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A New Year, a New Barrel

Last year was a good one for stocks and, by association, for the Bottom of the Barrel portfolio. The Barrel is an eclectic selection of small-cap stocks that are undercovered by traditional analysts and, in many cases, underowned by institutional investors.

As we begin 2004, I've eliminated a number of stocks from the portfolio. Although some of the decisions were difficult, it was time to make room for some new names. I based the decisions partly on performance but also on relevance, taking into account the number of reader responses I received on a particular stock, the industry it's in and its potential to be interesting in the year ahead. Here's the short list:

A New Year in the Barrel
Cleaning out the Barrel for 2004
Barrels Company/Ticker Date of Mention Recent Price Mention Price Change Dividend Yield
Moog (MOGa:NYSE) 11/7/2003 $54.16 $43.12 25.6%
Boston Beer (SAM:NYSE) 3/5/2003 18.61 12.55 48.3
Wild Oats (OATS:Nasdaq) 2/20/2003 13.20 7.25 82.1
Maverick Tube (MVK:NYSE) 1/23/2003 18.36 14.08 30.4
Energy Partners (EPL:NYSE) 12/5/2002 14.29 9.40 52.0
Men's Wearhouse (MW:NYSE) 11/20/2002 23.44 16.22 44.5
Coachmen (COA:NYSE) 8/21/2002 18.71 15.05 24.3
Superior Industries (SUP:NYSE) 7/10/2002 43.00 43.87 -2.0
Fidelity National (LION:Nasdaq) 5/8/2002 13.20 10.58 24.8
Cost Plus (CPWM:Nasdaq) 3/6/2002 43.15 25.83 67.1
Rare Hospitality (RARE:Nasdaq)* 2/20/2002 25.88 17.15 50.9
Hibbett Sports (HIBB:Nasdaq)* 10/24/2001 32.95 13.36 146.6
Bottom of the Barrel Income Portfolio
Barrels Company/Ticker Date of Mention Recent Price Mention Price Change Dividend Yield
South Jersey Industries (SJI:NYSE) 6/25/2003 $41.40 $36.90 12.2% 3.91%
Ameron (AMN:NYSE)* 11/6/2002 37.84 25.30 49.6 2.11
Hawaiian Electric (HE:NYSE) 7/31/2002 49.39 41.86 18.0 5.02
UGI Corp (UGI:NYSE)* 6/26/2002 33.74 19.24 75.4 3.38
Acadia Realty (AKR:NYSE) 6/5/2002 12.41 7.03 76.5 5.16
Capital Automotive (CARS:Nasdaq) 4/3/2002 33.91 22.95 47.8 4.91
Alexandria Real Estate (ARE:NYSE) 2/13/2002 58.33 40.25 44.9 3.98
Integra Bancorp (IBNK:Nasdaq) 1/2/2002 23.00 20.75 10.8 4.09
* Adjusted for Stock Split. Source: Bloomberg, Company Reports, TSC Research

The names being removed from the portfolio -- in no particular order -- are:

  • Cequel Energy (CQL:Toronto)
  • Topps (TOPP)
  • Real Resources (RER:Toronto)
  • NetBank (NTBK)
  • Huffy (HUF)
  • Playtex (PYX)
  • Trico Marine (TMAR)
  • Baldor Electric (BEZ)
  • California Water (CWT)
  • WD-40 (WDFC)
  • Empire District Electric (EDE)
  • WebMD (HLTH)
  • Coastal Bancorp (CBSA) (which is being acquired).

That leaves us with 20 good small-cap names as the foundation of the 2004 Barrel portfolio. Remember, this is a group of small-cap, largely underfollowed stocks. As such, they are more volatile, and they have a higher level of risk and speculation. Be sure that you thoroughly understand the risks of small-caps -- a lack of liquidity, a lower level (and sometimes quality) of information flow and potentially choppy action in price movement -- before you invest.

With that in mind, here's a quick look at some of the remaining Barrel stocks.

Remaining Energized

If you read my columns regularly, you won't be surprised to see a host of energy names staying in the portfolio. Maverick Tube (MVK) has been a solid performer over the past year, as drilling activity has seen a slow and steady pickup. Maverick benefits from increased drilling because it translates into more demand for tubular goods -- drill pipe and the like -- that are used in oil and natural gas wells. However, steel costs are likely to put pressure on Maverick's margins this year. The easy money has probably been made with this stock at around $20, but the exploration cycle should still give Maverick some strength.
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