Wednesday, July 30, 2008

Comparison with MagicDiligence

Final post on this for a while as I am heading off on a business trip today. SteveA has suggested that I get rid of my handicap and simply drop stocks before 1/26/08. I will do that. I just want people to understand that I am using a strictly mechanical approach and have not "stacked the cards" to find a method doing well... and this method is doing quite well.

Just for fun (put will not post regularly) I also made a list that showed stocks when the first appeared on the top 100 list. The top 25 list is outperforming the S&P by 9.4 points. The top 100 list is outperforming by 7.0 points.

New to Top 25 After 1/25/08

Symbol Date Original Current Dividend S&P O S&P D Stock Chg S&P Chg Diff
DTPI 2/2/08 4.75 5.33 - 139.58 1.31 12.2% -8.6% 20.8%
AIRV 2/13/08 5.08 6.46 - 136.37 1.31 27.2% -6.4% 33.6%
CITP 2/16/08 9.98 10.26 - 135.14 1.31 2.8% -5.6% 8.4%
PRXI 2/16/08 4.29 4.07 - 135.14 1.31 -5.1% -5.6% 0.5%
CAST 2/23/08 5.06 4.25 - 135.62 1.31 -16.0% -5.9% -10.1%
GSB 3/12/08 2.08 1.58 - 131.36 1.31 -24.0% -2.9% -21.2%
IGC 3/12/08 3.70 4.55 - 131.36 1.31 23.0% -2.9% 25.8%
LGTY 3/12/08 6.70 6.63 - 131.36 1.31 -1.0% -2.9% 1.8%
MRX 3/12/08 19.45 19.06 0.08 131.36 0.67 -1.6% -3.4% 1.8%
DEPO 3/22/08 2.74 3.86 - 132.08 0.67 40.9% -3.9% 44.8%
NVTL 3/22/08 8.98 9.60 - 132.08 0.67 6.9% -3.9% 10.8%
VRGY 3/22/08 17.42 22.28 - 132.08 0.67 27.9% -3.9% 31.8%
DLX 4/6/08 19.58 19.08 0.25 136.89 0.67 -1.3% -7.3% 6.0%
NTRI 4/6/08 14.94 17.62 0.18 136.89 0.67 19.1% -7.3% 26.4%
IUSA 4/6/08 5.28 5.14 - 136.89 0.67 -2.7% -7.3% 4.6%
LRCX 4/11/08 41.08 31.59 - 133.38 0.67 -23.1% -4.8% -18.3%
SLXP 4/11/08 6.47 7.40 - 133.38 0.67 14.4% -4.8% 19.2%
CHRD 4/19/08 5.03 5.44 - 138.48 0.67 8.2% -8.3% 16.5%
QXM 4/26/08 6.26 5.70 - 139.60 0.67 -8.9% -9.1% 0.1%
MDP 5/9/08 33.79 27.79 0.22 138.90 0.67 -17.1% -8.6% -8.5%
OMPI 5/9/08 7.11 8.96 - 138.90 0.67 26.0% -8.6% 34.6%
PPD 5/9/08 43.45 41.90 - 138.90 0.67 -3.6% -8.6% 5.0%
ELNK 5/25/08 9.21 9.58 - 137.64 0.67 4.0% -7.8% 11.8%
FTAR.ob 5/25/08 4.37 3.92 - 137.64 0.67 -10.3% -7.8% -2.5%
CHKE 5/31/08 27.25 22.33 - 140.35 0.67 -18.1% -9.6% -8.5%
APKT 7/5/08 4.62 4.92 - 126.31 0.67 6.5% 0.5% 6.0%
CSY 7/5/08 11.06 12.68 - 126.31 0.67 14.6% 0.5% 14.1%
VALU 7/5/08 32.00 36.60 0.40 126.31 0.67 15.6% 0.5% 15.1%
QCOR 7/26/08 4.84 5.01 - 125.48 0.67 3.5% 1.2% 2.3%
















Totals 4.1% -5.3% 9.4%
79.3% of stocks beat the S&P 500 Benchmark




S&P C

126.28






New to top 100 since 1/25/08 (note two stocks no longer exist)

