Hawkins Inc. (HWKN)
Posted by Eddy Elfenbein on April 16th, 2010 at 1:30 pm

I often encourage investors to seek out smaller, underfollowed companies. It’s hard to get an edge on Wall Street when you’re buying a stock that’s followed by 30 or more analysts. In fact, there are tons of high-quality companies that are completely ignored by Wall Street.
If you do a little homework, you can be as well-informed as anyone on a small stock. Most investors never think of calling the company and asking questions. Well, you’re the owner! You’re certainly allowed. A lot of times, good companies are more than happy to discuss their business. (How often does someone call you asking about your job?)
One company that I’ve followed for many years is Hawkins Inc. (HWKN). Talk about unloved! Barely anyone follows widdle Hawkins. Yet, this has been an outstanding stock for decades! (BTW, I’m not recommending the stock. I’m just using them as an example.)
Hawkins is a specialty chemical company based in Minnesota. So if you’re in, say, Fargo and you need a shipment of sodium hydroxide, well..these are the boys to call. They’ve been around for many years and the company is largely in family hands. They do what they do, and they do it well.
The odd thing about Hawkins is that they used to split their stock almost every, but by small amounts. You’d get a 10%, 15% or 20% stock dividend each year. As a result, the nominal share and dividend price didn’t move much, but the stock really did very well.
Here’s a look at Hawkins’ long-term performance. That flat line is the S&P 500, meaning HAWK beat the market so badly that you can barely see it in comparison. For another comparison, the blue line is Coca-Cola (KO).

20,000 Freakin’ Percent! In specialty chemicals! The historical return is even better since Hawkins has probably averaged a higher dividend yield over time. Yet, no one has heard of these guys.
The stock has become a lot more popular recently, but even two years ago, the shares would occasionally spend an entire day without seeing a single trade. There was an 18-month stretch around 2004-05 when the stock didn’t leave $12 a share.
Owning a stock like Hawkins is about as close as you can get to being in private equity but actually own a publicly traded stock. Shares of Hawkins trade very little and the volatility is exceptionally low. To many investors, that’s a bad thing. Not to me.

Breaking: Goldman Plunges on SEC Investigation
Posted by Eddy Elfenbein on April 16th, 2010 at 10:56 am

Shares of Goldman Sachs (GS) are getting smacked on the news that the SEC is investigating the firm. Here’s the complaint from the SEC. Can you guess when the news came out?

I’ve looked through this and it’s not nearly as bad as it appears. At most, I’m guessing Goldman will have to pay a fine. I share Henry Blodget’s take.

Friday Morning News
Posted by Eddy Elfenbein on April 16th, 2010 at 8:43 am

BofA reports earnings of $3.2 billion. They’re getting better but they’re far from strong.
GE beat their estimates! Their horrible, horrible estimates.
UnitedHealth’s CEO bags $100 million from stock options. Yes, $100 million!
Oracle (ORCL) is buying Phase Forward (PFWD). Expect more of these buys. Larry has $17 billion in cash to play with.
Barbie pushes Mattel (MAT) to a profit of seven cents a share. They lost 14 cents a share a year ago. Math is apparently getting easier.
Good news: Sony Ericsson makes profit of 21 million. Bad news: In euros.
Goldman Sachs (GS) director is stepping down.Too insider tradery.
Housing permits rose more than expected last month.

Money Magazine’s Best Buy-and-Hold Blogger
Posted by Eddy Elfenbein on April 16th, 2010 at 8:05 am

Money Magazine has just come out with a list of the 100 Best Moves You Can Make With Your Money. I’m honored to be named at #5 — the Best Buy-and-Hold Blogger.
If you’re new to the site, you can read more about us here, and be sure to check out our Buy List here. We’re well on our way toward beating the market for the fourth straight year! You can also follow us on Twitter here.

Proxy Battle Forming at Denny’s
Posted by Eddy Elfenbein on April 15th, 2010 at 2:39 pm

I have to admit that I’m not a big fan of Denny’s (DENN), but I’m almost always sympathetic to any proxy battle. There aren’t nearly enough of these.
Stock certificates aren’t just pieces of paper, they’re legal ownership in a company. If the owners don’t like how the company is being run, they have every right to try and make a change. The incumbent board usually acts offended by a proxy battle which I never understand.

