The Week's Winners
Boy, you go on vacation and you never know what's going to happen to your portfolio. Since almost all of my holdings are, at least in my planning, intended to be long term holds and I'm not looking for selling points, the return to the world of stock tickers after vacation is usually a matter for entertainment as much as anything else.
I don't have stop loss orders on any of my stocks, nor do I leave lowball buy orders out in the ether. Generally, I buy something when I have the money and think it's a good investment (though sometimes, of course, going on sale definitely tips the scales in favor of a stock being a "good investment"), and sell when I no longer think it's a good long term investment or otherwise lose confidence in the company. So even if I were here, I wouldn't have likely made any changes to my portfolio over the last ten days or so ... but it would have certainly kept my attention.
So what happened?
First, the winners -- the stocks that climbed in my absence, usually because they released earnings or otherwise made some kind of news. I'll post a separate message with the losers.
Formfactor (FORM) shot up about 10% on the week, re-entering the nicely priced territory it had previously climbed to this spring with the first indications of a turnaround in semiconductors and optimism that their new plant would be online soon. They took a tumble, but have now bounced almost all the way back and they're one of my favorites to watch right now. Full writeup I did pretty recently is here.
Netease (NTES) -- I just wrote this one up at some length here, but I'm pleasantly surprised to see it continuing to climb. My reason for not selling after a 50% gain is that I fully intended my Chinese internet investments to be volatile and to grow dramatically over time -- why would I sell when that's just what NTES is doing? My main regrets in investing have been from selling too soon -- sometimes way too soon, so I'm trying to fight that. NTES shares boomed because their business boomed, and it has every appearance of nice prospects ahead -- if I didn't already own shares I might wait a little bit and see if it drifts lower before the next earnings release, but I still think NTES looks great going forward, and the ridiculousness of the Baidu IPO tells you the market certainly still has a taste for Chinese technology.
Shanda (SNDA) -- Ditto, only to some extent we're still waiting for Shanda to climb to NTES' heights. Sure, they've doubled in a year or so -- but their earnings are growing at such spectacular rates that I can't see the stock price staying in this trading range for much longer. I bought around $32 and have watched it bounce up to $40, then back down to my buying range and below, then back up in anticipation of great earnings, and up and down and up and down since earnings were released. EPS were a hair short of analyst estimates, but nothing worth worrying about, especially since revenues were well above estimates. SNDA has seen some significant increases in product development and SG&A costs, so I hope those portend the first investments in additional growth going forward. Net income climbing by almost 60% in a company with a PE ratio of about 30 is just plain cheap, in my opinion, and while there's plenty of reason to worry -- regulation, competition, etc. -- that valuation leaves me feeling quite confident in my investment in the market leader. Full writeup here.
Overstock (OSTK), the baby of CEO Patrick Byrne, is just plain fun to own and watch. They had a remarkable week in my absence, though they seem to attract more bad news than good these days. First they fell a bit on average earnings, then they climbed pretty dramatically, as far as I can tell, on the exposure brought about by their short-seller lawsuit (and maybe some reconsideration of the earnings release, which I thought looked promising).
Patrick Byrne is starting to look like the rails are coming off his train thanks to his recent obsession with naked short selling, but I'm pretty confident he'll refocus on the business at hand now that everyone has called him on it and he has handed his fight off to the lawyers. And the business at hand remains great -- Overstock certainly has some tough competition in Ebay and Amazon, but they're building a strong and recognized brand online and feeding it with continued price improvement that keeps customers coming back. I'm a little bit less impressed with the travel business and the auction business for Overstock since they're really entering brand new markets without a real competitive edge over their strong competitors. I'd frankly rather see them focus on the closeouts and Worldstock business, but that's OK, I'm willing to watch and see if I'm wrong.
