Of Eagles and Turkeys

 | Mar 22, 2013 | 2:00 PM EDT
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We are nearing the end of the first quarter of the year and it has certainly been interesting so far. We have had fiscal cliffs, sequesters, Russians ravaging Cyprus banks and all sorts of assorted fun stuff to keep hold our attention. In spite of the politicians' best efforts, the stock market has paid far more attention to Uncle Ben that the dysfunctional circus on Capitol Hill and the S&P 500 is up about 8.5% so far. My macro-oriented friends are continuing to painfully learn that ZIRP (zero interest-rate policy) trumps all.

The Value Line service conveniently lists the best and worst performing stocks on one page, so I can spot trends and stories at a glance. Looking at the top performers' list, I was gratified to find a few of my stocks included. Tecumseh Products (TECUA) has drifted back off its highs, but the stock is still up more than 50% since the first of the year. Albany Molecular (AMRI) has doubled since I picked it as a long shot in the first week of January. One of my cheapies for the year, Sony (SNE), has participated in the Abe rally in Japan rising by almost 70% in the quarter.

My two dogs of 2012, SuperValu (SVU) and Radio Shack (RSH), have gained enough ground that I can now dream of breaking even if the companies repeat their strong first-quarter rallies. My "sneak in the back door" wind power play, Zoltek (ZOLT), has rallied more than 50% as activist investors engaged the company to unlock value. I bought all of these cheap enough that I will hold them except Albany Molecular. That one I would suggest you go ahead and sell at 1.6x book value.

Lest all of this make me overly giddy, let us turn to the worst performers' list. My picks are well represented here as well. Voice and data services company Tellabs (TLAB) rallied on the back of a special dividend last year but has since fallen sharply. The stock is down more than 35% to start the year. There is a spending backlog among mobile carries that should eventually allow the company to improve and the stock is trading below book and just above it net current asset level so I will hold the stock for the foreseeable future.

I have been pounding the table on Arch Coal (ACI) for several months now and so far all I have succeeded in doing is pounding the price down an additional 30%. The stock is now trading at 50% of tangible book value but I still think coal has a brighter future that most assume at the moment. This could take a long time to play out but as other providers shift to the faster growing export market, thermal coal for U.S. power producers will see demand and pricing stabilize and Arch's earnings outlook will improve. I backed into my starter position in ACI by I selling puts, and I think it is time to scale in by selling the July $5 puts for $0.57.

I thought I was a super genius value type for adding to shares of Cliffs Natural Resources (CLF) in the high $20s. After all, the tangible book value is above $32 and iron ore demand has to pick up at some point if the global recovery story is to remain in place and gain strength. Well, my super genius friend, you now have the opportunity to buy the stock almost 50% lower than your first price. I am going to add to this one eventually, but it's a train wreck right now and I will wait a while to engage in a third purchase of the stock. I expect to make a lot of money on Cliffs over my time frame, but I am starting to suspect it will be a very bumpy ride.

I want to investigate some of the names on list further. Atlantic Power (AT) is the biggest loser and has all the components of a good long-term value story -- including dividend cuts and class-action lawsuits. Kimball International (KBALB) has fallen off the highs of the year and is nearing levels that may tempt me to buy back into the electronics and furniture company.

While we had a couple of real stinker stock picks in the quarter, we had a few leaps higher that happened much more quickly than we expected and those offset my inevitable mistakes. The second quarter promises to be just as interesting. Plus, now we have baseball to help take our minds of it all once the bell rings.

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