I am retired and take educated guesses on all things financial.

January 18, 2010

January 19, 2010: A Conglomeration of Conglomerates

There used to be lots of conglomerates. Back in the "go-go" days of the early 1960s, conglomerates as a species were the equivalent of tech stocks in the 1990s. Just about every investment guru had their favorites to recommend. All good things must come to and end, and almost all conglomerates fell out of favor (and profits), sinking mightily into the abyss of the Investment Sea. Truth is, most conglomerate managements had no idea how to run disparate companies - many CEOs simply tried to diversify their way out of incompetence. So what's going on now?

There is a small stable of conglomerates to research. Some are well known, others not. In some cases, management has performed quite well creating slow but steady company value that should benefit the long term investor. A few are just getting started (more so in 2009 than in recent years). I omitted several from the list below because they were, under any criteria, dogs. You may find one or more of the stocks I list below to be of value within a diversified portfolio.

3M (MMM)- trading at $83.37 with a yield of 2.45%. 52-week trading range of $40.87-84.60.

7 Days Group Holdings (SVN) - trading at $14.70. 52-week trading range of $10.80-15.25. SVN owns seven hotels in China and operates other hospitality service offshoots.

General Electric (GE)- trading at $16.44 with a yield of 2.43%. 52-week trading range of $5.73-17.52. Reinventing itself,some say not for the better, after the legendary Jack Welch built this into a "best in class" conglomerate.

Leucadia National (LUK)- trading at $24.81. 52-week trading range of $10.26-26.47. LUK has operations in real estate, property management services, the gaming industry, telecommunications, manufacturing and medical product development.

Pampa Energia SA (PAM)- trading at $11.03 with a yield of 0.69%.52-week trading range of $9.33-13.83. This Argentine energy conglomerate is not widely known in the U.S., but was the big winner when it was more heavily weighted in the Buenos Aires Merval Index. PAM has many facets to its energy businesses.

Seahawk Drilling (HAWK) - trading at $23.53. A recent spin off from Pride. Focuses on drilling in the Gulf of Mexico environs.Some say this spin off did not create long-term value for newly-minted HAWK shareholders.

Starwood Property Trust (STWD)- trading at $19.88 with a yield of 2.01%. 52-week trading range of $18.26-21.71. STWD has operations within the real estate industry.

Textron (TXT)- trading at $21.88. 52-week trading range of $3.57-23.06. TXT has operations in commercial jets, defense, aerospace, general aviation and manufacturing entities such as Kantex, Greelee and E-Z-Go. Textron also has interests in the financial sector.

Tyco (TYC)- trading at $37.54. 52-week trading range of $17.25-37.66. TYC has operations in the security system industry, flow control systems (pipes, valves, etc.), heat sensing products, fire protection services, fire detection systems and many other products to promote and remediate safety. The center of controversy under a former CEO, Tyco appears to be poised to provide continued growth for long-term investors, although it may be pricey at this moment.

Wasatch Food Services (WTFS)- trading at $4.05, this company went public in early January of 2010. With a market cap of $125m, shares have edge up for a double digit percentage gain since trading commenced. Trading volume for this new entry average about 14,000/day.

Some investors, with good reason, have labeled conglomerates a poor man's mutual fund. I do not know where the winners will be in this sector. However, they deserve to be researched and followed, as diamonds sometime appear in the most unlikely places.

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