Symbol Date Original Current Dividend S&P O S&P D Stock Chg S&P Chg Diff
MFLO 1/26/08 12.42 22.01 - 133.04 1.31 77.2% -0.4% 77.6%
AIRV 2/2/08 5.22 6.46 - 139.58 1.31 23.8% -8.6% 32.3%
CDNS 2/2/08 10.61 7.34 - 139.58 1.31 -30.8% -8.6% -22.2%
GHM 2/2/08 34.02 84.53 0.06 139.58 1.31 148.6% -8.6% 157.2%
LIVE 2/2/08 5.25 2.05 - 139.58 1.31 -61.0% -8.6% -52.4%
VSEC 2/2/08 28.07 40.30 0.09 139.58 1.31 43.9% -8.6% 52.5%
CJR 2/13/08 21.81 17.09 0.25 136.37 1.31 -20.5% -6.4% -14.1%
FORM 2/13/08 20.09 16.12 - 136.37 1.31 -19.8% -6.4% -13.3%
MMS 2/13/08 37.32 37.05 0.10 136.37 1.31 -0.5% -6.4% 6.0%
KLAC 2/16/08 40.75 37.01 0.15 135.14 1.31 -8.8% -5.6% -3.2%
NVTL 2/16/08 13.35 9.60 - 135.14 1.31 -28.1% -5.6% -22.5%
GSB 2/23/08 3.53 1.58 - 135.62 1.31 -55.2% -5.9% -49.3%
TPX 2/23/08 16.67 10.03 0.08 135.62 1.31 -39.4% -5.9% -33.4%
VSEA 2/23/08 32.87 28.13 - 135.62 1.31 -14.4% -5.9% -8.5%
BOLT 3/1/08 17.39 20.50 - 133.82 1.31 17.9% -4.7% 22.5%
CHRD 3/1/08 5.78 5.44 - 133.82 1.31 -5.9% -4.7% -1.2%
MRX 3/1/08 20.47 19.06 0.08 133.82 1.31 -6.5% -4.7% -1.8%
ELOS 3/1/08 16.19 15.03 - 133.82 1.31 -7.2% -4.7% -2.5%
AMSWA 3/12/08 5.76 5.51 0.09 131.36 0.67 -2.8% -3.4% 0.6%
CRDN 3/12/08 29.28 46.08 - 131.36 0.67 57.4% -3.4% 60.7%
CROX 3/12/08 20.59 4.33 - 131.36 0.67 -79.0% -3.4% -75.6%
DEPO 3/12/08 2.97 3.86 - 131.36 0.67 30.0% -3.4% 33.3%
EME 3/12/08 22.24 31.05 - 131.36 0.67 39.6% -3.4% 43.0%
ELNK 3/12/08 7.34 9.58 - 131.36 0.67 30.5% -3.4% 33.9%
IGC 3/12/08 3.70 4.55 - 131.36 0.67 23.0% -3.4% 26.3%
OMPI 3/12/08 9.55 8.96 - 131.36 0.67 -6.2% -3.4% -2.8%
SNVNF 3/12/08 1.18 1.27 - 131.36 0.67 7.6% -0.5% 8.2%
TBI 3/12/08 12.42 15.18 - 131.36 0.67 22.2% -3.4% 25.6%
ALLI 3/22/08 4.08 5.42 - 132.08 0.67 32.8% -3.9% 36.7%
FIX 3/22/08 12.93 13.47 0.05 132.08 0.67 4.5% -3.9% 8.4%
DWCH 3/22/08 3.18 2.54 - 132.08 0.67 -20.1% -3.9% -16.2%
TRA 3/22/08 35.85 52.16 0.10 132.08 0.67 45.8% -3.9% 49.7%
NTRI 4/6/08 14.91 17.62 0.18 136.89 0.67 19.3% -7.3% 26.6%
BID 4/6/08 26.57 28.16 0.15 136.89 0.67 6.5% -7.3% 13.8%
