The Distressed 2012

This is year number four of "The Distressed", which has had mixed results in the past, but is too much fun to not continue the tradition. Here are the rules:

• 10 stocks, each 1/10th of what I usually invest per month.
• No .OB's, .PK's., or eminent bankruptcies.
• Generally speaking, I buy stocks I wouldn't otherwise buy.

Without further ado, I present to you the 2012 edition of "The Distressed":

Acme Packet (APKT, -58% from Apr. 2011): a slightly worse version of F5 Networks.
bebe stores (BEBE, -69% from Jul. 2005): small retailer, growing slowly.
Dendreon (DNDN, -73% from Apr. 2010): one of the choppiest charts in the history of the market. A hope to cure cancer.
Global Sources (GSOL, -82% from Oct. 2007): B2B in China? Yeah!
Hansen Medical (HNSN, -91% from Oct. 2007): a much crappier version of Intuitive Surgical.
MAKO Surgical (MAKO, -13% from Oct. 2011): OK, not very distressed...but a compliment to Hansen.
Rubicon Technology (RBCN, -64% from Jul. 2010): LED's and RFIC's. Decent fundamentals.
Savient Pharmaceuticals (SVNT, -93% from May 2008): hot stock tip from a friend...doesn't get any better than that.
Sunrise Senior Living (SRZ, -80% from Jun. 2007): in a demographically-promising business, but has been mismanaged for years.
Zipcar (ZIP, -52% from Apr. 2011): steady decline from IPO price. Interesting idea of car sharing vs. ownership (and maintenance).


Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Apple (AAPL) 15.07%
Baidu (BIDU) 9.52%
Google (GOOG) 7.50%
Southern Copper (SCCO) 6.47%
Intuitive Surgical (ISRG) 5.56%
Annaly Capital Management (NLY) 4.44%
Ace Limited (ACE) 4.32%
BP Prudhoe Bay Royalty Trust (BPT) 3.42%
Apache (APA) 3.26%
American Software (AMSWA) 3.26%
American Capital Agency (AGNC) 3.25%
The Distressed (APKT, BEBE, DNDN, ERTS, ESI, GSOL, HNSN, JSDA, LZB, MAKO, MSI, PCS, RBCN, RVR, SRZ, SVNT, WFC, ZIP) 2.98%
Kinder Morgan Energy Partners (KMP) 2.95%
Intel (INTC) 2.63%
McDonald's (MCD) 2.58%
Blackstone (BX) 2.46%
Prospect Capital (PSEC) 2.42%
Vodafone (VOD) 2.22%
Hugoton Royalty Trust (HGT) 2.20%
DuPont (DD) 2.11%
F5 Networks (FFIV) 2.09%
BreitBurn Energy Partners (BBEP) 1.77%
Under Armour (UA) 1.62%
Tesla Motors (TSLA) 1.62%
Amazon (AMZN) 1.52%
Chimera Investment (CIM) 1.23%
Netflix (NFLX) 1.18%

Stocks Of The Month: The Distressed 2011

In preparation for this year's additions, several stocks had to be purged from the portfolio. Borders (BGP), China Real Estate Information Corporation (CRIC), Energy Conversion Devices (ENER), E*Trade (ETFC), and GigaMedia (GIGM) were all underperformers with poor fundamentals - they won't be missed. Also, I took profits in American International Group (AIG) after a pullback/correction.

With MetroPCS (PCS) being the lone survivor of a particularly horrible batch of picks from last year, I seeked higher-quality candidates this time around. No .OB's or .PK's. No eminent bankruptcies. No poisoned balance sheets. Just some solid yet under-appreciated stocks, primed for a bounceback.

Without further ado, I present to you the 2011 edition of "The Distressed":

Electronic Arts (ERTS, -74% from Mar. 2005): game software maker figures to turn around at some point...or get bought out.

ITT Educational Services (ESI, -51% from Feb. 2009): outstanding profitability and margins.

La-Z-Boy (LZB, -74% from Apr. 2002): furniture business in a long slump.

China Nepstar Chain Drugstore (NPD, -81% from Nov. 2007): small ($414M market cap), risky but profitable, yields 6.4%.

White River Capital (RVR, -32% from Feb. 2007): smaller ($64M market cap), thinly traded, yields 5.9%. Subprime(!) auto financier.

Skechers (SKX, -48% from Jun. 2010): footwear maker subject to the most fickle of consumers.

STEC (STEC, -45% from Sep. 2009): data storage is a crowded area, but this could be the next SanDisk.

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Apple (AAPL) 12.31%

Southern Copper (SCCO) 10.61%

Dominion Resources Black Warrior Trust (DOM) 7.16%

Google (GOOG) 6.82%

Ace Limited (ACE) 4.35%

Baidu (BIDU) 4.34%

The Distressed (C, ERTS, ESI, F, JSDA, LZB, MMI, MSI, NPD, PCS, RVR, SKX, STEC, WFC) 4.18%

Apache (APA) 4.07%

Annaly Capital Management (NLY) 3.56%

Hugoton Royalty Trust (HGT) 3.54%

BP Prudhoe Bay Royalty Trust (BPT) 3.48%

Blackstone (BX) 3.13%

American Software (AMSWA) 3.11%

Prospect Capital (PSEC) 3.00%

Cherokee (CHKE) 2.96%

Frontline (FRO) 2.96%

Vodafone (VOD) 2.71%

Great Northern Iron (GNI) 2.68%

DuPont (DD) 2.62%

Intel (INTC) 2.45%

F5 Networks (FFIV) 2.34%

BreitBurn (BBEP) 2.31%

McDonald's (MCD) 2.26%

Intuitive Surgical (ISRG) 1.58%

Cree (CREE) 1.07%

Stocks Of The Month: The Distressed 2010

I have to admit...I've been looking forward to this for a while.

