January 2013
"If we knew what we were doing
It wouldn't be called research."
- Albert Einstein
There were plenty of reasons to be scared out of stocks in 2012. Headlines were blasted with frightening stories about the election, the fiscal cliff, Greece and, of course, the horrifying predicted Mayan apocalypse.
However, stock market investors reaped about a 16% total return. What's up with that? Well, the stuff that really counts for stock market valuation and direction were (and pretty much remain decidedly bullish). Interest rates are still near historic lows, earnings are at record levels and corporate balance sheets are in terrific shape.
Two of the companies we follow at BURKENROAD
REPORTS received buyout offers in 2012. In August, shareholders of Baton Rouge based Shaw Group were offered a 72% premium by CBI Corporation. In December, McMoRan Exploration of New Orleans received an even wider takeover premium by its former parent company
Freeport-McMoRan.
There is a ton of cash on the sidelines, and it seems more buyouts are ahead.
BURKENROAD REPORTS continues to attract national media attention and serves as a valuable career springboard for Tulane students. Since the inception of this academic program, more than 600 students have moved on to positions in investment related fields.
Our students at BURKENROAD REPORTS meet top management, visit company sites, and publish investment research reports on 40 "stocks under rocks" in Louisiana, Texas, Mississippi, Alabama, Georgia, and Florida. These in-depth research reports, video presentations, and conference registration information are available at www.burkenroad.org
| SAVE THE DATE Please join us for our 17th Annual BURKENROAD REPORTS Investment Conference on Friday, April 26, 2013, at the Westin Hotel in New Orleans. This popular event is free and open to the public and provides individual and institutional investors an opportunity to meet management and to learn more about some of the region's top public companies. Click here to register. |
Stocks are Climbing the Proverbial Wall of Worry
Against a favorable market backdrop, it was still very much a stock pickers market.
2012 Ups:
|
Conn's AFC Enterprises Crowncrafts Cyberonics |
+176% +78% +75% +57% |
Appliances and furniture in economically strong Southwest Increasing same store sales and big expansion plans at Popeyes Added pet beds to its product mix Medical device with a robust replacement market |
2012 Downs:
|
Sharps Compliance Carbo Ceramics Superior Energy Services PetroQuest Energy |
-45% -36% -27% -25% |
A tough year for the stock, but it's buying back more shares Very low natural gas prices Natural gas prices are very low Did I mention very low natural gas prices? |
New Coverage
We have added four new companies to our research universe.
Bristow Group (BRS/NYSE) is the world's largest helicopter company and serves the energy industry in several countries. We plan to visit its operations and training center in New Iberia, Louisiana.
Cash America (CSH/NYSE) is the largest pawn broker in the world (the second oldest profession). This Fort Worth-based specialty finance company also owns an online loan subsidiary with growth rates and margins higher than even its very profitable traditional bricks and mortar business.
Conrad Industries (CNRD/Pink Sheets) is very busy manufacturing and repairing vessels including barges, ferries, and oilfield support vessels. In October we traveled to Morgan City, Louisiana to meet with management and tour the facilities.
Susser Petroleum, MLP (SUSP/NASDAQ) was spun off from Susser Holdings (SUSS/NASDAQ) fall 2012. While SUSS represents the business inside each of its 540 convenience stores, SUSP represents the gasoline sales outside of the stores. Both SUSS and SUSP are headquarted in Corpus Christi, and we plan to visit with them in February.
The Burkenroad Mutual Fund
The Hancock Horizon Small Cap Burkenroad Fund had another strong year with a total return of 17.26%. Since its inception on December 31, 2001, the fund (ticker symbols HYBUX and HHBUX) has outperformed 99% of the nation's equity mutual funds. The fund has produced a total return of 214%, which is more than twice as high as the Russell 2000 Index (Small Cap Stocks) and almost four times the total return of the S&P 500 Index (Large Cap Stocks.)
The fund is managed by Hancock Bank and now has more than $185 million in assets. Hancock's managers utilize our student-produced research reports (as well as other sources) in the management of the Burkenroad Fund.
What's Up Down Here?
Tulane University and the region's economy are growing stronger. The University continues to receive a near record number of applications for admission. Tulane's 2012 - 2013 Freshman Class is one of the most academically qualified and service-minded in the University's history. Forbes magazine recently called New Orleans "America's New Frontier for Business Opportunity"
I now host a weekly radio show called "Out to Lunch" on the local National Public Radio station (www.wwno.org). The show is recorded from Commander's Palace restaurant, and I interview the inspiring people who are developing and growing enterprises in our area. I have no problem finding interesting guests as New Orleans has been named the nation's best city for young entrepreneurs.
We would like to thank Aaron Selber and the Burkenroad family for their continued generosity and encouragement through both bull and bear (and yes, even sideways) markets.
STAY OPEN.
Peter Ricchiuti
Founder & Director of Research
BURKENROAD REPORTS