Buy – Getty Realty Corp (GTY)

GETTY RLTY CORP (GTY)

Value opportunity. Getty Realty Corp. is the largest gas station-based real estate investment trust (REIT) in the United States They also lease petroleum distribution terminals. The Company’s properties are located in 21 states across the United States with concentrations in the Northeast and the Mid-Atlantic regions. They operate under Getty, BP, Exxon, Mobil, Shell, Chevron, Valero, Fina and Aloha.

The REIT owns the Getty trade name in connection with its real estate and the petroleum marketing business in the United States.

As of December 31, 2011, GTY owned 996 properties and leased 153 properties. In January 2011, it acquired fee or leasehold title to 59 Mobil-branded gasoline stations in a sale/leaseback and loan transaction with CPD NY Energy Corp.

It has also had to reposition its properties leased by Getty Oil, which declared bankruptcy and took 788 stores into that proceeding.

The large drop in income caused a temporary suspension of the dividend, which had been a cushy .48/share last June.   The properties have been repossessed and are now being released. There is interesting potential for dividend growth in this REIT stock as it returns to full health. The short-term yield is 2.63% but it has the potential to return to its 5.8% dividend once the inventory is re-leased.  This is a speculative investment in that one assumes that GTY will be able to re-lease all of the stations that were tied up the bankruptcy proceeding. MODEST BUY/ACCRUE.

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Buy on EXPEDITORS INTERNATIONAL OF WASHINGTON (EXPD)

EXPEDITORS INTERNATIONAL OF WASHINGTON (EXPD) – This is one of the few forward growth stock plays that we’re issuing, largely because of the unique parameters of EXPD’s high cash flow, low debt business model.

Expeditors International of Washington is a non-asset-based freight-forwarding and third-party logistics, or 3PL, provider.  It is the best and nearly the biggest in its business.  It has been profitable, and is a long-run-focused firm sitting on a mountain of cash.  It owes no debt, and produces strong cash flows of 17+% while deploying nearly no assets. Expeditors’ has had a record of steady growth, high margins, and high returns on invested capital.

We see it as a long term holding. With prices affected by sluggish demand for shipping, it is still trading near the bottom of its range.  Morningstar gives it a fair market value of $61.00, so current price is about a 38% discount to FMV.  The 1.7% dividend is nothing to write home about comparatively to our other holdings, but it does keep inflation out of the picture and allows time for a growth upswing in transportation which should start within a few months after the November elections here, and some improvements in Asia’s economy that are trending toward increased shipping.

It’s trading flat to down slightly (4% from our original position), but we’re adding shares as opportunities around $38.00 or less present themselves.  BUY/ACQUIRE.

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General Directions for Investing Research and Buy Ideas 7.16.2012

The economic plates are shifting. While we sit and argue about abortion and immigrants, our GDP has remained flat for a decade. China’s has soared to now rival the United States.  That is not to say that America is finished. If progressive politics can replace the internationalist gridlock that corporate America has on the Congress, we might see new opportunities ahead. The next Google. The next Space X.   Solar power.  The modern power grid.  Wind and water energy.  Newer more efficient cars and trains.  All of this has been held up in a political climate where narrow social agendae are grinding the wheels of government to a halt.  Where to invest in this climate?

A portfolio should be holding more American Depository Receipt (Foreign) stocks (ADR)s. Even with taxes and fees, there are opportunities and yields on dividends that position portfolios well to

Right now there are good value opportunities in Europe, Latin America, Australia, and Asia.

Out of Australia comes Alumina LTD ADRs (AWC) – A linked aluminum supplier to giant Alcoa (AA), which we also hold and like, Alumina Limited’s sole interest is a 40% stake in Alcoa World Alumina and Chemicals, or AWAC, the world’s largest alumina producer. Alcoa Inc. owns the 60% balance.  The stock, trading at lows in the high 2’s right now, is worth a fair market $10/share, and puts out an 8.6% dividend.  The pricing is in response to the processed metal’s falling price, but reports continue to show that aluminum forward growth generally looks good as new technologies need more lighter materials with which they can be built.  Alcoa posted a loss for the quarter, but still beat analyst numbers.  Remembering that we buy big companies on bad news this is an area where there is some profit to be made by adding stock to the dog pound with good yields, good management, and sound balance sheets that survive turbulent times.

Europe’s bad news continues to put pressure on even the best companies.  Utilities and telephone companies and other large, necessary, stabile entities with good cash flow and reasonable debt tend to be safe havens during turbulent times. They pay good dividends. They have predictable revenue streams in that regulation by governments usually provides operating parameters.

