Great Stock Buys for Late 2012


Craig Hodges Image Craig Hodges Co-Manager, The Hodges Fund

Select oil and energy stocks as well as some niche retailers are undervalued despite their strong fundamentals, says Craig Hodges, who identifies several solid stock buys for late 2012.

My guest today is Craig Hodges.  He is here to talk about areas, sectors, and stocks that are of interest to him right now.  So Craig, let’s get right to it. What are you liking right now?

At the Hodges Fund (HDPMX) and at the Hodges Small Cap Fund (HDPSX), we particularly think that the energy area has a lot of promise.  We like energy, we like some selective specialty retail, and also some industrials.  In the energy area, probably our favorite area would be the deepwater drillers. 

There is a company called Atwood Oceanics (ATW) that’s a deepwater driller, and that’s an area of the energy business that has the highest barriers of entry. So it’s hard to get into that business.  It takes five to seven years to build a deepwater rig, and half a billion dollars to do it. So there are not a lot of people flooding in, and that’s where your big oil deposits are going to be found in the next ten years.  So these companies like Atwood are going to have good pricing power for the next few years, and you’re going to see those day rates go up as oil continues to go up.  So that’s the part of the energy business that I think is probably the most attractive. 

We also see some selective oil companies like SandRidge (SD), and some that have been knocked down real hard, who I think have got a lot of promise as well. 

Is the investor memory of the Deepwater Horizon issue still playing into effect in that industry?

Yes, that’s why they’re very under-loved.