As I mentioned in an earlier post, I had selected the 8 Stock Portfolio from a short list of almost 30 candidate stocks. I thought it would be interesting to post the stocks that I removed from consideration and the various reasons why I thought these stocks didn’t measure up.
This will probably be an interesting list to revisit at some point in the future. If it turns out that my removals have outperformed the 8 stock portfolio, well… then I will have something to think about.
Jones Soda (JSDA)
Jones Soda is a beaten down beverage maker with falling sales despite the fact that they are getting their sodas onto more supermarket shelves. I removed them because I think they have damaged the uniqueness of their brand by putting the soda in aluminum cans instead of the cool glass bottles. Remember when Krispy Kreme starting selling their donuts in gas stations? I don’t think you can come back from something like this easily.
52 Week High Price: 12.76
Recent Price: 2.47
Decline from 52 Week High: 81%
Caribou Coffee (CBOU)
This company is one small player in the recently crowded field of high end coffees. They operate about 500 coffeehouses and sell canned beverages in stores like Target. Although I actually love their coffee, the company is losing buckets of money trying to open and operate expensive coffeehouses. Losses are growing and sales are shrinking too quickly to be optimistic about their survival.
52 Week High Price: 7.03
Recent Price: 1.74
Decline from 52 Week High: 75%
Chesapeake (CSK)
The company manufactures and supplies specialty paperboard and packaging. It has been whittled down to a whisper of a market cap of 18 million. This company is simply too tiny to compete against other better positioned and much better capitalized companies in the same industry.
52 Week High Price: 12.75
Recent Price: 0.88
Decline from 52 Week High: 93%
Cavalier Homes (CAV)
Besides having a cool pronounceable ticker symbol, the company produces, sells, and finances manufactured homes. After some thought, I decided that I wouldn’t select any stocks in the housing or financial industries. There will definitely be more casualties in these industries and I’m not up for guessing which ones will survive. Even if I could pick out the survivors, I think they will experience a long multi-year stock price “hangover” and a very lean decade or so.
52 Week High Price: 4.54
Recent Price: 2.34
Decline from 52 Week High: 48%
Travel Centers of America (TA)
Fittingly Travel Centers of America operates travel centers around America. I just couldn’t muster any excitement to look into their actual business after trying to figure out their corporate structure, which seems like a mish mash of LLCs and LPs.
52 Week High Price: 36.60
Recent Price: 2.49
Decline from 52 Week High: 93%
MoneyGram (MGI)
MoneyGram is in the global money transfer business. For a time this stock did excellent as their business and profitability grew. Then they decided to invest in subprime mortgages. The company currently does not have a CEO and faces off against global powerhouse Western Union, of which I own shares. As a general rule, I decided that I wouldn’t select any companies who face an obviously stronger and dominant competitor. These companies are all in weakened states and simultaneously trying to put their business back together and fend off a powerful titan seems like too much to ask.
52 Week High Price: 25.54
Recent Price: 1.47
Decline from 52 Week High: 94%
Blockbuster (BBI)
At one time Blockbuster was the dominant player in the movie rental business. Then Netflix came along with a better model. In the early days of Netflix, Blockbuster hardly considered this small upstart to be a threat. In recent years, Blockbuster woke up and copied the Netflix model. Ultimately, I think Blockbuster will remain a two steps behind Netflix as the movie rental business. In such a fast evolving business, that’s two steps too many.
52 Week High Price: 5.80
Recent Price: 2.80
Decline from 52 Week High: 52%
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