations. It is no secret that WNC has had a rough past year, and it has shown in the stock price. However, this is part of the reason why I like WNC - the worst seems to be in the past and already reflected in the stock price. This is good because as I have said before, the street is already expecting poor performance, so any 'meeting' expectations or downside surprise should have limited effect on the stock price. Furthermore, there is certainly a floor on this one as indicated by insider purchases by some of the officers as well as value investor and 10%+ holder, Gendell.
Some things I liked in the conference call....
1. Expenditures in the past.
In 2006, WNC spent a great deal of time and money on integrating an acquisition and a new ERP system to help counter increasing pricing pressure from suppliers and commodities. These two items were central factors in a poor 2006 for WNC and the expense is in the past and the foundation is laid for WNC to reap rewards from these developments.
2. Lots of Growth
WNC commented on lots of areas of higher-margin business sector growth. Their whole industry is not very exciting and under some pressure, but in many of WNC's new strategic avenues, they are seeing growth and new customers.
3. Share Buy Back
WNC bought back 700,000+ of their own shares during 4Q 2006 - average price less than $15 per share. This also serves as support as I imagine the buy back of WNC stock will continue. Most of this buy back took place towards the end of 4Q 2006, so we won't see this impact EPS #'s until 1Q 2007.
4. Huge Short Interest
Lots of short sellers out there and it would take 17+ days of trading at WNC average volume to cover the short positions. WNC is not going any lower, at least not significantly lower. I know, famous last words, but if WNC is to get their act together and put together a strong upside quarter, which I believe is at least 2Qs away, WNC will run and the shorts will be forced to cover, providing further buying pressure and further driving the stock up.
I also believe that lower oil prices will free up more money for trucking companies so they can purchase WNC products and we should see some good growth in trucking services over the next couple of years, likely starting in the summer of 2007.
This one is likely worth around $18-$19 today - and should reach $23-$25 within the next 12 months, and I figure that a great deal of that appreciation will take place during a very short period of time. I plan to add more to my position on weakness and collect the small dividend during the wait. It's a boring industry, but there are a great deal of dynamics here that could make WNC a big winner in late 2007. Of course, no promises, and WNC may remain in the weeds for a while, but I don't think we have a loser here - and the downside from $16 is $2-$3 per share and we have an update if $8-$10 per share....not a bad deal.
WNC announced a net loss of $0.16 per share - excluding extraordinary items, they would have had a net income of $0.16 per share, which is right in line with analyst expectations. It is no secret that WNC has had a rough past year, and it has shown in the stock price. However, this is part of the reason why I like WNC - the worst seems to be in the past and already reflected in the stock price. This is good because as I have said before, the street is already expecting poor performance, so any 'meeting' expectations or downside surprise should have limited effect on the stock price. Furthermore, there is certainly a floor on this one as indicated by insider purchases by some of the officers as well as value investor and 10%+ holder, Gendell.
Some things I liked in the conference call....
1. Expenditures in the past.
In 2006, WNC spent a great deal of time and money on integrating an acquisition and a new ERP system to help counter increasing pricing pressure from suppliers and commodities. These two items were central factors in a poor 2006 for WNC and the expense is in the past and the foundation is laid for WNC to reap rewards from these developments.
2. Lots of Growth
WNC commented on lots of areas of higher-margin business sector growth. Their whole industry is not very exciting and under some pressure, but in many of WNC's new strategic avenues, they are seeing growth and new customers.
3. Share Buy Back
WNC bought back 700,000+ of their own shares during 4Q 2006 - average price less than $15 per share. This also serves as support as I imagine the buy back of WNC stock will continue. Most of this buy back took place towards the end of 4Q 2006, so we won't see this impact EPS #'s until 1Q 2007.
4. Huge Short Interest
Lots of short sellers out there and it would take 17+ days of trading at WNC average volume to cover the short positions. WNC is not going any lower, at least not significantly lower. I know, famous last words, but if WNC is to get their act together and put together a strong upside quarter, which I believe is at least 2Qs away, WNC will run and the shorts will be forced to cover, providing further buying pressure and further driving the stock up.
I also believe that lower oil prices will free up more money for trucking companies so they can purchase WNC products and we should see some good growth in trucking services over the next couple of years, likely starting in the summer of 2007.
This one is likely worth around $18-$19 today - and should reach $23-$25 within the next 12 months, and I figure that a great deal of that appreciation will take place during a very short period of time. I plan to add more to my position on weakness and collect the small dividend during the wait. It's a boring industry, but there are a great deal of dynamics here that could make WNC a big winner in late 2007. Of course, no promises, and WNC may remain in the weeds for a while, but I don't think we have a loser here - and the downside from $16 is $2-$3 per share and we have an update if $8-$10 per share....not a bad deal.
Wednesday, December 6, 2006
Wabash National (NYSE: WNC)
Another day, a new stock has caught my eye and I have taken a position. Wabash National Corp. (NYSE: WNC) at $15.01 per share. I bought a few shares and some of the July 2007 $17.50 calls/options.
This is likely not a home run, but Jeffrey Gendell, the same value investor who brought us (well me) the likes of CECE, ASTE, and IOSP (missed the boat on that one, though I did call it), has shown up by annoucing his 10%+ position last week and subsequently purchasing another 136,600 shares on the open market. His track record is strong and WNC appears it has an above average chance to reach $20-$25 in the next 6-12 months.
The company manufacturers truck trailers and more information can be found on their web site at http://www.wabashnational.com/.
The company has been out of favor, citing some tough times with getting enough supplies to fill orders, some costs to launching their new ERP system, and general market conditions.
