Idea #5: HANS: Hansen, Leading Energy Drink Maker, Monster brand

Simple Investment Idea #5: HANS (Hansen): Leading Energy Drink Maker ('Monster' brand)

• TICKER: HANS
  
• SECTOR: Consumer Staples, Beverage, Energy Drink, Specialty Drinks
  
• GROWTH THEME: Hansen (HANS) is a specialty drink maker, and their Monster Brand Energy Drink is a leader. Generation Y (a large group) and the Youth, and global growth will help propel stock and industry forward.
  
• DEMOGRAPHICS: Wiley has a study of Energy Drink Demographics.
  
• MARKET CAP: $7.1B
  
• FORWARD PE: 22.73
  
• ESTIMATED 5 YEAR GROWTH: 14.5%
  
• FORWARD YIELD: 0%
  
• PEG+Y GROWTH: 1.56
  
• PERCENT ABOVE 50 DAY MOVING AVERAGE: 4.7%
  
• PERCENT ABOVE 200 DAY MOVING AVERAGE: 29%
  
• RELATED COMPANIES: Pepsi (PEP), Coca Cola (KO), Diageo (DEO)
  
• RELATED BRANDS: Red Bull (Austrian Red Bull GmbH), Rockstar
  

Stocks Above 50 Day Moving Average after Drop Today (August 15, 2007)

The Stock market has been experiencing a correction, and the S&P 500 Index ($SPX) only has 7.6% of its stocks above the 50 day moving average. This is very low!

What are these stocks holding up?

I used Yahoo Finance and selected the larger capitalization stocks above the 50 day moving average and above a $4 Billion market capitalization:

1. Procter and Gamble (PG)
   
2. Cisco (CSCO)
   
3. Pepsi (PEP)
   
4. Ebay (EBAY)
   
5. Alcan (AL)
   
6. Las Vegas Sands (LVS)
   
7. Kimberly Clark (KMB)
   
8. Southern Co (SO)
   
9. FPL Group (FPL)
   
10. Celgene (CELG)
    
11. Kellogg (K)
    
12. Garmin (GRMN)
    
13. Broadcom (BRCM)
    
14. Macronix Intl (MXIC)
    
15. Hilton Hotels (HLT)
    
16. LG Philips (LPL)
    
17. Biogen Idec (BIIB)
    
18. Paychex (PAYX)
    
19. Wrigley (WWY)
    
20. Juniper Networks (JNPR)
    
21. Wynn Resorts (WYNN)
    
22. Lyondell Chemical (LYO)
    
23. Nidec (NJ)
    
24. Leucadia (LUK)
    
25. Intuitive Surgical (ISRG)
    
26. Intercontinental Hotel (IHG)
    
27. Hudson City Bancorp (HCBK)
    
28. American Real Estate (ACP)
    
29. Amylin Pharma (AMLN)
    
30. Waters Corp (WAT)
    
31. Tim Hortons (THI)
    
32. Dade Behring (DADE)
    
33. Whole Foods Market (WFMI)
    
34. Barr Pharma (BRL)
    
35. Iron Mountain (IRM)
    
36. Navteq (NVT)
    
37. Dow Jones (DJ)
    
38. Vertex Pharma (VRTX)
    
39. Covance (CVD)
    
40. Trimble Navigation (TRMB)
    
41. Intersil Corp (ISIL)
    
42. LDK Solar (LDK)
    
43. Weight Watchers (WTW)
    
44. Stericycle (SRCL)
    
45. Hansen Natural (HANS)
    
46. China South Air (ZNH)
    
47. Checkfree Corp (CKFR)
    
48. Chaparral Steel (CHAP)
    

I'm not surprised seeing consumer staples companies such as Procter and Gamble (PG) and Kellogg (K). I'm not surprised seeing healthcare stocks such as Celgene (CELG).

As many commentators have pointed out, technology can be good. Ebay (EBAY) is on the list, and Location Based Service stocks such as Garmin (GRMN), Navteq (NVT), and Trimble (TRMB) are good. I'm surprised that Broadcom (BRCM) is on the list.

I also noticed several resorts such as WYNN and Las Vegas Sands (LVS), most likely because of Macau presence and eased Macau rules, and that even in slowdowns, people can still gamble.

Hotels such as Hilton Hotels (HLT) and Intercontinental Hotel (IHG) are also on the list.

I'm surprised by Hudson City Bancorp (HCBK), a Financial. How is this surviving?

I'm also surprised by American Real Estate (ACP). How is this surviving in this market?

Stocks Holding Up Despite a Big Down Dow 387 Day (Aug. 9, 2007)

The Dow Jones went down 387 points today, for a loss of 2.83% to end at 13270.68. But despite this big drop, there are stocks which went up today.

Here are a few of those stocks on my screen that went up despite a big drop in the market.

