Petsmart (Nasdaq: PETM; last closing price $67.43), a retailer in pet food and supplies, is primarily attractive because of the high level of its “shareholder yield” (dividends, plus net debt payback, plus net common stock repurchase). In particular, the company has reduced its share count by about 20% since 2010, adding a boost to its earnings per share, in addition to its underlying earnings growth. Business could still continue to grow, albeit at a slower pace, in the next few years. The pet supplies industry is becoming a crowded space but Petsmart is the largest company in the market. Some stores are expanding their own pet offerings, but it’ll be a while before (if?) they can become a serious threat. In the meantime, the company is still purchasing large amounts of its stock. It is also reportedly exploring other avenues, such as a sale of the company or a special dividend, which may boost shareholder returns.
Guangshen Railway Co. (NYSE: GSH; $20.00) operates railways in the prosperous southern Chinese province of Guangdong. Its main lines connect the three major southern business cities of Guangzhou, Shenzen and Hong Kong, giving the company a very attractive geographic market. Guangshen is affected by slowing economic growth in China, hurting its freight business in particular. However, ongoing reforms in railways in the country to subject them to market prices will be a boost to the company. It also trades cheaply compared to its Book value, even compared to its recent history and after adjusting for cash and debt on the balance sheet. In the meantime, the stock is paying a decent dividend of almost 3%.
Kyocera (NYSE: KYO; $47.37) is a Japanese firm that produces a number of electronic components from lenses for printers to solar cells modules. Their usage can vary from industrial to home to automobiles and often form the unseen parts of branded products. Kyocera looks like the perennially “undervalued” company, its share price oscillated between $40 and $55 over the past five years, often at a slight discount to its book value. Unlike previous years, Kyocera has been making a few more improvements to its financial situation, as exemplified by its Piotroski F-Score. The company still has a rock solid balance sheet with very little debt and financial leverage and a high current ratio.
Axis Capital Holdings (NYSE: AXS; $44.00) is a Bermuda-based firm with the majority of its operations in the United States. Its profits are roughly equally from the insurance and reinsurance businesses. It has moderate amount of leverage for a financial company and has been repurchasing large amounts of its own stock over the last few years, reducing its number of shares outstanding by almost a third since 2007. A good dividend yield of 2.4% and an average Price-to-Book value of about 1.0 make it an attractive purchase.