OFI

[berloga]

I love your viode overviews, David! Great job with those. I used IE7.0 and had to click the "play" button twice, but the video worked fine.

Your strategy for the intended long-term holding with subsequent reviews and reservations seems to be reasonable. For instance, SYX, OFI, HAUP look good so far whereas in case of MSI there may be something cooking under the water so if it becomes no longer attractive you will sell, right? I guess, that resolves the issue of the short-term vs long term. Buy for the long term and then act according to current situation and the outlooks.

Thank you!
Berloga.

[David Randolph]

I love your video overviews, David! Great job with those. I used IE7.0 and had to click the "play" button twice, but the video worked fine.

Your strategy for the intended long-term holding with subsequent reviews and reservations seems to be reasonable. For instance, SYX, OFI, HAUP look good so far whereas in case of MSI there may be something cooking under the water so if it becomes no longer attractive you will sell, right? I guess, that resolves the issue of the short-term vs long term. Buy for the long term and then act according to current situation and the outlooks.

Thank you!
Berloga.

Thanks for the comment on the videos berloga, I'm always a bit afraid that my poor English spoils the fun of watching them, but I guess what matters most is the content, not the shape.

You're right, when I buy a stock for the Main Portfolio, it must be with a long term perspective. I'm not looking to do quick trades here. But then I update the analysis everyday with new technical and fundamental information and the technicals, or the fundamentals, or my ideas about the business prospects can change, so I change the trading plan to reflect those changes.

OFI went down a bit yesterday, so I took profits on the 3 Stocks on Fire Portfolio. But it doesn't cross my mind to sell it on the Main Portfolio, because the business is strong and growing, and it is selling at a very cheap valuation.

Why would I sell now if I see $10 as a possible price in 6 - 12 months?

I'll continue holding OFI as a long term investment.

[David Randolph]

OFI's two biggest clients are Panda Restaurant Group and Jenny Craig, do you know these chains?

Well, here are their websites:

- http://www.pandarg.com/
- http://www.jennycraig.com/

It's funny, this Jenny Craig is a competitor to DIET. I didn't know that OFI made dieting products ... I wonder if this is the Jenny Craig Inc that OFI talks about in their SEC filings as responsible for 30% of their revenues.

Just these two account for 65% of OFI's sales, that is, $109.2 M. Imagine if they start getting more and more of these clients, just like they did recently, bringing in about $43 M in new sales just in the first year of the contract.

Here's more information about Over Hill Farms (OFI) business: http://www.overhillfarms.com/customers.htm

When I bought OFI for the Main Portfolio, it seemed so high didn't it? Well, I'm 9.37% ahead on the trade, and it doesn't seem so high right now, does it?

The stock is still severely undervalued in my opinion. Trading at 8 times forward earnings compared to the industry average of 22.8, I guess OFI looks like a sure thing.

It feels good to own a food related business, doesn't it? Food will always be needed. And there are no technological advances there to make your product obsolete. The more obsolete, the better

Just keep holding OFI.

[David Randolph]

OFI made $0.39 EPS over the last four quarters, so, not counting with the new contract they just secured that by itself will increase quarterly sales by about 27%, the trailing earnings multiple is $5.30/$0.39 = 13.6.

Competitor's like Conagra Foods and Sysco are trading at 32 and 26 times earnings, respectively, and with not nearly the same growth rates as OFI.

Short term traders are taking profits on OFI, but the stock barely moves down. It is setting itself up for another bull run. Fundamentals support at least a double from the current levels.

[David Randolph]

Nothing has changed from what I wrote last Thursday:

Short term traders are taking profits on OFI, but the stock barely moves down. It is setting itself up for another bull run. Fundamentals support at least a double from the current levels.

Volume has remained high, at 338,200 shares on Friday. I expect a new bull run this week and I'll keep holding OFI.

[Terliso]

Hoorah!! It does not get better than that ----> The T3ML with good fundamental

Nice pick David! what is the fair value of OFI?

