Q2 wrapped up with more selling. Oil broke $140/barrel, the financials continue to slide with investment firms downgrading each other, and home values continue to slide. Outlook looks pretty bleak, but there are opportunities in this environment. Some notable Q2 actions of the Ten Grand Chicago portfolio:
More Nutrisystem: I decided to increase my position in NutriSystem yesterday. Given the bleak economic outlook, the company guided their top line revenues downward for 2008. I revised my estimates for the company to drop by 11% in 2008, followed by another drop of 6% in 2009. Taking a 5% year of year growth from 2010 onwards, I have them valued at just over $18/share. Trading under $14/share as of yesterday, this was enough of a safety margin to add to my existing position. Nutrisystem’s brand and product line should help them once the economy turns around. It all depends on how deep this is going to go :)
Building Homes: The Select SPDR Homebuilders ETF (XHB) was added to the portfolio this quarter as well. This was one of those “no need to overanalyze” moves. If your time horizon is 20 to 30+ years and you believe that people still need to live somewhere, then this makes sense.
Herman Miller: They had a great quarter, but will face tough headwinds with rising costs in steel, plastics, and aluminum. They are trying to protect margins by recently increasing product prices. Again, another nicely valued company with a strong brand and product offering that will help them once the economic malaise passes. I’m working on a deeper analysis of this company in the coming weeks.
Financials Hurt: The Select SPDR Financials ETF (XLF) has been beaten down since adding it to the portfolio. More writedowns, layoffs, government interventions, and even the possibility of money market funds stepping in to buy stranded auction rate securities. The stomach virus is working its way through the gut… hopefully out the rear this year or next.
Copper Strike: Southern Copper (PCU) has dampened the losses of the overall portfolio showing relative strength. Copper is still in demand, supply isn’t increasing any time soon. The only blemish is the current mining strike happening in Peru. Still holding on to PCU.
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