Housing stocks – I suspected that housing stocks were rising pre-housing report release and I was correct. They are now sagging back down. There is absolutely no way to spin anything positive out of a market collapsing faster than experts thought. I am sure that Toll brothers and others will squeeze earnings on the way down as they squeeze their suppliers or try and re-set land prices. But they are a trainwreck, no matter what speed.
Oil services/equipment stocks – Wall Street seems to be looking for negative news on oil equipment companies. Maybe the Hurricanes won’t hit. Maybe the US has plenty of oil. Maybe Iranian oil won’t get sanctions.
The reality is that demand for oil equipment and services continues to soar through the roof. While the earnings growth is no longer 400%, I think 200%+ growth is nothing to sniff at. Especially when the P/E is in the low teens. The market is undervaluing them, which makes them attractive for LEAPs.
Semiconductors – In the face of a slowing PC market and slowing consumer spending, semiconductors look exposed. However, semis in the cell phone and Flat Panel TV markets still look hot.
AMX – A great quarter and they will continue to grow. I am waiting for more pullback before jumping in.
BMHC – They bought a window manufacturing company. Quick question: when condos and houses are being cancelled, what high volume item gets cancelled? Windows. More doors and windows get cancelled per housing unit cancellation than an oven. This was a weird acquisition.
CCJ – Uranium seems to be doing quite well these days. They have been creeping up and only 10% off their high.
DIS – Still not getting the boost they deserve from the Pirates movie. Did you know that the Pirates movie continues to rank in the top 10 movie incomes each week? They have already done $400M domestically and $1B internationally.
DO/ESV – One reason for softness among the oil drillers is that Wall Street thinks the day rates are dropping. I looked at ESV’s day rate log (it’s updated as of Aug 15th).
http://www.enscous.com/UploadFiles/File/08-15-06%208K%20Rig%20Status.pdfOver 10 rigs are up for contract renewals in the next 6 months (including August). Of those, some 7 already have a set price for renewal. The daily rate increase:
August - $20K
November - $40K
December - $130K
January - $180K
From a net revenue standpoint, Q3 increases $1.8M and Q4 increases $6.3M. January 2007 alone will see a $11.1M increase
And these net revenues are also net margins: it’s all upside.
From a revenue standpoint – the next 6 months don’t contribute as much revenue as 2007 will (the January 07 re-setting prices will add 25% to annual revenue).
From an earnings standpoint, however, it adds 2% increase in the next 6 months and 25% in 07.
And that’s just 7 rigs. ESV has many others. They have forward P/Es of 7. Pretty soon, they will be
While it’s not massive sequential growth, this is massive YoY growth
ET – Buy this stock the next time it falls below $23.
GHL – Ever since they announced a big sale of insider shares, I’ve been avoiding them. That plus more competition. I expect business is humming along, but I think I’d like to see a lower price.
GRP – After another great quarter and raising forecasts for the year, GRP is languishing again. Undervalued like crazy.
ISIL – I like them and they are showing good base around $23. Another undervalued growth stock (P/E of 25)
JBLU – Hanging tough, JetBlue is establishing a $10 base. I don’t like them as much because they haven’t successfully raised prices – bad for margins in this day of $70 oil.
JLG – They will be hurting as the construction boom slows, no doubt about it. But they are selling at a massive discount right now. I think they will rise as they get closer to earnings release (Sept 25) but I suggest shifting out after that.
JOYG – Keeps getting lower and lower. I think that they are suffering from a metals play run-down, wherein mining will drop as metal prices drop. Metals have to drop 40% in price before mining slows down. Perhaps the market expects that to happen.
MRVL – They signaled slower growth. They are oversold, because they are still growing, but I like fast growing semis better right now.
MDR – Buy buy buy. It continues to go up and to the left. It’s one of the few oil equipment companies that is not suffering from Wall Street fears. It’s 2% off its 52 week high. As I mentioned a few months back, their subsidiary came out of bankruptcy, adding sales and earnings.
NTRI – Pass. While I think that they can continue to grow, I have concerns about the actual growth rate. The huge growth isn’t over on a Year-over-year basis, but it is slowing on a sequential basis. I think that this is the last 2 quarters of huge growth.
NUAN – Notice the strong insider buying. $11M recently. Dig a bit deeper and you’ll notice that the insiders are Directors on the Board who also have ties to Warburg Pincus. WB is a major investor from the early days and has yet to cash out. Buyout possibility? I remain intrigued.
PCP – Basic industrial company especially focused on the aerospace industry. As a result – solid earnings growth and beating analysts’ expectations. Sequential growth is accelerating: from 10% per quarter to 13%. As always – I think that they are incredibly undervalued.
STX – Well, I hoped for better per the acquisition but it hasn’t turned out. I don’t want to leave because HDD based video cameras are being released for the holidays. Sony has a High Def 100% digital for $850 retail today.
TIE – The company continues to make massive earnings, but the stock has no investor confidence. Meanwhile, the CEO continues to buy millions of dollars of stock on the open market. That’s what keeps me in – what does he know that others don’t.
TRID – Buy buy buy. A clear base at $19 and upside from here.
TTI – Another undervalued growth stock in the oil services/equipment sector
VOL – In a trading range until earnings release. Good for another 3~6 months then get out.
WSO – An air conditioning service company. Did you hear about the massive heatwave? They made some upside, I guarantee it. Recession or not – everyone pays for air conditioning.
ZOLT – A sudden 8% rise today on heavy volume. Something is up.
ZRAN – Oversold. Another value opportunity.
WHR – Continues to go up although I want it to go down. I am confident it will. A few hundred thousand homes not getting sold means a few hundred thousand fewer customers for new whirlpool products.
ETH – Down ~4%+ today. At last the market is acknowledging the precariousness of a furniture maker when the housing market is soft.
CPWM – Also down 4%. The puts we paid $0.60 each for are now worth $3.30.
RSH – Radioshack bonds were cut to a junk rating. Turns out the rumor is that Sam’s Club (subsidiary of Walmart) may buy them out or partner with them. I do think Radioshack has a brand name of value. However, they still have the wrong product mix: they sell exactly what others sell.
Radioshack has a new top management team led by the former turnaround whiz from Sears and Kmart. But I think the damage has been done. No doubt they will concentrate on fixing the balance sheet.
I think that RSH can not survive on its own. Instead, they are fishing for a partner to take them over. Certainly Day could try and encourage the move thanks to his contacts.
