The Cupboard Laid Bare
Between February 12 and March 7, 2008, I wrote about 16 stocks. The bad news is that each of the companies has a lower share price than a year ago. The good news: my stocks as a group lost 42.9% compared to 49% for the Wilshire 5000 Total Market Index. The best performer of the bunch was food company General Mills (NYSE:GIS), down just 9.1%, while the biggest loser was designer/retailer Liz Claiborne (NYSE:LIZ), down a whopping 90.1%. Cutting to the chase, here are my winners and losers (from the list of 16) for 2009. (For more, see Industries That Thrive On Recession.)
Winner No.1
My strongest pick is specialty retailer Buckle (NYSE:BKE), in my opinion one of the best, if not "the" best retailer in America. It has achieved double-digit same-store sales growth for 19 consecutive months, most recently increasing it 21% in February, compared with a 6.2% decline for teen retailers as a group. With mall traffic down, it appears it's the only store besides Wal-Mart (NYSE:WMT) getting any business. Full-year earnings in 2008 should rise 34% to $2.18 per share and then 6% to $2.32 per share in 2009. Those are analyst estimates. I'm thinking Buckle will beat them. It really is the only game in town.
Winner No.2
Industrial and construction parts distributor Fastenal (Nasdaq:FAST) is down 35.8% in the past 52 weeks. Is this justified? Not if you go by its full-year earnings. It increased earnings 20% in 2008 to $279.8 million ($1.88 per share) on revenues of $2.34 billion, up 13.5% from 2007. CEO Willard Oberton did mention when discussing the past year that January's sales were down 4-6% for the first time ever, and he had no idea what the future would bring. Personally, I think Fastenal is simply managing expectations. Standard & Poor's rates it a strong buy, impressed by its plan to slow store growth - instead building staff levels in existing stores and improving customer service. Most importantly, it has raised the annual dividend payout from 54-70 cents in addition to paying a special 27-cent dividend this past December. With so many firms cutting or suspending dividends, it's nice to know some are raising them.
Winner No.3
Rather than going with General Mills on its own, it makes more sense to buy the PowerShares Dynamic Food & Beverage ETF (NYSE:PBJ). In addition to owning shares in the Minneapolis-based food company, PBJ owns 29 other quality food and beverage stocks, mimicking the Dynamic Food & Beverage Intellidex. In my opinion, this should be a core part of any portfolio. We all have to eat.
Losers 1, 2 and 3
I'm not going to waste a lot of space on those I expect to tank. The first, and most obvious, is Liz Claiborne. CEO Bill McComb indicated in its fourth-quarter conference call that same-store sales for its retail brands (Lucky Brand Jeans, Juicy Couture and Kate Spade) would drop 15-25% in each of the first three quarters of 2009. With numbers like this, it doesn't put bankruptcy out of the question.
Healthcare distributor Henry Schein's (Nasdaq:HSIC) Q4 sales fell 7.5% and net earnings 27.3%. On February 22, it lowered 2009 EPS guidance from between $3.27 and $3.36 to between $3.11 and $3.26, citing lower sales due to fewer visits from patients looking to save money. That will continue until unemployment drops back to normal levels.
In early February, digital x-ray systems company Sirona Dental Systems (Nasdaq:SIRO) announced Q1 earnings (excluding charges) of 37 cents a share, 12 cents lower than analyst estimates. Like Henry Schein, it's taking a beating because patients are staying away. (For more, see Recession-Proof Your Portfolio.)
Bottom Line
I'll be shocked if Buckle doesn't rise in 2009. It remains my favorite stock by a country mile.
