Thursday, April 21, 2011

Earnings Season Starts With a Pop

Less New Economy

Do people over thirty reading the MFI Diary remember the go-go days of the late 90s? The Nasdaq would routinely go up over 100 points a day, ending at a peak over 5,000. Ten years later we're at 2,820. Those were the days of the "new economy" stocks. Like MSFT, DELL, CSCO, INTC and BRCM plus many smaller ones that fell by the wayside, such as AMCC, PMCS and VTSS.

Of course the opposite of new economy stocks were the boring old old economy stocks. Insurance companies, maytag, Weyhauser etc. Guess what? In 2000 you would have ended up much better off being in the old economy. I still remember one post called "An Open Letter to Warren Buffett" where the writer scolded WEB (An open letter to Warren Buffett (from a non-admirer)) to get over his passion for simpler stocks like KO or JNJ and to invest in CSCO, even if it was trading at 150x earnings.

As we know everything moves in a circle. So here we are ten to fifteen years later, and the new old economy stocks are yesterday's new economy stocks: CSCO, MSFT, DELL and INTC. They are all on the MFI list and I think they are all undervalued.

INTEL Earnings

Wow, Intel had some unexpected blowout earnings! They made (Intel reports record Q1 revenue, 30% profit boost) 56 cents a share. The stock has jumped about 6% since then. I'll be interested to see if the other old/new stocks fare well aslo.

Sandisk Earnings

Not quite as rosy as INTC, and the stock is down as I dream of Sunday Easter ham. But the quarter looks decent, the operating income was up 10% year over year, Cash and near cash are up. And they said even with interruption from Japan quake, they still see 2011 on track (SanDisk Announces First Quarter 2011 Financial Results).

Philip Morris International

Wow, I wish all my stocks were like PM. They have been a picture perfect magic formula stock. They hit the screens a bit less than a year ago as the beginning of the Greek crisis and the rapid drop of the Euro put PM ion tghe mid 40s. Since I bought them, they are up 53% plus I have another 4 points in dividends. I will have to sell them in another month or so, as they are off the list. They had another solid quarter (Rising cig sales push Philip Morris Int'l net up) and went up 1.7%.

Reynolds American

My other tobacco stock, RAI also reported today. They also had very good numbers (Reynolds American 1Q net income climbs) but ended up down 3 cents. This has been another steady eddie and they are up 44% since I bought them in January 2010. The week is going decently as these more classic stocks are carrying some water for me and it isn't all about RTO for a change.


Homer315 said...

In that letter writer's defense, if Buffett had bought CSCO when that guy recommended it, he would have made ten times his money in the next three years. And had he bought Cisco back when the writer recommended it, and held onto it until today, WEB's return would have been about 161%, while the S&P and NASDAQ have returned 67% and 107% respectively. There are worse returns...

AndrewsDad said...

I have a number of the new old economy stocks. Long, long time holder of MSFT. Recently bought INTC and am up exactly 6.24% in less than a month.

I was seriously looking at PM but I just could not pull the trigger. Having never smoked anything in my life, father was a cop, mom was a nurse, not sure if that was the reason. On the other hand, the staunch free market capitalist in me says legal business, no reason not to buy.

Just another one of my biases that have cost me money over the years.