TRID & Other thoughts
TRID sank hard today. I shake my head in dumbfounded wonder (and at the loss I am facing on my call options).
Down on no news suggests that there are fears about pricing pressure.
Other stocks under pressure include TIE, ESV, & ILMN
TIE - As of Jan 5th, the #1 Russian Titanium maker (VSNMPO) is banned from doing business with US companies due to its Iran/Syrian business ties. Boeing gets 50% of titanium from them, and Airbus 80%. This is incredible for TIE. If Bush allows it - it is a good stick over Putin at a time when Russia is dragging feet over Iran
The fact that TIE has had nothing but incredible good news lately (major cost reductions from titanium sponge production, reduction in competitive threats from Russia) and the fact that the stock continues to fall tells me to accumulate.
ESV - Downgraded within 1 week by JP Morgan and Wachovia (JPM was today). A conspiracy nut would suggest that the rumors of an ESV buyout are true, that JP Morgan and Wachovia are underwriting part of it, and these downgrades are part of getting a lower price. More likely, there is general concern about natural gas and ESV's exposure to NG drilling in the Gulf of Mexico. the facts show that ESV has very minimal exposure to NG drilling and that its GOM exposure is small and shrinking.
In fact, a smart investor would recognize that most companies are moving the drilling fleets out of the GOM, which will lead to substantially lower NG drilling (25% of NG comes from GOM). That means higher NG prices in 2007 Winter.
Which brings me back to my conspiracy theory. Many other drilling firms are much, much more exposed to GOM and NG weakness. So why did JPM single out ESV? Bash the company to get a better price and do the Seadrill acquisition.
As a value guy, I see a company selling for 7x contracted 2007 earnings. Buying out this company today would drive a 15% annual return on investment. That's hard to ignore.
ILMN - revisiting lows before earnings releases. This stock, as a small-cap, will surge on earnings.
OCN and NUAN are showing strength. Good sign. As did CTSH and CSH.
PCP - Big bounce back after their acquisition announcement of another Boeing related company.
CLB - Nice bounce back today on no news.
MDR - Nice bounce back. This one is so undervalued that I see a large jump i nthe next 3 months.
How does all of this affect the portfolio?
Well, we are very weighted in small caps, so I accept volatility.
Winners so far - UCTT, PCPand NUAN
Losers so far - TRID, CLB, MDR, ESV (a bit) and TIE (a bit)
The rest are stuck in the middle - a little up, a little down, although more down than up.
What to do about the losers? I don't see any reasons to hop out and hop back in (missed that on TRID).
TRID - Technically, this is a broken stock with no support. In barely 2 months it has fallen from $25 to $17 - a 30% drop. Fundamentally, though, this company is fantastic. Sales are through the roof and better than expected. CES is all about LCD TVs. And TRID dominates the market. They have ~16 P/E (which is according to estimates for the last 2 unreported quarters). The only weakness is falling consumer spending as it affects TV purchases. Well, I think falling prices translates into higher sales. I am staying put. I will be contrary on this one.
ESV - Staying put.
MDR - Like I am going to leave a company growing 100%+ and accelerating their earnings and margins. And has a 20 P/E. Bear in mind that the rest of the world is on a spending spree for energy infrastructure. US economic developments will not stop Indian electricity investments, for example.
CLB - I am going to wait for the earnings release. We are down a lot - 13% - but lets hold on. It is the one stock that looks riskiest.
TIE - I think investors will rediscover TIE in 2007. There is absolutely no weak spots in this company's armor. The stock is no longer trading at the discount it was last year because contracts are not re-setting at the phenomenally higher prices. (Contracts expiring in 2005/6 re-set prices from an average $8 to $30+, creating a massive profit surge). However, they will get upside from more production and moderating energy prices. Demand is not going away, unlike copper.
Down on no news suggests that there are fears about pricing pressure.
