As I consider myself something of a cratedigger of a value investor, GuruFocus is a valuable source of information. I’m always looking for new ideas and one cool screen GuruFocus has is the Double Buy screen. It allows you to see which stocks have been bought by both gurus and insiders. Separately that is data I am already interested in but screening for both at the same time is beyond good. These are currently the top three stocks that come up on the screen:
Horsehead Holding Corp.
By sheer coincidence the No. 1 stock is my biggest loser of the year: Horsehead Holding (ZINC, Financial). I am down a lot on this one and have been buying all the way while it has been falling. Horsehead is an interesting zinc producer, with a $144 million market cap, that heavily invested in a new factory (about $500 million) which it has been unsuccessfully trying to ramp up.
Because it continues to fail to do this, Horsehead is cratering due to Chinese demand for commodities falling off, the company may issue some stock, and a 2017 debt maturity is coming closer by the day the stock has been massacred. I am continuing to hold the stock because:
- Management brought in help to get the factory up. This guy actually sounds confident it will happen.
- Once the factory is up and running, the company has a low-cost facility that adds a lot of EBITDA.
- The company has a unique competitive advantage because of its low-cost feedstock that is protected by long-term contracts.
- The company owns a few cash flow positive assets besides the new factory that could be sold if push comes to shove.
Gurus Mohnish Pabrai, HOTCHKIS & WILEY, Paul Tudor Jones (Trades, Portfolio) and Jim Simons (Trades, Portfolio) are owners among others.
Seritage Growth Properties
Seritage (SRG, Financial) is a $1.25 billion market cap REIT spun off from Sears Holding (SHLD, Financial). It owns 200-plus properties but in some way or another Sears and K-Mart are tenants or co-tenants in almost all of them. It has recently fallen off quite a bit and is now trading at just 1.22x book value. I wouldn’t bet the farm on it, but it looks pretty attractively valued, and I could see myself adding it to an REIT basket. However, perhaps wrongly, I am not that interested in REITs currently. Gurus who own this, likely because they own Sears Holding, include Bruce Berkowitz (Trades, Portfolio), Edward Lampert (Trades, Portfolio), Jim Simons (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Murray Stahl (Trades, Portfolio).
Olin Corp.
Olin Corp. (OLN, Financial) is a chemical company that makes chlorine and soda, bleach products and Winchester ammunition. So it is a weird conglomerate with a market cap of about $3.62 billion. The company only has about $600 million in debt which it can easily handle with its $255 million in cash and $290 million of EBITDA. It trades on a 14x forward P/E basis and an EV/EBITDA multiple of 14x. Insiders hold a sizeable number of shares, together almost 10% of all shares outstanding which is something I look for. Gurus who own this include: Steven Cohen (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Jim Simons (Trades, Portfolio), George Soros (Trades, Portfolio), David Dreman (Trades, Portfolio) and Chuck Royce (Trades, Portfolio). It’s unfortunate they are not known as activist investors, or we could expect some fireworks if they were to try and break up the company. That does not appear to be the angle here though.
Disclosure: Long Horsehead
