Last night we welcomed George Schwartz back to Kudlow & Company. George is the president and portfolio manager of the four star Morningstar-rated Ave Maria Catholic Values fund. His fund is up almost 8 percent year to date—roughly double the S&P. Incidentally, George’s five "Kudlow Stock Club" picks from back in early October are up a remarkable 28 percent. (Sometimes it pays to watch the show…)
According to George, all five of his latest stock picks are candidates for a private equity buyout. He says they're all underleveraged, so the leveraged buyout boys could come, leverage them up, and take them over at a much higher price. He believes all of them could double in three years' time, even if they're not taken over.
Without further ado, here are George’s picks and commentary from last night’s show:
Zebra Tech. (ZBRA) - It's a $41 stock, a midcap with a $3 billion market cap. Zebra is the world leader in bar code technology and related equipment. It's a financial fortress. They've got $7 a share in cash and no debt, growing at 15 percent per year in earnings and cash flow.
Foot Locker (FL) - It's a $24 stock on the Big Board. Foot Locker is the dominant industry leader in athletic shoe retailing. It's a perfect candidate for a leveraged buyout. Clean balance sheet, no debt, $2 a share in cash. They're buying back their own stock.
Legg Mason (LM) - Big cap company, $20 billion market cap. It's a $97 stock. It's a global asset manager. They got out of the brokerage business, they swapped their brokerage business to Citigroup for Citigroup's asset management division. An absolute money machine, extremely high profit margins, high return on equity, selling at 18 times earnings, very high quality.
American Science & Eng. (ASEI) - This is a micro cap company, half a billion dollar market cap, $51 stock. It's a homeland security, homeland defense-related company. The stock's down from $93 a year ago, where it was way overpriced, but now it's at $51, selling at 17 times earnings. They have $12 a share in cash with no debt. They make X-ray detection equipment to scan cargo and baggage, looking for drugs and illegal aliens and explosives.
Select Comfort (SCSS) - This is a $17 stock with a $1 billion market capitalization. They make the Sleep Number bed where you can adjust the firmness of the mattress with a dial. It's a perfect takeover candidate too. It's growing 20 percent a year, selling at 18 times earnings with no debt.
