Wednesday September 19, 2012
by John Buckingham, editor The Prudent Speculator
At the recent MoneyShow investment conference, I took part in a panel discussion in which my fellow presenters and I served up our favorite stock ideas.
While I had scores of names from which to choose, I opted to focus on lesser-known, undervalued high-yielding stocks, each of which has received little in the way of love from investors this year.
Diamond Offshore (DO), a global offshore oil and gas drilling company, specializes in the harsh environment, deepwater and jack-up rig markets.
Diamond appears poised for handsome long-term top-line growth due to the continued discovery of energy sources in extreme locales, while ongoing efforts to renew and modernize its fleet allow for bottom-line improvement.
Solid pricing in the oil markets affords the opportunity to boost rig rental rates and re-price some of its contracts, meaning that the special dividends that have been paid out for a quite a while now (the ‘true’ yield is 5.2%) are likely to continue.
Nash Finch (NAFC) is the second largest publicly traded wholesale food distributor in the United States, in terms of revenue, serving 1500 independent grocery stores in 29 states and over 475 military commissaries and exchanges in the U.S. and Europe. The company also owns and operates 58 retail grocery stores.
The company engaged in substantial capital investments over the past couple of years, while deflationary pressures further hurt neat-term results.
We like that Nash Finch continues to generate industry-leading free cash flow and that it remains very profitable with EPS expected to improve going forward from the current (arguably trough) $2.40 level. The stock currently yields 3.8%.
PetMed Express (PETS) is a nationwide pet pharmacy that delivers prescription and non-prescription pet medications for dogs, cats and horses directly to the consumer.
The company also sells pet accessories, pet food, and health and nutritional supplements. PetMed’s products are marketed primarily through its Web site and over the telephone.
Though profits were crimped in Q2 as it spent heavily to add 197,000 new customers, we believe that PetMed has ample room for growth in the almost $50 billion pet supply market.
We like that management continues to use its cash-rich, debt-free balance sheet to actively repurchase shares and pay out the recently increased dividend, which currently yields 6.1%.
Learn more about this financial newsletter at John Buckingham's The Prudent Speculator.