With nearly half of 2012 under our belts, it's time to review prognostications made in my year-end 2011 piece Nine for 2012.
1. Metals will move higher. I had gold at $1800 last year and silver breaching $40. For 2012, I see gold breaching $2000, and silver again moving back above $40. The printing presses have been on overdrive, inflation is on the way, and the precious metals will benefit. This is the Austrian Economist in me coming out.
Gold prices are flat year-to date, while silver is down about 3%. A 25% move in gold and 50% move in silver over the next six months seems unlikely. But I'm not giving up on either longer term. The commodity bulls may have thrown in the towel for now, but with the Treasury printing presses still on overdrive, precious metals and other commodities will again have their day.
2. Agriculture stocks will do well in 2012. I'm doubling down here; last year I was dead wrong, and the likes of Limoneira (LMNR), Alico (ALCO), Cresud (CRESY) and Archer Daniels Midland (ADM) did not perform well. This year will be different.
So far, this group of agriculture stocks is up an average of about 3% year to date, which is nothing to write home about. Alico is up 50%, while Cresud has been hammered (-32%) primarily due to an Argentine government that has nationalized the oil industry and the fear that there's more to come. Cresud shares fell sharply enough for me to take a new position.
3. On the political front, in a "hold your nose and vote" election, Obama will be defeated in November by Mitt Romney; even if we see an uptick in the economy. The past three years have been a disaster and someone new will be residing in the White House. Republicans will keep the House and take back the Senate. They best deliver. There will be no honeymoon. The electorate is sick and tired and it does not matter what side of the aisle you prefer. It's crunch time.
Nothing new here.
4. Presuming that we see uptick in the economy, tech-related stocks will rebound. I prefer the smaller cheapies with great balance sheets that are loaded with cash, such as Ingram Micro (IM), Tech Data (TECD), Benchmark Electronics (BHE), and Electro Scientific Industries (ESIO) to name a few.
After decent first quarter performance, all of these names have stumbled and are down about 7% on average. Ingram and Benchmark are both again trading below net current asset value (NCAV). These names trade at an average of 1.09x NCAV, and .83x book value. They are cheap, but if you don't have patience, stay away.
5. I expect good performance from restaurant turnaround stories such as Denny's (DENN) and Wendy's (WEN), which is on the cusp of eclipsing Burger King for the No. 2 slot in fast food. In addition, I have my eye on Luby's (LUB), which trades below book value, owns significant real estate and has all but fallen off the radar, and Frisch's (FRS) which yields 3.3% and also owns a lot of its' locations.
This group is up an average of more than 21% so far in 2012 and Luby's has been very strong (+47%). Frisch's is up 40%, while Denny's is also in positive territory (+14%). Wendy's continues to disappoint (-15%).
6. In long-shot land, troubled restaurant name Cosi (COSI) will be the subject of more intense activist efforts and the company will be forced to make some major changes. Meanwhile, Premier Exhibitions (PRXI) will be the subject of a transaction involving the company's Titanic assets. Remember, this is long-shot territory, and both of the above are as much wishful thinking as they are predictions.
After strong first-quarter performance, Cosi has pulled back significantly, and is down 6% year to date. The company is in the midst of a rights offering, priced at 65 cents per share and this has been a drag on shares. With newer management in place and former activist Brad Blum now advising the company, it's put up or shut up time. Meanwhile, mystery still surrounds Premier, which is up 8% year to date. Auction results for the Titanic assets, originally scheduled for April 15, have still not been announced and a deal has not yet been completed. Quite interestingly, the company was added to the Russell 3000 Index last week.
7. Nukes will stage a comeback. Despite last year's disaster in Japan, fears will begin to subside with the realization that there are currently few if any viable alternatives. This will bode well for Energy Solutions (ES). Meanwhile, the very troubled USEC (USU) will get a reprieve, and shares will rebound off of the current $1 area. You might want to put that one in the long-shot category, too.
USEC did get a small reprieve recently, but shares are still down year todate. There is much skepticism about the company's viability longer term. Meanwhile, Energy Solutions, which performed nicely during the first quarter, was hammered after the company cut guidance. Shares are down 49% year to date. I took a new position here, given what appeared to be an overreaction.
8. General Motors' (GM) troubles will continue. he Volt will continue to disappoint as will the Cruze. Investors will not embrace this stock in 2012 and it will ultimately live up to the value-trap theory. This goes against a great deal of smart money.
GM shares are up less than 2% year to date. I remain skeptical. Regarding the pension obligations, one factor that makes me bearish on the name; GM is now offering buyouts and is transferring management of some of its plans. This will supposedly save the company big bucks ($26 billion is the number I've seen). Perhaps a step in the right direction, but the recall of more than 475,000 Chevy Cruzes last week seemed to get more attention.
9. Real estate finally bottoms out in 2012 and companies such as Tejon Ranch (TRC), Texas Pacific Land Trust (TPL) and even St. Joes (JOE) will begin to appear more attractive to investors. Did I really just write that about JOE?? I'd actually be a buyer of the company at $10.
As a group, these names are up an average of 18% year to date. All are in positive territory, but Texas. Pacific Land is the big winner, up 43%. No bottom yet in real estate. Not interested in St. Joes at current price ($15).