Earnings x 3

Busy Earnings Day

Looks like I have three stocks report today: PONR, MTEX & (gulp) TRLG. PONR was this morning and was “ok” (Pioneer Announces 2006 Results). Stock is down 7% at lunch, but that seems a bit of an over-reaction to me. They made in 2006 about $99m of Earnings Before Income Tax (EBIT). Their enterprise value is about $355m. So that is an earnings yield around 27%! I will probably add to the blog this evening after MTEX & TRLG report.

For those of you sitting on the sidelines, perhaps not liking individual stocks or wanting a little more hand holding or lower expenses, I did see a new approach today that is quasi MFI. Wisdom Tree has launched some new ETFs. The one that caught my eye was EEZ. The fund basically looks at the S&P 500 and picks the top 100 trailing earning yields. They then invest in those 100, with the weights determined by the earning yield. They have back-tested and found it to out-perform the S&P 500. I think it is a novel approach and may consider some of my kids’ college funds to go into this ETF. It can tend to get over-weight as for example Energy did well in 2006 and many of them have higher earning yields. There are several key differences between this approach and MFI. Obviously, ROIC is not a component of the ETF. They use market cap rather than enterprise value for earning yield, so companies with a lot of cash might not score as well. The ETF only focuses on top 500 stocks, so it is more of a large cap play, while MFI tends to be smaller cap. Finally, unlike MFI, this ETF does not give everything equal $ weight, so a company with an earnings yield of 25% would get 2x more invested in it than 12.5%. JG says that you also need to know if it is a good business, not just whether it is cheap. That being said, the expense ratio is just 0.28% and it seems like a great way to get the diversification if you don’t have a large bankroll. It is interesting that these “mechanical” approaches from Wisdom Tree are gaining acceptance. It lends credence to MFI in thinking you can out-perform the market by being mechanical and taking the emotions out of trading.

FTO did get upgraded today by Goldman Sachs (Frontier Oil upgraded by Goldman Sachs) - from a “Sell” to “Hold”. As always, I don’t get excited about what the analysts say, but it often does have ST influence on a stock. Let us see when they placed the Sell rating…wow, looks like it was August of 2005. Guess they don’t change very often! I am guessing that downgrade in August, 2005 was a bad call. Wow, their price then was $18.22 and now they’re north of $31. See even those brilliant guys at GS mess up.

Wish I owned that stock! PPD is a stock that I first listed in my tracking portfolios in May of 2006 (at $33.26). It re-appeared in December at $40.21 and was on the January 26^th, 2007 list at $38.63. Right now it is at $56.35! That is a 46% pop, since the end of January… not many stocks have done that. They actually issued a bulletin today to the NYSE saying essentially they did not know why their stock has spiked upwards (Pre-Paid Legal Services Has No Comment on Recent Trading Activity)… hmmm, must be some rumors swirling! (note, PPD only ended up about 2.5%).

I sold SHOO from my sidecar today. It reached the psychological barrier of $30 and I was happy to bank a decent profit.

Waiting for MTEX & TRLG to post. It looks like the market isn’t very confident, they both dropped on a green day. Not that the market knows. I saw that ARO posted nice earnings today. That took me back to early November (“I Can See Clairely Now”) where I commented on JG publicly saying that ARO, AZO and CLE were all “cheap”. ARO was around $28 back then and now they’re $38. You could do worse than pile in on his recommendations. CLE also went up, I did ride that train (made over $2k) as I bought a lot of shares. Let us see how AZO has fared… nice, about $110 to $125.

Okay, TRLG just came in! (True Religion Apparel Reports 2006 Fourth Quarter and Full-Year Financial Results) Hmmm looks pretty much on target. Sales up 17%. Made 21 cents per share. They say sales in new stores have exceeded expectations (that sounds good). Gross margins went from 51.1% to 54.1%, that is big. EBIT is up about 16%. Doesn’t appear to be a train wreck. I wonder what AH trading is doing and the 45% of the people short the stock?

Last note, MTEX had their earnings (Mannatech, Inc. Reports Record Fourth Quarter Sales). Revenues up about 5%, they are making investments in new products. Pretty much as expected.

Ok, I am off to watch my Hoosiers vs Gonzaga. Probably no better 4 day strecth during the year than the 1st four days of March Madness.