There We Go Again

There You Go Again

That is one of the great quotes from a Ronald Reagan presidential debate (against Jimmy Carter I think). And there I go again. HW had disappointing earnings and was down sharply on the day. It feels like a sharp punch in the stomach. I did note the other day that my new MFI stock, WH is the reverse of HW. Maybe it’ll go higher since HW went lower…

The One Big Question

The big assumption that the MFI approach makes (and which is clearly not working for me and some others) is that the income from the previous 12 months is a good proxy for estimating earnings for the next 12 months. I could make a list of stocks I have bought and their actual trailing twelve month earnings when I bought them and then their actual 12 month earnings and I can assure you that the stocks that flopped were the ones that didn’t meet that assumption. So to me, clearly the one big question you should ask yourself before buying an MFI stock is, “do I think the company has a very good chance of matching or beating the earnings from the past 12 months?” In a quasi recession, that is no slam dunk. And it is arguably more difficult for smaller companies than larger companies during a downturn as their revenues tend to be more concentrated (certainly a lesson I’ll remember next recession). We are not stock market geniuses, but it is a question I need to get a better answer to before buying the next MFI stock.

One MFI Stock + One MFI Stock = ?

What happens when one MFI stock (UNTD) buys another MFI stock (FTD)? Is the combined entity an MFI stock? We’ll find out, I guess. UNTD announced today they are buying FTD for $15.08 a share. Oddly (unless the math is wrong) FTD is only up to $13.80. That doesn’t make much sense to me. I guess it is because UNTD is down 9% and the deal must be partially financed by stock. Not a very attractive deal to stockholders when both stocks drop.

Late to the Unhappy Party

I love it when an analyst is late to the party. Baird downgraded HSII a day after their 13% plunge yesterday. Of course HSII is down another 7% today, so perhaps they’re on to something.

WNR Turns on the Spigot

It what has to be good news for my beleaguered WNR (down an astonishing 80% for me) is they fired up production at their Yorktown plant. They estimate that will create $2 to $2.5 million of income per month. They need it. I guesstimate that would be about 35 cents per share. Not a bad increment for a $10 stock. I did read the VLO earnings release to get some idea of where my three refiners (HOC, FTO and WNR) will be going. It was pretty bad. They had almost $28 billion (with a “B”) in revenues, yet managed to scratch out a net income of $472 million (with an “M”). Doing a little quick math, that means they made about 1.7 cents in income on the dollar of revenues. Recall FTO was around 9 cents last quarter, while HOC and WNR were more in the 1 to 2 cent range. I should not say this, but I am foolishly optimistic that WNR is going to start turning things around. Recall last quarter they had all sorts of glitches, which should be fixed by now. Also, I gotta believe they benefited from the ALJ fire. I am not so optimistic about HOC. They had a plan to go from 5,000 bpd of heavy crude to 50,000 bpd. I suspect that is stuck in neutral. Stay tuned.