I notice that every time I take a vacation, the market does interesting things.
I'll discuss strategy in a 2nd post and focus for now exclusively on our 2 week performance.
THE GOOD1. Sell prices worked - We sold CLB and NOV almost at their highs, locking in some gains
2. Strong YTD performance - We remain above 22%
3. Still beating the broader markets: the DOW is still in single digits and NASDAQ barely in the double digits
THE BAD1. Buying a bit too soon Friday - I bought in only to see CLB, NOV, TRID and IO continue to drop a bit more. 50% of our losses came from here.
2. Major pullbacks - There is no way to feel good about major 1 day losses on stocks. As great as 7% and 4% overall
3. Lost money again on TRID - This one is moxed. We lost some on the TRID 15.5 stop (after buying in $16+. But with TRID falling to $14, I am glad we had that STOP.STOCK REVIEW (2 week overview)INFRASTRUCTURE: COMMUNICATIONSAMX – Flat. It ran up to $70 on pre-earnings excitement but a bad release hurt. At the same time, it dropped in line with the broader market, which is a good sign.
* Revenue rose 30%, slightly beating expectations. They added 6.2M subscribers.
* Earnings before taxes, depreciation, etc (EBITDA) rose 44.6% versus expectations of 43%
The reasons EPS was lower than expected was accelerated writedowns on equipment depreciation. Depreciation is a non-cash expense, so I like that they continue to grow fsater than expectations.
And that is as it should be: after subscriber acquisition costs are factored in, the marginal cost of new subscribers is minimal from the equipment cost standpoint. Put another way: new subscribers are higher marginal profit, so we should expect at least $300M in profit this year from these new subscribers (6M * $50 profit per user).
Conclusion: Still growing. I was afraid that it was slowing and I WAS WRONG. Worth buying if you don't own already
MICC - Down 1.5%. It stayed above $90 for 7 of 9 days, dropping only Friday.
NUAN – Down 3.5%. It has stayed above $20 for 2 weeks now. After staying in the $18s & 19s for September. The NOKIA moves are starting to unfold as promising for NUAN. Mapping services as a means to other applications seems imminent, and voice recognition will play a major role. Microsoft has no real presence and Apple and Google use NUAN.
NUAN's strategy seems appropriate. On the one hand, they are making sure that plenty of 3rd party developers use NUAN and nobody else. On the other hand, they are playing nicely with the big boys. In other words, they are ensuring that there is no compelling reason to look for an alternative solution.
At a certain point, this is very much like a Windows annuity stream.
INFRASTRUCTURE: TRANSPORTATION
PCP – Down 6%+. PCP has been mostly flat for almost 4 weeks.
At first, I wasn't sure how to react to the Boeing delay. A 6 month delay in orders for PCP would be a major problem. They can counter this with the strong demand in China for their extruded pipes used in power plants and sewage systems ($400M in backlogs or ~10% of total backlog). But it turns out that if Boeing has sourcing issues with fasteners, then PCP can now charge premium prices as an alternative vendor.
Analysts expect a 60% growth in EPS for the quarter.
DRYS - Down 6%. Oops - bought a bit early. Maybe buy more next week. China as a major exporter and importer (iron ore, for example) is a big user of ships. I spent 4 months watching DRYS and DSX waiting for a stock slump and none came. I'm in - pricing power is on their side.
RAW MATERIALS including oil services/equipmentTIE – Flat. Added to the S&P 500 so that will boost volumes and add a bit more underlying strength. And it hurts the shorts for this stock to stay ~$32+.
ATW – Down ~4%+. They broke through and stayed above $80 for 7 of the last 9 days. A great sign.
CLB – The stock is up 2% for the 2 weeks. And that's after a 5% drop on Friday. We sold at $138 and bought back in at $132. That's the way it should be - sell high and buy a bit lower.
FWLT – Up ~1%. The CAT release hurt but it shouldn't have. CAT said US business is bad but global is great. Umm, that's where FWLT is focused. Leaving MDR and going to FWLT was also the right move
MDR is down 10% in 5 days vs. 5% for FWLT. MDR is vulnerable to recent moves that go against coal based power plants.
IO - Down 4% in 2 weeks and we bought Friday and lost 2%. Why IO? if you read the Schlumberger release, you will not ethat they see massive demand for seismic exploration. IO is the leader in this field. I have discussed IO previously and this seemed like a good buy opportunity for us.
NOV – The stock is down 9% in 2 weeks. As with CLB, we sold near their high ($80) and locked in our profits. We almost bought back at $77.8 but missed that - count our blessings. We were able to buy back in on Friday at ~$73, but we still lost a sizeable 4.7% because we bought in too soon.
HEALTHCAREHOLX – Flat. They hit a 52 week high of $69 and are down 5% from there. What a sudden change from the past 2 months where it was just sitting.
IMA – Up 5% and hit a 52 week high again. They didn't drop this week at all and they broke $60!!
BTW I am on vacation for a week starting mid-week next week, so expect less real-time commentary
OTHERTRID - We're back! Down 15% in 2 weeks and we bought in just shy of the low of $14. Why do I keep doing this? With $3.5o in cash per share, this stock is $10.
Think about that: $580M ($10 * 58M shares) buys you $300M in sales and $50M in earnings. In 1 year, that will be $400M in sales and $70M in earnings (assuming the analysts are correct).
Undervalued, anyone?
Also, Yahoo EPS seems wrong: they are stating $0.43 but TRID announced $30M net on 58M shares (~$0.50).
What's interesting is that they dropped Wednesday and were flat Friday.
