Two Unloved Stocks
06/09/2014 3:18 pm EST
GameChanger's Hilary Kramer discusses two unloved stocks that she thinks have significant upside potential.
SPEAKER: Hi, I’m here today with Hilary Kramer, owner of Gamechangerstocks.com and right now we’re going to talk about unloved and misunderstood stocks. What’s the story with the unloved and misunderstood stocks?
HILARY KRAMER: That’s where the money is to be made. Companies like SFX Entertainment, SFXE, Electronic Dance Music. This is a company with a $500 million dollar market cap and a potential to be a triple out there because Electronic Dance Music is more than just a trend. It’s here to stay. These are the big festivals, two-three days long. Tickets can cost in the hundreds of dollars. Billions to be made, matter of fact.
SPEAKER: Lollapalooza and that kind of thing?
HILARY KRAMER: That’s exactly right, and Electric Zoo—that will be another one, and these festivals are big money and big future because it’s also food items, clothing, retail, premium tickets, and here’s a company, SFXE, that is buying up, doing a build-up, buying, acquiring and will be…
SPEAKER: Why did it show up on your screen in your model?
HILARY KRAMER: Because the stock went public at $12 and it’s now $6 and it’s because Wall Street doesn’t understand electronic music and they’re afraid of what it means and what it implies. They’re not afraid to bring Potbelly public or a company that might build cholesterol in someone’s heart, but they’re afraid of a company that is about something that’s young and unknown to them and seems a little bit on the edge.
SPEAKER: Is there another one you like?
HILARY KRAMER: I love W.R. Grace, GRA. W.R. Grace is an old chemicals company, cement, packaging material. W.R. Grace emerged from bankruptcy in December. The stock is trading the low 90’s. It could easily reach $115 to $120.
SPEAKER: What kind of valuation do you have on that?
HILARY KRAMER: Valuation would be comparing it to BASF and I see, easily, a $10 to $15 billion dollar market cap potential, especially because there are a lot of regulatory changes in the oil refining business and W.R. Grace comes in and puts in and fits and retroactively refits those refineries. As well, the chemicals business is very profitable and now that W.R. Grace has emerged from bankruptcy, which had to do with litigation over the tragic asbestos situation, but there’s a $2 billion dollar trust, there’s no more litigation overhangs, so now W.R. Grace is in a position to really negotiate with their suppliers, with their customers.
SPEAKER: So, why do you think people should consider sort of these undervalued, misunderstood, unloved companies?
HILARY KRAMER: Because today, you’re not going to make a triple in Apple anymore. Apple’s a wonderful company. Companies like Microsoft with new leadership. Yes, there might be 20% upside there, but you’re not going to find the real upside unless you turn over every rock and go for unloved and misunderstood.
SPEAKER: And how much of someone’s portfolio do you think they should allocate to these types of stocks?
HILARY KRAMER: Within equities, it should be 50% of the portfolio because a person just won’t make it, and even if you’re looking for dividend yield, if we have any kind of correction, one might see their capital decrease and, sure, the dividend yield goes up, but they still net net have lost money, where these companies, as a niche, as having a story around them, could continue to grow in any market.
SPEAKER: Thank you Hilary.
HILARY KRAMER: Thank you.
SPEAKER: Thanks for joining us at the Moneyshow.com video network.