Witmer is clearly worried about money printing at both the ECB and the FED as all of her picks are not only value stocks but also money-printing beneficiaries with real tangible assets.
Witmer first recommended a titanium dioxide manufacturer. Titanium dioxide is basically a pigment that makes products white. Almost anything you see that is white from sunscreen to white paint will have titanium dioxide.
"Last year I recommended Tronox (TROX) at $94 a share. Now it is $125. Tronox manufactures titanium dioxide and is one of five companies with the technology to produce it via the chloride method, which is cost-efficient and environmentally friendly. Tronox recently announced a merger with a division of Exarro (EXX.South Africa), a South African company that mines titanium dioxide feedstock. This will make Tronox vertically integrated. The acquired business has a 1.5-million-ton stockpile of ilmenite, the feedstock, which is in tight supply. Tronox hit a high of $165 last year. Shares have backed off due to market turmoil, mixed feelings about the acquisition and uncertainty regarding the economy. Most important, sales of titanium dioxide were slow in the fourth quarter. Investors didn't understand this was a seasonally weak period. Insiders have been buying shares at Kronos Worldwide (KRO) a Tronox competitor, which adds credence to our theory."
Indeed, insiders have loaded up at KRO, purchasing 535,000 shares at around $18. Shares of KRO currently trade at $22.
It should be noted that Tronox was in bankruptcy last year making it a turnaround play.
Witmer commented on the reasons for the bankruptcy when she said, "It was spun out of Kerr-McGee with a lot of environmental liabilities and debt. Then the financial crisis hit. But there have been positive surprises since I recommended it last year. Tronox has tax-loss carry-forwards that are worth about $30 a share. And the company has incredible earnings power, in the range of $20 to $30 a share. I had guessed it was around $12 a share. Some think it is over-earning because of the tight supply situation, but even using an 11 multiple of my prior estimate and adding the tax assets and the next 12 months' free cash flow gets you a target price of more than $190 a share. If earnings continue to grow at the current rate, they might be sustainably closer to $20, which gives you a $250 stock."