My Own Analyst

The Insanity of Investing in 2010

This is how to make money, but it's downright impossible to know if your stock will do this:

 

 

Orion Marine Sails Into S&P 600

ORN caught a break last night.  Standard & Poors announced that the company will replace a departing member of its S&P 600 Small-Cap index on 8/16.  The stock jumped 4% or so on the news.  The short-term impact is that index funds will be buying the stock - that's the pop.  Longer-term, though, it could lead to better visibility regarding the story. With the recent disappointment in the outlook, I lowered my one-year target from 21 to 20.

TECUA and HAYN

HAYN reported a very strong quarter and demonstrated its ability to meet customer demand on short notice.  Most importantly, the aerospace backlog is soaring.  The guidance for the next two quarters was above consensus and appears achievable.  I still can't figure out why someone sold this stock below 27 this summer.  I expect to raise my one-year target of 50 by 5-10%.

TECUA saw another huge sales quarter - off the charts at 52%.  Excluding litigation settlement and a small restructuring charge, they reported a profit.  On a cashflow generation basis (incorporating depreciation less capex), the company had very high earnings.  The call is in 40 minutes, but it looks to me like the management team is moving in the right direction.  I expect to maintain my target of 25, which is 1.25X TBV (which has declined from year-end levels).

Electricity Producers Surge

Our two power companies (ALE and POR) both reported good quarters and raised guidance.  ALE is being driven by improving industrial demand (taconite production), which was the main part of the buy thesis.  POR is seeing several headwinds dissipate.  We own POR in both models and ALE in CG/B only.  I struggle with its valuation, but I think it can go higher.  POR I continue to like for capital appreciation.  Both of these stocks are small and well-capitalized with juicy dividends.  I prefer them (the sector really) all day to a portfolio of bonds.

Buckle has Become Unbuckled

Another huge disappointment in terms of same-store-sales.  We will have to wait until 2 weeks when they report for more clarity, but the declines over the past 13 weeks have been extreme.  Last month, the culprit appeared to be heavy promotion by ANF.  In any event, this one has been a terrible round-trip from when we got involved initially in December.

Not Surprisingly, ORN Reduces Outlook

Hopefully this news was fully priced in (if not overly discounted), but the company reduced its outlook for sales for 2010 to $360mm-$370mm (about 10%).  Operating margins are expected in the same 16-18% range, as the company is sticking to its pricing discipline despite some apparent aggressive pricing that is costing them business on the East Coast.  For the quarter, sales were light, but EPS came in slightly stronger than expected.  The stock seems due for a bounce (sell the rumor, buy the news).  I continue to expect the stock to perform well over the next several years as the Panama Canal widening drives signficiant port expansions to accomodate larger ships.

BDX: Not as Sick as Peers

Investors were braced for very bad news, but BDX results were only slightly softer than expected on sales and in line on EPS.  Note that I am adjusting for the fact that disposed assets were included in the results but had been expected to be excluded.  The guidance was a little light on sales, but mainly due to currency.  EPS were perhaps slightly better than analysts had expected, even adjusting for the discontinued operations.  This should lead to some relief (70-71).

Cullen/FrostBankers: Strong Quarter

CFR earned .87 compared to the .80 consensus on better credit trends.  The press release indicated continuing deposit growth but alluded to the ongoing loan demand challenges.  The earnings a year ago were .63, so this is good growth.  I like the chart and the valuation is fair for this most excellent bank.

Ceradyne Beats and Raises

Ceradyne reported sales in line and a small EPS beat (.23 compared to .21 consensus) and raised sales and EPS guidance for the year.  They had previously had very high bands created by the uncertainty in defense.  The new guidance raises the floors dramatically and sets the mid-points above the consensus.

Reviewing the prepared remarks, uncertainty in defense remains, but industrial is very strong (this was what I was expecting).  New orders (including defense) actually grew finally compared to a year ago.  The company is covered by a lot of defense analysts, but that part of their business is now down to just 1/3 compared to over 50% a year ago.

CRDN's TBVPS is 19.80 and the net cash per share is 7.32. 

SYNO Likely to Beat

BCR's report showed again extremely strong growth in biological tissues (+90%), suggestive that SYNO should have a great quarter again.