Last February, I made the completely liberating decision to buy crappy stocks and not care if they lose money. Pleasantly/well timed to the market recovery, 7 of those 10 stocks are in the black one year later.

So I will repeat the selection progress from last year: 10 more lousy stocks, each 1/10th of what I usually invest per month. And 10 more snarky comments for each wretched stock.

Without further ado, I present to you the 10 newest members of "The Distressed" (percentages are from 52-week high):

Ambac Financial (ABK, -71%): bond insurer which somewhat famously imploded in the fall of 2008.
Blockbuster (BBI, -76%): just like Netflix, but with way more overhead and debt.
Borders (BGP, -73%): old-fashioned, old-media retailer very near to bankruptcy.
China Real Estate Information (CRIC, -45%): irresistible intersection of the twin bubbles of China and real estate.
Energy Conversion Devices (ENER, -74%): beat-down solar cell and nickel battery company.
E*Trade (ETFC, -49%): nearly wiped out by mortgage business. Minus points for annoying talking baby commercials.
GigaMedia (GIGM, -61%): the worst of many Chinese online gaming stocks.
Jackson Hewitt (JTX, -81%): completely inferior competitor to the larger, healthier HR Block.
Palm (PALM, -45%): largely invented the smartphone, only to get trampled by everyone else.
MetroPCS (PCS, -69%): second-tier mobile provider. Bonus points for "Tech & Talk" commercials.

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Southern Copper (PCU) 10.92%
Apple (AAPL) 10.67%
Google (GOOG) 9.03%
Terra Nitrogen (TNH) 6.82%
Dominion Resources Black Warrior Trust (DOM) 6.46%
The Distressed (ABK, AIG, BBI, BGP, C, CRIC, ENER, ETFC, F, FNM, GIGM, JSDA, JTX, MOT, MTLQQ.PK, PALM, PCS, WFC, YRCW) 5.76%
Ace Limited (ACE) 5.07%
Tesoro (TSO) 4.90%
Frontline (FRO) 4.55%
American Software 4.02%
Blackstone (BX) 3.66%
Biovail (BVF) 3.24%
Vodafone (VOD) 3.11%
Tidewater (TDW) 3.05%
Great Northern Iron (GNI) 3.03%
Apache (APA) 2.97%
McDonald's (MCD) 2.90%
DuPont (DD) 2.42%
Annaly Capital Management (NLY) 2.40%
PDL BioPharma (PDLI) 2.35%
Cherokee (CHKE) 2.19%

Stocks Of The Month: The Distressed

A few days ago, I had a crazy idea.

Instead of picking stocks I like and losing money, why not pick stocks I don't like - even hate - and lose money?

So for this month, I chose 10 of the worst stocks I could possibly think of, and bought 1/10th the amount of shares I usually would for each one. If one or two go belly-up, no big deal. Heck, one of them dropped over 10% today, and I can laugh it off. This is a good thing...I think.

Here they are - from now on, to be known collectively as "The Distressed" (percentages are from 52-week high):

American International Group (AIG, -98%). The company that made "derivatives" a curse word. If they are lucky, they will return to being a big, boring insurance company.
Blackstone (BX, -80%). The weasels that sold high on the hedge fund craze by going public.
Citigroup (C, -88%). An ill-conceived, poorly managed financial conglomerate. Fire the management and break up the company, and there's value.
Ford (F, -79%). Um...they're an American car company.
Fannie Mae (FNM, -98%). Could go bankrupt. Or could solve the mortgage crisis.
General Motors (GM, -90%) They're like Ford, only much crappier.
Jones Soda (JSDA, -94%). Makes delicious pure cane sugar pop. Kind of a luxury discretionary item these days.
Motorola (MOT, -64%). Poor management and execution, decent R&D.
Wells Fargo (WFC, -57%). Probably the healthiest bank in America. 7% dividend yield.
YRC Worldwide (YRCW, -87%). Transports lead the market, right?

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Terra Nitrogen (TNH) 14.41%
Dominion Resources Black Warrior Trust (DOM) 14.13%
Tesoro (TSO) 11.58%
Google (GOOG) 10.02%
Apple (AAPL) 8.46%
Southern Copper (PCU) 8.41%
Frontline (FRO) 8.36%
Ace Limited (ACE) 7.80%
Tidewater (TDW) 4.75%
Atlas Energy Resources (ATN) 4.16%
The Distressed (AIG, BX, C, F, FNM, GM, JSDA, MOT, WFC, YRCW) 4.07%
Apache (APA) 3.71%