A few thoughts on a few stocks
I continue to hold my JLG options and shares despite the weakness. I am looking for the earnings release. I am looking at several data points.
First, construction continues strongly around the world. We know this directly (China GDP was recently increased to 10%+) and indirectly: CAT had a great release.
As another sign of continuing strength in the basic materials stocks, JOYG released tremendous earnings today. Earnings up 500% and higher than analysts expected.
Goldman Sachs had this to say Wednesday: “We look for engineering and construction stocks to trade most closely with oil prices and expect further increases in oil and gas capital spending to remain a key driver for well-positioned companies"
Although the US economy is slowing, we are still growing at 2.9% annually. I think the fear of a slowdown is a bit overdone but real in certain segments like housing construction. JLG is not part of the residential construction and is part of the utility, telecom and oil construction. These are still growing.
Also, CAT has begun re-branding JLG equipment and selling in Europe as of August.
I do not think the weakness in JLG is justified. It looks very oversold and I look to the release in 25 days to help and will hold on until then.
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Anyone else noticing the SNDK surge? I think all semiconductor stocks will be on the rise.
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Meanwhile, I am dumbfounded by NVL. They just announced profits would be even lower and they fired the CEO, but the damn stock goes up 5%. I nailed the fact that they would be reporting much worse fundamentals. They are closing down, excuse me, streamlining some European operations and taking a $6M charge. Analysts liked the management shuffling because they think that a new CEO will change things for the better and resolve the basic problems of delayed financial reports and capped contractual prices.
I am sure that a new CEO can expedite the financial reporting. (On a sidenote, why are companies allowed to go over 1 year in reporting their financials without the threat of de-listing? The rules are there but unenforced – shades of pre-Enron crap at the stock exchanges).
I don’t see how a new CEO can fix the pricing. They would have to negotiate with customers for higher prices and that isn’t going to happen easily. The reluctance of the market to push this stock down further in the face of rapidly deteriorating financials is a problem for our puts. I may pull the trigger sooner rather than later and take a small loss.
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CFFN is another stock that should be down but is up. I hate maniupulated stocks.
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RSH has been up up up since we voted down down down. They just fired 403 employees in an effort to bolster the bottom line. Good move on their part. It will probably generate $15M+ in savings sometime over the next 6 months.
That's the right move for a troubled company. Trim the fat and get a quick financial injection. SG&A runs a chunky 45% of their revenue (except during the holiday season). He just reduced that 45% to 42%. A great start and I'm sure that there are other operational cuts on the way. I expect a larger cut after the holidays. My guess is some stores will be shut - and pray that they can sublet the space.
The problem, however, is not operational so much as it is existential. Electronics have grown from the days of buying radio parts at RSH and building your own radio. At the high end are HDTVs and stereos and at the low end are batteries, cell phone accessories and gadgets. RSH is not the place to buy expensive electronics: they lack the showroom and depth of product line and competitiors like Bets Buy do so much better. At the low-end, even cell phone companies have stores. Radioshack works better in a major city where foot traffic draws people in (to replace batteries or some minor electronics). Those are low margin products.
So what do they do? Satellite radio. That's a smart play in terms of what merchandise can be managed in a small store. But again, lots of competition.
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WHR continues a slow, steady climb up. Makes no sense. Analysts are saying that WHR can make a lot of money selling energy saving washing machines. I just priced these out. A top of the line regular washing machine is $450. The energy saving machines are $1300. I don't see a lot of people rushing out to 'save money' by throwing out the old machines.
I am also encouraged by the strong LG inroads into WHR territory. That retards WHR efforts to raise prices.
First, construction continues strongly around the world. We know this directly (China GDP was recently increased to 10%+) and indirectly: CAT had a great release.
As another sign of continuing strength in the basic materials stocks, JOYG released tremendous earnings today. Earnings up 500% and higher than analysts expected.
Goldman Sachs had this to say Wednesday: “We look for engineering and construction stocks to trade most closely with oil prices and expect further increases in oil and gas capital spending to remain a key driver for well-positioned companies"
Although the US economy is slowing, we are still growing at 2.9% annually. I think the fear of a slowdown is a bit overdone but real in certain segments like housing construction. JLG is not part of the residential construction and is part of the utility, telecom and oil construction. These are still growing.
Also, CAT has begun re-branding JLG equipment and selling in Europe as of August.
I do not think the weakness in JLG is justified. It looks very oversold and I look to the release in 25 days to help and will hold on until then.
-----------------------------------------
Anyone else noticing the SNDK surge? I think all semiconductor stocks will be on the rise.
--------------------------------------------------
Meanwhile, I am dumbfounded by NVL. They just announced profits would be even lower and they fired the CEO, but the damn stock goes up 5%. I nailed the fact that they would be reporting much worse fundamentals. They are closing down, excuse me, streamlining some European operations and taking a $6M charge. Analysts liked the management shuffling because they think that a new CEO will change things for the better and resolve the basic problems of delayed financial reports and capped contractual prices.
I am sure that a new CEO can expedite the financial reporting. (On a sidenote, why are companies allowed to go over 1 year in reporting their financials without the threat of de-listing? The rules are there but unenforced – shades of pre-Enron crap at the stock exchanges).
I don’t see how a new CEO can fix the pricing. They would have to negotiate with customers for higher prices and that isn’t going to happen easily. The reluctance of the market to push this stock down further in the face of rapidly deteriorating financials is a problem for our puts. I may pull the trigger sooner rather than later and take a small loss.
-----------------------------
CFFN is another stock that should be down but is up. I hate maniupulated stocks.
-------------------------------------
RSH has been up up up since we voted down down down. They just fired 403 employees in an effort to bolster the bottom line. Good move on their part. It will probably generate $15M+ in savings sometime over the next 6 months.
That's the right move for a troubled company. Trim the fat and get a quick financial injection. SG&A runs a chunky 45% of their revenue (except during the holiday season). He just reduced that 45% to 42%. A great start and I'm sure that there are other operational cuts on the way. I expect a larger cut after the holidays. My guess is some stores will be shut - and pray that they can sublet the space.
The problem, however, is not operational so much as it is existential. Electronics have grown from the days of buying radio parts at RSH and building your own radio. At the high end are HDTVs and stereos and at the low end are batteries, cell phone accessories and gadgets. RSH is not the place to buy expensive electronics: they lack the showroom and depth of product line and competitiors like Bets Buy do so much better. At the low-end, even cell phone companies have stores. Radioshack works better in a major city where foot traffic draws people in (to replace batteries or some minor electronics). Those are low margin products.
So what do they do? Satellite radio. That's a smart play in terms of what merchandise can be managed in a small store. But again, lots of competition.
---------------------------
WHR continues a slow, steady climb up. Makes no sense. Analysts are saying that WHR can make a lot of money selling energy saving washing machines. I just priced these out. A top of the line regular washing machine is $450. The energy saving machines are $1300. I don't see a lot of people rushing out to 'save money' by throwing out the old machines.
I am also encouraged by the strong LG inroads into WHR territory. That retards WHR efforts to raise prices.
posted by Andrew at
7:33 AM
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