FDRY 4/11/08 11.57 17.60 - 133.38 0.67 52.1% -4.8% 56.9%
MNST 4/11/08 22.23 18.14 - 133.38 0.67 -18.4% -4.8% -13.6%
CHE 4/19/08 40.84 40.95 0.06 138.48 0.67 0.4% -8.3% 8.7%
SLP 4/19/08 1.71 1.59 - 138.48 0.67 -7.0% -8.3% 1.3%
LQDT 4/26/08 8.43 11.11 - 139.60 0.67 31.8% -9.1% 40.9%
NHWK 4/26/08 7.28 7.60 - 139.60 0.67 4.4% -9.1% 13.5%
QCOR 5/2/08 4.38 5.01 - 141.51 0.67 14.4% -10.3% 24.7%
WINS 5/2/08 4.86 3.99 - 141.51 0.67 -17.9% -10.3% -7.6%
SILC 5/2/08 8.80 5.63 - 141.51 0.67 -36.0% -10.3% -25.7%
SYX 5/2/08 16.50 16.74 - 141.51 0.67 1.5% -10.3% 11.7%
ASF 5/9/08 27.44 27.02 0.11 138.90 0.67 -1.1% -8.6% 7.5%
SWIR 5/9/08 17.73 12.48 - 138.90 0.67 -29.6% -8.6% -21.0%
SNCR 5/9/08 12.79 12.00 - 138.90 0.67 -6.2% -8.6% 2.4%
BR 5/16/08 21.68 21.17 0.06 142.66 0.67 -2.1% -11.0% 8.9%
PROJ 5/16/08 9.00 8.05 - 142.66 0.67 -10.6% -11.0% 0.5%
PDX 5/16/08 55.75 49.69 - 142.66 0.67 -10.9% -11.0% 0.1%
NSR 5/25/08 22.27 21.15 - 137.64 0.67 -5.0% -7.8% 2.7%
SPSS 5/28/08 38.89 35.84 - 139.30 0.67 -7.8% -8.9% 1.0%
CSY 5/31/08 13.30 12.68 - 140.35 0.67 -4.7% -9.5% 4.9%
SIGM 5/31/08 18.50 18.05 - 140.35 0.67 -2.4% -9.5% 7.1%
ZINC 6/6/08 12.78 12.04 - 136.29 0.67 -5.8% -6.9% 1.1%
DYII 6/15/08 7.00 4.04 - 136.15 0.67 -42.3% -6.8% -35.5%
ESIC 6/21/08 3.44 3.11 - 131.58 0.67 -9.6% -3.5% -6.1%
NCMI 6/21/08 12.59 12.61 - 131.58 0.67 0.2% -3.5% 3.7%
BIDZ 6/28/08 8.85 9.31 - 127.53 0.67 5.2% -0.5% 5.7%
RMCF 6/28/08 9.63 8.99 - 127.53 0.67 -6.6% -0.5% -6.2%
APKT 7/5/08 4.62 4.92 - 126.31 0.67 6.5% 0.5% 6.0%
HANS 7/5/08 25.25 24.56 - 126.31 0.67 -2.7% 0.5% -3.2%
MTW 7/5/08 27.58 27.43 - 126.31 0.67 -0.5% 0.5% -1.1%
NVDA 7/5/08 12.49 11.65 - 126.31 0.67 -6.7% 0.5% -7.2%
BA 7/12/08 63.28 63.21 - 123.84 0.67 -0.1% 2.5% -2.6%
CHH 7/12/08 23.24 25.57 - 123.84 0.67 10.0% 2.5% 7.5%
MSFT 7/20/08 25.86 26.11 - 125.98 0.67 1.0% 0.8% 0.2%
VCLK 7/20/08 10.20 11.30 - 125.98 0.67 10.8% 0.8% 10.0%
SHFK.PK 7/26/08 27.50 27.50 - 125.48 0.67 0.0% 1.2% -1.2%
IBAS 7/26/08 3.90 3.95 - 125.48 0.67 1.3% 1.2% 0.1%
