We’ve seen a nice turnaround in British Telecom (BT) over the last few years, and locked in double-digit yield on our dividend based upon the purchase price.  We’ve bought France Telecom (FTE) and continue to acquire it here and there as its 12.1 to 13.5% dividend is appealing, and there isn’t any particularly compelling bad news in the company’s news itself to suggest any danger to the dividend at this time. Even if they cut it in half, though, 6.5% would still be a far better return than we can find in bonds or (stop laughing) at the banks.

We’re looking at a smaller presence in Telefonica SA (TEF) for much the same reason. The Spanish telephone company hold telephone companies in Latin America and Europe.Telefonica has more debt than the others, and will be divesting some of its non-core assets over the coming months, but we expect that to help, not hurt the bottom line on debt retirement.

Both are posting yields in the 11-13% range, which far outstrips a bond, with far better liquidity and the likelihood that both operators will do reasonably well enough as the economies of Europe recover over the next 5-6 years to at least warrant the pickup of our minimum 17% discount to the fair market value of the stock in appreciation, possibly better, plus the dividend. Dividends can be cut, but at the moment it still looks secure.

The other avenue to look down are in any company which own raw materials and precious metals or minerals. Most are highly undervalued right now, but as the recovery rolls out, they will all do well. BHP Billiton (BHP), Alcoa (AA), and even more obscure oil or resources trusts.

Cross Timbers Royalty Trust (CRT), pays a monthly dividend in the 8.8% range.  It has virtually no liabilities. Other than the oil drying up in their various lease lands, the risks are relatively borne by the company doing the drilling and the pumping. Their stocks cycle in price as optimism and pessimism about oil prices surge like the tides. CRT is a domestic trust that pulls in money from lands it leases to others. A downward move in the long term would be based on decaying proven reserves. If you invest, make sure you read their reports to see what their forward projections on proven reserves are.  If they have less than 15 years, the stock should already be in price decay.  Great Northern Iron Ore (GNI) which we bought as a temporary refuge last year, has started its decay as the trust winds down. The interest rates are spectacular to the price, but its a comet not worth chasing as the principle will be impacted.

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July Buys 2012

NOKIA CORP SPON ADR F1 ADR REP 1 NOKIA CORPS (NOK) – We already hold some of this stock.  Nokia continues to be pilloried by the market. The stock dropped to a new 52 week low of 1.92 last week. We like the stink of decaying flesh on corporate bones.  Nokia missed the smartphone wave, and the Tsunami landed on it. They have made deals with Microsoft for the Windows platform and a joint project with Siemens.  Right now, the brain trust of analysts is saying that Nokia will cut its dividend (likely) and that one should sit on the sidelines.  Microsoft infused quite a bit of cash, over $1B into NOKIA to work with a partner to catch up on its Smartphone ambitions, but it did not give an exclusive to the phone manufacturer. They also are being hammered on the low end by Asian competitors who offer viciously low pricing, and their brand name has all but evaporated from the U.S. market. All that said, at $1.92, we think that  NOK isn’t going out of business.  Further, even though the company got burned going its own way with advanced mobile phone devices and got smoked by Apple and Google, it holds substantial patents that Apple and Google need to access, which we believe are worth more than its current very low share price. It holds a BB+ credit rating from Morningstar. Its dividend is at 9.2%. If slashed in half 4.5% is still not that bad to buy a bit of patience.  We are buying cautiously, but see a lot of upside potential at these basement prices. BUY

CEMEX (CX) – The Friday before last the Senate passed a two year, $105B transportation bill that should be good news for Cemex and other building material suppliers. Cemex has been a gradual build of purchases of the world’s largest producer of ready-mix concrete.  Cemex has operations in the US, Mexico, South America, Europe and Asia.  They have been selling off non-core assets to reduce their debt load after acquiring Rinker just before the 2008-2009 correction.  The stock has great recovery potential 2015-2017, which, while a bit slower than our original estimates, is in line with the pace of economic recovery. Look for book value to return to the $15/sh range in 2015-17. At $6.53 you’re getting a great company at a good discount to fair market value.  BUY

 

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The Value Genius – Buy Ideas – 07/06/12

BUY:

Alcoa (AA) – We’ve bought Alcoa in its slide down, and we’re continuing to buy as opportunities present themselves. It hit its 52 week low and at 8.39 we find it very attractive. Aerospace use is picking up, and the aluminum giant has either temporarily or permanently shuttered locations to bring production into line. With even modest improvement in usage by the auto industry, already up, which is gearing up for lighter hybrids. China and ultimately Africa represent growth opportunities, along with the retool of North America, as that slowly unfolds. Alcoa’s fortunes will advance. Analysts are being particularly hard on Alcoa and we think it a bit unwarranted.

