HAPPY EASTER WEEKEND EVERYONE! WATCH THOSE EGGS…James
markets
The DJIA, S&P 500 and NASDAQ all rose last week: by 0.25%, 1.1% and 2.6% respectively.
ARK Innovation ETF (ARKK), our proxy for popular momentum stocks, advanced by 6.0% last week. Year-to-date, however, it has lost 3.0% of its value.
IN 40 1.0s
As previously noted, the first Cigar Butts and Wallflowers Portfolios were closed out as of yesterday. I’m calling them Cigar Butts 1.0 and Wallflowers 1.0. New versions will arrive in the coming weeks.
Last week, 19 of our 40 Cigar Butts, or 48%, advanced. On average, these issues gained 0.3%, so, great, but also less than the benchmark for a second week in a row. Ultimately, our CB Portfolio 1.0 beat the S&P 500 in 16 of the 21 weeks since we measured its performance. Net-net: CB 1.0 gained 41%(!) versus a 17% gain in the S&P 500 over the same time period. Year-to-date, our CBs grew 24% while the S&P was up only 7.0%.
Our Wallflowers 1.0, i.e. our portfolio of large but unpopular companies, fared better last week as 15 of the 24*, or 62.5%, advanced. The average change was a gain of +1.45%, handily beating the benchmark. Y-T-D, our ‘flowers grew 20.2%--beating the S&P 500 by roughly a factor of three(!)
Our i/Bets portfolio powered on from a loss the week before. Ten of its 17 components, aka Boring Kitties, or 59%, advanced last week. On average, they advanced 1.2%. Since inception just four weeks ago, our speculative index is now up 7.9%--well more than the benchmark’s gain this year.
* SNE is no longer a traded ADR, so it was dropped this week. And although DISCA and VIAC were to be added to the Wallflowers Index as of Monday, they are not included as neither would have had results for a full week.
This weekend, the DJIA trades at a 45% premium to its quantitative value (QV*); the S&P 500 at a 42% premium; the NASDAQ Composite at a 29% premium; and the Russell 2000 +103.5%(!) Our estimated bear-to-bull-market trading ranges are:
DJIA: 15303 (low) to 34261 (high)
S&P 500: 1892 (low) to 4236 (high)
NASDAQ Comp: 7020 (low) to 15717 (high)
Russell 2000: 750 (low) to 1680 (high)
The IN 40s (Portfolios)
NOTE: The first column of numbers = Intrinsic Value/Intrinsic Value adjusted for Margin of Safety/Current Price. The second = Weekly/Y-T-D % return.
Cigar Butts (value > price)
Qurate Retail (QRTEA)_____29.80/20.00/11.82_____-1.2/+7.7
Alibaba (BABA)_____729.50/488.80/224.36_____-1.3/-2.4
G Willi-Food (WILC)_____110.63/74.10/23.40_____-1.0/+8.6
Knoll Inc. (KNL)_____34.20/22.90/16.56_____-1.5/+12.8
Steelcase Inc. (SCS)_____113.92/76.30/14.47_____-1.4/+6.8
Signet Jewelers Ltd (SIG)_____157.20/105.30/57.32_____-2.6/+110.2
ACCO Brands Corp (ACCO)_____11.80/7.90/8.34_____+0.8/-1.3
Papa John’s Int’l (PZZA)_____151.00/101.17/88.48_____+0.1/+4.3
Weibo (WB)_____81.00/54.20/50.01_____+1.6/+22.0
Sally Beauty Holdings (SBH)_____23.80/16.00/20.18_____-0.7/+54.8
