Catching up - Part 3 Dealing With the Dogs
In the flight to safety, small and mid cap stocks suffered greatly. A 15%~20% price drop was not uncommon. Some stocks held up well (NUAN) and others dipped and others just dropped
I also think that it is time to reverse the diversification. I will be selling when the time looks right - the challenge is balancing how much of a loss to take with the potential gain from other investments.
I think the time to do anything is fast approaching as the September pre-earnings excitement builds.
LITTLE EARNINGS EXCITEMENT
AMX - Barely beat
ATW - Met
CLB - Met
ESV - Beat by 4%
IMA - Met
MDR - Crushed earnings 39%
NUAN - Beat by 17%
OCN - Beat by 70% (but mainly because of a one-time sale)
PCP - Beat by 12%
PWR - Met
TIE - Met
UCTT - Met
CTSH - Almost no bounce Friday. It moved up in pre-earnings mode and generally held up well. They are trading below their 200 DMA and they reported good news in th elast earnins release.
Verdict: we leave
1. Fair valuation - Not much room for upside when the P/E is 39 and projected growth is about the same
2. Other places to invest
HOLX - They had a solid earnings beat: 7%. I believe that HOLX remains undervalued based on the PEG (growing >50%+ but P/E of 44). One thing to note is that they had a loss 4 quarters ago, which makes their P/E look higher than it is. That is, as of next quarter, their P/E will drop to 30 from the current 44.
Verdict: we stay
1. Healthcare is a growing need in China/India/Russia
2. Undervalued
OCN - I don't understand. My strategy was 100% right: position for rising foreclosures. OCN is supposed to be a leader in dealing with foreclosures. I was right - their business has grown substantially. But not in step with the growth of foreclosures.
I made a mistake here.
TIE - Down down down. TIE has suffered a bit less than its peers RTI and ATI. That's a sign that hedge funds and others don't believe in titanium. They are right and wrong.
A large part of TIE's big runup the past 4 years was the massive rise in Ti prices. TIE had contracts that were expiring and would re-set at the much higher market prices. Today, price increases don't seem to be as significant.
At the same time, demand for Ti has never been stronger. Airplane demand for titanium is huge.
The fundamentals are still solid and we'll probably see a lot of bottom feeding. I also like the way cash shot up $50M and accounts payable dropped $45M - that suggests that they made $100M in cash that they used intelligently.
Verdict: We stay 1 more quarter.
TRID - Not moving at all as I expected. I love a company that has a forward P/E of 9 while growing >30%. I just wish the market would love them as much.
Verdict: We stay 1 more quarter
UCTT - UCTT is not showing the earnings and sales growth that we want to see. The 2008 year is supposed to bring them back into strong growth. This is classic performance for an emerging company. I liked the way they dropped inventory and accounts payable.
I also think that it is time to reverse the diversification. I will be selling when the time looks right - the challenge is balancing how much of a loss to take with the potential gain from other investments.
I think the time to do anything is fast approaching as the September pre-earnings excitement builds.
LITTLE EARNINGS EXCITEMENT
AMX - Barely beat
ATW - Met
CLB - Met
ESV - Beat by 4%
IMA - Met
MDR - Crushed earnings 39%
NUAN - Beat by 17%
OCN - Beat by 70% (but mainly because of a one-time sale)
PCP - Beat by 12%
PWR - Met
TIE - Met
UCTT - Met
CTSH - Almost no bounce Friday. It moved up in pre-earnings mode and generally held up well. They are trading below their 200 DMA and they reported good news in th elast earnins release.
Verdict: we leave
1. Fair valuation - Not much room for upside when the P/E is 39 and projected growth is about the same
2. Other places to invest
HOLX - They had a solid earnings beat: 7%. I believe that HOLX remains undervalued based on the PEG (growing >50%+ but P/E of 44). One thing to note is that they had a loss 4 quarters ago, which makes their P/E look higher than it is. That is, as of next quarter, their P/E will drop to 30 from the current 44.
Verdict: we stay
1. Healthcare is a growing need in China/India/Russia
2. Undervalued
OCN - I don't understand. My strategy was 100% right: position for rising foreclosures. OCN is supposed to be a leader in dealing with foreclosures. I was right - their business has grown substantially. But not in step with the growth of foreclosures.
I made a mistake here.
TIE - Down down down. TIE has suffered a bit less than its peers RTI and ATI. That's a sign that hedge funds and others don't believe in titanium. They are right and wrong.
A large part of TIE's big runup the past 4 years was the massive rise in Ti prices. TIE had contracts that were expiring and would re-set at the much higher market prices. Today, price increases don't seem to be as significant.
At the same time, demand for Ti has never been stronger. Airplane demand for titanium is huge.
The fundamentals are still solid and we'll probably see a lot of bottom feeding. I also like the way cash shot up $50M and accounts payable dropped $45M - that suggests that they made $100M in cash that they used intelligently.
Verdict: We stay 1 more quarter.
TRID - Not moving at all as I expected. I love a company that has a forward P/E of 9 while growing >30%. I just wish the market would love them as much.
Verdict: We stay 1 more quarter
UCTT - UCTT is not showing the earnings and sales growth that we want to see. The 2008 year is supposed to bring them back into strong growth. This is classic performance for an emerging company. I liked the way they dropped inventory and accounts payable.
posted by Andrew at
9:12 PM
4 Comments:
What do you think about MDR in the long haul? My take is that given the recent contract renewal with the Dept. of Energy to maintain the US national crude oil reservers, their recent split announcement, they're still a good buy.
IF we do enter a recession in 2008, I feel that this is the type of company that won't be affected very much, if at all given the type of work that they do.
good to see you back. starving for some good insight.
I read your email about Bull return. Your crystal ball seems to work :) In fact, lot of comanies in our portfolio started the reverse swing. Thanks for all your time...
MDR - I just posted a link to a good review of these guys. They are really well positioned for strong growth and upside surprises.
The DOE oil reserve is one of those yet-another-nice-contract type of deals that MDR keeps racking up.
I agree with you about a 2008 recession. It's in the cards for the US, but worldwide, the economy is growing.
For the past 9 months I have been trying to position for a recession by: going multinational/global and healthcare and avoiding consumer goods.
Post a Comment
Subscribe to Post Comments [Atom]
<< Home