[capricho]

David-outstanding pick. This proves once again how adept you are at this game. BRAVO! (uh, not BRVO)

[jorgegr]

Excellent pick David. Regret I only got in with a small position.

I would also like to know your opinion abt a fair value for this one.

[David Randolph]

Excellent pick David. Regret I only got in with a small position.

I would also like to know your opinion abt a fair value for this one.

Thanks Terliso, capricho and jorgegr

I expect EPS for the next 12 month period on OFI of $0.67 (it was $0.39 for the past 12 month period), the average earnings multiple of the Processed & Packaged Goods industry is 22.52, so OFI should rise to $0.67*22.52 = $15.08 to be valued at average.

But, competitors like Conagra Foods and Sysco trade at higher than average earnings multiples, with less growth than OFI, so perhaps the market should warrant an even higher earnings multiple to OFI.

But $15/share sounds fine for now

I'll keep on holding OFI.

[David Randolph]

OFI had a perfectly normal correction day yesterday, touching the midpoint of the previous day's white marubozu, which was $5.63.

I see OFI reaching a price somewhere between $10 and $15 in 2007, just with the current fundamental information, so I'll keep on holding the stock, ignoring the short term gyrations, in terms of the decision making process.

[njshiva]

I had a limit order to buy at 5.6 only one third got filled 
I will add some more this week. I like this stock

[styriver]

Thanks for the pick been in since 4.60. I track insider trades at insidercow.com
It appears the CFO has dumped most of his shares over the past 4 days.

Seems odd considering the earnings prospects.

[David Randolph]

Thanks for the pick been in since 4.60. I track insider trades at insidercow.com
It appears the CFO has dumped most of his shares over the past 4 days.

Seems odd considering the earnings prospects.

You're right styriver, the CFO sold ALL his 315,500 shares the last few days. And another director, which used to hold 2,032,250 shares, sold 200,700 shares between February 1st and February 5th (he's probably still selling, but reports are not out yet).

This is an interesting situation.

My take is, CFO's, CEO's and other insiders know a lot about their companies, but they don't know much about the stock market ! They trade like everybody else, that is, they have problems when they see a stock rising too fast and rush for the exit door. But usually the trend continues ...

On every big gainer in the stock market there were insiders selling big chunks of their positions as the stock kept rising. No one is able to catch a meaningful move if he sells his position every time an insider sells his. Moreover insiders may sell, but they always have more shares, due to stock option compensation plans, stock awards and stuff like that.

I want to thank styriver for bringing up insider sales (applause), but I always play my own game, even if insider's game points in another direction.

It's curious to see how with so many insider sales the stock is holding up so well.

I'll keep holding OFI.

[rickjust]

hi,
just my take on insider selling.
if a stock is riising in an uptrend and has had pretty good gains then selling for insiders who got their shares pretty cheaply is not a problem . they want to take profits and spend it, no doubt, for any number of reasons . (i know one insider for a company who cashed in to pay for college for her kids)
f the stock is plummeting in the other direction and everyone including insiders are dumping then there might be a problem. but this is not the case here.
i have been quiet of late, but i have been watching and learning thanks to david.
the trend is your friend . until something fundamentally has changed the trend will continue . fear is your biggest enemy in the market . take a look at yahoo boards, when a stock is rising all the fear mongers come out and tell you the sky will fall any minute now.
jmho
maxi

[David Randolph]

I fully agree with rickjust (applause).

There was this press release from OFI yesterday:

• Overhill Farms to Present at the Roth Capital Partners 19th Annual OC Conference
Market Wire (Thu 9:30am)

And a director of the company, Harold Estes, kept on selling his shares. He sold 120,947 shares on Tuesday, Wednesday and Thursday combined.

Even with all this insider selling, OFI closed in the green yesterday, respecting the $5.63 short term support level. I bet that when this insider selling gets out of the way the stock will initiate a new bullish leg towards $7 or $8.

I'll keep holding OFI.