Wendy’s Co. (WEN)_____46.50/31.10/20.74_____-/-5.4
Caesarstone Ltd. (CSTE)_____44.10/29.60/13.89_____+1.2/+7.8
Pitney Bowes Inc. (PBI)_____11.61/7.78/8.30_____+0.2/+34.7
United Rentals Inc. (URI)_____300.00/200.00/333.00_____+1.0/+43.0
United Natural Foods (UNFI)_____59.30/39.70/32.88_____-3.3/+105.9
PBF Energy Inc. (PBF)_____18.50/12.40/15.59_____+8.7/+119.6
TTM Technologies Inc. (TTMI)_____19.90/13.30/14.94_____+2.3/+8.3
NCR Corp. (NCR)_____37.60/25.20/37.94_____-0.1/+1.0
HanesBrands Inc. (HBI)_____20.50/13.70/19.48_____-5.2/+32.8
Berry Global Group, Inc. (BERY)_____82.80/55.48/61.56_____-0.7/+9.6
Booking Holdings (BKNG)_____3150.00/2109.00/2382.46____+2.5/+7.0
Biogen (BIIB)_____651.00/436.00/278.72_____+0.7/+13.8
BorgWarner (BWA)_____42.36/28.39/46.30____-0.9/+19.8
Facebook (FB)_____519.99/348.40/298.66_____+5.6/+9.3
Cisco Systems (CSCO)_____66.00/44.22/52.02_____-1.1/+16.2
Net Ease (NTES)_____223.00/149.41/106.60____+2.6/+11.3
Check Point Soft (CHKP)_____521.00/349.07/113.60____-1.4/-14.5
Walgreens-Boots (WBA)_____84.00/56.28/54.94_____+5.1/+37.3
Regeneron (REGN)_____808.00/541.36/474.93_____-0.4/-1.7
American Express (AXP)_____201.60/135.07/144.57_____+0.2/+19.6
Goldman Sachs (GS)_____405.50/271.69/328.00_____+0.2/+24.2
EQT Corp. (EQT)_____32.00/21.44/19.06_____-3.3/+49.2
DXC Technology Co. (DXC)_____69.00/46.23/30.85_____+8.7/+19.7
Energizer Holdings (ENR)_____89.00/59.63/48.37_____+0.4/+14.7
Flowers Foods (FLO)_____47.00/31.49/23.94_____-1.0/+5.8
Foot Locker (FL)_____74.00/49.58/56.75_____-1.6/+40.3
Gannett (GCI)_____19.00/12.73/5.33_____-0.4/+58.6
Quest Diagnostics (DGX)_____206.00/138.02/129.44_____+0.2/+8.6
Sprouts Farmers Markets (SFM)_____54.00/36.18/26.70_____-4.5/+31.4
Thor Industries (THO)_____193.00/129.31/136.82_____+2.3/+47.1
Wallflowers (large & unpopular companies)
Piper Sandler Cox (PIPR)_____88.20/59.10/112.49_____+0.5/+11.5
Gilead Sciences Inc. (GILD)_____58.30/39.10/66.44_____+1.8/+14.0
Lenovo (LNVGY)_____16.70/11.16/27.66_____+7.0/+48.0
Best Buy (BBY)_____114.00/76.38/115.76_____-2.9/+16.0
Berkshire-Hathaway (BRK.B)_____225.00/180.00/258.46_____+0.7/+11.4
Comfort Systems USA (FIX)_____45.10/30.20/76.05____+1.3/+44.4
Allegion PLC (ALLE)_____111.00/74.31/127.75_____+0.8/+9.8
Albemarle Corp. (ALB)_____152.70/102.30/151.00_____+0.4/+2.2
Scotts Miracle-Gro (SMG)_____186.19/124.70/250.00_____+3.6/+25.5
Alphabet Inc. (GOOG)_____1878.90/1258.90/2136.33_____+5.0/+22.0
AmerisourceBergen (ABC)_____146.60/98.22/116.89_____-1.5/+19.6
Paccar Inc. (PCAR)_____82.60/55.30/92.03_____-1.8/+6.7
Supernus Pharma (SUPN)_____25.20/16.90/26.70____+1.8/+6.2
Sony Corp (SNE)_____51.12/34.30/N/A_____N/A/N/A*
SpartanNash Co (SPTN)_____23.20/15.60/19.45_____-3.2/+11.7
Acuity Brands, Inc. (AYI)_____98.27/65.84/168.90_____+16.0/+39.5
AECOM (ACM)____60.01/40.00/64.38_____-0.1/+29.3
Comcast (CMCSA)_____67.00/44.89/54.75_____-0.8/+4.5
Keurig Doctor Pepper (KDP)_____45.00/30.82/34.50_____-2.0/+7.8
