Crazy Morning after Gumshoe Contest

By Travis Johnson, Stock Gumshoe, October 13, 2008


The entrants to the Stock Gumshoe Weekend Contest kept their fingers crossed this morning as they watched the markets continue to bounce off of Friday’s lows — many of them picked the big morning bouncers — including GM, APWR, and several other morning rockets.

If you’ll remember, the contest had two parts: First, who provided the most interesting stock idea for this environment?

And second, who can pick the stock that will go up most between now and election day. We’ve got three weeks to go for that second part, but I can tell you about the first winner today.

If you’d like to go back and see all the entries before you learn who won, just click here to see the original contest announcement and scroll down to see all the entries.

There were no shortage of excellent suggestions and ideas thrown out over the weekend — I told folks that I would only award the price if 20 people made submissions, and we ended up closer to 200. So I can’t complain about that — should have known that the thoughtful, wise, and unusually good looking Gumshoe readers would come through. We saw many submissions from long time regulars, as well as a lot of folks stepping up to share their thoughts for the first time. All great to see.

So … drum roll, please — the winner of the first part of the contest and a cheerfully given $50 prize is …

Bob M., who submitted entry number 46. Here’s what he shared:

“WWE For those of us non-elitists out there. Price has held steady,even through these troubling times . Between $13 & $16. Not a bad dividend also,was raised to $0.36/share.They have expanded into Europe,China,India, Mexico,& South America.Guys & gals follow their story lines,essentially soap operas (telenovelas) with sweat.Legions of loyal fans worldwide & they just keep on buying those PPV’s,Action Figures,Apparel,DVD’s,etc.”

I have no idea whether WWE will be a winner — I know very little about their core business … but I can’t resist the idea. When I look at my portfolio these days I feel like I’ve been on the receiving end of a piledriver from Stone Cold Steve Austin, so it seems only appropriate to pick a company that gives the vicarious thrill of watching huge men give each other concussions.

Plus, they have a huge pile of net cash and pay a big dividend (about 10% at the moment). They’re certainly a consumer discretionary/media/licensing name, not unlike Marvel which is a favorite stock of mine, and they didn’t get beaten up nearly as much as most of the bigger name stocks we’ve seen here.

So … I have no idea how it will do, but this was the most intriguing idea to me, straight out of left field and almost never mentioned on CNBC. Thanks Bob — I’m a snarky East Coast elitist whenever I can get away with it, and I can’t say I ever liked wrestling myself, but I like your idea.

This was a very tough choice. Honorable mentions go to several folks who had intriguing ideas, including …

Entry 136: WomanWithPortfolio picked another great sector play, as she so often does, with PWR as a play on rebuilding and expanding electrical infrastructure (specifically power lines). And she had one of the more thoughtful comments about strategy, too.

Plays on agriculture of various types — there were all kinds of these, from the equipment makers, to stocks like FEED or the MOO ETF, or other popular consumer staple stocks like General Mills. All interesting, and we’ve certainly seen agriculture fall far and fast, and we will all certainly still be eating next year if we’re doing anything. Of these the one I found most compelling was the pick of Archer Daniels Midland (ADM) by Don Routledge (entry 97) — he pointed out that it’s trading well below book value, and “everybody has to eat.” True enough, and almost good enough for the win.

And with the wild morning trade, several folks shared ideas that also got a Barron’s Bounce this morning to go along with the “world is not ending” bounce — including a thoughtful look at MetLife (MET) from Mike S., and several cash-rich companies that several folks mentioned, including Deere and Caterpillar.

There were also quite a number of picks of beaten down financials — National City, Bank of America, and a few others that are all moving more or less in tandem this morning. There were also several folks lining up for lottery tickets with Fannie Mae or Freddie Mac or a variety of other companies that are close to insolvent or on the verge of bankruptcy, though the claims of some that “it’s so far down it has to go up from here” are frightening. Remember that the maximum loss is still “everything you put in,” for any equity investment.

