July 23, 2014
FROM THE EDITOR
Nancy Zambell

by Nancy Zambell
Editor of Dick Davis Dividend Digest and Dick Davis Investment Digest
Mid-Year Top Picks Updates from Investment Digest, Issue #759

This issue is our Mid-Year Top Picks Update. Many of our contributors’ recommendations returned double-digit gains so far this year. We’ve included sell recommendations on a few picks and six new Top Picks for the remainder of the year.

Since last month’s issue, the Dow Jones Industrial Average hit the milestone of 17,000, and—for the most part—has managed to stay above that benchmark. We are just at the beginning of second-quarter earnings season. So far, 74 companies in the S&P 500 have reported, and 72% have beat estimates—higher than average. Our advisors remain mixed on the market’s near-term future, and our Sentiment Barometer has turned just a bit less bullish.

We have a nice array of Top Picks for you, coming from biotech and healthcare, technology, energy, financial and REITs. Our contributors also offer a new international ETF pick, several sell/holds and some pertinent market advice.

In addition to our Top Picks, our new recommendations include quite a few selections from the recovering biotech/technology and energy sectors, as well as some value picks in the home building and financial arena, a recent IPO, and Pacific and Gold ETFs.

EDITOR'S PICK

June 23, 2014
Luby’s (LUB)
Carl Delfeld

Carl Delfeld

Luby’s (LUB), founded in 1947, is multi-branded restaurant that includes Luby’s Cafeteria, Fuddruckers, Cheeseburger in Paradise, and Luby’s Culinary Contract Services. Its 181 restaurants are grouped into traditional cafeterias (94), gourmet hamburger (66), casual dining /bars (19), one upscale fast-serve chicken restaurant, and one seafood restaurant. Lastly, Luby’s is a franchisor for 114 franchised Fuddruckers restaurants. The owners of these franchise units pay royalty revenue.

Late last November, Luby’s stock traded as high as $8.98 but since then it has pulled back 76% and is down 31.3% so far in 2014.
This situation presents an attractive entry point for the following reasons:

• The stock trades at a discount to the company’s break up (book) value;
• 30% of outstanding stock is held by insiders and management, with an additional 46% held by institutional investors;
• Insiders have been increasing their stake—always a positive sign;
• Buildings and land are stated on the books at cost and a significant discount to market value. Over 50% of the company’s properties are company-owned, and Fuddruckers was acquired in bankruptcy at a discount during 2010;
• Luby’s and Fuddruckers restaurants are disproportionately concentrated in Texas, particularly Austin, Houston and San Antonio where the economy and real estate prices are strong. Read More »


FEATURED INCOME INVESTMENT

July 18, 2014
Orange (ORAN)
Benj Gallander + Ben Stadelmann

Benj Gallander + Ben Stadelmann

Orange (ORAN) from Contra the Heard

Orange (ORAN), the former France Telecom, has had a lovely run since the beginning of the year. Our feeling is that there is lots more upside in store for this leading telecom provider in France. Operations also cover Poland, Spain and parts of Africa. But hey, if you want to visit corporate headquarters, plan a jaunt to Paris.

Orange is enormous, with revenues of almost $56 billion. Debt is a heavy $53 billion, not unusual for enterprises in this sector. Cash flow from operating activities is almost $10 billion. That helps finance the dividend. The book value is around $12.50.

Orange has been retreating from some markets. Recent sales have included the operations in the Dominican Republic and Uganda. Read More »


INCOME INSIGHTS

James Stack

James Stack

from InvesTech Research -  in Dividend Digest Issue 262, dated July 16, 2014

The blue chip market indexes have marched steadily higher over the past three months, despite the annual admonitions from “Sell in May” advocates. On an equally positive note, economic data has also strengthened since early this year, and our technical indicators remain bullish. Let’s look at where these technical gauges currently stand and how this scenario has historically played out over the next 12 months.

*Our Negative Leadership Composite (NLC) is showing an increasing bullish “Selling Vacuum” which has risen quickly, indicating that defensive selling pressure is drying up.

* This bullish “Selling Vacuum” in our NLC is near the critical +20 threshold, which, if it breaks through, has strong positive implications for the months ahead.

Read More »