Totals 1.9% -5.2% 7.0%
61.4% of stocks beat the S&P 500 Benchmark




S&P C

126.28





Tuesday, July 29, 2008

Earnings Out the Wazoo!

I think I had more stocks report earnings today than any day I can remember. Here is the list: COH, MHP, IAR, BBSI, LRCX, HW, LCAV and GNW (not a MFI pick). Also TRID reported a disaster last night. Let us review them one-by-one (note the first group, through IAR was written before the opening bell):

TRID – while they made money in the quarter, which was unexpected, they said they expect to have an operating loss of $23-$27m in fiscal 2009. They also said they expect to burn through $28-$32m of their cash stockpile. Doing the math, that means they think in a year they’ll have $183m in cash. Their market cap is $235m (at the start of the day). Assuming there is a light at the end of the tunnel and they start making money in 2010, they should be fine. But given other investment choices out there, this doesn’t look like a great play right now. I suspect the market will see it the same way if the paperboys trading in the early morning are any indication (which they probably are).

LCAV – pass the barf bag. What a disaster (LCA-Vision posts 2Q loss; suspends dividend). Their operating loss was $3m, compared with a $10m gain a year ago. Adjusted same store revenue was down 36%. That seems hard to do. They dropped their dividend a quarter ago, now they have suspended it. I am already down 64% on these guys. Thankfully the worst they can do is go to zero. I have to say that I have lost virtually all respect for Barron’s these past 9 months. They wrote cover stories on both LCAV and IAR suggesting they were worth taking a chance on (come to think of it, they were pushing GM as well, hmmm). The lesson here is that when times get tough, people decide not to have discretionary eye surgery that is paid for out of their own pocket. It makes sense and I should have figured that out last October.

MHP – They say they still expect to make between $2.65 and $2.75 in 2008 (RPT-UPDATE - McGraw-Hill net tops view despite S&P rating slump). Overall revenues were down by 2.6%, but net income was down over 23%. They are being hit by the credit crunch as well as there are many fewer new issues that need S&P ratings. You also have to wonder if the gold standard of the S&P rating has been tarnished a bit. When you strip out the financial services piece, where MHP really had a monopoly, you’re honestly left with a media and publishing company. They likely have much higher margins in the financial service segment, so declines there hurt them double. Hopefully, a lot of that drop is priced in and when things return to “normal” (assuming they ever do), MHP will rise again, like a phoenix. The good news with MHP today is the earnings don’t seem like a disaster.

COH – after the doom and gloom of the 1st 3 reports, it was nice to see some good news (Coach Reports Fourth Quarter Earnings Per Share of $0.50, Up 20%). COH reported earnings in-line with revenues and income both up 20%. That is incredibly impressive in today’s retail environment. Yet the stock is about 50% off its 52 week high. They gave guidance of $2.25 (vs $2.17 for 2008) per share for 2009. I’ll be interested whether the market focuses on that or their stellar quarter. I suspect they are under-promising… and even so, the fact that they are still expecting growth makes my heart warm. I do see where their stockholder’s equity has dropped in the past year from 1.910 to 1.515, not sure why it would drop if they’re making money? I don’t think they’ve been re-purchasing stock, nor to my knowledge have they paid a large dividend. Strange. Also their cash is down by about $400m., which mirrors the drop in equity.

HW – Well, the good news is they’re making money (Headwaters 3Q profit falls, but tops forecast). I felt their headline was pretty darned mis-leading, I really don’t like companies to “spin”. They say “2008 Recurring EPS of 0.31 up 15% from 2007”. If you read that you’d say, that sounds good. But in reality, they made 98 cents per share a year ago, and 31 cents this year. That sounds (and is) pretty bad. They have stopped getting Govt Section 45K subsidies. However, all in all, not a disaster quarter. I keep watching the HCAT area as I feel this will be their real fuel for growth. Still a disappointing $2m. This is their product that allows refiners to refine more of the gunky oil, which is cheap and spin into gold, so to speak. I am not sure what is taking this so long to get off the ground. I’ll likely read the transcript this evening to see what they say about HCAT.