As for this quarter's earnings for Overstock, they were brought down by a huge technology investment, which I see as a promising investment for future growth and scalability, and by earnings that more or less were in line with estimates -- a hair above, it appears. The key to me is the top line -- they're continuing to grow very quickly, with gross profit more than doubling and revenues up about 72% over last year. That's what we're buying -- a mercurial CEO with a touch of brilliance, a company that sees sales climb dramatically even during what they called a "sluggish" quarter, and a brand name that is being aggressively promoted and backed up with big investments in customer satisfaction. I like it, and I see nothing to be overly concerned about -- if you want slow growth retail, I'd stick with Amazon instead. If Overstock has a few more good days, I just might reach green on that part of the portfolio -- I bought all the way down, so my average price is just a bit less than $50.
Northern Orion (NTO) -- These Canadian copper miners report today, and I expect there won't be anything too shocking. Their big climb came after they announced their new analysis of the feasibility of the Agua Rica site -- and like the biotechs, these guys are valued as much on their future prospects as on their current earnings, though copper in the ground can certainly be considered to be a different kind of bet than one based on clinical trial data.
They are still valued right around their projected net present value of the Agua Rica mine plus cash on hand, with cash flow from Alumbrera still coming in to help them finance Agua Rica. This net present value estimate assumes much lower than current market prices for copper and comparably low prices for gold, the major by-product of the mine, so I think I've still got some margin for safety and will continue to hold NTO as a long term bet on copper. I think the low cost profile of Agua Rica gives me much more downside protection than most other copper miners, and good upside if copper continues to be in worldwide demand in the long term. Full writeup on NTO is also available.
MEMC Electronic Materials (WFR) ... this one didn't show anything dramatic while I was gone, but continued solid climbing on increased optimism for the semiconductor turnaround. Up about 10% from it's lows of ten days ago, which I'll certainly take, but I think much better things are still ahead for WFR. My full thesis is here if you're interested.
Dreamworks Animation (DWA), which had been left for dead, started kicking and coughing on the side of the pool as tepid earnings exceeded the dramatically lowered expectations. The stock reacted dramatically well, with a nice bounce back up, but my position is still well under water. I'm just holding on at this point, waiting to see if management gets its act together and if their upcoming lower profile films in the coming year do well. I'm not worried about the death of the DVD -- in fact, I think the next format, HD-DVD or Blu-Ray, might end up being a nice multi-year earnings catalyst for a lot of these entertainment studios who have significant titles in their libraries that can be re-released in the next format for fans. Dreamworks and Marvel shared writeup sums up my feelings in DWA here.
Provide Commerce (PRVD), better known as the parent of Proflowers, which I consider to be hands-down the best flower delivery service available, continued it's long roller-coaster ride with a grind back up the mountain last week. Sort of like a mirror image of the collapse they had in the spring when they revealed that Valentine's Day sales disappointed, then recovered somewhat with news that Mothers' Day beat their expectations. Earnings beat street estimates, so I am now not far from where I started with PRVD -- I bought at nosebleed levels over the winter, and bought significantly more after the first quarter swoon, so the shares have now climbed back up past my average buy price of about $22. I'm not selling, I think their business model and customer service have them primed to clobber the traditional florists over the long term -- the flowers are just plain better. I'm a happy customer and wish I had noticed when they IPOd because I probably would have bought then.
Like Overstock, I'm not that thrilled about Provide's non-core businesses -- their recent expansion into gift baskets, fruit, and premium meats doesn't resonate for me, and their competition in those areas is tough and well-branded. I don't think they can make the same compelling argument that their product is better and fresher in those areas than the market leaders like Harry and David or Omaha Steaks ... but it's just a small part of the business, with relatively minor costs and good upside, so it doesn't bother me that they're trying.
Will finish my writeup on the week's losers -- Cendant, Harris and Harris, Middleby, Click Commerce, Akamai, Design Within Reach and others -- in the next day or two ... but suffice to say, I haven't sold any of them and so far I don't plan to.
