Stock review: Part 1
Putting aside the STOPs that pulled us out of stocks, these are the stocks that I have discussed. As you will see, companies that I stumped for came through with solid earnings results.
AMX - Up 10% since we started investing in them a few weeks ago. They added 7 million users to their client base and earnings were up 33% Y/Y and beat analyst expectations. Half of the surprise came from a one-time event, but the story is about improving margins. I expect margins to continue to improve as efficiencies improve: declining incremental costs associated with the increasing client base
AAPL - Back in November I began saying that AAPL was overpriced relative to iPod business. In February I advised folks to short it. It fell from the high 70s to a recent low of $50. The day of earnings release I advised folks to close out the put orders. Good thing too - they ran from $51 that day to $65 this week. Excitement is building for the back-to-school and holiday sales, but I think AAPL will disappoint. Watch for Microsoft to launch an anti-trust lawsuit against AAPL contesting the iTunes monopoly: songs downloaded from iTunes store can not be played on anything but an iPod.
BMHC - Back in November I began saying that BMHC was a problem. In February I advised folks to short it. It has fallen from the high 30s to $21.
CCJ - Uranium. I like them, even if the stock is flat. The EU and India will need uranium. The revenue and earnings are strong: 45% and 366% respectively. But they are slowing a bit next quarter.
DIS - Pirates brought in the gold and continues to do solidly. International markets haven't been tapped yet and then there is the DVD market. I heard that the video game is lousy. In general, this movie plus the holiday travel to Disneyland parks should be putting bounce into Disney's step but not so far. Given the impact that Pirates will have on the next quarter earnings, this is one to consider for a 5%~10% short term upside.
DO - What a great quarter. Earnings up over 300% on a revenue jump of 81%. The downside to this story is that it is nearly 100% utilized, which makes near-term upside surprises practically impossible. Upside will come next year and when they are able to add additional offshore rigs. This is a stock to own long term - their earnings are projected to grow 300% over the next 15 months. But for the near term, I would look at DO as accumulate on weakness. They may also raise dividend rates.
I suspect that some contracts are expiring over the next few months, enabling DO to charge much higher rates, but that is limited. Any rig coming off contract today could get an additional $100K per day or $36M extra in pure annual profit.
With 129M shares outstanding, that's an extra $0.29 per share or $6 per share price at 20 P/E. Good, but not exciting. More rigs are what matters.
EMT - Sales up 10% and earnings up 41%. This has a $16 price that we want to hit and then leave.
ESV - Another drilling winner. Earnings up 200% on a 100% increase in sales. As I mentioned in previous posts prior to earnings release, ESV's prices jumped 75% during the quarter. Like DO, ESV is challenged by 97% utilization rates. Where do they go from here?
"Our rig construction projects remain on schedule and within budget. Our new ultra-high specification jackup rig, ENSCO 108, is scheduled for delivery in the second quarter of 2007. The rig is already committed for work in Southeast Asia following delivery. ENSCO 8500 and ENSCO 8501, our two new ultra-deepwater semisubmersible rigs, are scheduled for delivery in the second quarter of 2008 and first quarter of 2009, respectively. Both rigs are being built against firm multi-year contracts."
You should hear 2 things: strong demand and limited supply. ESV like all other drill related companies are maxed out. To give an idea of the value of 1 rig: daily rates are touching $200K. One rig delivers ~$72M per year in revenue.
ET - Strong results. After boosting earnings 50%, ET raised earnings outlook ~10%. They are firing on all cylinders: accounts grew 58% and trades stayed fairly strong in the face of the Q2 turmoil in the markets: daily trading shrank from 180,00 to 161,000. They are also getting strength out of the merger - lower operating costs with higher revenues.
The one thing I like about ET is their forward looking marketing. They are entering China - and that's something that will only help. imagine the margin income as Chinese traders discover the opportunity to get cash and bypass banks.
GRP - Yes, please. Another big quarter for an oil drilling company. Earnings up 50% on a 36% revenue jump. And margins increased as well (sorry, bad pun). Profit for the drill bits segment of their business increased 98% on 25% revenue increase. They also increased earnings expectations. And they are incredibly cheap: 18 P/E
ISIL - Another misunderstood chip company. Earnings were up 150% on a 35% jump in earnings. Sequential earnings were also up. But ISIL got hit because of some exposure to the PC market. I think that this is actually in ISIL's benefit: they are the ones benefitting from a PC slowdown because they are more nimble than bigger players. ISIL is stealing business from bigger companies.