Ford (F)_____18.00/12.00/12.17__________-1.0/+38.4
International Game Technology (IGT)_____34.00/22.78/16.85_____-3.3/-0.5
Interactive Brokers (IBKR)____121.00/81.07/73.67_____+0.9/+20.9
HP Inc. (HPQ)_____57.00/38.19/32.05_____+1.2/+30.3
Service Corporation Intl. (SCI)_____82.00/54.94/52.37_____+2.1/+6.7
Teradyne, Inc. (TER)_____171.00/114.57/128.81_____+8.2/+7.4
/i/Bets aka “Boring Kitty” (speculations)*
Beazer Homes (BZH)_____-**/-/21.73_____+3.7/+41.7
Lionsgate Films (LGF.A)_____48.00/32.00/15.57_____-0.8/+36.9
Nature’s Sunshine Products (NATR)_____38.00/25.48/19.50_____+6.8/+30.4
Seneca Foods (SENEA)_____-/-/47.67_____-13.1/+19.5
Solitron Devices (SODI)_____-/-/7.35_____-2.0/+27.8
Qualstar Corp. (QBAK)_____-/-/3.60_____+10.8/+20.0
Orbit International Corp. (ORBT)_____-/-/5.90_____+2.6/+4.1
Quarterhill (QTRHF)_____-/-/2.03_____+2.0/+0.5
Hon Hai Prec. Co. Ltd. (HNHPF)_____12.45/8.34/8.61_____-4.3/+29.9
City Developments Ltd. (CDEVY)_____8.51/5.66/6.20_____+6.9/+3.2
Dundee Corp. (DDEJF)_____2.73/1.83/1.15_____+2.7/+5.2
Travelcenters of America Inc. (TA)_____46.02/30.83/26.78_____-1.5/-17.9
Hollysys Automation (HOLI)_____-/-/12.59_____-1.0***/-14.3
Ossen Innovation (OSN)_____-/-/4.82_____+1.3***/+1.3
Happiness Biotech (HAPP)_____-/-/2.09_____+5.6***/+13.0
Qudian Inc. (QD)_____-/-/2.29_____+1.8***/+65.9
Tantech Holdings Ltd. (TANH)_____-/-/1.56_____-1.3***/+13.0
** A dash in place of QV implies a “nascent bargain issue.” Discussion/definition of how this is calculated may be found in the 2/21/21 House Money issue. As with all of our metrics, it involves simple math and is easily grasped.
*** Includes one partial week.
Workouts, aka Special Situations
Open
· On July 13, 2020 Analog Devices, Inc. (ADI) and Maxim Integrated Products, Inc. (MXIM) announced a merger in which MXIM shareholders would receive 0.630 of a share of ADI per MXIM share. The deal is to be completed in the summer of 2021. This implies a premium of 5.9% to MXIM’s current price, or a roughly 20% return on an annualized, non-compounded basis.
· On October 29, 2020 Marvell Technology Group (MRVL) announced that it would purchase Inphi Corporation (IPHI) for $66 in cash and 2.323 shares of stock. The deal is to be completed by June 30, 2021 and implies a premium of 0.5% to IPHI’s current price, or about 2.5% on an annualized, non-compounded basis.
· On October 30, 2020 AMD announced an agreement to purchase Xilinx (XLNX) for 1.72 shares of AMD stock per share of XLNX. The deal is to be completed by the end of this year. This implies a premium of 7% to XLNX’s current price, or a roughly 9% return on an annualized, non-compounded basis.
· On December 1, 2020 Salesforce (CRM) announced its acquisition of Slack (WORK) for $26.79 in cash plus 0.0776 shares of CRM, to be completed mid-2021. This implies a premium of 5.8% to WORK’s current price, or a roughly 20% return on an annualized, non-compounded basis.