Technorati tags: snda ostk form ntes nto wfr dwa prvd Shanda Overstock Netease
I don't have stop loss orders on any of my stocks, nor do I leave lowball buy orders out in the ether. Generally, I buy something when I have the money and think it's a good investment (though sometimes, of course, going on sale definitely tips the scales in favor of a stock being a "good investment"), and sell when I no longer think it's a good long term investment or otherwise lose confidence in the company. So even if I were here, I wouldn't have likely made any changes to my portfolio over the last ten days or so ... but it would have certainly kept my attention.
So what happened?
First, the winners -- the stocks that climbed in my absence, usually because they released earnings or otherwise made some kind of news. I'll post a separate message with the losers.
Formfactor (FORM) shot up about 10% on the week, re-entering the nicely priced territory it had previously climbed to this spring with the first indications of a turnaround in semiconductors and optimism that their new plant would be online soon. They took a tumble, but have now bounced almost all the way back and they're one of my favorites to watch right now. Full writeup I did pretty recently is here.
Netease (NTES) -- I just wrote this one up at some length here, but I'm pleasantly surprised to see it continuing to climb. My reason for not selling after a 50% gain is that I fully intended my Chinese internet investments to be volatile and to grow dramatically over time -- why would I sell when that's just what NTES is doing? My main regrets in investing have been from selling too soon -- sometimes way too soon, so I'm trying to fight that. NTES shares boomed because their business boomed, and it has every appearance of nice prospects ahead -- if I didn't already own shares I might wait a little bit and see if it drifts lower before the next earnings release, but I still think NTES looks great going forward, and the ridiculousness of the Baidu IPO tells you the market certainly still has a taste for Chinese technology.
Shanda (SNDA) -- Ditto, only to some extent we're still waiting for Shanda to climb to NTES' heights. Sure, they've doubled in a year or so -- but their earnings are growing at such spectacular rates that I can't see the stock price staying in this trading range for much longer. I bought around $32 and have watched it bounce up to $40, then back down to my buying range and below, then back up in anticipation of great earnings, and up and down and up and down since earnings were released. EPS were a hair short of analyst estimates, but nothing worth worrying about, especially since revenues were well above estimates. SNDA has seen some significant increases in product development and SG&A costs, so I hope those portend the first investments in additional growth going forward. Net income climbing by almost 60% in a company with a PE ratio of about 30 is just plain cheap, in my opinion, and while there's plenty of reason to worry -- regulation, competition, etc. -- that valuation leaves me feeling quite confident in my investment in the market leader. Full writeup here.
Overstock (OSTK), the baby of CEO Patrick Byrne, is just plain fun to own and watch. They had a remarkable week in my absence, though they seem to attract more bad news than good these days. First they fell a bit on average earnings, then they climbed pretty dramatically, as far as I can tell, on the exposure brought about by their short-seller lawsuit (and maybe some reconsideration of the earnings release, which I thought looked promising).
Patrick Byrne is starting to look like the rails are coming off his train thanks to his recent obsession with naked short selling, but I'm pretty confident he'll refocus on the business at hand now that everyone has called him on it and he has handed his fight off to the lawyers. And the business at hand remains great -- Overstock certainly has some tough competition in Ebay and Amazon, but they're building a strong and recognized brand online and feeding it with continued price improvement that keeps customers coming back. I'm a little bit less impressed with the travel business and the auction business for Overstock since they're really entering brand new markets without a real competitive edge over their strong competitors. I'd frankly rather see them focus on the closeouts and Worldstock business, but that's OK, I'm willing to watch and see if I'm wrong.
