Beazer Homes USA, Inc. (BZH), Annies Inc (BNNY): Three Homerun Stocks for Baseball Season

Published on May 28, 2013 at 7:44 am by The Motley Fool in News

Successful investing is one of life’s pursuits that lends itself to endless metaphors. Because of the competition and the emotional toll involved when putting real money on the line, I always find that sports metaphors are especially fitting. So with the baseball season in full swing and the market uncertain, it’s time for you to invest in some home-run stocks.

Annies Inc (NYSE:BNNY)

Home-run stocks, usually small-caps, offer the possibility of high reward for taking on high risk. Unlike low-risk “singles and doubles,” such as General Electric Company (NYSE:GE) or Pfizer Inc. (NYSE:PFE), small-cap home-run plays can grow many times over, and transform your portfolio.

Here are a few potential home runs you should look at right now.

Hopping around the base paths

Annies Inc (NYSE:BNNY) is a natural and organic food company that is at the forefront of a monster trend. This company, which you may know by its “bunny logo” brands like “mac n’ cheese,” makes many convenience foods, healthier. Annies Inc (NYSE:BNNY)’s gives customers access to organic frozen pizzas or macaroni, all at the local neighborhood market.

Regardless of whether you think Annie’s is a good investment here, you have to like the trend. Look around, fellow Fools — soda sales are declining every year in the U.S. and fast food giants are cannibalizing themselves, all while healthy eating names are experiencing hyper growth.

American’s are becoming more health conscious, but they still love their convenience, and that’s where Annie’s comes in.

The consensus analysis estimate is for earnings to grow over 20% for Annie’s, and to increase each of the next three years. Returns on equity come in at a whopping 34%, and revenue is growing at 16%. The numbers, and the super trends, are in Annies Inc (NYSE:BNNY)’s favor so the big test will be how the company handles the next leg up the growth ladder. Annie’s cash position dropped precipitously from 2011 to 2012, partially due to a frozen pizza recall but also (largely) to support growth. Now that hyper-growth is here, we’ll have to see how Annies Inc (NYSE:BNNY)’s handles increased costs and competition. The next year will be crucial, but I think Annies Inc (NYSE:BNNY)’s offers more than enough reward to be worth the risk.

Ignite your portfolio

Nothing goes better with baseball metaphors than some good eating, so let’s stay on this restaurant theme and look at another small-cap grower: Ignite Restaurant Group Inc (NASDAQ:IRG).

Ignite Restaurant Group Inc (NASDAQ:IRG) is a holding firm that owns and operates Joe’s Crab Shack and Brick House Tavern. The company also recently acquired Romano’s Macaroni Grill. I like Ignite Restaurant Group Inc (NASDAQ:IRG)’s diverse portfolio of seafood, Italian, and a “Hooters-esque” pub (Brick House). These great brands have led Ignite to grow earnings 25% this year, and 30% is projected next year, along with double-digit revenue growth.

With growth like that you may think the time to buy has passed, but that’s not the case. Ignite has missed each of the past quarters by a penny, which has caused investors to keep the stock in neutral, which could be a good thing. Sometimes earnings misses are actually good if they’re not a sign of larger problems. I think, generally speaking, it’s hard to calculate costs (and therefore exact earning estimates) for small and fast growing businesses. Considering that Ignite Restaurant Group Inc (NASDAQ:IRG)’s earnings have grown, but just missed a few analysts targets, right now be could be a great buying opportunity. Best of all the company has two obvious near-term growth catalysts. Not only did they recently purchase Romano’s, but it recently started franchising for Brick House, and new locations are coming. In short, this one has the potential to go yard.

The Comeback Kid

While Ignite and Annies Inc (NYSE:BNNY)’s are fast growers that are relatively new players,

Beazer Homes USA, Inc. (NYSE:BZH) is that old, broken-down all-star at the end of the bench. The big question is: does this veteran have a come back in the works? Beazer Homes USA, Inc. (NYSE:BZH) lost a whopping $13.85 in 2011, and the company was nearly wiped out during the financial crisis. But there is reason for hope.

While Beazer Homes USA, Inc. (NYSE:BZH) may be one of the laggards in housing, with serious cash issues, it hasn’t rebounded nearly as strong as its competitors despite the rebound in housing. Last year Beazer Homes USA, Inc. (NYSE:BZH) shrank that loss in half, and it expects to turn a profit in the forth quarter of this year. The company also expects to be fully profitable, for the entire year, by 2015. Don’t get me wrong, this is a very risky play, but it’s a great speculation. Beazer Homes USA, Inc. (NYSE:BZH) has been able to shrink its losses considerably, because all of housing is doing better.

If the stock market, and housing, continue to rise two things will happen:

1) Fewer “cheap stocks” will exist

2) Due to less values being available, mediocre stocks will rally with the broader market

So I find Beazer interesting, simply because before the recession it sold for $364 and now it’s at about $21. Today’s price is also a 52-week high, which is truly amazing. This stock is worth keeping an eye on, if Beazer Homes USA, Inc. (NYSE:BZH) can show that it’s truly turning the corner, it could rally hard and outperform the market by a bundle.

It’s Baseball Season

These stocks make perfect sense right now, with stocks at all-time highs. I think the perfect portfolio, in this market, would include 80% index funds and 20% “home-run” stocks.

The reasoning is simple, the easy money has already been made. So while you need some safety (indexing) you also need a few individual stocks that can double or triple, even if the market stays flat.

These home-run stocks can deliver those returns. It’s time to play ball.

The article 3 Home-Run Stocks for Baseball Season originally appeared on Fool.com is written by Adem Tahiri.

Adem Tahiri has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Adem is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

NYSE:BZH NYSE:BNNY Annies Inc (BNNY)Beazer Homes Usa Inc (BZH)

Beazer Homes USA, Inc. (BZH), Annies Inc (BNNY): Three Homerun Stocks for Baseball Season

Published on May 28, 2013 at 7:44 am by The Motley Fool in News

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