The Players
Melky Cabrera: Gloating is pretty much the main impetus for why anyone would write a blog, and last time we nailed Melky to a T. It still didn't stop Dayton from signing Frenchy to a long-term deal and ignoring the advice of the PBR Hedge Fund. The problem is that Melky is a good stock to have in YOUR portfolio, but no one is dying to pay more than it's worth to have it in their portfolio. So Dayton will go into the offseason looking to trade Melky and cash in, but I think he's going to be disappointed when the Philles don't offer Cole Hamels for him. After his surge, he's now just a Hold, no longer a buy. Good luck finding a buyer Dayton, you know he's not a CF, right?
Alex Gordon: I want so badly to take profits and look for another downtrodden stock to flip, but I can't bring myself to pull the trigger. If his stock goes any higher - in terms of real, not perceived value - the Royals have themselves a legit star. However, when he sprains a pinkie finger that keeps him out of the line-up all next year, this season will be a distant memory. I have a feeling Dayton is ready to put about $50 mil into the GORDON Homegrown STAR fund; it's a play you have to make regardless of the pure logic behind the situation, so I concur. I'm still scared every time the stock loses value that it won't recover, but let's go all in on Gordon and if we get burned, then so be it. We need look no further than Minnesota and Joe Mauer to see a cautionary tale, but Gordon is still about $130 mil cheaper risk. At this point nobody can really come back and say you shouldn't have bought into GORDON stock, so go long and get as many options as you can.
Jeff Francouer: There is a certain GM who feels this is a good stock and there is still a certain Royals' blog which feels it's going to tank. Right now Francouer is very good and Dayton has the right to say "I told you so" to the legions of Frenchy doubters out there, but even the best odds would give Frenchy a 50/50 shot at repeating this year's performance. And if the coin flip lands on the wrong side, majority share holder's Dayton Co. will be left with another overextended asset clogging up space in your portfolio. I didn't buy when it was cheap, I didn't buy when it went up and down early this year, and I'm certainly not going to buy the FRENCHY Veteran Leader Index Growth fund while it's at a new 52 week high. I'm more than willing to be wrong on this pass, I'll take my chances.
Mitch Maier: Does anyone even remember the ticker symbol for this stock? Given that 500 shares of Maier Inc. costs about as much as a frozen pizza, I recommend buying. I can easily see someone else taking over Maier Inc. and squeezing more value out than the Royals seem to get (The Tampa Bay Hedge Fund, maybe?).
Billy Butler: The Billy Butler Dividend Fund is a must have for every investor. You are going to get a 4.5% yield and its going to come every three months. Billy should fire the compensation committee (his agents) that gave CEO Dayton a true club option that will reduce the window of his most profitable re-sign years with no upside. But that's not the Royals' problem, because they hold that long term call option at around $13 million if they want it. It’s fun to be in a good position and that is what the Royals are in here. Billy Co. is going to crank out steady value and don’t forget that he’s still a year shy of the Jamesian Peak Earnings Age. Buy steadily (using dollar cost averaging).
Bryan Pena: See Mitch Maier.
Salvador Perez: What a turn of events. Dayton makes the typical CEO mistake of drastically overpaying for Jason Kendall stock because he went to business school, where they teach you that purchasing a mature catching company as part of an acquisition spree will create "synergies" (game calling), "vertical integration" (leadership) and help "diversify" (veteran) your product line. These are all horrible reasons for a team such as the Royals to open their wallet. The Powder Blue Room offers an online MBA course for GM's of small market, lower tier revenue clubs. The course contains one Power Point slide. It is a white back ground with black letters that say "Find Young Talent Cheaply". That's it. Nothing there about "veteran leadership", "delight in the clubhouse", "ability to call a game" etc... These are all reasonable qualities in a stock, but the Royals need talent. Worry about the other stuff when you bust into the Dow Jones Industrial Index.
Salvador Perez is a stock that is still flying under the radar, but probably not for long. He can barley buy a shot of Patron, yet he is major league listed. This is where an analyst needs to walk the factory floor. Not too many analysts walk the floor of The K these days and they are missing an opportunity. If you watch closely you will see that his defense as a catcher is actually fun to watch. Really, this is true. He looks pretty blocking balls. The safety is always off on the cannon. Catching does not look difficult for him. Keep in mind that catching at the major league level is extremely difficult.
If he can monetize his online hitting platform, you are looking at an early retirement. If he doesn't you will probably get your money back. At the current stock price you are looking at "heads I win, tails I don't lose that much". Take advantage of everyone that read the analysts' reports (Baseball America) that said he is only a defensive catcher before they look at his game film, buy and don't stop until you hit early retirement.
Chris Getz: Even Dayton and Ned finally sold this one. When you have 8 extra base hits in over 400 plate appearances, you're not a major league starter. Now that I don't have to evaluate him as such, we can finally put a fair valuation on Chris. As a pinch runner and back-up to the back-up infielder, he's perfectly fine, I'd even buy at that price. As long as I don't have to write another article about why he is hitting leadoff, then all is cool between the PBR and the Getzie Coaches’ Kid Fund. Buy very, very, very, very low.
