by John Buckingham, editor The Prudent Speculator
At the recent
MoneyShow investment conference, I took part in a
panel discussion in which my fellow presenters and I served up our
favorite stock ideas.
While I had scores of names from which to
choose, I opted to focus on lesser-known, undervalued high-yielding
stocks, each of which has received little in the way of love from
investors this year.
Diamond Offshore (
DO), a global offshore oil and gas drilling company, specializes in the harsh environment, deepwater and jack-up rig markets.
Diamond
appears poised for handsome long-term top-line growth due to the
continued discovery of energy sources in extreme locales, while ongoing
efforts to renew and modernize its fleet allow for bottom-line
improvement.
Solid pricing in the oil markets affords the opportunity to boost rig
rental rates and re-price some of its contracts, meaning that the
special dividends that have been paid out for a quite a while now (the
‘true' yield is 5.2%) are likely to continue.
Nash Finch (
NAFC)
is the second largest publicly traded wholesale food distributor in the
United States, in terms of revenue, serving 1500 independent grocery
stores in 29 states and over 475 military commissaries and exchanges in
the U.S. and Europe. The company also owns and operates 58 retail
grocery stores.
The company engaged in substantial capital
investments over the past couple of years, while deflationary pressures
further hurt neat-term results.
We like that Nash Finch continues
to generate industry-leading free cash flow and that it remains very
profitable with EPS expected to improve going forward from the current
(arguably trough) $2.40 level. The stock currently yields 3.8%.
PetMed Express (
PETS)
is a nationwide pet pharmacy that delivers prescription and
non-prescription pet medications for dogs, cats and horses directly to
the consumer.
The company also sells pet accessories, pet food,
and health and nutritional supplements. PetMed's products are marketed
primarily through its Web site and over the telephone.
Though
profits were crimped in Q2 as it spent heavily to add 197,000 new
customers, we believe that PetMed has ample room for growth in the
almost $50 billion pet supply market.
We like that management
continues to use its cash-rich, debt-free balance sheet to actively
repurchase shares and pay out the recently increased dividend, which
currently yields 6.1%.