1. Leucadia (LUK): (Up 6% today)

Leucadia (LUK) is a company that many call a mini Berkshire Hathaway (BRK.B), Warren Buffet's Company. Management is excellent, led by Guru Investor Ian Cumming and Joseph Steinberg. In 1978, Cumming and Steinberg banded together to take control of the company for $100,000 of their own money and $1.2 million from others to grow it to a $10 Billion company today. Both are still active in the company and as of 2007, Mr. Cumming is 65 and Mr. Steinberg is 63 years old.

Leucadia is a holding company that uses a deep value investing approach, buying distressed companies at discount prices, and sell them for profits.

In a shareholder letter, Mr. Cumming and Mr. Steinberg say:

"We tend to be buyers of assets and companies that are troubled or out of favor and as a result are selling substantially below the values which we believe there are. From time to time, we sell parts of these operations when prices in the market reach what we believe to be advantageous levels. While we are not perfect in executing this strategy, we are proud of our long term record…. We believe we are conservative in our accounting practices and policies and that our balance sheet is conservatively stated. To mutilate a hackneyed phrase, we are old dogs and we can't learn new tricks-we believe the ones we learned over the last 30 years continue to work just fine."

The company's stock has gone up recently on good volume and is now very near its all time high. In March 2007, they announced a stock buy-back program.

2. Hansen Natural (HANS): (Up 1.43% today)

Hansen Natural is a $4.3 Billion Drink Company that specializes in the specialty Energy Drink Business. They have a forward PE of 23.44, a 5 year estimated growth rate of 28.59%, for a good PEG of 0.81 (less than 1 is good).

Hansen Natural (HANS) recently announced very good results, and JP Morgan analyst Dara Mohsenian said that catalysts include "improved distribution, contributions from the new Java Monster coffee drink, market share gains, entry into the on-premise market and international growth." Mohsenian also says that strong earnings growth "puts Hansen in a solid position to implement 16-ounce price increases if it chooses, which could be a very significant earnings per share driver" in an Associated Press article.


3. Central European Distribution Corporation (CEDC): (Up 2.51% today)

CEDC is a Polish Vodka producer and importer of other alcoholic and non-alcoholic beverages. The company is a $1.77 Billion company, with a Forward PE of 20.94, a five year estimated growth rate of 17.5% for a reasonable PEG of 1.19.

4. Middleby (MIDD): (Up 5.34% today)

Middleby is a $1.2 Billion company that designs, manufactures and sells cooking equipment and related products. The company has a forward PE of 21.06, a five year estimated growth rate of 18.5%, for a reasonable PEG of 1.13. It recently announced record earnings.

5. Allscripts Healthcare Solutions (MDRX): (Up 4% today)

Allscripts is a $1.44 Billion company that provides clinical software and connectivity and information systems for physicians. It has a forward PE of 32.07, a five year estimated growth rate of 30.44 for a reasonable PEG of 1.05. The company recently announced earnings.

6. Peabody Energy (BTU): (Up 3.17% today)

Peabody Energy is a $12.25 Billion US based Coal Company with a forward PE of 15.06, a five year estimated growth rate of 16.6% for a PEG of 0.91. The Coal sector has been beaten up recently, but a recent US Department of Energy report suggesting coal demand should increase this year is helping stocks in this sector.

7. Sirf Technologies (SIRF): (Up 4.28% today)

Sirf Technologies makes chips for the global positioning market. This $1 Billion company has a forward PE of 15, a five year estimated growth rate of 26.86% for a good PEG of 0.55 (less than 1 is cheap). The company has missed its quarter recently, and the stock is near its 52 week lows.

8. Stanley (SXE): (Up 2.61% today)

Stanley is a $500 Million company that makes information technology systems for the US defense and federal civilian government agencies. Forward PE is 19.11, five year estimated growth of 21.57%, for a good PEG of 0.89. On July 18, 2007, Navy announces a $23.1 Million Deal, where Stanley is one of the four military contractors which won the award.

9. Level 3 Communications (LVLT): (Up 4.87% today)

Level 3 is an $8.23 Billion company that is in the communications business in North America and in Europe. Among many telecom services, Level 3 also is in the fiber optic networking area.


Companies which show strength during big down days are companies you should watch out as they may lead the way when the market does come back.

(Do beware of short squeeze rallies though.)

Drink and Soda Stocks By the Numbers

In this article, we look at different Drink and Soda Stocks and look purely at the raw numbers. (Data taken from Yahoo Finance on Thursday, June 21, 2007):

Symbol	Stock Name	MyPEG	Forward PE	5 yr growth	Yield
HANS	Hansen Natural	0.77	22.80	28.60%	0%
CEDC	Central European Distribution	0.96	18.10	17.50%	0%
STZ	Constellation Brands	1.25	14.48	11.50%	0%
JSDA	Jones Soda	1.27	46.88	34.00%	0%
DEO	Diageo	1.30	17.22	10.50%	2.30
PEP	Pepsi	1.32	17.85	11.00%	2.30
BUD	Anheuser-Busch	1.52	17.13	9.00%	2.20%
KO	Coca Cola	1.58	18.15	8.50%	2.60%

In order to understand the chart, we have to understand the different elements.