I also saw several interesting healthcare picks — including two stocks I’ve owned, Intuitive Surgical and Accuray, but a surprisingly small number of pharmaceutical or biotech stocks. Lots of experts still consider these to be defensive, but apparently the Gumshoe faithful don’t buy that after a few years of absolute misery in most healthcare sectors. For what it’s worth, I still own Accuray, but it might be a tough few years for these makers of capital goods for hospitals — word is that lots of hospitals are still having plenty of trouble financing big ticket purchases, though that could turn around quickly, too.

And longtime valued contributor farley5 threw in an interesting pick (he calls it “risky”) in natural gas — our heavily teased old friend InterOil (IOC) that’s betting on serving up LNG to hungry Asian markets. A few other folks also saw a return to favor for energy in general, including longtime reader Advantedges, and several folks clung to the energy pipeline sector for salvation as they churn out high yields during this uncertainty (tickers thrown out for consideration included KMP and APL). Maybe the fact that Aubrey McClendon got margin calls on Friday for his massive bet on his own company, Chesapeake, means that we’re finally hitting “capitulation” in those markets, too (CHK is up 20% or so as I type, incidentally). Several folks picked Canadian Royalty Trusts, which may do very well but in some cases will face dividend cuts with lower oil and gas prices, even if you’re not worried about the tax change coming in a couple years — maybe the beaten-down prices already reflect those possible concerns, maybe not.

Of course, there were also plenty of folks who didn’t read (or care about) the “rules” — a few put buyers and short picks, which may end up doing well but aren’t eligible for the contest (the SEC may have lifted its short ban, but the Gumshoe Short Ban is still in effect). And there were several folks who picked some variation of the Midas touch — GLD or a variety of gold miners, and, surprisingly enough, only one person who recommended buying a handgun or a mountain cabin. So far this morning the fact that the world may not end is working against them, but who knows, over the next few weeks they may end up being the last ones standing.

And in that same vein, there are several people betting on a recovery in commodities to restore health to any number of mining companies, whether it’s for molybdenum or copper or rare earth minerals — if the Chinese economy continues to grow and the Chinese government keeps lending us money to keep US consumers buying their plastic gewgaws, maybe they’ll be the picks with leverage to global recovery that will fill your coffers.

Among the submissions some typically very economically sensitive names, the shipping and transport companies, also were well represented. Lots of folks like the various dry bulk shippers here (Dry Ships, Navios, and a few others), as well as several oil tanker companies (Tsakos and Frontline, among others). They certainly count as beaten-down, and many pay huge dividends … and maybe the dips in the Baltic Dry Index or tanker rates will be short-lived, or will overstate the earnings shortfalls many of these companies will experience in the quarters ahead.

And final mention should probably go to the sellers of numb minds — I noticed both Diageo and Anheuser Busch were picked. I too have admired Diageo from afar (and helped fill their coffers with my own purchases, I must admit), but thought they were too expensive — you could certainly argue that they ain’t expensive anymore. And BUD has a good deal in place to sell itself but the market is for some reason terrified that InBev will back out — if the deal goes through this quarter you could have made a 20% gain in just a couple months by buying at the lows last week. And more importantly, I would assume that last week was a very, very strong week for sorrow-drowning.

So … lots of interesting ideas, some good perspective from both the most fearful bear market sufferers and the most hopeful investors who see a bull market hiding in the rubble. I hope you had a chance to read some of the entries even if you didn’t throw out an idea yourself. I’ve gotten some help from a Canadian reader (TV Guy) who interrupted his Thanksgiving to get our tracking spreadsheet started, so that will go up online in the next day or two so you can keep track of who had the best idea for these next few weeks of maximum uncertainty. And I’ll keep it up online so even if you don’t win the next phase of the contest, you can still point to your fabulous idea next year if it turns out to be a big winner … and claim your share of bragging rights.

The winner of the second half of the prize will probably be a much more volatile and crazy pick than the WWE suggestion that wins this first half — I wouldn’t be surprised to see our winner have more than a 100% gain in that time frame, or the last-place submission go bankrupt. Now, if only I knew beforehand which was which …