IAR – At $2.20 per share going into earnings, Idearc is being priced like it is going out of business, or as Cramer put it, “a lottery ticket”. IAR has been rudderless for much of 2008. They lost two CEOs and a CFO in a 2 month stretch. I do like the tone being set by the new guy, Scott Klein. He says they’re going to “right-size expenses, accelerate revenue growth (in reality, stop the bleeding) and create a high-performance culture.” (Idearc Announces Year to Date and Second Quarter 2008 Results) I believe it can be done, we’ll see if he is the guy to do it. Now digging into the numbers, I guess I don’t see any “surprises”, though I see the stock is selling off pre-trading. They reiterated their guidance, though it is amazingly opaque guidance, “mid single digit decline in amortized multi-product revenue and some operating margin contraction”. What does that mean anyway? Their revenues are down for 1st 6 months by 6.1% and 5.7% for the recent quarter. While their operating expenses are down for the 1st 6 months by 2.8%, they were actually up a bit in the 2nd quarter. I suspect that is why they’re selling off early. They HAVE to reduce expenses if revenues are dropping. I’ll be curious to see what the reason is… could be the actually cost of hiring Mr Klein. I could live with that if it was a one-time bump. Their operating income for the quarter was 279m (339m the 1st quarter… quite a drop). Then they had their albatross of interest expense of $163m… leaving 76m for us. They are not going out of business quite yet. They are meeting their obligations. But they need to turn the trend around. I do wonder if they’ll try to retire some of the debt by issuing more stock. Or will they try and pay it down more aggressively? I don’t know how many financial levers are in the bag of tricks. I also don’t know if the debt rate can reset higher, not pleasant in today’s credit markets. The good news, if there is any, is that I think IAR’s competitors are actually in worse shape financially (RHD for one). If one of them went belly-up, it might provide some additional opportunities. IAR really highlights what was so dreadful about the private equity days of the past 2-3 years. These guys (the same wizards I am sure that packaged up the stinking sub-prime mortgage loans and sold them as decently rated paper) took over these companies with a steady cash flow, and re-engineered their finances… basically leveraged them to the hilt and then spun them back off in an IPO. As with the sub-prime fiasco, these companies are fine as long as income streams stay balanced or grow (or house prices stay steady or rise). But if there is a bump in the road, the leverage becomes too much to bear. I am not really sure who is at fault. Shame on me and other investors for buying these leveraged companies. But shame on the banks for being too loose with credit, I am sure some of these companies will go under. It really is analogous to sub-prime. Of course these financial wizards were making larger bonuses in a year, by putting lipstick on these pigs, than you or I will see in a life time. I guess that is the American way. Ok, I’ll stop preaching and get on with the earnings.

After the Closing Bell

Great day in total for the markets. Not so happy if you owned IAR and TRID like moi. IAR was down an astonishing 40%, I didn’t see that coming. TRID (not the chewing gum) was down 24%. Both were in the worst ten performers for the day. HW was the good news, up 25% to be one of the best performers of the day. LCAV was neutral, which surprised me. They were down 15% at one point, but fought back. COH was down, that disappointed me a bit… not sure I understand, I suppose it was the guidance. Finally, MHP was up almost 7%... more than I expected. Now let us check the wire on my three evening stocks.

LRCX – wow, at 1st blush the numbers look great (Lam Research Corporation Announces Earnings). They were expecting 40 cents and got 57 cents. Plus revenues were higher than expected. But comparing YoY is a little more sobering. Last year in the June Quarter they made 200m in operating income. This year just $64m. That is a huge drop-off and will likely move them down the MFI lists. They do have over $1b in cash and seem strong. Well, certainly not a disaster, but they didn’t say much about the future except that they are in a market that they expect to have growth opportunities of next several years.

BBSI – again, the bar has been lowered. BBSI made 29 cents with the scurvy analysts expecting 22 cents (BBSI Announces Second Quarter 2008 Operating Results). Sounds good for a start. Hmm, revenues were actually up YoY by 13%. That seems promising. The problem is their payroll costs are up 33%, that is what is eating their bottom line. Here is some good news, they expect about 35 cents next quarter and those scurvy analysts only expect 28 cents. I guess I will be able to sleep tonight. Neither of these two companies should tank, and both seem to have some upside.


Now a quick peak at how my simple portfolio is faring against MagicDiligence (I promise I will not do this everyday). MD had a great day and is now up 1.75% and outperforming by a healthy 6.9%. Below is my portfolio. I changed the formatting slightly to make it fit better. I took out the current S&P price as it is the same for everyone and I just show it at the bottom. Also I show my actual results then adjust by 2.3% at the bottom to negate the lead I had on MD as of yesterday when the contest started. As you can see, I am up on the S&P by 8.9 points. When adjusting for my 2.3 point handicap, I trail the MD portfolio as I am then outperforming S&P by 6.6%.