Nevertheless, the upside here is limited.
JBLU - This stock hops around. JBLU continues to grow the business and there is some margin improvement. But they are at the mercy of oil prices.
JLG - Construction continues to be strong, but you wouldn't know that by looking at JLG's stock price. Even CAT raised earnings expectations. Watch for a run to $22. Not a long term buy - construction will be slowing down soon.
JNPR - We own puts on JNPR and they had a market sympathy move. Consolidation among their customers is hurting them. I expect nothing but bad news from them.
JOYG - You wouldn't feel any joy owning this stock. Another casualty of a disconnect between earnings and stock price. They will have incredible earnings. However, like JLG, they are at the tail-end of the boom.
MDR - Another oil and energy equipment/services company poised to show strong results. This is a buy. Probably LEAPs.
NTRI - I loved what NTRI produced this past quarter, but there's a reason we have been out of them. I think that they are fairly valued. Oh, don't get me wrong: I still love them. I like the way they are bringing Dan Marino onboard as a celebrity spokesperson. Women are bombarded by whats-her-name at Weight Watchers. Men are as big a market (pun intended) and they are untargetted.
The company is doing great: earnings up ~300% on 220% revenue jump, beating expectations by almost 20% and 10% respectively. Margins are strong.
I almost jumped back in when the company shed (heh heh) $13. But I do worry when the president quits so abruptly. I am re-thinking them.
NUAN - After crushing earnings for 3+ quarters, NUAN only met expectations last quarter. They dropped ~40% in price. Creeping back up, the stock price is starting to show faith in the numbers: expectations of 100% sales/earnings growth. I love the NUAN story and this is a buy. Ever since I heard that they came out with a Hindi version of their voice recognition software, I knew that we had a strong management at the company. a NUAN deployed system is even cheaper than using a help desk in bangalore. Watch Indian companies use it to make themselves even more aggressive
AMX - Up 10% since we started investing in them a few weeks ago. They added 7 million users to their client base and earnings were up 33% Y/Y and beat analyst expectations. Half of the surprise came from a one-time event, but the story is about improving margins. I expect margins to continue to improve as efficiencies improve: declining incremental costs associated with the increasing client base
AAPL - Back in November I began saying that AAPL was overpriced relative to iPod business. In February I advised folks to short it. It fell from the high 70s to a recent low of $50. The day of earnings release I advised folks to close out the put orders. Good thing too - they ran from $51 that day to $65 this week. Excitement is building for the back-to-school and holiday sales, but I think AAPL will disappoint. Watch for Microsoft to launch an anti-trust lawsuit against AAPL contesting the iTunes monopoly: songs downloaded from iTunes store can not be played on anything but an iPod.
BMHC - Back in November I began saying that BMHC was a problem. In February I advised folks to short it. It has fallen from the high 30s to $21.
CCJ - Uranium. I like them, even if the stock is flat. The EU and India will need uranium. The revenue and earnings are strong: 45% and 366% respectively. But they are slowing a bit next quarter.
DIS - Pirates brought in the gold and continues to do solidly. International markets haven't been tapped yet and then there is the DVD market. I heard that the video game is lousy. In general, this movie plus the holiday travel to Disneyland parks should be putting bounce into Disney's step but not so far. Given the impact that Pirates will have on the next quarter earnings, this is one to consider for a 5%~10% short term upside.
DO - What a great quarter. Earnings up over 300% on a revenue jump of 81%. The downside to this story is that it is nearly 100% utilized, which makes near-term upside surprises practically impossible. Upside will come next year and when they are able to add additional offshore rigs. This is a stock to own long term - their earnings are projected to grow 300% over the next 15 months. But for the near term, I would look at DO as accumulate on weakness. They may also raise dividend rates.
I suspect that some contracts are expiring over the next few months, enabling DO to charge much higher rates, but that is limited. Any rig coming off contract today could get an additional $100K per day or $36M extra in pure annual profit.