France Telecom (FTE) – Sure it hasn’t grown much in the last few years, but with a dividend yield of 13.1% and pretty decent cash flow, we’re not crying in our beer while we wait for them to work through the sluggish European economy. Huge cash flow. We pick up a bit here and there on the dips.

American Capital (ACAS) – I originally bought into ACAS to ride the tide of the capital companies buying and developing mid-path start-ups into profit generators. It paid a tidy cash dividend. Along came 2008 and 2009 and ACAS squeaked through. Dividend suspended.  I bought it down into the floor of  3.21 when it had been in the high 40’s.  They’ve weathered the storm. Their debt is 20% of equity, fairly low, and they’ve turned out a 53% annualized return for the quarter alone.  I hope to see them restore the dividend one day soon. At its current price, with the numbers that it generates we think its $9.60 price point is a pretty good bargain for the portfolio of companies which they hold.  I cautiously acquire a bit more, and advise caution, because this business, even with a much stronger balance sheet than it had in 2009, is still at greater risk of loss or delay in returning to profitability in any major correction.  Between 5 and $9, though, a good chunk of that risk is factored in.

Berkshire Hathaway (BRK.B) – Right now it is out of buy territory just slightly. If it drops into the low to mid seventies, BUY.  A highly diversified company which follows a lot of strict value rules and has returned stellarly for all involved. The concerns that its leadership, Warren Buffet and Charlie Munger, are old is unwarranted. They’ve been grooming the team that runs the place for decades.

 

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Value Genius Summer Equities Review – 2012 – Sells

It’s been a while since I reviewed the portfolio. I have had a few people tell me that Armageddon in the financial world is imminent, and that we won’t see a 12,000 DOW again ever. Take the profit and run.

My model assumes that there are apt to be a few shocks relative to the situation in Europe, not another melt-down.  The downgrade of the 15 banks last week was already priced in. Corporate profits remain at all-time highs.  I do not see a lot of cash-strapped companies, or a market near as over-heated as we had in 2008/2009.

As we approached the Great Recession, you may recall that I wrote to you that my “window” on the stock world had hit an amazing new low. Stocks were so overvalued that only a small handful, three or four, were in view. After the sharp correction there were nearly 300.  Today’s “window” features an average number of companies, about 39-49 suggesting that the market is not greatly over or under valued.

We’ve profited on discipline and patience. This is not a time to change that course, in my opinion. This is the way of value investing. If you buy a stock at a 17% or better discount to fair valuem you watch the tree, not the forest of the DOW.  We make money in up markets, down markets, and every one in between because companies with intrinsic value may sink for days, weeks, months or even years, as has been the case with the banks, but these dogs have their day.  We will always have “crops” growing and those ready to harvest.

If you avoid high flash stocks like GOOGLE, Apple or Facebook, which are darlings one minute and run out of the next, you can find profitable, reliable, and more shock-proof securities in grungy, “must have” lines of work.  Pipelines and big staple companies like Proctor & Gamble were places of refuge for many an investor not wanting to get hosed on the sale of flash stocks and then run into an equal screwing in near-zero Treasury instruments.

Here are my review of certain stocks, with an eye towards having cash to buy as the micro-corrections of Europe’s Greece mess roll out.

SELL:

Home Depot (HD) – I’ve run about a 64.98% profit plus dividends to a 73% gain, which factors to about 14.72% per year.  In another year or two, it could be more, if the housing market picks up. On the other hand, we can’t complain about the gain, and the possible bounces of the market could jeopardize a tidy profit. If it runs away, it was a constructive relationship. If it drops again, we might pick it up on the next rebuild.

Raytheon (RTN)  & Lockheed Martin (LMT) – Up 21% to 23% there is a bit more ride in these, and a very nice dividend, but once reality hopefully seeps into the Congress, and a holistic approach to the budget takes hold, defense contractors can expect to see some contraction in their business forecasts.  The Pentagon isn’t pushing for things that their paid spokespeople on Capitol Hill are pushing for, and that is going to be the wedge that limits upside, in my opinion.  Wars are on the decline, and governments are cash-strapped as it is. Sell.