Spartanburg-based Denny’s Corp. issued a scathing response Wednesday to a group of investors waging a proxy fight against the company’s executive leadership.
In a letter to shareholders, Denny’s slammed members of the Committee to Enhance Denny’s, saying they are “playing fast and loose with the truth,” and pursuing their own personal interests rather than the company’s.
On Tuesday, the group issued its own letter to shareholders more than a month after first publicizing its views in a news release. The letter blasted leadership on a number of issues, including the company’s declining stock price, drop in guest traffic, failure to grow system-wide restaurants and ceding the top market spot to competitor IHOP.
“To this date, there still has been no formal communication from this group despite the fact that the company proactively reached out to them directly in response to their public filings,” Denny’s said in its letter. “Instead, these very recent stockholders chose to launch a costly and distracting hostile proxy contest in the hopes of changing the company’s course to pursue actions that we believe serve only their own narrow interest and not those of Denny’s stockholders.”
Led by investment firms Oak Street Capital Management and Dash Acquisitions, the group owns 6.3 percent of the company’s outstanding shares.
Shareholder voting rights allows for investors to state their case for change once they obtain 5 percent interest.

The New Fortune 500 List Is Out
Posted by Eddy Elfenbein on April 15th, 2010 at 2:05 pm

Walmart (WMT) edges out ExxonMobil (XOM) for the #1 spot. Here are the Top 100 ranked by revenues:

Happy Tax Day
Posted by Eddy Elfenbein on April 15th, 2010 at 10:56 am

Here are some Tax Day deals to enjoy:
Subway is coming to the rescue with Customer Appreciation Day. Buy one footlong sandwich and get one for FREE today.
PF Chang’s is giving you a break by taking 15% off your food bill today.
Bring in your own reusable mug and Starbucks will fill it up for FREE with their brewed coffee
Cinnabon is giving out 2 FREE cupcake bites to every customer from 6pm to 8pm on Tax Day (while supplies last).
Staples is offering 30 pages of FREE tax return copies. Staples is also offering free on-line expert tax advice.
Whole Foods is offering to pay customers’ sales tax. The tax-free shopping day is a first-time event for the Southern region.
Barry Ritholtz points us to a document from the IRS detailing what the taxes the Top 400 earners pay. To make the cut in 2007, you needed a minimum income of $138.8 million.

Have Breakfast with Nouriel Roubini
Posted by Eddy Elfenbein on April 14th, 2010 at 2:07 pm

The bidding starts at $7,000.
P.S. I’m willing to have breakfast with any of the losing bidders for only $6,000. I’ll even bring my own Frosted Flakes.
(HT: Felix)

WaMu: “I Like Big Bucks”
Posted by Eddy Elfenbein on April 14th, 2010 at 12:28 pm

Sung to Sir Mix-a-Lot’s classic:

I like big bucks and I cannot lie.
You mortgage brothers can’t deny,
That when the dough roles in like you’re printin’ your own cash,
And you gotta make a splash,
You just spends.
Like it never ends,
Cuz you gotta have that big new Benz.
All of that bling you’re wearin’,
Shining so bright peoples starin’.
It’s crazy, I gotta ski Aspen
That’s all I’m askin’.

This was the same company, by the way, that ran those awful race-based ads:

Progressive’s Impressive First Quarter
Posted by Eddy Elfenbein on April 14th, 2010 at 10:16 am

Progressive (PGR) is one of those ridiculously profitable insurance companies that I wish I had bought years ago. Just from watching TV, you’re probably familiar with the commercial wars between Geico (Cavemen, the Gecko and Buffett) and Progressive (Flo).
Here’s the thing: Car insurance can be very profitable industry. And I mean very profitable. Unlike some other forms of insurance, everyone has to buy it and the experts have thorough data on accidents.
Over the last 35 years, PGR’s stock is up more than 1500-fold compared with 14-fold for the S&P 500. The last few years, however, have not been so kind to Progressive. Near the end of 2005, the stock broke $31 a share (split-adjusted) and it eventually dipped below $10 a share last March.
Annual earnings-per-share dropped from $2.13 in 2006 to $1.55 in 2007 and $1.29 in 2008. Last year, EPS rose slightly to $1.55. Margins have squeezed the entire industry.
PGR’s Q1 earnings came out this morning and they were very good:

Progressive reported a profit of $295.6 million, or 44 cents a share, up from earnings of $232.5 million, or 35 cents a share, a year earlier. The latest period included $30.8 million in investment gains, while the prior year included losses of $73.4 million.
Net premiums written increased 7% to $3.78 billion, while premiums earned rose 3% to $3.5 billion.
Analysts surveyed by Thomson Reuters projected earnings of 37 cents a shares on $3.69 billion of premiums written.
The combined ratio, or amount of premiums paid as claims, rose to 90.9% from 89.5%. Meanwhile, the amount of personal auto and special-lines polices in force–largely homes–rose 7% and 3%, respectively, to 7.8 million and 3.5 million.

This is very good news, but I want to see more before I’m convinced the turnaround is for real.