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Kenwood Group’s Barbara Bowles still awaiting a value-stock comebackFor the last several years it has been all about growth in the stock market, and last year was no exception. Fast-growing companies with rising earnings reigned, while ugly duckling “value” stocks went largely unappreciated.
All of which made it a pretty tough environment for value investors like Chicago-based Kenwood Group Inc. president and chief investment officer Barbara Bowles, who seeks small to mid-size companies with low prices, robust business operations and strong earnings growth. Bowles’ picks for last February’s Private Screening tell the story. Of the five, just one-The Limited Inc. (NYSE: LTD)-rose from its recommended price. Its 53.11% gain pushed the portfolio into the black, for a gain of .62%.
The stock of the Columbus, Ohio, clothing retailer was trading at $25.38 when Bowles picked it; 12 months later it had risen to $38.86. Larry Jones, Kenwood’s executive vice president and senior portfolio manager, speaking for Bowles, who was unavailable for comment, points out that The Limited’s gain is even bigger if you factor in shares that holders received in the August 1999 spin off of Limited Too, which markets girls’ clothing. Limited stock holders picked up a share of Limited Too for every seven shares of Limited Inc. they owned, which amounted to about $2.41 a share. Jones said Kenwood sold a portion of its Limited stake to take some timely profits.
Jones points out that the Kenwood Midcap Value portfolio had an 18.74% cumulative total return for the year through September 30. That’s better than the 9.32% return of the Russell Midcap Value Index, the benchmark for Kenwood’s Midcap portfolio.
Meanwhile, things haven’t been as bright at greeting card maker American Greetings Corp. (NYSE: AM). Shares of the Cleveland-based company fell 39.66%, from $40.49 to $24.43, since recommendation. But Jones says American Greetings has a number of things going for it, including Internet initiatives such as online greeting cards and the pending acquisition of Gibson Greetings.
Avnet Inc. (NYSE: AVT), a maker of electronic components and chips, fell 3.83%, from $57.91 to $55.69. However, Jones says, “As the demand for technology and components rises, Avnet should do well as a distributor.” While regional banks haven’t done well because of rising interest rates, Colonial BancGroup (NYSE: CNB) has outperformed its peers, says Jones. The stock fell 4.35%, from $12.42 to $11.88, over the 12-month period.
Last, Kenwood still likes Ultramar Diamond Shamrock Corp. (NYSE: UDS), which fell 2.15%, from $26.96 to $26.38. The petroleum refiner has “enjoyed tremendous margins on oil refining” in the last several months as its competitors suffered a variety of problems, including fires and accidents, Jones says. Higher oil prices are also boosting the company’s revenues. “We think that oil prices are going to remain well above the lows of last year,” says Jones.