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William Thomason is always on the hunt for fundamentally sound stocks with a positive growth track record but that suddenly suffer a fall in stock price. By buying stocks that are undervalued relative to the market or to other stocks in their industry, and selling them when they reach an attractive selling price based on his target, Thomason is a true contrarian.
Managing partner and chief investment officer of Thomason Capital Management L.L.C., Thomason constantly adds to and subtracts from his his universe of 250 stocks as he scouts for these conditions. “Once the price is down, I look for 12- to 18-month turnaround catalysts, like a new CEO, a change in a market trend, new product development, or the elimination of a product that was a drain on earnings,” says Thomason, who also is the author of Make Money Work for You — Instead of You Working for It (John Wiley & Sons; $24.95). Thomason’s firm offers traditional and alternative asset management for individuals and institutions. The following picks fit his criteria:
Oshkosh Truck Corp. (NYSE: OSK), designer and manufacturer of specialty commercial, fire and emergency, and military trucks, is a debt-free company well placed to benefit from the continued demand for military trucks. “The U.S. Department of Defense is a major customer, and Oshkosh also sells to commercial customers, municipalities, and other government agencies, including airports,” says Thomason.
Thomason also likes IAC/InterActiveCorp (NASDAQ: IACI), which operates leading and diversified businesses in sectors being transformed by the Internet. One of its most recognizable business divisions is the Home Shopping Network. Run by legendary Hollywood dealmaker Barry Diller, IAC/InterActiveCorp trades at a considerably lower multiple, in revenue and earnings, than other Internet giants, such as Google, Amazon, and eBay. Yet this year the firm is projected to generate more revenue than Google. “Crunch the numbers and IAC/InterActiveCorp looks like a bargain,” Thomason says.
Another undervalued stock by Thomason’s calculations is Apollo Group Inc. (NASDAQ: APOL), which provides higher education to working adults. The company operates through its subsidiaries, The University of Phoenix Inc., Institute for Professional Development, The College for Financial Planning Institutes Corp., and Western International University. “In 18 months the stock went down almost 40% while earnings per share went up almost 50%. That’s a pretty good combination,” he says.
In the technology sector, Thomason likes Micron Technology Inc. (NYSE: MU), a provider of advanced semiconductor solutions that he says used to be strictly a DRAM (computer memory) commodity but in recent years has moved into image sensors using CMOS (semi-conductor) chips. Because Micron manufactures and markets DRAMs and Flash memory, Thomason believes one of the catalysts for the company will be Microsoft’s new operating system, Vista. “Whenever you have a new operating system, it’s a memory hog. Micron’s core business might see some better growth next year because of Vista,” he says.
Mueller Water Products Inc. (NYSE: MWA), a manufacturer of water infrastructure and flow control products, stands to increase its revenues by taking advantage of the nation’s new infrastructure needs and repairs
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