David Dreman is the founder and chairman Dreman Value Management, which currently has $5.5 billion in AUM. He is best known for his deep value approach to sourcing equity ideas.
Associated Banc Corp (NYSE: ASBC) should have a decent 2012 and a strong 2013. We expect most of the BSA expenses to be incurred this year and expect expenses to rise as ASBC makes network update investments. We also expect the company to reap the majority of the benefits from operational leverage in 2013, so holding off on establishing a position would be our tactic. The $30 million stock repurchase program announced should be completed in Q2 perhaps accompanied by partial calls of the 7.625% trust preferred. Given advances in net interest margin and market anticipation of a rebound in loan growth, we think valuation of 14.5x 2013 earnings would be fair.
Jarden Corp (NYSE: JAH): Q1 organic sales growth was 2.9% – Mapa Spontex did well in Europe and First Alert saw gain, driving the 6.2% jump in Branded Consumables. A mild winter also boosted sales where sales in warm weather activities like fishing offset weak sales in winter activity products like skiing. JAH has strong brands, stable cash flows, and consistently delivers revenue growth within striking distance of 5%. Tuck-in acquisitions in markets like the ever popular China and Brazil will help the company achieve the steady growth rates. There are opportunities to take market share through new product launches and product line extensions, but we prefer other faster growing retail companies to JAH in part because we are not certain JAH will be able to garner an investment grade rating even with the share repurchase program over. The stock is also held by Murray Stahl, Glenn Krevlin, and Ken Fisher.
NCR Corp (NYSE: NCR) is leading provider of self-service and assisted-service solutions including ATMs, self-service kiosks, and point-of-sale (POS) devices as well as third party networking products. NCR is undergoing a strategic initiative to focus more on businesses with a recurring, higher margin software revenue model. NCR primarily serves customers in retail, hospitality, and financial services, and turning these areas into its core client base is a move we view positively. The major headwind we identify with NCR is its $1.3 billion unfunded pension liability (as of year-end 2011). NCR is making contributions to pensions of $215 million and $245 million for 2012 and 2013, though allocations are subject to change. The stock is trading at a significant discount to its historical five year average of ~11.9x, compared to ~8.8x 2013 earnings. We think this is an attractive opportunity. Billionaire David Einhorn has the largest stake in NCR among the nearly 400 hedge funds we are tracking.
DST Systems (NYSE: DST) is the largest information processor for the mutual fund industry with 100 million accounts on its platforms, representing ~35% of total US accounts with offerings including software and securities processing. We are fans of the recurring revenue business model and think the market opportunity is substantial. The recurring revenue model has resulted in around $5 per share of FCF generation over the past several years. Regarding the market opportunity, about half of mutual fund companies still do information processing in-house, so to the extent that DST can effectively communicate its value proposition (minimum 20% savings), there are millions of accounts that are at its fingertips.
Hospitability Properties Trust (NYSE: HPT) is not particularly attractive to us given the likelihood of additional capital raising (probably through a follow-on offering that would dilute current shareholders). HPT did announce an agreement with Wyndham Worldwide (NYSE: WYN) to rebrand 20 hotels/3,023 rooms, but until HPT can clearly demonstrate a cost-effective source of capital, we are steering clear of the company.