Other stocks under pressure include TIE, ESV, & ILMN
TIE - As of Jan 5th, the #1 Russian Titanium maker (VSNMPO) is banned from doing business with US companies due to its Iran/Syrian business ties. Boeing gets 50% of titanium from them, and Airbus 80%. This is incredible for TIE. If Bush allows it - it is a good stick over Putin at a time when Russia is dragging feet over Iran
The fact that TIE has had nothing but incredible good news lately (major cost reductions from titanium sponge production, reduction in competitive threats from Russia) and the fact that the stock continues to fall tells me to accumulate.
ESV - Downgraded within 1 week by JP Morgan and Wachovia (JPM was today). A conspiracy nut would suggest that the rumors of an ESV buyout are true, that JP Morgan and Wachovia are underwriting part of it, and these downgrades are part of getting a lower price. More likely, there is general concern about natural gas and ESV's exposure to NG drilling in the Gulf of Mexico. the facts show that ESV has very minimal exposure to NG drilling and that its GOM exposure is small and shrinking.
In fact, a smart investor would recognize that most companies are moving the drilling fleets out of the GOM, which will lead to substantially lower NG drilling (25% of NG comes from GOM). That means higher NG prices in 2007 Winter.
Which brings me back to my conspiracy theory. Many other drilling firms are much, much more exposed to GOM and NG weakness. So why did JPM single out ESV? Bash the company to get a better price and do the Seadrill acquisition.
As a value guy, I see a company selling for 7x contracted 2007 earnings. Buying out this company today would drive a 15% annual return on investment. That's hard to ignore.
ILMN - revisiting lows before earnings releases. This stock, as a small-cap, will surge on earnings.
OCN and NUAN are showing strength. Good sign. As did CTSH and CSH.
PCP - Big bounce back after their acquisition announcement of another Boeing related company.
CLB - Nice bounce back today on no news.
MDR - Nice bounce back. This one is so undervalued that I see a large jump i nthe next 3 months.
How does all of this affect the portfolio?
Well, we are very weighted in small caps, so I accept volatility.
Winners so far - UCTT, PCPand NUAN
Losers so far - TRID, CLB, MDR, ESV (a bit) and TIE (a bit)
The rest are stuck in the middle - a little up, a little down, although more down than up.
What to do about the losers? I don't see any reasons to hop out and hop back in (missed that on TRID).
TRID - Technically, this is a broken stock with no support. In barely 2 months it has fallen from $25 to $17 - a 30% drop. Fundamentally, though, this company is fantastic. Sales are through the roof and better than expected. CES is all about LCD TVs. And TRID dominates the market. They have ~16 P/E (which is according to estimates for the last 2 unreported quarters). The only weakness is falling consumer spending as it affects TV purchases. Well, I think falling prices translates into higher sales. I am staying put. I will be contrary on this one.
ESV - Staying put.
MDR - Like I am going to leave a company growing 100%+ and accelerating their earnings and margins. And has a 20 P/E. Bear in mind that the rest of the world is on a spending spree for energy infrastructure. US economic developments will not stop Indian electricity investments, for example.
CLB - I am going to wait for the earnings release. We are down a lot - 13% - but lets hold on. It is the one stock that looks riskiest.
TIE - I think investors will rediscover TIE in 2007. There is absolutely no weak spots in this company's armor. The stock is no longer trading at the discount it was last year because contracts are not re-setting at the phenomenally higher prices. (Contracts expiring in 2005/6 re-set prices from an average $8 to $30+, creating a massive profit surge). However, they will get upside from more production and moderating energy prices. Demand is not going away, unlike copper.
posted by Andrew at
7:14 PM
1 Comments:
I have followed TRID with you ever since you brought it to our attention last year. Honestly, why fight the market sentiment? they don't like the stock and the stock price shows it. How many opportunities have you missed be being blinded by TRID???
Sell and move on. I did and haven't looked back (and haven't lost nearly as much as you on it either!)
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