Paper Can Still Beat Tech

 | May 13, 2013 | 4:00 PM EDT  | Comments
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Stock quotes in this article:

bbry

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aapl

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nflx

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ish

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fmd

I confess that I am just an old-fashioned guy. If I use a new piece of technology, short the stock right away.

If you think I am kidding, I will spell it out. I got a smart phone for the first time in February 2008. It was a Blackberry (BBRY). I finally replaced it last year. I got an iPhone 4. See how that has worked for Apple (AAPL). In 2011 I broke down and tried Netflix (NFLX). I am a technological curmudgeon and something of a Luddite. Companies should pay me not to use their stuff. I am the cooler of tech.

This is especially true of books, newspapers, and research material. I know I can read it all online and often I am left with no other choice. I just do not want to do so. I do most of my screening online and the majority of my research as well. However, I print it out to read.

I have had an on-again, off-again subscription to a statistical service that sends me monthly lists of stocks trading below book value with high earnings yields and issues that are net current asset bargains. I know I can get all this online in a blink but I like having the paper in my hand to sit down and browse.

Last year, I let my subscription lapse as it seemed silly to be paying for something I can get online in a minute. I recently re-upped because I found I missed having the little sheets of paper around the office to peruse and back issues to refer back to form time to time. During the weekend I had a chance to sit out on my little lanai with coffee and the latest issue.

There are some interesting ideas that pop up. Many of these would not have hit my screens because I often use more filters than just price to book an earnings yield. One strikes me as a particularly interesting longshot opportunity. If The First Marblehead Corp. (FMD) is able to get all of its troubles behind it the stock has enormous upside. The student loan business is not exactly a great place to be right now, but the company appears to have a chance at recovery.

First Marblehead offers private student loans and works though banks and credit unions. They also have a tuition payment plan program for universities that has 700 schools enrolled. Their recent earnings release showed improvement and they re-qualified for continued NYSE listing. First Marblehead is not for the faint of heart, but it has the potential for an option-like payoff over time if the company survives.

Several shipping stocks make the list and although my track record is spotty with these stocks over the years some of them are just too cheap not to own. However, I feel a little more comfortable with the group as Wilbur Ross continues to make bullish statements about the industry and is spending large amounts of money to back his words. The one that really stands out for me right now is U.S. - based International Shipholding Corporation (ISH). The company owns 46 vessels that include bulk cargo vessels, autos and truck carriers, and containers ships. They serve niche markets and have both international contracts as well as U.S. flagged vessels covered under the Jones Act for port to port shipping within the U.S.

The stock is cheap under almost any measure you use. The shares fetch just 50% of tangible book value and have a price-to-earnings-ratio of just eight at the current price. Unlike other shipping companies that suffered enormous losses as the markets experienced a glut of vessels and a slowdown, International Shipholding has long string of profitable years for more than a decade. The stock also pays a comfortable dividend with a yield of 5.5% so you get paid to with for business to improve.

As I look at the list I note that the number of U.S. stocks that trade below book with a high earnings yield, or below net current asset values, is small. That is a bit of a red flag, so be cautious about building positions even with cheap stocks. Stay small and move slow is always the best approach.

I keep up with technology advancements because I have to do so, and they are quicker and cheaper than my old-fashioned methods. But sometimes the slower older ways can uncover opportunities I might have overlooked otherwise

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