The Ideas Report For Serious Investors

Sometimes we all get a little impatient and look for instant gratification in the stock market. Most of the companies featured on these pages have provided such gratification, not least Premier Exhibitions (PRXI), one of our recent picks. The stock is up 52% in less than a month, and it retains substantial upside. Nevertheless, I will boldly assert that the explosive short-term performance of some of our picks has been due to two factors—luck and sheer luck.

You see, when we look for companies with strong downside protection, there is simply no room for trying to predict the stock price over the next month or even six months. Finding stocks with low downside and above-average long-term upside is tough enough. If we had to worry about short-term catalysts for the stock price, we would either not find any companies in which to invest or we would be forced to compromise on our downside protection criteria.

So, while recent experience may tempt you to compress your time horizon and expect great short-term performance from the companies featured on these pages, it may be time once again to embrace patience. None other than Warren Buffett has stressed the importance of patience, in investing and in life. Consider this Buffett quote: “Someone’s sitting in the shade today because someone planted a tree a long time ago.” Or this one: “You can’t produce a baby in one month by getting nine women pregnant.” These statements touch on the simple truth that some things cannot be rushed. Consistent investment success is one of those things.

With that preamble, we turn to this month’s featured companies, each of which appears to be cheap due to the absence of a short-term catalyst for the stock price. As a result, patience may be required to reap a return on investment. The good news is that each company meets our downside protection criteria while retaining above-average long-term upside potential.

Tejon Ranch (TRC) owns the largest piece of contiguous private land in California, situated north of Los Angeles. The depression in real estate has subdued investor interest in the company, providing patient investors with an interesting opportunity to own this asset at well below fair value. What’s more, Tejon has no net debt and is effectively controlled by famed value investor Marty Whitman. As a result, it’s highly likely that shareholder value will be maximized over time.

Imation (IMN) is a consumer-focused technology firm with leading market share in removable storage products, such as recordable DVDs. The company has a strong balance sheet and owns the widely recognized Imation and Memorex brand names. Trading well below book value and in line with “net net” working capital, the shares strike us as simply too cheap to ignore.

Disclosures: Long IMN, no position yet in TRC.

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