As 2017 draws to a close, it is time for some reflection, including what went right and what went wrong. There is usually a fair amount of both, and I'll be sure to hit the good and the bad in coming columns. Perhaps uncharacteristically, I'll start with some of the good.
In early September, I published a list of My 5 Favorite Stocks for the Rest of 2017, which admittedly included names with some hair on them that many investors were shunning. Depending on the circumstances, that can create opportunity. Even the ugliest, most soiled one-dollar bill is still worth a dollar, and if you can buy it for 50 or even 75 cents, it is still bargain. It may not look nice, but it still buys a dollar's worth of stuff and is not worth any more or less than the crisp dollar bill that just came off the Treasury printing press.
The five faves have been more than pulling their weight. Four of the five are in positive territory and they collectively are up an average of 27% since the initial column ran. That's a bit better than the performance of the Russell 2000 and Russell Microcap indices, which are up 10% and 9.7%, respectively, during the same period.
The big winner of the group so far is retailer Hibbett Sports Inc. (HIBB) , up 67%, There is no doubt that retail has been on the ropes, but this name perhaps was punished a bit too harshly during the great retail shellacking we've witnessed for most of 2017, which came to a head over the Summer. Hibbett has more than doubled since bottoming in August. Retail has major issues and is changing dramatically, and Hibbett never again may command the $67 per share it did in 2013, but there is some value left, in my view.
Currently a "double-net" -- a stock trading at 1 times to 2 times net current asset value -- that is trading at just under 2 times net current asset value, Hibbett also is trading at 13 and 12 times fiscal 2019 and 2020 consensus earnings estimates, respectively. It has about $3 per share in cash on the books, no debt and has continued to reduce share count via buybacks. Lest you think the stock has had a great year, it is still down 45% year to date despite the run-up since August.
Fast casual restaurant name Zoe's Kitchen Inc. (ZOES) is up 31%; while there has not been a lot of news here, the name may be benefitting from more interest in the sector in the wake of the Buffalo Wild Wings (BWLD) pending sale. Zoe's stock has languished as the growth crowd has soured on the name, which went public in 2013. Despite the recent uptick, shares are still down 30% year to date.
The mysterious Biglari Holdings Inc. (BH) is up 32%, which also could be partially due to interest in the restaurant sector, as BH owns about 20% of Cracker Barrel Old Country Store Inc. (CBRL) as well as the Steak 'n Shake and Western Sizzlin chains. It was also just downright cheap at $300 a share -- that is, if you can stomach the company structure and can look past the fact that shares now trade at the same level they did four years ago.
Fitbit Inc. (FIT) is up 13% though it has been treading water of late as the market awaits holiday shopping data on the company's Ionic smartwatch, which has drawn praise and criticism. The coming year may be make or break for Fitbit, a name of which markets remain extremely skeptical.
FreighCar America Inc. (RAIL) , down 9%, is the only name in negative territory. Third-quarter results were bad and the company suspended its dividend. Still a double-net trading at just 1.44 times net current asset value, the balance sheet remains solid, with $121.2 million, or nearly $10 per share, in cash and short-term investments. That's a significant arsenal of liquidity, gives the company a long runway to fix some issues and still may make it compelling to an acquirer.
I continue to hold all five of these names, warts and all, but the common theme of the original column was that I believed all had been overly punished by the markets. We'll see if that theory continues to hold.