Nancy Zambell: Common Sense Picks
08/29/2002 12:00 am EST
In an investment world that seems to grow ever more complex, it is refreshing to listen to Nancy Zambell, who focuses exclusively on conservative, common sense investing. Here's an overview of her fundamental strategy and some of her current favorites.
"I have found over the years that the investment community tends to make things too complicated. They want you to believe that you cannot do this stuff on your own - so that you can pay them big bucks to tell you what to do. Let me tell you, everyone here is perfectly capable of doing that yourself. It takes a little bit of elbow grease and a little education. There are never guarantees in the stock market. But if you take a handful of equations and a little common sense, you can pretty much analyze any company to decide whether or not to make an investment."
"I have found a number of good ways to limit your risk when buying stocks. By purchasing stocks that do not have a gaggle of Wall Street analysts following them, that do not have high institutional holdings, and do not have high p/e ratios, you definitely can increase your returns. I suggest focusing on stocks that have less than 35% institutional holdings. As a rough guideline, I would avoid stocks that have more than ten analysts following them. Look at the company's growth rates - growth in earnings and growth in sales. These rates should be growing in tandem. Avoid companies with high growth rates but no profits. Only buy companies with reasonable debt levels. And check if insiders are buying or selling."
"Here are some stocks that look pretty good these days:
Hormel Foods (HRL NYSE) makes Spam. They are one of the biggest pork producers in the world. The stock is trading around $22 a share, at the low end of its 52-week range, and it pays a dividend of 1.79%. Net income was up 7% for the most recent nine months. That's not a huge number, but it's a pretty steady company.
Gundle SLT Environment (GSE NYSE) makes liners for landfills. Revenues were up 71% in the last six months. The stock is trading around $8.30 a share, near its 52-week high.
ICT Group (ICTG OTC) manages call centers. A lot of companies are farming out this work rather than doing it in-house. Sales for the past six months were up 27%, net income rose 47%. It is trading near $16, about midway through its 52-week range.
Alliant Energy (LNT NYSE) is an electric and gas utility in the Midwest. It's trading around $20 a share, close to its 52-week low. Its sales and net income were down recently, but lately, insiders have been buying. They may know something that we don't."
Finally, for the more speculatively-inclined, Nancy offered workshop attendees a high- risk, very low-priced play on Cuba - Leisure Canada (LCN VSE), a Vancouver exchange-listed hotel developer. She explains, "I went to Cuba to visit the company's properties. Its biggest problem is dealing with the Cuban government. It takes a long time to get permits for what they want to do. However, I talked to management about six weeks ago, and they tell me they are going ahead with a major hotel property and may break ground before year-end. It's an interesting play, because already the island of Cuba gets millions of visitors a year. Many people hear about the embargo and think no one visits. Let me tell you, 65% of the people in the hotel I stayed in were American. You can go, but under the auspices of a business trip with a special visa. Tourism in Cuba is already thriving, and I believe the embargo will eventually get lifted. The company also announced that it will operate hotels for some of the big chains as another source of revenue. The company operates at the high end of the market. It even has contracts with the PGA to one day build golf courses there. It's a high-risk situation, but I'm holding on to the stock because it is so cheap."