August 4, 2020

Two big L’s in a row

Those who refuse to acknowledge the racial injustice awakening going on in our country this summer took two big L’s within the last week or so. They lost the NFL – the league now admits it was wrong not to support the right of players to express their feelings about police brutality in black communities. There is talk that Commissioner Goodell may take a knee with the players during the first National Anthem c...

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Some Things About the Markets That Will Never Change

This is the craziest market I’ve ever seen. The pandemic somehow turned a bunch of people into day traders.  At first they were buying beaten-down airline and cruise stocks. Now they’ve moved on to buying shares of companies that have filed for bankruptcy. Hertz, JC Penney, Pier 1, Chesapeake Energy and GNC have all filed for bankruptcy recently but have seen massive price swings over the past week: Granted,...

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Ten reasons the “second wave” hasn’t spooked the markets (yet)

In the state of Texas, hospitalizations for the virus are up 42% since Memorial Day. The state of Arizona just issued a warning that they’re getting close to full capacity in their hospitals. Many states that have reopened are experiencing surges of cases and deaths, along similar trajectories of the spikes seen in the early days for New York, New Jersey, California, Michigan, etc. And while this uptick in cases hi...

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Rates

The Federal Reserve made it clear today that rates aren’t going anywhere anytime soon and that the current “stabilization” aka quantitative easing measures now in place for the bond and cash markets are also not going away. They did acknowledge that conditions have improved (aka, stocks went back up). Here’s Peter Boockvar: Both the bond market and the stock market are picking up on the fact that ...

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Backtests vs. Real Life in the Markets

The weekend of March 21-22, I wrote about the performance dispersion among S&P 500 companies using the following chart: At that time there were 156 companies down 40% or more in 2020 alone. Eighty-six stocks were down at least 50% and 40 companies had fallen 70% or worse less than 3 months into the year. What a difference a few months makes. Here’s the updated performance chart broken out by return buckets as o...

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Animal Spirits: Stock Market Euphoria

This week’s Animal Spirits with Michael & Ben is supported by YCharts: Mention Animal Spirits and receive 20% off your subscription price when you initially sign up for the service. We discuss: The biggest 50-day rally in stock market history The fastest stock market ever How far the market has come since March Why people underestimated the Fed Why were so many people wrong about the May jobs report? Getting hu...

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My 5 Largest Dividend Growth Stock Positions With Double-Digit Lifetime Returns

Over time stocks fall in and out of favor with the media, analysts and investors. It is too easy to fall in love with a stock only to have your heart, and brokerage account, broken. As an investor that takes a value approach to selecting the best dividend growth stocks, I tend to focus on fundamentals with a heavy dose of analysis. It may be surprising but even this approach will favor certain

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Hanover Foods Reports Quarterly Results

Hanover Foods is a name that is familiar to Oddball investors. We have covered this one four times on this blog (in 2012 twice and in 2013 and 2016). It has also been written about on Corner of Berkshire and Fairfax, Credit Bubble Stocks (twice), and other blogs.

Hanover A shares traded as low as $55 in March and are currently $68, which is where they traded as long ago as 2003. Back then, with about 1.07 million A and B shares outstanding, the market capitalization was $73 million. Now with only 715k A and B shares the market capitalization is down to $49 million.

Shareholder equity then was $95 million. Now, as you'll see below, it is $242 million! Current assets net of all liabilities was only $13.6 million. Now it's $126 million. (So, the price to book is now 0.2x and the price to NCAV is 0.39x.)

Part of the problem is that earnings have declined. In the 2003 fiscal year, Hanover earned $9.8 million on $290 million of sales. In fiscal 2019, earnings were only $2.6 million on $395 million of sales.

The 1% return on equity translates into a 5% earnings yield thanks to the 80% discount to book value.

Will Hanover ever return to greatness? We will be writing about some ideas in the upcoming Issue of the Oddball Stocks Newsletter.