Erik Hosmer: Hosmer plays baseball like Bill Gates codes C++. It’s just what he does. That is how we feel about Hosmer stock. He just looks like he can play baseball. He looks good against quality pitching. He looks good catching the ball. He looks good adjusting his cap. He looks good smiling at the camera. He looks good chewing tobacco. He looks good cleaning his fingernails…you get the idea.
Of course, it’s all about price and Hosmer stock isn't a cheap stock. The stock price has him fairly valued.....for the most part. But Hosmer stock is similar to a large retail company that owns all the land under its stores and the market is missing it. Hosmer is valued as a prospect in the mold of Moustakas stock, but he has clearly already passed that and is soon to be compared with the Texiera large cap first base funds. You don't really have a choice here. You've got to buy a little high and hope to sell higher. There is a good chance the current price is going to look dirt cheap in a couple of years. Don't let your neighbors laugh and speak ill of you on the 16th hole, buy the stock.
Johnny Giavotella: Wildly overvalued from the get-go, but who wouldn't like this stock? Always undervalued (he's 5'8", haven't you heard), but with real potential (extra base power). My valuations of him were always based on the fact the he couldn't have been worse than Getz, but I still advocated for the Aviles fund to be kept around (He's hitting .340 for the RED SOX, by the way). I'm actually quite curious about this stock, so I own a few shares just for fun. I could see a Dustin Pedroia ALLSTAR Index Fund or I could see Cris Getz beating him out for the job next year. It's probably one of the more interesting stocks in the Royals portfolio, so you might as well have a few shares.
Alcides Escobar: Alcides is like buying a Jackson Pollack painting. If you’re already rich it’s fun to show off, but if you’re broke you should probably sell it and pay employees that make money for you. I like to look at Alcides too, but I’ve been reading the Dayton Moore Investor’s Report and he’s convinced that this is a necessary piece to have in your portfolio. It’s not. He’s still one of the worst hitters in baseball, yes worse than YUNI. That backhand is awesome, but he’s still burning through cash with his OBP. If you can find another art collector who’ll give you 10x what you paid then take it and build another factory. If not keep looking at it and hope you get rich enough to buy a room for it.
Mike Moustakas: What to do? If you looked through a catalogue of baseball stocks and saw a 3B stock under 6'-0", slightly pudgy, not very smooth in the field (or overall for that matter), you certainly would not pay the price that Dayton Moore is probably currently asking. This is where the Powder Blue Room analysts have their questions. Inside our glass encased, sound proof, off-shore conference room, the PBR has had many a conference call stating our reservations about picking up a big block of Moose stock. We like our blue chips to look, act and move like one. Moose stock sure doesn't look like Erik Hosmer stock. He doesn't walk like Hosmer stock, isn’t nearly as smooth; he doesn't even throw the ball back to the pitcher in same suave fashion that Hosmer does. We are well aware that one can't make an investment decision based on the company printed annual report, but we like our blue chip stocks to look and act the part.
It’s nice to see Moose stock end the year hitting well, but if Dayton called and said we could trade him back to Milwaukee for a controlling stake in Greinke Co., we’d give the order to pull out of Moose stock. You could try and hedge, but don't bother, the rest of the league has already beat you to that position. If you can find a sucker SELL. Otherwise; dance with whom you brought.
The Pitchers
Nate Adcock: Nate is like a Farmers National Bank Platnium Select Savings Account; everybody should have a few bucks in a savings account because it will be there when you need it. However, no team has ever won the World Series with the Nate Adcocks of the world. And whether or not Nate is in Japan next season or pitching for the Royals he won't suddenly make you a 90 win team. Not a Buy, but if you've got a few bucks tucked away in an Adcock 1yr CD, just save it for a rainy day.
Louis Coleman: This stock has taken a beating lately. People who bought high are now stuck taking losses, but if he's your fourth best reliever, all is well with your bullpen. Hold.
Tim Collins: Little Timmy is like an Airline stock. Sometimes you wonder how he isn't better than he is; people fly, they spend a lot of money to do so, so why can't airlines make money? Timmy's left handed, strikes out a lot of people and has a crazy delivery. But wait he's walked more people than Jeff Francis in over 100 less innings. Also, lefties hit about as well as do righties; so he's not a lefty specialist, not a closer and not a set-up guy, I'd sell.
Aaron Crow: Last time we advised staying away from this stock due to the unreliability of relief pitchers. Since then he was named an All-Star, briefly made the closer and then his ERA went up 1.5 runs (supposedly he was hurt) and now he's not even the set-up man. If Crow isn't a starter, then what is he? Turns out, he's probably a flash-in-the-pan bullpen guy. I'll keep my fingers crossed, but I'm still staying away from the CROW Fund until he does what he did earlier in the year for seven innings every fifth day.
Greg Holland: Like all reliever stock, the Holland stock is overvalued, but I still really like it. The SO/BB ratio is just what you want to see from a dominant reliever...Joakim, watch your job. I'd buy this stock, it's probably still got room to grow.
