Lenny Dykstra….Stockpicking Savant?
This is the first in our new series: Talking Heads
Lenny Dykstra was a one-man wrecking crew when he played for the Mets and Phillies back in the day. Brash and outspoken, he was the Charlie Hustle of his generation. He has parlayed his baseball earnings into a http://www.nj.com/mets/ledger/index.ssf?/base/sports-1/1160455584216100.xml&coll=1">mini empire that includes car washes, quick lube outlets and other related business ventures. All in all, we would have to say that he has done well for himself despite some missteps along the way and lingering suspicions that he still parties too much.
Indeed, we think some of his television appearances have been quite bizarre as he adjusts to a different type of media glare. Of late, Lenny has frequently been quoted in the media advocating a deep-in the-money call strategy and has also been quoted on the record boasting of a near-perfect run of stock picks…
Dykstra says more than 90 percent of his stock picks are money-makers. And if you don’t believe it, he says with that familiar edge, ”go ahead, dude, look it up.”
Still, he can’t be any worse than some of those so called professionals CNBC trots out day after day, and we are willing to give him a shot at attaining guru status here at UTC. A reasonably lucid Dykstra was on Fox News Channel’s “Bulls and Bears” this past weekend (10/21/06) sharing his investment prowess with, well, anyone who will listen. His picks included:
Archer Daniels Midland (ADM)
Yahoo (YHOO)
Anadarko Petroleum (APC)
Unit Corp (UNT)
Diageo PLC (DEO)
Despite our skepticism regarding ex-baseball players and ex-wrestlers who dispense financial advice to the unwashed masses, we are trying to have an open mind. And we have to be honest. We love Lenny Dykstra. We admired his grit during his playing days and now his attempts to create jobs and wealth since he retired from the game. We are just not convinced he is a stock savant with a 90% success rate, although he is probably better than Joe Battapaglia.
We also love a good scrap, and have an ego every bit as bloated as Lenny’s face and waistline. Thus we think a little wager is in order. We will submit five picks, including the high flying recent IPO Acme Packet (APKT)
and the following:
Express Scripts Inc.(ESRX)
Global Payments(GPN)
DeVry Inc. (DV)
Exlservice Holdings (EXLS)
The two portfolios will be tracked and we will update you periodically on the progress, or lack thereof. The circus will end on December 31st, 2006 and a winner declared.
Too, in honor of Lenny’s five flea ridden dog picks, we will make a modest donation to the North Shore Animal League at the contests end....and if we beat Lenny we will ask him to match our donation.
Game On, Nails
Live by the Sword…Die by the Sword
Straight talk from mutual fund managers is a rare commodity in the investment arena. Excuses, spin doctoring and excessive BS are their stock in trade. Its how they hold onto assets when they really don’t deserve to.
Thats why we want to give a shout out to Ric Dillon Jr. and the crew at Diamond Hill Investments. Diamond Hill is a small, employee-owned investment organization in Columbus, Ohio, an area of the country better known for football fanatics than investment geniuses. Diamond Hill Investments (Morningstar)
Perhaps it is easier to see the forest through the trees in Columbus, or maybe its something in the water. In any case, Ric and his team of dorky looking CFA-types have put up numbers that positively sparkle.
Until this year.
A hefty overweight in the energy sector has left their small and mid-cap strategy offerings near the bottom of their peer group after a few years of serious outperformance. As we saw in the aftermath of the tech bubble, a large sector bet can quickly turn a hero into a goat. But they are sticking with their energy thesis and explain their rationale in their latest quarterly review, instead of blowing smoke up their clients rear-ends which is the modus operandi in these situations.
We applaud this approach. It is forthright and and honest. Its the polar opposite of snake oil doled out constantly by the big mutual fund shops. And it probably does more to buy them time and earn their clients trust than any other course of action. Of course, they better get it right.
Maybe the Putnams of the world can learn something from these dorks.
The first of many in our new feature: Shout Out
The Hedgie Who Didn’t Like to Short
Legg Mason’s sterling reputation, built largely on the back of Bill Miller and the fawning media that chronicled his every move, is starting to tarnish at the edges or perhaps singe at the edges, given the stock’s big blowup last week- (LM chart)
Investors who recently put money in Miller’s flagship fund Legg Mason Value Trust (LMVTX) are likely regretting that decision with one and three year returns that are bottom of the barrel. But investors might want to take a closer look at the Clearbridge operation that LM acquired recently from Citigroup. Now headed by Brian Posner, another Hedge Fund manager who folded up the tent at his Hygrove Partners, he recently brought aboard fellow University of Chicago alum Robert Gendelman who the NY Post so accurately portrayed in its puff piece “Hedge Fund Escape” (NYPost)
Unlike the more measured pace at Legg Mason, where his days are often spent on research and meetings with companies in his portfolio, Gendelman often did not have time to catch his breath at Cobble Creek. “I also felt uncomfortable with the necessity to short stocks,” he says, referring to the controversial practice of borrowing stocks and then selling them, hoping to make a profit by returning the stocks later after the price drops.
Don’t get us wrong. We love the NY Post. But investors might want to closely monitor this fund family for further signs of underperformance. Hiring your biz school buddies who could not generate alpha in the long/short world might comfort Posner, but it is likely to leave investors feeling blue. So we will be keeping an eye on these two former Hedgies as they go back to investing the money of poor suckers who don’t know any better.We are putting these guys on double secret probation.
Stay tuned for updates as we initiate our new feature ….
Double Secret Probation
Watching the guys who are watching your money
Timing is Everything
Today shortly after the close our good friends at streetaccount.com posted the following news:
16:18 Deutsche Bank initiates homebuilding sector: CTX, DHI, HOV, LEN, TOA, and TOL Centex (CTX) and Lennar (LEN) are initiated buy with targets of $67 and $56. DR Horton (DHI), Hovnanian (HOV), Technical Olympic (TOA), and Toll Brothers (TOL) initiated hold with targets of $25, $32, $11, and $30.
Less than an hour later Centex lowered guidance dramatically:
Tim Eller, Centex Corporation Chairman and CEO, said, “The housing market continues to adjust rapidly and Centex is executing its balanced approach to effectively manage these transitions. Cancellation rates that were well outside of historical levels diminished our earnings visibility this quarter. We continue to focus on generating cash and on positioning ourselves for strategic reinvestment as business conditions improve. We will provide additional information about our second quarter results in our quarterly conference call and press release.”
Centex Reports Preliminary Second Quarter Results (Yahoo)
Centex closed the after hours trading session at $52.32, down $2.77 from its $55.09 4pm close.
Tomorrow we would expect the hapless Deutsche analyst to:
A) Call in sick and take a 3-day weekend
B) Downgrade the stock to hold and lower his price target in the quickest flip-flop in Wall Street history
C) Pretend like nothing happened when he shows up in the office and deflect attention from his gaffe by talking incessantly about the Mets game
Art Imitates My Life
Although we were never part of the Billionaire Boys Club that gained notoriety in the 80’s, we were members of a more notorious cabal for many years. One that featured private jets to the Super Bowl, sky boxes in the Bronx, steaks at Sparks and the obligatory back rooms at strip clubs.
This cabal is called the buyside. And although the sexy hedge fund side of it beats working for the vanilla mutual fund side...it’s all the same. It’s about getting your ass kissed by the sellside as you play god with the commission stream that is their lifeblood.
It’s about partying like a rock star with a job on the side.
We will leave the high road to others. Hell, let them eat cake.
Because we can’t wait for this show to hit HBO… from the creators of Entourage
Boys’ night out at HBO-Ellin’s next comedy series set on Wall Street (Variety)