· On December 12, 2020, AstraZeneca (AZN) announced its acquisition of Alexion Pharma (ALXN) for $60 in cash plus 2.1243 AZN shares, to be completed in Q3 2021. This implies a premium of 7.9% to ALXN’s current price, or a roughly 15% return on an annualized, non-compounded basis.
· On December 20, 2020, Lockheed Martin announced its purchase of Aerojet Rocketdyne (AJRD) for $56 per share, in cash, to be completed in H2 2021. This implies a premium of 19% to AJRD’s current price, or a roughly 25% return on an annualized, non-compounded basis.
· On December 21, 2020, Blackwells Acquisition LLC offered to buy Monmouth Real Estate Investment Corporation (MNR) for $18 per share, in cash, to be completed in Q2 2021. MNR currently trades above the offering price.
· Also on December 21, 2020, HMS Holdings (HMSY) announced that it agreed to be acquired by Gainwell Technologies for $37 per share, in cash, to be completed in Q2 2021. This implies a premium of 0.1% to HMSY’s current price, or a roughly 0.4% return on an annualized, non-compounded basis.
· On March 25, 2021, Coherent Inc. (COHR) terminated its previous merger agreement with Lumentum (LITE) and entered into a new agreement with II-VI (IIVI) in which COHR shareholders will receive $220 per share in cash plus 0.91 shares of IIVI. The deal is to be completed in the fourth quarter of 2021. This implies a premium of 10.3% to COHR’s current price, or a roughly 14% return on an annualized, non-compounded basis.
· On January 25, 2021 NCR (NCR) announced an agreement to buy all outstanding shares of Cardtronics (CATM) for $39 apiece. The deal is to be completed in mid-2021. This implies a premium of 0.3% to CATM’s current price, or a roughly 1.5% return on an annualized, non-compounded basis.
· On February 16, 2021, Tribune Publishing Co. (TPCO) announced that it would be acquired by its major shareholder, Alden Global Capital, for $17.25 in cash, with the deal expected to close in the second quarter of this year. TPCO currently trades above the offering price.
· On March 3, 2021, The Michaels Companies (MIK) announced that it would be acquired by affiliates of private equity firm Apollo Global Management (APO) for $22 per share, in cash. The deal is expected to close by August 1st. This implies a premium of 0.3% to MIK’s current price, or a roughly 0.6% return on an annualized, non-compounded basis.
· On March 11th, Chubb (CB) submitted a proposal to acquire The Hartford (HIG) for $65/share. No agreement has been reached and there is no timeline for closing. HIG currently trades above the offer price.
· On March 21st, Canadian Pacific Railway (CP) announced an agreement to acquire Kansas City Southern (KSU) for 0.489 CP share plus $90 in cash per share of KSU. The financial transaction is expected to close in the second half of 2021. This implies a premium of 4.6% to KSU’s current price, or a roughly 9-20% return on an annualized, non-compounded basis.
· On March 22nd, Blackstone Group (BX) confirmed that it had offered 11.85 Australian dollars per share for Crown Resorts Ltd. (CWN-AU). CWN-AU currently trades above the offered price.
· On September 30, 2020, Caesars Entertainment (CZR) agreed to buy William Hill (WMH-GB) for 272 pence per share. William Hill currently trades above the offer price.
· On January 14, 2021, Atlantic Power (AT) announced an agreement to be acquired by I Squared Capital. AT shareholders are to receive US$3.03 in cash per share. The transaction is expected to close in Q2 2021. This implies a premium of 5.9% to AT’s current price, or a roughly 20-24% return on an annualized, non-compounded basis.
Closed
· Acacia (ACIA) traded at $114.45 when we noted its pending acquisition on January 17th. On March 1st, the company was sold for $115 to Cisco Systems (CSCO)—a realized gain of 0.5% over nine weeks, or roughly 3% on an annualized, non-compounded basis.
· Eaton Vance (EV) traded at $70.26 per share when we noted its pending acquisition on January 24th. On March 1st, shareholders received $73.78 in cash and stock, for a realized gain of 5.0% over eight weeks, or roughly 32.5% on an annualized, non-compounded basis.
Weekend Chart