MyPEG

MyPEG is my own variation of the PEG Ratio. A MyPEG of less than one means the stock is cheap relative to its growth. A MyPEG of greater than two means the stock is very expensive relative to its growth. More info on MyPEG in this link.

Forward PE

Forward PE is the Price divided by Forward estimated earnings. When choosing between a stock that has a PE of 15 and a growth rate of 15% vs. a stock that has a PE of 30 and a growth rate of 30% (both have a PEG ratio of 1), I'll prefer the former. The reason is that high PE's are often priced to perfection. Any miss and high PE stocks can get hit very hard. Stocks with Lower PEs have less expectations and have a greater margin of safety. Another reason is that I have more confidence in the forward PE than the 5 yr. estimated growth rate. So the results are better by preferring the lower PE stock given an equivalent PEG or MyPEG because the 5 year growth rate is given less importance. Lastly, stocks can't maintain 30% plus growth for long periods of time, so growers from 15-30% might be preferred.

5 Yr Growth

5 Yr Growth is an estimate by the analysts. As I discussed earlier, the higher the better, though some people such as the legendary Peter Lynch have suggested that buying fast stocks, but not too fast, might be a good idea (from Peter Lynch's One Up On Wall Street : How To Use What You Already Know To Make Money In The Market).

Yield

The higher yield, the better. If you have a high yield, high growth, and low PE, that's a good combination.

Symbol	Stock Name	EV/EBITDA	%Short	%Inst. Own
HANS	Hansen Natural	23.89	14.70%	60.70%
CEDC	Central European Distribution	16.51	10.20%	62.30%
STZ	Constellation Brands	9.81	11.40%	83.90%
JSDA	Jones Soda	105.68	26.30%	27.30%
DEO	Diageo	13.42	0%	18.70%
PEP	Pepsi	12.59	0.60%	68.50%
BUD	Anheuser-Busch	11.17	0.90%	63.00%
KO	Coca Cola	15.35	1.30%	64.50%

EV/EBITDA

Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization. It is another measure of valuation. The lower the Better. A value of 8 or less is very good.

% Short

The higher the percentage, the higher number of people who believe the stock should go down. However, the higher the percentage, the better for those who go long because if good news is to hit a stock, not only does the price go up, but all those people who are shorting have to "cover" (Buy a stock to fulfill their loan obligation to the broker) their short position further fueling the gains. This is often called a "short squeeze".

% Institutional Ownership

People have different theories on this. Some people, like Peter Lynch, prefer a stock without that much institutional ownership. Because once the big mutual funds discover the stock, this could propel the stock to multibagger (make many times your money on your original investment) heights. However, some prefer a higher institutional ownership because that means that mutual funds and other institutional investors are already buying the stock (and may have them in their approved to buy list), and when more money comes in, they may add to their position.

Conclusion

Based on all this and based on just the numbers, Hansen Natural (HANS) and Central European Distribution Corp (CEDC) seem to have the best Growth at a Reasonable Price ratings.

Note that there are other companies that were not looked at including AmBev (ABV), a South American Drink Company, and National Beverage Corp (FIZZ), because there was some missing information. They could still be very good investments, however.

Stock Chart: PFE, Pfizer (June 15, 2007)

PFE, Pfizer, appears to be in the middle of an ascending right triangle, a bullish formation. The stock does not have the strength to break upper resistance. However, as the stock goes lower, at each stage, buyers support the stock at higher levels, creating higher lows. As the stock trades closer to the end of the triangle, buying pressure may be so strong, that the stock could breakout possibly on good volume.

Many technical buyers would like to buy the breakout above the triangle, ideally when the breakout is accompanied by good volume.

However, some could argue that the patient investor (who cares more about fundamentals than technicals or charts) can invest within the triangle. The justification of this is that a stock like Pfizer (PFE) pays a good dividend yield (currently at 4.30%). While waiting for the stock to breakout, the patient investor can reinvest dividends at lower prices.

For a real life example of a breakout off an ascending triangle, see Hansen Natural (HANS) example right here.

Here's a current day stock chart of Pfizer with the aid of the tools at StockCharts.com .

Stock Chart: Hansen Natural (HANS) has Broken Out! (June 15, 2007)

Hansen Natural ( HANS ) has just broken out of an ascending triangle on Good Volume. This is bullish!

Previously, HANS had formed an ascending right triangle with the hypotenuse increasing in slope from left to right. Ascending Triangles have a bullish bias. The stock has no strength to break past resistance. However, as the stock tries to go lower, there are buyers who start supporting the stock at higher levels, creating higher lows. Soon, all this buying pressure gets stored in the tip of the triangle, and the only thing a stock can do is Breakout upwards with Good Volume.

This is what is happening to HANS right now, and HANS has a bullish bias.