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I am all charged up and ready to go for the next round of the Open. My engine is revved and here's what I'm thinking... - The market has taken a beating since October and now is the perfect time to go shopping because stocks are on sale. My top two value picks are Cognizant Technology Solutions Corp. (CTSH) and Helix Energy Solutions Group (HLX).
- A growth stock that has fallen almost 50% (from $43 to $23) since October is Buffalo Wild Wings Inc. (BWLD). I love the fact that at this sports bar and restaurant, the "girls have gone wild'! Sally Smith and her management team (5 out of 7 executives are women) have racked up impressive numbers. Since 2000, revenue has grown from $53.2M to $321M (8-year annual growth rate of 29.3%) and net income has grown from $2.6M to $20.5M (8-year annual growth rate of 34.3%). Under Smith's leadership, the company grew from 35 locations (in 1994) to 493 in December of 2007. The 500th unit will open in February.
- And then my rock steady company - The Procter & Gamble Company (PG) - a Warren Buffett heavy weight (his fourth largest publicly traded company). Earnings come out on the eve of the start of the contest and I don't expect any surprises. The stock is off ten dollars from its recent high. PG is an innovation machine.
- My final area will be to focus on the Magic Formula Index which I introduced on my website a little over a year ago. The Magic Formula Index is inspired by "The Little Book That Beats the Market". According to the author Joel Greenblatt, the book may be the only investment book that you will ever have to read. Greenblatt claims an enviable record of 40% annual returns since 1985 in his private investment firm Gotham Capital. In the Little Book (it really is little!), Greenblatt lays out a simple strategy that just seems to work. He contends you should buy 20 to 30 stocks each year with the highest pre-tax earnings yield (the inverse of price to earnings ratio) and the highest return on capital. And so I have five picks from my Magic Formula Index - Biovail Corp. (BVF), Freight Car of America Inc. (RAIL), Korn/Ferry International (KFY), United Online Inc. (UNTD), and ViroPharma Inc.(VPHM).
Come on February 1! And Ground Hog's Day follows. Oh, my! We are going to have fun!
Pierre Cutler
The Sacramento Executive
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