With 129M shares outstanding, that's an extra $0.29 per share or $6 per share price at 20 P/E. Good, but not exciting. More rigs are what matters.
EMT - Sales up 10% and earnings up 41%. This has a $16 price that we want to hit and then leave.
ESV - Another drilling winner. Earnings up 200% on a 100% increase in sales. As I mentioned in previous posts prior to earnings release, ESV's prices jumped 75% during the quarter. Like DO, ESV is challenged by 97% utilization rates. Where do they go from here?
"Our rig construction projects remain on schedule and within budget. Our new ultra-high specification jackup rig, ENSCO 108, is scheduled for delivery in the second quarter of 2007. The rig is already committed for work in Southeast Asia following delivery. ENSCO 8500 and ENSCO 8501, our two new ultra-deepwater semisubmersible rigs, are scheduled for delivery in the second quarter of 2008 and first quarter of 2009, respectively. Both rigs are being built against firm multi-year contracts."
You should hear 2 things: strong demand and limited supply. ESV like all other drill related companies are maxed out. To give an idea of the value of 1 rig: daily rates are touching $200K. One rig delivers ~$72M per year in revenue.
ET - Strong results. After boosting earnings 50%, ET raised earnings outlook ~10%. They are firing on all cylinders: accounts grew 58% and trades stayed fairly strong in the face of the Q2 turmoil in the markets: daily trading shrank from 180,00 to 161,000. They are also getting strength out of the merger - lower operating costs with higher revenues.
The one thing I like about ET is their forward looking marketing. They are entering China - and that's something that will only help. imagine the margin income as Chinese traders discover the opportunity to get cash and bypass banks.
GRP - Yes, please. Another big quarter for an oil drilling company. Earnings up 50% on a 36% revenue jump. And margins increased as well (sorry, bad pun). Profit for the drill bits segment of their business increased 98% on 25% revenue increase. They also increased earnings expectations. And they are incredibly cheap: 18 P/E
ISIL - Another misunderstood chip company. Earnings were up 150% on a 35% jump in earnings. Sequential earnings were also up. But ISIL got hit because of some exposure to the PC market. I think that this is actually in ISIL's benefit: they are the ones benefitting from a PC slowdown because they are more nimble than bigger players. ISIL is stealing business from bigger companies.
Nevertheless, the upside here is limited.
JBLU - This stock hops around. JBLU continues to grow the business and there is some margin improvement. But they are at the mercy of oil prices.
JLG - Construction continues to be strong, but you wouldn't know that by looking at JLG's stock price. Even CAT raised earnings expectations. Watch for a run to $22. Not a long term buy - construction will be slowing down soon.
JNPR - We own puts on JNPR and they had a market sympathy move. Consolidation among their customers is hurting them. I expect nothing but bad news from them.
JOYG - You wouldn't feel any joy owning this stock. Another casualty of a disconnect between earnings and stock price. They will have incredible earnings. However, like JLG, they are at the tail-end of the boom.
MDR - Another oil and energy equipment/services company poised to show strong results. This is a buy. Probably LEAPs.
NTRI - I loved what NTRI produced this past quarter, but there's a reason we have been out of them. I think that they are fairly valued. Oh, don't get me wrong: I still love them. I like the way they are bringing Dan Marino onboard as a celebrity spokesperson. Women are bombarded by whats-her-name at Weight Watchers. Men are as big a market (pun intended) and they are untargetted.
The company is doing great: earnings up ~300% on 220% revenue jump, beating expectations by almost 20% and 10% respectively. Margins are strong.
I almost jumped back in when the company shed (heh heh) $13. But I do worry when the president quits so abruptly. I am re-thinking them.
NUAN - After crushing earnings for 3+ quarters, NUAN only met expectations last quarter. They dropped ~40% in price. Creeping back up, the stock price is starting to show faith in the numbers: expectations of 100% sales/earnings growth. I love the NUAN story and this is a buy. Ever since I heard that they came out with a Hindi version of their voice recognition software, I knew that we had a strong management at the company. a NUAN deployed system is even cheaper than using a help desk in bangalore. Watch Indian companies use it to make themselves even more aggressive
posted by Andrew at
3:47 PM
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