Regardless, revenue for the company was up and it appears the bad news is already priced into the company.
Short and sweet, it seems that their new ERP program may alleviate some of the supply problems they have faced. They also continue to secure new accounts. Trucking is here to stay and demand will continue to be placed on this industry to deliver the goods and raw materials we use everyday. Furthermore, it appears that the company is well on its way to correcting some of their intrinsic problems they faced that led to this decline in overall income. The company trades at 1.6 times book value and 0.4 times sales, so there does appear there is some strong value to be had. The company also produces about $25M per year in free cash flow.
Again, this one is probably not a huge winner, but probably a relatively safe place to place your money and should yield a 50%+ return over the next 6-12 months. Plus, the fact that Gendell is loading up, and may continue to do so, is certainly a big plus. There is also a fair 1.2% dividend yield, though historically, it has been closer to 0.5% - so perhaps a double or even more is not out of the question.
Also, 10% of the outstanding shares are sold short - and with 12+ days on current average volume to fully cover those short positions, if the company does experience an upside, positive earnings announcement (which may be 2 or 3 quarters away), we could see return to a fair value and an additional boost from the short squeeze.
A similar thing appeared to happen to Powell Industries (NASDAQ: POWL) - another one of Gendell's holdings. Today, they announced strong upside earnings and the stock traded as high $29.39 before closing at $27.92 (up 16.7%). Part of the big gain was due to the surprise earnings and probably a fair portion was attributed to a short squeeze considering that not many shares are in the float and about 3% of their shares with a 9.9 short ratio (9.9 days to cover) was there.
Plus, WNC looks like it may benefit from what is called the January effect. Stocks that perform poorly during the year are often sold off in December to get some capital losses on a person's tax return. Often, people repurchase the shares sold off in the tax-loss selling in January, accounting for a burst upwards. That may or may not happen, but certainly a candidate to do so.
WNC is also well down from its January, 2004 highs of $30+ - partially attributed to how the high oil and gas prices impacted the transportation and trucking industry. With oil well off from its highs, appearing to stabilize, and the world getting used to $60+/bbl., business should very well start to flow again at WNC.
Double bottoms that occured in August 2006 also indicate that WNC is probably pretty close to the lower end of its trading range and likely is not going much lower than where it is today.
To sum up...
1. Most of bad news already priced in;
2. Gendell buying shares;
3. 10% of shares short - possible short squeeze on positive news;
4. Operational adjustments should help restore net income;
5. Great value at 1.6x book value, 0.4x sales, and $25M of FCF
This is likely not a home run, but Jeffrey Gendell, the same value investor who brought us (well me) the likes of CECE, ASTE, and IOSP (missed the boat on that one, though I did call it), has shown up by annoucing his 10%+ position last week and subsequently purchasing another 136,600 shares on the open market. His track record is strong and WNC appears it has an above average chance to reach $20-$25 in the next 6-12 months.
The company manufacturers truck trailers and more information can be found on their web site at http://www.wabashnational.com/.
The company has been out of favor, citing some tough times with getting enough supplies to fill orders, some costs to launching their new ERP system, and general market conditions.
Regardless, revenue for the company was up and it appears the bad news is already priced into the company.
Short and sweet, it seems that their new ERP program may alleviate some of the supply problems they have faced. They also continue to secure new accounts. Trucking is here to stay and demand will continue to be placed on this industry to deliver the goods and raw materials we use everyday. Furthermore, it appears that the company is well on its way to correcting some of their intrinsic problems they faced that led to this decline in overall income. The company trades at 1.6 times book value and 0.4 times sales, so there does appear there is some strong value to be had. The company also produces about $25M per year in free cash flow.
Again, this one is probably not a huge winner, but probably a relatively safe place to place your money and should yield a 50%+ return over the next 6-12 months. Plus, the fact that Gendell is loading up, and may continue to do so, is certainly a big plus. There is also a fair 1.2% dividend yield, though historically, it has been closer to 0.5% - so perhaps a double or even more is not out of the question.
Also, 10% of the outstanding shares are sold short - and with 12+ days on current average volume to fully cover those short positions, if the company does experience an upside, positive earnings announcement (which may be 2 or 3 quarters away), we could see return to a fair value and an additional boost from the short squeeze.
A similar thing appeared to happen to Powell Industries (NASDAQ: POWL) - another one of Gendell's holdings. Today, they announced strong upside earnings and the stock traded as high $29.39 before closing at $27.92 (up 16.7%). Part of the big gain was due to the surprise earnings and probably a fair portion was attributed to a short squeeze considering that not many shares are in the float and about 3% of their shares with a 9.9 short ratio (9.9 days to cover) was there.
Plus, WNC looks like it may benefit from what is called the January effect. Stocks that perform poorly during the year are often sold off in December to get some capital losses on a person's tax return. Often, people repurchase the shares sold off in the tax-loss selling in January, accounting for a burst upwards. That may or may not happen, but certainly a candidate to do so.
WNC is also well down from its January, 2004 highs of $30+ - partially attributed to how the high oil and gas prices impacted the transportation and trucking industry. With oil well off from its highs, appearing to stabilize, and the world getting used to $60+/bbl., business should very well start to flow again at WNC.
Double bottoms that occured in August 2006 also indicate that WNC is probably pretty close to the lower end of its trading range and likely is not going much lower than where it is today.
To sum up...
1. Most of bad news already priced in;
2. Gendell buying shares;
3. 10% of shares short - possible short squeeze on positive news;
4. Operational adjustments should help restore net income;
5. Great value at 1.6x book value, 0.4x sales, and $25M of FCF
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