Introducing the Karyatides Portfolio (also Caryatids)

Wall Street Greek introduces the Karyatides Portfolio (also Caryatids), with its first two components, SEI Investments (Nasdaq: SEIC) and VCA Antech (Nasdaq: WOOF)

The Karyatides

Like the Karyatides that hold up the Porch of the Maidens at the Erechtheion, upon the Acropolis in Athens, we plan for these component stocks to prove reliable pillars for any long-term portfolio. Likewise, we expect the model portfolio to prove a source of reliable long-term growth.

Karyatides are sculpted female figures that serve as architectural supports in the place of columns. A pillar supports a structure, and must prove reliable and strong over time. Symbolically, this fits perfectly with our hope for this portfolio.

The Karyatides in Athens consist of six such figures, and so our portfolio will consist of six components. Detailed reports on each component of the portfolio, with target price and earnings estimates, will only be available to subscribers to the Wall Street Greek value added offerings site. This project is still under development, so you enjoy this free notice for now. In the future, we will announce new additions and subtractions from the portfolio on this blog, but we will not offer detailed information regarding the stocks except to subscribers.

First Two Additions to the Karyatides Portfolio

We bear some risk in introducing the first two components of the portfolio at this time, just ahead of their individual earnings releases. However, recent market turmoil and even a management warning at one of the companies have served to adjust the prices of these shares to very attractive points for long-term acquisition, in our view. So, while the risk of near-term disappointment exists, we would very likely only grow more interested in taking positions in these two stocks on any negative interpretation of data within their respective reports. At the same time, we believe ample opportunity for upside surprise exists as well.

SEI Investments (Nasdaq: SEIC)

SEI Investments (Nasdaq: SEIC) is not a new name to Wall Street Greek readers. We have written about it on several occasions. The shares are down 5% today, ahead of the company's earnings report release, which is scheduled for distribution after the market close. SEIC management will discuss the report tomorrow morning at 10:00 a.m.

There is great concern for SEIC shares ahead of the earnings report for good reason, because of the company's core business. SEI provides investment processing, fund processing and investment management business outsourcing solutions to corporations, financial institutions, financial advisers and affluent families. Much of its performance, if not all, is greatly dependent upon investment asset values, since it earns fees on those. However, over the years SEIC has been especially good at one thing, managing earnings. In times when business was good, it could leverage asset growth over its expense structure and offer above consensus performance. Even when times were bad, SEIC has put its cash to use buying its own stock and expanding into better performing international markets when necessary.

Last quarter, the company offered in line results, and this quarter clearly presents a challenge. Next quarter is likely to present an even greater challenge since there is a lag on its fees and asset values they are earned upon. Perhaps guided by management, consensus estimates for this quarter have come down, now standing at $0.34, according to Thomson Financial. This is down from $0.37 ninety days ago. The price movement ahead of the report certainly indicates investor trepidation. The stock chart is the worst it has looked in years.

SEIC shares are down 23% year-to-date, and that's excluding today's 4% decline. So, why do we like it then? The company has been successful in offering outsourcing services to clients ranging across several business lines. Offering investment services, it's able to leverage its core offerings across end clients. It's made a billionaire out of its founder, Chairman and CEO in the process. Returns on capital have improved over the years as a result of this leveraged growth.

We expect the company will continue to grow, aided by international demand for its offerings and a ripe for picking market overseas. Also, the company still has opportunity domestically, and may advantage from the failure of peers during these tough times. Trading at 16.5X the consensus EPS estimate of $1.44 for '08 (based on a price of $23.74), and matched against 15% long-term growth expectations (19.5% growth over the last five years), the shares offer a unique opportunity for entry. We feel market fear has created an enhanced opportunity for long-term interests.

VCA Antech (Nasdaq: WOOF)

VCA Antech (Nasdaq: WOOF) the nation's largest operator of free standing veterinary hospitals, with an attractive and profitable national diagnostic laboratory operation, operates in an extremely fragmented market still opportune for long-term growth.

This stock is down mostly due to its own corporate management warning that the effects of recession could come to play in its business. We are very enthusiastic about this opportunity as a result. WOOF, scheduled to report earnings at the close on Wednesday April 23, 2008, is down 36% this year. Both of these stocks operate in the Mid-Cap realm, having grown into the sector while I've been following the firms. Thus, both have suffered from capital withdrawal out of Small-Cap funds as small cap finally fell out of favor for cheaper, multinational large-cap stocks.

However, both these firms operate viable businesses with unique growth opportunity. So, they have suffered by little fault of their own. Valuations were somewhat extended because of the flow of funds favoring small caps, but that situation is now fixed.

WOOF should benefit as it gobbles up its mom and pop competitors, sort of like how Home Depot (NYSE: HD) and Wal-Mart (NYSE: WMT) did in the past. Clearly, its market is smaller than those two comparables, but the $18 billion plus animal health care services market composed of 22,000 hospitals nationwide offers plenty of room for growth. WOOF operates as the leader in the industry with its network of less than 500 hospitals. The competition is fragmented, and significant economies of scale are gained over them as WOOF grows.

Are Americans going to give up Fido because of economic hardship? Some 63% of American homes own a pet, and surveys indicate they're willing to spend $700+ to save their pet's life. While Rex may not be enjoying as many treats as he use to, we expect he'll still get his shots.

WOOF now trades at about 18X '08 earnings expectations of $1.57. That compares to a 16% long-term growth outlook (grew 26% over the past five years). We think there's a unique opportunity for investors who give this dog a bone now. WOOF is a serial UPOD (Under Promise, Over Deliverer) when it comes to earnings, so we expect the company to not let investors down.

Wall Street Greek will record Tuesday April 22, 2008 closing prices as our cost basis in return calculation. We hope you benefit from these ideas, and offer you deeper insight through our subscription offerings. Please take the time now to indicate if you would have interest in such an offering, which is also likely to include a periodic new stock idea and weekly conference calls. We have a lot of exciting ideas in mind, and look forward to your feedback. Even go so far as to tell us what you think 23% annual return performance is worth, assuming I could duplicate the result achieved as an analyst. Thank you.

Please see our disclosure at the Wall Street Greek website.