Pembina Pipeline (PBA) – Me, sell a pipeline?  Pembina pays a 6.1% dividend, but we made a 37.52% gain on it, and indications were that it will slide down a bit for a while.  It’s Canadian, so we don’t pick up the tax benefits of a Kinder Morgan (KMP).  It’s small, so it doesn’t have the scale of larger carriers like Trans-Canada (TCP).  It also had a spill in Alberta, which is causing Canadian regulators to look at them again.  Nothing has been done to them yet, but I’d rather watch this from the sidelines. When it drops again we may revisit it and take the ride again.

American Express (AXP) – American Express has a great model, but its rep with small and medium merchants has risen to fairly awful levels.  They’re trying to repair that damage, but their pricey merchant fees have stunted forward growth.  It’s slightly above where we bought it a couple of years ago. The pale dividend of 3% at the price we purchased it was not enticing enough to wait it out. It’s also in the financial services sector, for better or worse, which also could add extra anchor to its growth potential. SELL.

DIAGEO (DEO) – The spirit maker moved into an intoxicating 15% average gain.  I see it as slightly overvalued, about $8.00 over fair market. The 2.1% dividend isn’t enough to hold it in an over-valued situation. We toast its benefits.  If there was a sharp correction, I’d be back for another round.

Analog Devices (ADI) – An 18.21% profit on this chipmaker and a 5.6% dividend based on the price that we acquired it were pretty good. The company is well run, and I might have held on to it save the fact that chips are vulnerable to macro economic conditions like large market corrections. Europe’s potential gridlock put it on the sidelines until we see how things play out.  I’d definitely be back into this stock if the price and the market conditions are right for long-term opportunities.

Illinois Toolworks (ITW) – A 27% gain and a 4.2% dividend at time of purchase made this an unusually short love affair.  It’s fair market value has become more of a question mark. I get a lot of disagreement from the different services I research.  We’ll take the lock on the gain, and see if there is another opportunity for it again later.

Double Eagle Petroleum (DBLEP) – A small preferred with a 9%+ dividend, I bought it to hold through some bumpy months last year as a cash cow. It was about flat where we bought it in terms of the share price last year, but it still returned about 8.8% on our money for a year, which sure beats the bank, a CD or a savings account.  We’ll keep it in mind in future if we need parking space again.

 

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Stock Ideas for October 5, 2011

The market has been seesawing up and down.  As I have mentioned in previous columns, this is apt to happen for a while. People are nervous, and when they panic it rains carnage that is the carrion of a good value investor’s diet.  Here are some ideas:

MBT – Mobile Telesystems (Mobil’nye TeleSistemy OAO) – I’m not taking a huge stake in this Russian telephone company that is as big there as AT&T or Verizon is here. The uncertainties of government always loom in post-Soviet Russia. This company not only has great growth potential, it is also turning out an 8.8% dividend on yesterday’s closing price. It also was trading at over double its current price within the last 52 weeks.  The rest of the world economies drag on price more than anything organic to MBT’s marketplace.

EXPD – I like logistics companies. High cash flow, low overhead, and very low debt. They don’t own anything. They broker the deals to get freight moved at better prices.  We held on to Forward Air for years, until it hit a peak before the last roller coaster and we sold it.  Expeditors International of Washington is the performance leader among non-asset-based freight-forwarding and third-party logistics providers. This blue chip logistics firm, which pays a sub-inflation 1.3%, looks like a good buy as long as it stays below 41.00 a share.

We go in and out of 3M (MMM) as prices dictate.  The company is on the bottom of a cycle pushed down only by larger economic forces. It’s a good buy below $80.00.

France Telecom (FTE) is still a great acquisition. They own a huge chunk of Europe, and are making other international inroads Their stock pays out a 10.10% dividend at yesterday’s close.  Not bad.

With a long time horizon in mind, two of the larger housing builders with the legs to ride out the current recession I acquire when they hit bottom-feeder prices.  KB Home (KBH) and Toll Brothers (TOL) are lean, mean, and well run.  Banks don’t want foreclosed properties, so they’re pushing short sales hard. There will be a bubble of these that will soak up much of the housing demand for a year or two. After that, as inventories in over-extended properties dry up, building can begin back on the road to normal.  These two builders look to profit the most from the recovery.  KB Home pays a 4.5% dividend that warrants your patience and is a bargain today at about 5.55. It’s a deal under 9.80. Toll Brothers does not, but also has a great footprint once we end this long, gloomy part of the cycle.

Remember that all of these stocks are suggestions and based on actual purchases made. You should research further on your own, ask your stock guru, investment advisor, priest, rabbi, mystic or whomever else gives you investment guidance.

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