With Thanksgiving upon us, let's break from the normal routine and sift through the Barrel, looking for names for which to give thanks and others to label as turkeys.
Although the Barrel has had its share of challenged stocks (you can call them bad picks if you wish), it's also had some solid performers in an otherwise challenging year. So, let's assess the feast and famine.
The portfolio has plenty of "positive surprises," stocks that are either appreciating more rapidly than expected or continuing to hold gains.
has fared well since
being profiled in late October. Although it still has skeptics, WebMD has managed to transform itself from an Internet play to an industry-specific play -- in this case, health care -- that leverages the Internet. Although there's a high degree of speculation associated with the company's growth plans, its ability to expand both the payment-processing business and the physician practice-management business will go a long way in determining its success. That said, I wouldn't ignore a nearly 25% gain in two months.
hangs on to profits in the portfolio, up more than 27% since
profiled a year ago. At $25, however, this stock is trading near its midsummer level, and it's likely stuck in that range until the company reports fourth-quarter earnings. Given Coinstar's strange guidance
drama earlier this month, the company will have to reassure investors that it can deliver. I wouldn't wait around to find out.
Several names in the income portfolio deserve a pat on the back. This group has been the workhorse of the portfolio, not only posting solid gains for the most part, but also paying stable dividends, which has taken on increasing importance for investors. I've recently reviewed the
real estate investment trusts and
utilities in the income portfolio, so here are two others:
UGI continues to run its natural gas and electricity utility in Pennsylvania, as well as experiencing solid growth from its propane business, including its majority ownership of
. The company is posting double-digit earnings growth and still sports a yield of 4.3%.
Met-Pro's pollution-control and fluid-handling businesses are unimaginative, but necessary, and its order backlog is increasing. Although the stock has come back from its May highs, the 2.6% yield and a recent dividend boost make Met-Pro a nice, conservative small-cap.
Finally, let's give thanks for a trio of retailers in the portfolio:
( CPWM) and
, which all continue to post solid results. In a challenged retail marketplace, this Christmas season will be unusually important to future outlooks, but retailers with well-defined specialties should outperform.
The portfolio still has some turkeys, many of them from the financial sector.
The biggest is
( IBNK), an Evansville, Ind., bank that is struggling as interest rates decline and its net interest margin erodes. It will take time for new portfolio management to yield results, but the company did post a slight increase in loan volume in the third quarter, and credit quality is strengthening. Although I'm less than enamored with the speed at which current management has reacted to the rate environment, this remains an intriguing play both for the dividend -- a current yield above 5% -- and for the potential that the bank could be sold in the next consolidation wave. Another bank in the portfolio,
, has been saddled with similar issues, but it remains a good takeout candidate as larger banks look for a footprint in the lucrative Atlanta market.
The other problem-child bank in the portfolio is
( NTBK). A reasonably good performer, this Atlanta-based "virtual bank" faces skepticism about a branchless bank's ability to gain traction. If anyone can do it, NetBank can, so its stock has a good chance of improving from here. It has good support at about $8.30. If the company continues to execute, a mid-teens price by mid-2003 is reasonable.
Home for the Holidays
Finally, if you're looking for the ideal turkey-and-stuffing recipe or the perfect Barrel stock, look no further than
my column on the company's inextricable ties to its founder's fate, the stock is up more than 50%. Investors must think Martha has a lot to be thankful for.
Have a happy Thanksgiving.
As originally published, the table in this story contained errors. Please see our Corrections page.
Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to