Symbol Date Original Current Dividend S&P O S&P D Stock Chg S&P Chg Diff
TIRTZ.OB 1/5/08 23.33 24.49 1.32 141.31 1.31 10.6% -9.7% 20.3%
UNTD 1/5/08 10.83 11.39 0.40 141.31 1.31 8.9% -9.7% 18.6%
PCR 1/9/08 34.19 27.83 - 140.37 1.31 -18.6% -9.1% -9.5%
CSPI 1/12/08 7.02 5.75 - 140.15 1.31 -18.1% -9.0% -9.1%
DTPI 2/2/08 4.75 5.33 - 139.58 1.31 12.2% -8.6% 20.8%
AIRV 2/13/08 5.08 6.46 - 136.37 1.31 27.2% -6.4% 33.6%
CITP 2/16/08 9.98 10.26 - 135.14 1.31 2.8% -5.6% 8.4%
PRXI 2/16/08 4.29 4.07 - 135.14 1.31 -5.1% -5.6% 0.5%
CAST 2/23/08 5.06 4.25 - 135.62 1.31 -16.0% -5.9% -10.1%
GSB 3/12/08 2.08 1.58 - 131.36 1.31 -24.0% -2.9% -21.2%
IGC 3/12/08 3.70 4.55 - 131.36 1.31 23.0% -2.9% 25.8%
LGTY 3/12/08 6.70 6.63 - 131.36 1.31 -1.0% -2.9% 1.8%
MRX 3/12/08 19.45 19.06 0.08 131.36 0.67 -1.6% -3.4% 1.8%
DEPO 3/22/08 2.74 3.86 - 132.08 0.67 40.9% -3.9% 44.8%
NVTL 3/22/08 8.98 9.60 - 132.08 0.67 6.9% -3.9% 10.8%
VRGY 3/22/08 17.42 22.28 - 132.08 0.67 27.9% -3.9% 31.8%
DLX 4/6/08 19.58 19.08 0.25 136.89 0.67 -1.3% -7.3% 6.0%
NTRI 4/6/08 14.94 17.62 0.18 136.89 0.67 19.1% -7.3% 26.4%
IUSA 4/6/08 5.28 5.14 - 136.89 0.67 -2.7% -7.3% 4.6%
LRCX 4/11/08 41.08 31.59 - 133.38 0.67 -23.1% -4.8% -18.3%
SLXP 4/11/08 6.47 7.40 - 133.38 0.67 14.4% -4.8% 19.2%
CHRD 4/19/08 5.03 5.44 - 138.48 0.67 8.2% -8.3% 16.5%
QXM 4/26/08 6.26 5.70 - 139.60 0.67 -8.9% -9.1% 0.1%
MDP 5/9/08 33.79 27.79 0.22 138.90 0.67 -17.1% -8.6% -8.5%
OMPI 5/9/08 7.11 8.96 - 138.90 0.67 26.0% -8.6% 34.6%
PPD 5/9/08 43.45 41.90 - 138.90 0.67 -3.6% -8.6% 5.0%
ELNK 5/25/08 9.21 9.58 - 137.64 0.67 4.0% -7.8% 11.8%
FTAR.ob 5/25/08 4.37 3.92 - 137.64 0.67 -10.3% -7.8% -2.5%
CHKE 5/31/08 27.25 22.33 - 140.35 0.67 -18.1% -9.6% -8.5%
APKT 7/5/08 4.62 4.92 - 126.31 0.67 6.5% 0.5% 6.0%
CSY 7/5/08 11.06 12.68 - 126.31 0.67 14.6% 0.5% 14.1%
VALU 7/5/08 32.00 36.60 0.40 126.31 0.67 15.6% 0.5% 15.1%
QCOR 7/26/08 4.84 5.01 - 125.48 0.67 3.5% 1.2% 2.3%
















Totals 3.1% -5.8% 8.9%
75.8% of stocks beat the S&P 500 Benchmark
Handicap
-2.3%
S&P C

126.28

Net Total
6.6%