As for this quarter's earnings for Overstock, they were brought down by a huge technology investment, which I see as a promising investment for future growth and scalability, and by earnings that more or less were in line with estimates -- a hair above, it appears. The key to me is the top line -- they're continuing to grow very quickly, with gross profit more than doubling and revenues up about 72% over last year. That's what we're buying -- a mercurial CEO with a touch of brilliance, a company that sees sales climb dramatically even during what they called a "sluggish" quarter, and a brand name that is being aggressively promoted and backed up with big investments in customer satisfaction. I like it, and I see nothing to be overly concerned about -- if you want slow growth retail, I'd stick with Amazon instead. If Overstock has a few more good days, I just might reach green on that part of the portfolio -- I bought all the way down, so my average price is just a bit less than $50.
Northern Orion (NTO) -- These Canadian copper miners report today, and I expect there won't be anything too shocking. Their big climb came after they announced their new analysis of the feasibility of the Agua Rica site -- and like the biotechs, these guys are valued as much on their future prospects as on their current earnings, though copper in the ground can certainly be considered to be a different kind of bet than one based on clinical trial data.
They are still valued right around their projected net present value of the Agua Rica mine plus cash on hand, with cash flow from Alumbrera still coming in to help them finance Agua Rica. This net present value estimate assumes much lower than current market prices for copper and comparably low prices for gold, the major by-product of the mine, so I think I've still got some margin for safety and will continue to hold NTO as a long term bet on copper. I think the low cost profile of Agua Rica gives me much more downside protection than most other copper miners, and good upside if copper continues to be in worldwide demand in the long term. Full writeup on NTO is also available.
MEMC Electronic Materials (WFR) ... this one didn't show anything dramatic while I was gone, but continued solid climbing on increased optimism for the semiconductor turnaround. Up about 10% from it's lows of ten days ago, which I'll certainly take, but I think much better things are still ahead for WFR. My full thesis is here if you're interested.
Dreamworks Animation (DWA), which had been left for dead, started kicking and coughing on the side of the pool as tepid earnings exceeded the dramatically lowered expectations. The stock reacted dramatically well, with a nice bounce back up, but my position is still well under water. I'm just holding on at this point, waiting to see if management gets its act together and if their upcoming lower profile films in the coming year do well. I'm not worried about the death of the DVD -- in fact, I think the next format, HD-DVD or Blu-Ray, might end up being a nice multi-year earnings catalyst for a lot of these entertainment studios who have significant titles in their libraries that can be re-released in the next format for fans. Dreamworks and Marvel shared writeup sums up my feelings in DWA here.
Provide Commerce (PRVD), better known as the parent of Proflowers, which I consider to be hands-down the best flower delivery service available, continued it's long roller-coaster ride with a grind back up the mountain last week. Sort of like a mirror image of the collapse they had in the spring when they revealed that Valentine's Day sales disappointed, then recovered somewhat with news that Mothers' Day beat their expectations. Earnings beat street estimates, so I am now not far from where I started with PRVD -- I bought at nosebleed levels over the winter, and bought significantly more after the first quarter swoon, so the shares have now climbed back up past my average buy price of about $22. I'm not selling, I think their business model and customer service have them primed to clobber the traditional florists over the long term -- the flowers are just plain better. I'm a happy customer and wish I had noticed when they IPOd because I probably would have bought then.
Like Overstock, I'm not that thrilled about Provide's non-core businesses -- their recent expansion into gift baskets, fruit, and premium meats doesn't resonate for me, and their competition in those areas is tough and well-branded. I don't think they can make the same compelling argument that their product is better and fresher in those areas than the market leaders like Harry and David or Omaha Steaks ... but it's just a small part of the business, with relatively minor costs and good upside, so it doesn't bother me that they're trying.
Will finish my writeup on the week's losers -- Cendant, Harris and Harris, Middleby, Click Commerce, Akamai, Design Within Reach and others -- in the next day or two ... but suffice to say, I haven't sold any of them and so far I don't plan to.
Technorati tags: snda ostk form ntes nto wfr dwa prvd Shanda Overstock Netease
This article posted by One Guy @ 8/15/2005 01:36:00 PM 0 comments
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