Joakim Soria: Oh Joakim, why couldn't you have just kept your real nickname? Now you're just OKAY, you're not what you have been and we don't know what that means going forward. I suppose you'll get the job again next year as long as you stay healthy, but you're just not an exciting stock to own anymore. I'm still holding, but it's mainly because I overextended myself buying your stock over the past few years.
Everett Teaford: Apparently it was Everett who was mislabeled as a small cap lefty specialist. As a starter he strikes out about 9/game and dominates (until Saturday). Even though the PBR usually likes to have more data, this stock is still cheap and could fill in the hole of the hopefully departing Jeff Francis and Bruce Chen. Buy a few shares of this one and see what happens.
Blake Wood: If Blake can keep it together for the rest of the year, then at best he's the fourth piece in a big trade (see Jeremy Jeffress), but that's about it. Nothing to see here, move along. He's essentially a functioning factory on a heavy equipment manufacturers' asset sheet. Keep using it until it breaks, but if it breaks the company will keep going without missing a beat.
Felipe Paulino: The broker you have in your "market assisted brokerage account" called you up and pushed you to buy "boatloads" of Paulino in June. He said it was a young stock all the analysts were talking about because the company had recently moved into the high profit starting pitching industry. You didn't buy and your golf buddies made fun of you as the market began to warm to what is a somewhat promising growth stock.
However, the market is brutal to growth stocks that don't constantly grow and a couple of rough starts sent the stock off its 52 week high. Now the question is whether or not Paulino is worth buying now that it is trading at a valuation where growth is already accounted for in the price. Taking in the Royals’ other options in the starting pitcher market it’s a very strong Hold, hopefully you bought early.
Bruce Chen: The Powder Blue Room was short on Bruce Chen stock so hard it made the protagonists in Michael Lewis' The Big Short look like they were playing nickel slots. Any Powder Blue Room trader found to be holding a long position in the stock was immediately fired and ordered to watch a full season of Jose Guillen playing slow pitch softball in San Domingo. We created an over-the-counter market to sell call options on Chen stock because we were certain the stock would never be worth "calling".
We were wrong. Chen maintained steady free cash flow and kept his listing as a major league company. He developed into the niche industry of Jamie Moyer companies that seem to survive despite not having strong fundamentals. Companies like this rely on accounting tricks to keep earnings positive. The upside is minimal at best and the downside is immense. The prices for options on Chen stock going bankrupt are again tempting and one should never forget how close this company was to being de-listed. You might get a small dividend check every fifth start next year, but you are one bad month away from going broke. Anything times zero is zero. If you bought back in 2010, congratulations, go sell it all and buy yourself something nice. Find some other sucker to take the hot potato.
Danny Duffy: We looked into long term options of Duffy stock while he was still a company waiting to be major league listed in Omaha. The problem was that the rating agencies (Baseball America) had been touting him for a while now and his potential was priced in. It is certainly nice to see a Royals subsidiary able to beat hitters with good stuff, while throwing from the left side. This stock is admittedly in a better industry than the dot-com busts like Chris George.
You could do worse than picking yourself up a few hundred shares at this point, because the price tag never went very high on Duffy stock. There is still room for a massive turn into a company like Greinke Co. and even if he flops you will still be able to get $0.80 on the dollar and live to fight another battle. Nothing hurts more than missing the next big growth phenomenon so go buy yourself some insanity insurance and pick up a few shares. If he wins the Cy Young at least you will have some in your portfolio and not get laughed out of Jackson Hole's high speed gondola lift over your 2013 President's Day weekend ski trip.
Jeff Francis: We have to be honest here. The Powder Blue Room does not even have an analyst assigned to cover Jeff Francis stock. Someone might have mentioned this stock at a Denver investor's conference one time, but that was only because it must be included in the "AL Central Starters With Over 150 Innings Pitched Index".
We didn't even know the ticker symbol for this stock. If you own it you could use the stock certificate to diagram offensive plays for the Chiefs that might actually work. Maybe call into Cramer's lightening round and see what he thinks. The Powder Blue Room says could care less about having this one in its portfolio.
Luke Hochever: There are a lot of stubborn folks who paid a decent price for this stock when it had its IPO out of a Fort Worth bucket shop. Those folks are still holding on in the dear hope that the stock reaches that level again. If you are an institutional investor you certainly have to have a block of this stuff because he's good enough to be included in all the S&P (Starters and Pitchers) Index Pitching Funds. Hochevar could still end up as a decent innings eating, dividend paying stock that churns out decent profits over time. We bought our block at a reasonable price and we're reasonable people, so we are going to hold on, take our steady dividend and reinvest elsewhere.
The Royals stock is up, but will we see it continue to grow in fiscal year 2012? As a whole, we think so, but there are still some serious assets missing and some we feel are overvalued by current Royals Fund Manger Dayton Moore. Dayton’s done a good job of gutting the system and getting some fundamental earnings potential back in the Royals portfolio, but next year and this offseason will really tell the tale on where the Royals go from here.
