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%
