"Street Critique"-Hilary Kramer, Chief Market Strategist at Greentech Research and Author of "Ahead of the Curve"
Wednesday, May 07, 2008PAUL KANGAS: Tonight's "Street Critique" guest says with commodities prices at record levels, there's money to be made in the scrap metal recycling stocks. She's Hilary Kramer, chief market strategist at Greentech Research and author of "Ahead of the Curve." Hilary, good to see you.
HILARY KRAMER, AUTHOR, "AHEAD OF THE CURVE": Thank you, Paul.
KANGAS: Before we get into the scrap metal business, what's your take on today's market sell-off?
KRAMER: Well, certainly the bulls lost out today and the bears took over and they have the upper hand. It's not all the way up. We have a lot of concern out there especially in the insurance stocks. The financial institutions still have some weakness. There's surprises there, surprises coming. And of course the retail sector is weak and there's concern on the side of the consumer and debt that continues to grow.
KANGAS: Might have been time to take a few profits too after the recent upturn.
KRAMER: That's right.
KANGAS: OK. Now let's get into these commodity markets. They've been extremely volatile with a lot of big institutional money piling in and demand for metal soaring. Why not just play the raw materials directly with commodity futures instead of the stocks?
KRAMER: Well, with these particular companies that are metal recycling companies, you are buying a tremendous opportunity with the management teams and an event that's coming which is that there's consolidation in this sector. We haven't seen a lot of M&A activity out there. But in scrap metal recycling, we've seen consolidation. There will continue to be roll-ups on these companies because the stocks are so strong they can afford to make acquisitions.
KANGAS: And commodity trading is not for anything but professionals, correct?
KRAMER: Be careful on that one.
KANGAS: That's right. What are some of your favorites in the scrap metal area?
KRAMER: My favorite stock is Metalico. MEA is the ticker symbol. The composite price today was $13.70. Metalico which again, I've brought up many times before is a New Jersey based scrap metal recycler in the northeast, just made an acquisition of Schneider in New York state, a private company. We should see Metalico go from $13.70 to at least $20 if they continue to buy smaller scrap metal recycling companies. And of course, they themselves could be an acquisition target because there are a lot of big players that want to get into the northeast.
KANGAS: OK. You also like Simms Group, SMS on the big board. We have a chart up. KRAMER: Yes, SMS, $34 stock. Simms Group could easily go to $40 because here's an Australian company, trades here in the U.S., big $4 billion market cap but no sell side analysts cover the company, so you're buying undervalued companies simply because no one knows about it on the street.
KANGAS: How about another name quickly.
KRAMER: I like IDSA, Industrial Services of America. This is a very small cap company. It's a small cap gem, a top manager. The CEO there has been in the business for over 50 years. We could see some consolidation there. They're also in the ferrous and non ferrous area of scrap metal recycling.
KANGAS: And we have 20 seconds for one more.
KRAMER: Schnitzer, SCHN. Schnitzer is all the way up in the low 90s, but we could see Schnitzer go to $110. Schnitzer is a big exporter of the scrap metals. (INAUDIBLE) such demand domestically.
KANGAS: Quickly, do you own any of these stocks or have other disclosures to make?
KRAMER: I own all of these companies and am bullish on this sector.
KANGAS: Great. Hilary, thanks for sharing your ideas with us once again. We'll see you in a couple of weeks.
KRAMER: Thank you, Paul.
KANGAS: My guest, Hilary Kramer, chief market strategist at Greentech Research.
